The Dubai Court of Cassation clarifies the Position on the Interpretation of Back-to-Back Clauses
A Back-to-Back clause is an agreement that a Sub-contractor will not be entitled to payment
from a Main Contractor unless the payment has been received by the ultimate client or
Employer. This clause is a regular feature in construction and general commercial agreements.
However, its interpretation has long been a contested issue. Different parties have different
views and interpretations. There even seemed to be a judicial shift in interpreting this clause in
the best interest of the weaker party by way of ordering payment for services performed
notwithstanding the existence of the back-to-back clause.
The Dubai Court of Cassation clarifies such position in different rulings. In on of the recent
cases, a Subcontractor requested the court to order the Main Contractor to pay an outstanding
amount for the delivered sub-contracted works. The Main Contractor, on the other hand,
contended that the claim is premature because the equivalent payment had not been received
from the Employer and, therefore, the obligation to pay the Subcontractor had not been arisen
yet under the back-to-back clause.
In this case, both the Dubai Court of First Instance and the Dubai Court of Appeal favored the
Subcontractor’s claim ordering the Main Contractor to appeal. But, the Dubai Court of
Cassation dismissed the Subcontractor’s claim based on prematurity and the existence of the
back-to-back clause in the subject matter Subcontract.
This Dubai Court of Cassation’s judgment is helpful in establishing that the Courts will continue
to recognize and apply the back-to-back arrangement, provided that challenges are raised
properly.
Read more: