ADGM Court upholds arbitration clause in employment contract

In a significant ruling for employment law and arbitration within the ADGM, the Court of First Instance has upheld arbitration clauses in employment contracts, staying proceedings in two consolidated cases involving claims for unpaid salaries and employment benefits.

Read the judgment

Summary:

The claimants commenced proceedings against their former employer in the ADGM Court of First Instance. Both claims were based on alleged breaches of their employment rights under the ADGM Employment Regulations 2019. The claimants sought recovery of unpaid salaries and other employment-related entitlements, including end-of-service gratuity.

The defendant applied to stay the proceedings, relying on a clause in the contracts of employment which provided that any disputes arising under the contracts were to be resolved through arbitration. 

The claimants opposed the stay, arguing that the arbitration clause was null and void under ADGM law and that employment disputes should be heard by the ADGM Court.

The Court noted whilst the ADGM Founding Law granted exclusive jurisdiction to the ADGM Courts in various matters, including employment disputes, it specifically provided that the parties to a dispute “may agree to refer their claims or disputes to arbitration”. 

The Court ruled that the arbitration clause was valid and enforceable and did not contravene the ADGM Employment Regulations 2019 or public policy. 

The Court therefore ordered a stay of proceedings and the claimants’ claims could not be pursued in the ADGM Court. Justice Sir Michael Burton GBE acknowledged that his decision reached the opposite result to that provided for in the UK, by reference to s.203 of the Employment Rights Act 1996.  

Implications for employers and employees in ADGM:

This judgment confirms the enforceability of properly drafted arbitration clauses in ADGM employment contracts. ADGM employers should therefore consider whether arbitration would be a suitable forum in which to resolve potential disputes with certain categories of employees.

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