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UAE Federal Arbitration Law v UAE Arbitration Chapter: old wine in a new bottle? (Part 1)

After a long period of gestation, the UAE Federal Arbitration Law is now likely to become a reality: its enactment is scheduled for later this year, having recently been approved by the UAE National Assembly and the Cabinet of Ministers and now awaiting signature by the President of the UAE, Sheikh Khalifa bin Zayed bin Sultan Al Nahyan. Before adoption in its present form, the UAE Federal Arbitration Law has gone through a number of drafts, some of these inspired by the UNCITRAL Model Law, others customised by reference to other leading arbitration laws in the region. The effect of the new law will be to repeal the arbitration-specific provisions of the UAE Civil Procedures Code, those being Articles 203 through to 218 and 235 through to 238, also commonly referred to as the UAE Arbitration Chapter. To date, the UAE Arbitration Chapter has governed arbitrations seated in onshore United Arab Emirates (UAE), with the UAE courts serving as the curial courts in support of arbitration. For the avoidance of doubt, the UAE Arbitration Chapter exists alongside two stand-alone UNCITRAL Model Law-based arbitration laws that govern arbitrations seated in the free zones, the 2008 Dubai International Financial Centre (DIFC) Arbitration Law and the 2015 Abu Dhabi Global Market (ADGM) Regulations.

The UAE Arbitration Chapter has long been criticised for being a retrograde instrument of local arbitration. In the same breath, the UAE courts have often been portrayed by the international arbitration community as little supportive of and at times even outright hostile to arbitration. I respectfully disagree.

In the Commentary on the UAE Arbitration Chapter (Blanke), I was able to conclude – on the basis of an in-depth study of a total of over 650 arbitration-relevant rulings of the UAE courts – that the UAE courts have been remarkably arbitration-friendly, bending the interpretation of the individual provisions of the UAE Arbitration Chapter to the greatest extent possible in favorem arbitrandi. Over the years, the UAE courts have established a remarkably consistent, arbitration-friendly case law precedent, giving rise to – to borrow from the French – a jurisprudence constante in the field of UAE arbitration. This includes, for example, the recognition of the principle of party autonomy, the separability of the arbitration agreement from the main contract, the partial enforcement of arbitral awards and the limited notion of local public policy, turning the UAE into a comparatively secular arbitration jurisdiction.

Further, more recently, the UAE has also established a largely consistent pro-enforcement record under the 1958 New York Convention. With this in mind, I have always been a proponent of reforming the UAE Arbitration Chapter to address existing procedural deficiencies rather than adopting a radically new standalone arbitration law. That said, the lobby in favour of bringing about a sea change has finally gained the upper hand and the UAE Arbitration Chapter will soon be no more!

Will this mean, however, that the existing case law precedent that provides guidance to the interpretation of the UAE Arbitration Chapter will be of no assistance in the construction of the new federal arbitration law? Following an initial review of the UAE Federal Arbitration Law, the answer to this question must be a resounding “no”.

Despite claims to the contrary, the provisions of the UAE Federal Arbitration Law are not altogether different from those of the existing UAE Arbitration Chapter. A lot of the existing case law precedent will therefore be instrumental in the construction of the provisions of the new federal arbitration law. Therefore, the Commentary on the UAE Arbitration Chapter will also retain its relevance in providing guidance on the interpretation of corresponding provisions of the UAE Federal Arbitration Law.

In a series of three blogs to be published over the next three months, I will provide a brief introduction to some of the main provisions of the UAE Federal Arbitration Law and demonstrate how they will benefit from the construction of the existing provisions of the UAE Arbitration Chapter in the hope that this will be of assistance in the interpretation of the UAE Federal Arbitration Law as and when it will take effect later this year.

The new law contains a number of articles that deal with the basic procedural framework conditions of arbitration. These essentially reflect the status quo under the UAE Arbitration Chapter. Article 6 expressly provides for the principle of separability and as such codifies existing arbitration practice under the UAE Arbitration Chapter (see, for example, Case No.108/2009, ruling of the Abu Dhabi Court of Cassation of 12 March 2009; Case No. 167/2002, ruling of the Dubai Court of Cassation of 2 June 2002; Case No. 164/2008, ruling of the Dubai Court of Cassation of 12 October 2008; Case No. 265/2009, ruling of the Dubai Court of Cassation of 25 October 2009; and Case No. 166/2008, ruling of the Federal Supreme Court of 1 February 2010; Blanke, I-077 and II-007).

Article 7 requires an arbitration agreement to be in writing and provides that it can be evidenced by an exchange of communications, by reference to an arbitration clause in another document or by an acknowledgement of the existence of the arbitration clause by one of the contracting parties in proceedings before the courts or over the course of the arbitration process. The formation of an arbitration agreement by exchange of correspondence has been acknowledged in the terms of Article 203(1) of the UAE Arbitration Chapter (see Case No. 64/2005, ruling of the Dubai Court of Cassation of 18 April 2005; and Case No.174/2005, ruling of the Dubai Court of Cassation of 19 December 2005; Blanke, I-073 and II-004); so has the incorporation of an arbitration clause by reference (see Case No. 25/Judicial Year 21, ruling of the Federal Supreme Court of 9 January 2001; Case No. 174/2005, ruling of the Dubai Court of Cassation of 19 December 2005; Case No. 44/2008, ruling of the Dubai Court of Cassation of 22 April 2008; Case No. 610/2008, ruling of the Dubai Court of First Instance of 1 July 2010; and Case No. 500/2013, ruling of the Dubai Court of First Instance of 29 September 2013; and Blanke, II-024) as well as the submission to arbitration through signature of terms of reference (see Case No. 524/2009, ruling of the Federal Supreme Court of 22 December 2009; Blanke, I-068 and II-002).

Pursuant to Article 8, a court must stay the proceedings before it and refer the matter to arbitration if a respondent raises the existence of an arbitration agreement before submitting a substantive defense; in a similar vein, Article 203(5) of the UAE Arbitration Chapter has given effect to an arbitration defense (Blanke, II-038-II-047).

Article 10 leaves freedom to the contracting parties to make their own choice of arbitrators (stating that there is no particular requirement of gender or nationality) and requires arbitrators to disclose any conflict of interest or anything that may affect their independence; for the avoidance of doubt, this reflects the status quo under the UAE Arbitration Chapter, both male and females, foreigners and locals, Muslims and non-Muslims being eligible for appointment subject to a continuing obligation to remain independent (see Blanke, I-095).

Further, again in recognition of the status quo under Article 204 of the UAE Arbitration Chapter (see, for example, Case No. 1343/Judicial Year 4, ruling of the Abu Dhabi Court of Cassation of 27 January 2010; Case No. 297/Judicial Year 4, ruling of the Abu Dhabi Court of Cassation of 10 June 2010; Case No. 795/Judicial Year 4, ruling of the Abu Dhabi Court of Cassation of 9 December 2010; Case No. 131/2009, ruling of the Dubai Court of Cassation of 14 June 2009; Case No. 138/2009, ruling of the Dubai Court of Cassation; Case No. 169/2009, ruling of the Dubai Court of Cassation of 13 September 2009; Case No. 303/2012, ruling of the Federal Supreme Court of 13 November 2012; and Blanke, I-096 and II-049–II-055), Article 11 provides for the default appointment of arbitrators by the curial court or the administering arbitral institution, requiring that a sole arbitrator of a chair does not share the nationality of any of the parties (Blanke, II-074).

Taken in the round, the procedural framework conditions of arbitration under the UAE Federal Arbitration Law are (if anything) cosmetic and no more than old wine in a new bottle… they codify in relevant part an already existing status quo and do not change significantly (if at all) the arbitral procedure in the UAE…

… to be continued…

DWF LLP Dr Gordon Blanke

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