The DIFC has amended its arbitration law to ensure alignment with the New York Convention, putting an end to uncertainty over the power of the courts to dismiss or stay an action.

On 15 December 2013, the DIFC adopted an amendment to DIFC Law No.1 of 2008 (the DIFC Arbitration Law), to ensure compliance with article II(3) of the New York Convention (to which the UAE acceded in 2006).

Article II(3) imposes an obligation on the courts of a contracting state to dismiss or stay an action, upon request of a party, in a matter which is the subject of a valid arbitration agreement. Prior to the DIFC amendment, there was doubt over whether the DIFC Arbitration Law gave full effect to this: article 13(1) did not expressly state that the power of the DIFC courts to stay proceedings in favour of arbitration proceedings applied to arbitrations seated outside the DIFC.

The issue came to light in two conflicting decisions of the DIFC Court of First Instance in 2012. In Injazat Capital Limited v Denton Wilde Sapte, the DIFC Court (Justice Sir David Steel) declined to stay an action in favour of an LCIA arbitration in London. However, in IES v Al Fattan Engineering, the DIFC Court (Justice David Williams) ruled that, while article 13(1) of the DIFC Arbitration Law did not explicitly provide for the power to stay proceedings in favour of a non-DIFC seated arbitration, the DIFC Court could nevertheless use its ‘inherent discretion’ to stay such matters.

These conflicting decisions caused concern and anxiety among the arbitration community in Dubai, but the position has been put beyond doubt by the DIFC amendment. This provides that the power to stay proceedings now also applies ‘where the Seat of Arbitration is one other than the DIFC’ and ‘where no Seat has been designated or determined’ (article 7(2) and (3)).

This welcome development reinforces the DIFC’s reputation as an arbitration-friendly jurisdiction.

Dubai International Financial Centre

The DIFC is a federal financial free zone situated in the Emirate of Dubai, UAE. It has its own legal system (and arbitration law) and courts distinct from those of the wider UAE, based on the common law system.