REUTERS | Kim Kyung-Hoon

The 2017 DIAC Rules or waiting for Godot… (Part 1)

The pending adoption of the 2017 Dubai International Arbitration (DIAC) Rules feels like a scene from Samuel Backett’s Waiting for Godot: having been announced and in essence launched at DIAC Arbitration Week in November 2017, the 2017 DIAC Rules are presently still awaiting assent from the Ruler of Dubai and have therefore not yet formally been adopted. As a result, the DIAC Rules 2007 continue to apply.

Three years after their original launch, it is time to recall what users of the 2007 DIAC Rules are missing and why the 2017 version of the Rules would be a welcome contribution to the trend towards modernisation that has been ushered in by the adoption of the UAE Arbitration Law (FAL) in 2018. As I have reported in a number of previous blogs, the FAL, which entered into force with effect from 16 June 2018 and takes inspiration in relevant part from the UNCITRAL Model Law, has taken onshore arbitration in the UAE into the 21st century. The 2017 Rules would serve as a welcome complement to the provisions of the FAL and arguably further enhance the practice and procedure of onshore arbitration. For the avoidance of doubt, despite their intended use in a national, onshore context, the DIAC Rules, whether in their 2007 or 2017 version (once adopted), are available for the administration of arbitrations irrespective of the seat of arbitration (whether onshore, offshore, national or international). In other words, arbitration users domestically and internationally are at liberty to contract into the DIAC Rules for the administration of their arbitral disputes anywhere in the world.

The following summarises some of the highlights that the 2017 DIAC Rules bring to the practice and procedure of arbitration in the UAE, and seeks to contextualise my previous assessment of the 2017 DIAC Rules against the background of the now adopted FAL.

Seat of arbitration

The 2017 DIAC Rules introduce the Dubai International Financial Centre (DIFC) as a default seat of arbitration (article 25(1), 2017 DIAC Rules). This means that under the new Rules, DIAC arbitrations are default-seated offshore and are hence governed by the 2008 DIFC Arbitration Law, which in turn will trigger the curial competence of the DIFC courts. Albeit a potential disappointment to more conservative, local arbitration users, this will place the curial supervision of the arbitration into safe hands. That said, the evident advantage of an offshore default seat will now have been overtaken by the adoption of the FAL, which creates a modern, onshore arbitration regime that compares favourably to the DIFC Arbitration Law.

This also raises the question as to whether DIAC would benefit from a two-pronged approach, adopting an alternative, stand-alone set of rules for offshore arbitration, administered through its representative office in the DIFC (DIFC-DIAC). The DIFC-DIAC Rules (as they could be called) would default-seat in the DIFC, whereas the DIAC Rules would do so in onshore Dubai, hence securing the application of the FAL under the supervision of the onshore Dubai courts in arbitrations under the DIAC Rules. This would allow both local and international arbitration users to opt into one or the other set of Rules, thus affording a choice between onshore and offshore arbitration under the DIAC mantle.

Venue of the arbitration

Irrespective of the seat of the arbitration, the parties and the tribunal are free to hold hearings, procedural meetings and deliberations in the arbitration at a venue of their choice, that is, a place different from the seat (article 25(2), 2017 DIAC Rules), a position also codified in the terms of article 28(2)(a) of the FAL. In addition, the 2017 DIAC Rules endorse the practice of virtual venues, whereby hearings and procedural meetings may be conducted by electronic means of communication, for example, by video conference or specialist electronic platforms, such as Microsoft Teams and Zoom. This accords with the position under the FAL, which facilitates the virtual conduct of hearings and procedural meetings (article 33(3), FAL) and tribunal deliberations (article 28(2)(b), FAL). Under the 2017 DIAC Rules, hearings and procedural meetings “shall nonetheless be treated for all purposes as having been conducted at the seat of arbitration” (article 25(2), 2017 DIAC Rules). In light of the express endorsement of the free choice of an arbitral venue other than the seat in the terms of the FAL, this provision has arguably lost its allure following adoption of the FAL.

Electronic communication.

The 2017 DIAC Rules support a new arbitration reality, the foundation for which has been laid by corresponding provisions of the FAL, namely that of virtual arbitration. With this objective in mind, the new Rules, as has been seen above, do not only endorse the conduct of hearings and procedural meetings by electronic means (that is, without the physical presence or in-person attendance of the parties, their counsel and witnesses), but also allow the electronic notification of a counterparty by way of service (article 3.5, 2017 DIAC Rules). This follows closely the universal endorsement of electronic means to facilitate the conduct of arbitration under the FAL, including arguably the electronic signature of awards (article 41(6), FAL). Importantly, the FAL also makes express provision for electronic notification (article 24(1)(a), FAL), as well as the remote hearing of oral witness testimony (article 35, FAL). In support of the latter, the 2017 DIAC Rules contain a specific authorisation to examine witnesses electronically, including the remote administration of the oath (which arguably remains a mandatory requirement under article 33(7) of the FAL):

“…the tribunal shall have the authority to accept oaths and conduct examinations in person or by electronic means including telephone or video conference or a combination thereof, provided it has first satisfied itself of the identity of the witness.”

Awards

Under the 2017 DIAC Rules, “the award shall be deemed to have been made at the seat of arbitration” (article 25.3, 2017 DIAC Rules). This corresponds to the wording of the FAL (article 41(6), FAL) and dispenses with the requirement of old that awards be signed and as such formally issued at the seat at the risk of arbitrators violating their mandate, rendering an award that would qualify as originating outside the seat (that is, for example, foreign rather than domestic if rendered outside the UAE in circumstances where the seat of arbitration was, for example, Dubai or Abu Dhabi). In this sense, article 42.4 of the 2017 DIAC Rules expressly provides that “all awards shall be deemed to have been signed and issued at the seat of arbitration, without the physical presence of the tribunal at the seat of arbitration.”

Under the new rules, awards will also be subject to formal ICC-style scrutiny by the DIAC Secretariat, with a focus on potential procedural irregularities:

“…prior to signing any award, the tribunal shall submit the final draft of the award to the Secretariat, which may provide comments as to form. Without affecting the tribunal’s liberty of decision, the [DIAC Executive Committee] may, in exceptional circumstances, draw the tribunal’s attention to points of substance for consideration.” (Article 42.8, 2017 DIAC Rules.)

Importantly, given the decision-making prerogative of arbitrators under UAE law, the DIAC Executive Committee’s comments on substance can only be suggestive rather than prescriptive. In this context, it is also worth reminding that the FAL allows for the rectification of clerical errors of form in an award (such as irregularities in the signature requirement) pending a challenge process (Article 54(6), FAL and more specifically, Ali & Sons Marine Engineering Factory LLC v E-Marine FZC (Civil Cassation Appeal No 1083/2019)).

Finally, the 2017 DIAC Rules envisage the publication of awards in redacted format with party consent (article 42.10, 2017 DIAC Rules), promoting some form of precedential continuity in DIAC decision-making under the new Rules whilst preserving the presumption of confidentiality under UAE law.

To be continued…

 

 

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