Partner – dispute resolution at King & Wood Mallesons
Resolving commercial disputes by arbitration remains a popular choice in the Middle East. Parties continue to routinely include arbitration clauses in their contracts, attracted by the confidentiality of arbitral proceedings, industry expert adjudicators and the possibility of disputes being heard in any language.
Recent legal reforms to Dubai's arbitration landscape have consolidated arbitration centres and promulgated new state-of-the-art arbitration rules. Accordingly, boilerplate arbitration agreements from historic standard form precedents may no longer be fit for purpose in the post-reform environment and should be revisited.
Abolishment of arbitration centres
On 14 September 2021, the Dubai government enacted Decree 34 of 2021 concerning the Dubai International Arbitration Centre, abolishing the Emirates Maritime Arbitration Centre (EMAC) and the Dubai International Financial Centre (DIFC) Arbitration Institute (DAI), including its DIFC-London Court of International Arbitration (LCIA) centre.
All rights and obligations of the abolished arbitration centres were transferred to the onshore Dubai International Arbitration Centre (DIAC).
According to the decree and the new DIAC statute:
- Existing arbitration agreements appointing the abolished centres, which were concluded before the decree, are still valid, although the DIAC has replaced the abolished centre as the administering body unless otherwise agreed;
- EMAC arbitrations ongoing before 20 September 2021 will be administered by DIAC, but under the applicable rules of EMAC, and DIFC-LCIA arbitrations where a designated case number was given on or before 20 March 2022 will be administered by the LCIA;
- The new DIAC organisational structure includes an Arbitration Court, whose functions will undertake general supervision of the alternative dispute resolution (ADR) methods offered by DIAC and ensure they are properly used in a timely manner and with the required efficiency.
Businesses entering into new arbitration agreements should no longer expect disputes to be administered by EMAC or the DIFC-LCIA.
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New DIAC rules
The decree was swiftly followed by the new DIAC rules, which came into effect on 21 March 2022. Their objective is to “deliver flexibility and choice to the parties, cementing DIAC’s position as the pre-eminent arbitral institution for disputes in the Middle East region”.
The rules complement the modern UNCITRAL-based 2018 UAE Arbitration Law, while being flexible enough to be used with any seat of arbitration agreed by the parties.
The new rules apply to both new requests for arbitration to DIAC and new arbitrations commenced under the rules of the abolished centres from 21 March 2022, unless agreed otherwise.
Under the new rules, parties should be aware of the following:
- The DIFC will be deemed the place of the arbitration unless otherwise agreed;
- This default DIFC seat triggers the application of the arbitration-friendly DIFC Arbitration Law No 1 of 2008 for procedural questions and makes the offshore common law English-speaking DIFC courts the relevant supervising court;
- In certain circumstances, parties may issue a single request for arbitration in respect of multiple claims arising out of, or in connection with, more than one agreement to arbitrate, then submit a request for consolidation of multiple arbitrations, and/or submit a request for joinder of a party;
- Disputes will be determined by a sole arbitrator, unless the parties specify otherwise or the Arbitration Court exercises its discretion to the contrary;
- Tribunals, after consulting the parties, may conduct hearings or meetings at any place, be it in person, by telephone, or through any other appropriate means of virtual communication, including video conferencing;
- The language of the arbitration will be the language of the arbitration agreement unless otherwise agreed;
- Prior to the constitution of the tribunal, a party who has entered into a third-party funding arrangement must disclose that fact to all other parties and the centre, together with details of the identity of the funder, and whether the funder has committed to an adverse costs liability;
- Expedited proceedings will take place, unless otherwise agreed, if the total of sums claimed and counterclaimed is below AED1m, or if the parties agreed in writing, or in cases of exceptional urgency as determined by the Arbitration Court, whereby an arbitrator will be appointed within five days of the Arbitration Court’s decision, and the award is to be issued within three months;
- The costs of the arbitration, to be assessed by the tribunal, will include the fees of legal representatives, unless expressly excluded.
Commercial parties should examine existing arbitration agreements to ensure they remain fit for purpose and correctly reflect the parties’ intentions, particularly if they refer to the rules of the abolished arbitration centres or the DIAC rules.
The modernised DIAC rules, incorporating measures such as consolidation and joinder, expedited procedures and disclosure of third-party funding arrangements, while designed to promote speed and efficiency, may not always correspond with the parties’ initial intentions when boilerplate clauses were drafted.
Parties should remain vigilant to ensure that the arbitration rules incorporated into their arbitration agreements correspond with their intentions and expectations for dispute resolution procedures and consider the recent legal reforms.
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