Arbitration in the UAE
Arbitration is one of the most popular methods of alternative dispute resolution around the world, particularly as we are seeing more and more disputes as the global economy is intertwined, with businesses conducting cross border trade making international commercial transactions and contracts a crucial component of this interaction, and therefore the need to have a streamlined process to resolve any disputes stemming out of them imperative. Indeed, parties involved have realized that such disputes are best resolved through a private, independent, flexible, and neutral legal process. Arbitration practice has fared well not only in Western legal systems, but also in the Middle East region and specifically in the United Arab Emirates (UAE). The UAE is known to have taken multiple initiatives towards fully integrating Arbitration as an alternative dispute resolution mechanism chosen by concerned parties.
We will therefore look further into the manner in which the UAE has paved the way for an enhanced legal system favoring and promoting arbitration proceedings and practices.
1. Arbitration Law in the UAE: How it started
UAE’s first stand-alone law on Arbitration is the famous Federal Law No. 6 of 2018 known as the UAE Arbitration Law. This new law was issued in May 2018 and abrogated Articles 203 to 218 of the UAE Civil Procedures Law No. 11 of 1992, which previously regulated arbitration matters in the UAE. The new Law provides an exhaustive legal framework that governs all aspects of arbitration proceedings, and it is mainly based on the UNCITRAL Model Law on International Commercial Arbitration (1985). The UAE Arbitration Law shall govern any arbitration process conducted in the Emirates unless otherwise agreed by the concerned parties and on condition that their agreement does not violate provisions related to public order and policy in the State. The Law shall apply as well to any international commercial arbitration conducted abroad if the concerned parties agreed as such in their agreement to arbitrate. Moreover, UAE’s Arbitration Law can be applied to any arbitration process related to a dispute arising out of a legal relationship, whether contractual or not, which is governed by a substantial UAE Law provided that it is not excluded by any specific provision. UAE courts fully respect the parties’ will to resort to arbitration rather than national courts in order to resolve their conflicts. As evidence to that, Article 8(1) of UAE’s Arbitration Law stipulates the Court should declare the inadmissibility of the action and the incompatibility of the Court’s jurisdiction to rule upon the dispute brought before it if the parties have previously concluded an Arbitration agreement, and any of the disputed parties raises this issue before having looked into the substantial matters of the case.
2. The Arbitration Process
A. Arbitration Requirements
The UAE’s Arbitration Law requires that the parties’ agreement to arbitrate be in writing, for it to be valid. This requirement was expansively interpreted to embrace the changes necessitated by the global pandemic. That being said, concluding arbitration agreements via e-mail, referring in the original contract to an arbitration agreement available in another document, and concluding an oral arbitration agreement during court proceedings provided that it is recorded are all considered as valid arbitration agreements. It is important to note that the Law reinforced the requirement for arbitrations agreements to be signed by both disputing parties, or by the duly authorized representative.
Regarding the appointment of arbitrators, it is a matter for the parties to agree on the number of arbitrators. However, the arbitral tribunal should always be composed of an odd number of arbitrators. If by any chance the parties agreed on appointing an even number of arbitrators, an additional arbitrator will be appointed by the other arbitrators in order to act as a chairman. If the arbitrators failed to appoint the chairman, the arbitration institution will do so instead. In absence of the parties’ agreement concerning this matter, the default number of arbitrators shall be three.
B. Arbitral Proceedings
Pursuant to Article 27 of the Law, the arbitral proceedings are deemed to have commenced on the following day of the composition of the Arbitral tribunal (which is composed of the Arbitrators). According to the Arbitration Law, in absence of the parties’ agreement regarding the language of the proceedings, the default language will be Arabic. That being said, choosing the language of the arbitral proceedings is an extremely crucial matter especially if either of the concerned parties does not belong to the Arab region. The new Law stipulated that arbitral hearings may be held through “modern means of communication” and electronic technology, which means that parties may agree on refraining from being physically present during arbitral hearings and deliberations. For instance, Article 35 explicitly states that: “The Arbitral Tribunal may hear the testimony of witnesses including the expert witnesses, by the modern means of communication which do not require them to appear in person at the hearing.” Embracing the use of technology will certainly boost and modernise the way arbitral proceedings are held in the UAE. Concerning confidentiality, arbitral proceedings are not confidential by default. This means that the concerned parties must explicitly or implicitly address the issue of confidentiality if they wish for their arbitration process to be fully confidential. Article 33 of the Law only mentions that the hearings shall be confidential unless otherwise agreed by the parties. However, the confidentiality of the hearings does not necessarily imply the confidentiality of the documents, pleadings, evidence provided, or any other submission given out by the parties or the tribunal during proceedings. Regarding the issuance of the arbitral award, in the absence of the parties’ agreement, the award must be issued by the arbitral tribunal within a period of 6 months from the date of the first hearing of the whole arbitration process. Under the new Arbitration regime, this period can now be extended for an additional 6 months unless agreed otherwise by the concerned parties. The Arbitral Award shall be written, and the decision shall be based on the majority of all the members of the arbitral tribunal. The award should be signed by the arbitrators or at least the majority of them. It is important to highlight the provisions of Article 41(6) of the Law which provides that awards can be signed electronically and outside the place of arbitration. This means that also arbitrators no longer have to be physically present in the UAE when rendering an award. When the final award is issued, the arbitral proceedings shall be deemed to have come to an end. Article 52 reconfirms that the arbitral award shall be binding to the parties and have the force of res judicata.
3. Dubai’s New Decree No. 34 of 2021
A recent significant development in the UAE was the issuance of Dubai’s Decree No. 34 of 2021 which rendered the Dubai International Arbitration Centre (DIAC) the focal point of arbitration hearings within the Emirate. The Decree is mainly known to have dissolved two important arbitration centers which are the following: The Emirates Maritime Arbitration Centre (EMAC) which was administered by EMAC arbitration rules, and the Arbitration Institute (DAI) of Dubai International Financial Centre (DIFC) which was administered by the DIFC-LCIA arbitration rules. The DIAC 2.0 will replace these Centres regarding the administration and supervision of the disputes which commenced under the old regime. That being said, all agreements to arbitrate concluded after the issuance of this Decree, should not refer the dispute to any of these Centres which are no longer in use, subject to the nullity of the arbitration agreement. More than that, the new DIAC Arbitration Rules that came into effect on March 21, 2022, will replace DIFC-LCIA and EMAC Arbitration Rules regarding ongoing and future arbitrations. According to Article 7 of Decree no. 34, the onshore Dubai Courts and the DIFC Courts will be the only competent courts to rule upon all arbitral cases, claims, or challenges related to both substantive and procedural matters that were previously given out by the arbitral tribunals of the DIAC and the Abolished Centres. Regarding contracts that are already in place and contain EMAC or DIFC-LCIA arbitration clauses, parties who concluded such contracts must amend their arbitration clauses in order to comply with the new Decree. Given that DIAC 2.0 will have the support of the DIFC Courts and the onshore Dubai Courts as mentioned in Article 7, parties have the right to choose between DIFC or onshore Dubai as the Seat of their arbitration proceedings. However, if the parties have failed to designate the arbitral seat within their agreement to arbitrate, then the DIFC Courts will be deemed as the default seat of future DIAC arbitrations instead of the Dubai Courts.
In Short, over the past few years, the UAE has shown true dedication and solid commitment towards promoting and enhancing arbitration in its region especially after the adoption of its Federal Arbitration Law, which entered into force in June 2018. Seeing that the new Law has favored modernisation, embraced technology, and aligned with international standards and practices, it has moved the UAE to the forefront of arbitration especially in the Arab region and strengthened the position of its arbitral seat with correspondence to international arbitration. In addition, the newly born Decree No. 34 of 2021, which established DIAC 2.0 as the single unified arbitration centre in the Emirate of Dubai, independent from the government, and headquartered in onshore Dubai with a branch in the DIFC, has reflected the importance of DIAC as an internationally recognized arbitration centre and the efforts exerted by the UAE Federal government into promoting the arbitration standards and services provided in the UAE especially to international users.