By Nick Carnell
Have you recently spent what seemed like a lifetime trying to make sense of the identity card regulations? Have you also looked in your wallet at the number of cards you have with your photograph staring out at you?
Do you as a matter of course carry a copy of your passport visa page because you are almost bound to need to produce it somewhere?
Those involved in the resolution of disputes face a further challenge – is the person from whom you take instructions actually entitled to instruct you?
The common answer is that the party provides a power of attorney which is duly notarised by a notary public.
Where the party is an individual, the fact that the power has been notarised will generally be conclusive that the person is who he says and usually that is an end to the matter.
The generally accepted wisdom is that if the document is duly notarised, that is sufficient proof that the party in question is actually entitled to do that which the power of attorney says.
Where the party is a company or a partnership, matters become less straightforward.
Companies are owned by their shareholders. Most construction companies are subject to regulations requiring that a minimum of 51% of their shares are owned by a UAE national.
In the majority of cases that person will not play a day-to-day role in the management of the company.
Instead, he will delegate that task to the expatriate minority shareholder and provision will usually be made, either in the memorandum of association or in a separate agreement, for the management of the company to be conducted other than by the majority shareholder by a
“manager.”
Where any time passes between the execution of this document and the power of attorney a party intent on raising suspicions might ask for evidence that this authority had not been revoked.
The absence of any effective companies registry means that the only really conclusive way to bury this doubt is to get the majority shareholder himself to confirm the position.
But does this authorise the “manager” to conduct litigation or arbitration?
Article 7.3 of the DIAC Rules provides that a tribunal may require the parties to provide proof of their representatives’ authority in such form as they may require.
Common sense says this is something the party ought to address in explicit terms. The document which gives power to the manager ought to provide him with the express right to conduct litigation or arbitration.
This should be reflected in the power of attorney. If this does not appear on the face of the documents, a corrective deed is a sensible measure.
Assuming there are no issues between the minority and majority shareholders, this ought not to constitute a problem. What it does is create a good deal of work and attendant cost.
Of course, underpinning the system is the concern to establish that parties are who they say and that their lawyers can act on behalf of the entity they purport to represent.
However, the system is flawed and unwieldy. This is shown by comparison with free zone
companies.
Although free zone companies who engage in litigation before Dubai Courts or arbitration before DIAC are still required to provide powers of attorney, there is no requirement for a majority shareholder who is a UAE citizen, and hence the problem identified in the previous paragraphs will not occur.
Interestingly, DIFC Court has no requirement for powers of attorney and it seems unlikely that the DIFC arbitration centre will impose any such
requirement.
It should be stressed that the issue is not the requirement for local participation – in many cases there is good reason for this – but with the requirement for proof of authority.
The instances where this really is an issue – while they will occur – will be relatively rare.
In the vast majority of other jurisdictions, a litigant is generally presumed to be who he says he is and to have the authority to act on behalf of a company.
If a serious question is raised (as distinct from simply attempting to create procedural obstacles) this can be investigated by the court or tribunal at an appropriate point.
There will also be instances where the claim is brought by someone other than the named claimant.
Examples include claims brought by sub-contractors under name-borrowing arrangements, and subrogated recovery claims brought by insurers.
In both cases, whether the intended claimant actually has the right to bring the claim ought to be a contractual issue determined by the terms of the contract, or as the case may be, the insurance policy.
The UAE is anxious to be perceived as a modern forum for the resolution of disputes.
A thorough review of the requirement for powers of attorney (and the role played by them) would seem to be an important part of this process.
CW