REUTERS | Vasily Fedosenko

Three, two, one… lift off: a fresh start for arbitration in the UAE?

Following the launch of the revised arbitration rules of the Dubai International Arbitration Centre (DIAC) (the DIAC Rules) during Dubai Arbitration Week in November 2017, their adoption by Ruler’s Decree is now (according to confidential sources) imminent and likely to coincide with the official adoption of the new United Arab Emirates (UAE) Federal Arbitration Law, which is to replace the UAE Arbitration Chapter, that is, the arbitration-specific provisions of the UAE Civil Procedures Code. Pursuant to an announcement of the UAE government on 28 February 2018, the UAE Federal Arbitration Law has now been approved by the UAE Federal National Council, the UAE advisory parliament, pursuant to Article 90 of the UAE Constitution. It is therefore on schedule to enter into force later this year.

I have reported on the drafting history of the new UAE Federal Arbitration Law in previous blogs and therefore do not intend to discuss its anticipated content and scope in further detail here. Suffice it to recall that the new UAE Federal Arbitration Law is anticipated to streamline the onshore recognition and enforcement process, essentially dispensing with the need for ratification. Under the new law, arbitration awards – like court judgments – will qualify for immediate execution through the execution judge. Challenges, in turn, may be filed within 30 days from issuance of the award, but will not suspend or prevent an action for enforcement. This, no doubt, will take the enforcement of both domestic and foreign arbitration awards to a new level and give confidence to foreign investors that procedural concerns about the UAE as an enforcement jurisdiction will soon become a spectre of the past.

Turning to the revised DIAC Rules, these send a strong message to the international arbitration community that despite criticism that the DIAC has more recently lost ground to competing institutions, such as the offshore Dubai International Financial Centre – London Court of International Arbitration (DIFC-LCIA), the sister organisation of the LCIA based in the DIFC, it is a force to be reckoned with on the Dubai and wider Middle Eastern arbitration scene for administering the resolution of regional disputes in the 21st century. The revised rules contain elements of other leading international sets of rules, such as those of the International Chamber of Commerce (ICC) International Court of Arbitration and the LCIA. As such, they provide a unique framework for the administration of arbitration disputes whilst paying particular attention to cultural sensitivities prevalent in dispute resolution across the region. In addition, the revised rules take account of modern developments in litigation funding and the importance of third party funding within the context of arbitration as an alternative means of dispute resolution, in the wider sense of that term. With this in mind, key features of the revised DIAC Rules include:

  • Alternative appointment process. The revised DIAC Rules introduce a new Article 14, which allows the parties to opt into a list appointment process based on a shortlist prepared by DIAC, and operating on the basis of mutual elimination and preferential ordering of candidates from the list.
  • Statement of availability. Apart from a statement of impartiality and independence, arbitrators will be required to make a declaration stating their availability for serving a mandate under the revised rules. This addresses concerns that arbitrators do not dedicate sufficient time to the conduct of an arbitration process to ensure a fair hearing of both parties in the interest of the proper administration of justice.
  • DIFC as default seat. Under the revised rules, DIAC arbitrations will be default seated in the DIFC, hence triggering the application of the DIFC Arbitration Law (which is modeled on the UNCITRAL Model Law) as the procedural law of the arbitration and the DIFC Courts’ competence as the curial courts in support of the arbitration. In this sense, the DIAC Rules enter into direct competition with the DIFC-LCIA Rules, which equally opt for the DIFC as a default seat.
  • Emergency arbitrator. Like more recent versions of the ICC and LCIA Rules, the revised DIAC Rules introduce the concept of the emergency arbitrator, who will be empowered to take urgent provisional measures before constitution of a DIAC tribunal.
  • Joinder and consolidation. The revised DIAC Rules contain elaborate joinder, consolidation and multiple contract provisions to ensure procedural efficiency in more complex multi-party and multi-contract scenarios.
  • Tribunal’s power to sanction counsel conduct. Taking guidance from the LCIA and DIFC-LCIA Rules, a new Article 50 empowers a DIAC tribunal to impose sanctions on devious counsel that seeks to obstruct the arbitration process and jeopardise the enforceability of a resultant award (whether by knowingly making false statements or representations, or submitting false evidence or concealing/assisting in the concealment of evidence). This provision is, no doubt, intended to prevent well known guerrilla practices that are often encountered in arbitrations seated in the Middle East.
  • “Shariah-Compliant Arbitration”. A new Article 52 offers DIAC administrative services for arbitrations that require strict compliance with the principles of the Islamic Shariah. More specifically, DIAC has available a roster of arbitrators qualified in Islamic Law for ready appointment in such disputes and will assist in ensuring Shariah compliance of any prospective awards.
  • Third party funding. A new Article 53 empowers a DIAC tribunal to request disclosure of the existence and the details of any third party funding arrangements in relation to the arbitration and to take such arrangements into account in the exercise of its powers to award costs, including adverse costs orders against third party funders.
  • Awardability of party costs. The revised Article 2 of the DIAC Appendix on Costs now expressly empowers a DIAC tribunal to award party costs (that is, both legal representation fees and other party costs, such as expert fees and costs incurred through calling fact witnesses). This addresses requirements that have emerged from Dubai case law precedent according to which current Article 2.1 of the DIAC Appendix on Costs excludes the recovery of party costs bar an express empowerment of the tribunal, for example, in the terms of the underlying arbitration agreement or terms of reference (see Case No. 282/2012, Dubai Court of Cassation).
  • Allocation of fees among DIAC tribunal members. Article 3.4 of the DIAC Appendix on Costs lays down a default position of 40 (Chairperson)/30 (Co-arbitrator)/30 (Co-arbitrator), which accords with best international practice (albeit leaving discretion to the DIAC Executive Committee to decide otherwise in special circumstances). This clearly responds to the ICC’s more recent practice of assessing the proper allocation of fees on a case-by-case basis, bar express agreement of the tribunal members. There is an argument for saying that the DIAC default position encourages a greater degree of collegiate cooperation between members of a tribunal.
  • Scrutiny of draft award. The revised DIAC Rules formalise what has been the silent practice of the DIAC for the past three to four years, by introducing a formal ICC-style scrutiny process of draft awards prior to issuance. This process will go to form as well as substance. In order to preserve the decision making liberty of the DIAC tribunal, any comments of substance will be for guidance only and have no binding effect on the tribunal.

Whether the adoption of the UAE Federal Arbitration Law and the revised DIAC Rules truly mark a fresh start in arbitration in the UAE is questionable. My view has always been that there is nothing wrong with the provisions of the UAE Arbitration Chapter, nor the judicial interpretation of its provisions in practice, that could not have been addressed through a revision of the provisions of the chapter. That said, the new law and the revised DIAC Rules will no doubt give impetus to the continued enhancement and modernisation of the UAE as a leading seat of arbitration in the Middle East.

DWF LLP Dr Gordon Blanke

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