Federal Law No. 6 of 2018 Concerning Arbitration (the "New Law") came into force on 16 June 2018. It applies to all arbitrations seated in the United Arab Emirates ("UAE") (excluding the DIFC and ADGM), and includes arbitrations already underway.
Prior to the New Law, arbitration in the UAE was regulated through Articles 203 to 218 of the UAE Civil Procedures Law (the "CPL"). These Articles of the CPL, which have been in force since 1992, have now been repealed, and therefore still have effect.
The New Law largely incorporates the UNCITRAL Model Law (2006) (the "UNCITRAL Model"), widely regarded as an international benchmark against which arbitration laws can be compared. However, around half of the now-repealed CPL provisions can be found in the New Law.
The result is a blend of new and old – the UNCITRAL Model as a framework, with some old traditions of UAE arbitration at its heart. The New Law should provide more certainty, and give arbitrators more confidence to proceed with, and conclude, proceedings more efficiently. Much will depend ultimately on how the UAE Courts discharge their supervisory function, by supporting the arbitral process and enforcing awards swiftly.
- Agreeing to arbitrate: As before, a company representative must be properly authorised to enter into an arbitration agreement or the agreement will be void (Article 4). As long as the arbitration agreement is in writing, the requirements of form have been relaxed, which now expressly recognise exchange of correspondence and incorporation by reference to be legitimate provided there is sufficient clarity (Article 7).
- Avoiding an arbitration agreement: As before, an arbitration agreement may be waived if proceedings are commenced before the UAE Courts, and the defendant fails to plead the existence of the arbitration agreement immediately, before addressing the merits of the dispute (Article 8).
- Waiver of right to object: The New Law requires a party to object within seven (7) days if it considers any term of the arbitration agreement or New Law has been breached, failing which a party is taken to have waived its right to object (Article 25). Parties are at liberty to agree a different time period if they wish. However, it appears that an annulment action will be admissible if a party has waived previously its right to object (Article 54(5)). This presents an uncertainty, and will be left to the UAE Courts to determine.
- Interim measures: UAE Courts and tribunals (see Articles 18 and 21, respectively) may grant interim measures of protection necessary to preserve a party's rights. As attachment orders were the typical form of interim measure available previously, it remains to be seen whether other remedies may become available by reason of the New Law.
- Interim awards: Tribunals may now issue interim/partial awards (in addition to final awards), which will be enforceable by the UAE Courts (Article 39).
- Awards: Awards are now deemed final and binding, but still require ratification by the UAE Courts for enforcement (Article 52). The requirement for signing of awards in the UAE has been removed, and the New Law specifically contemplates signing by each arbitrator at a different time and location, in person or electronically (Article 41(6)).
- Enforcement: Although the New Law contains specified grounds for challenge/annulment of awards, there are now more grounds for challenge than in the CPL. Enforcement, and the scope for challenge/annulment, will depend on the approach adopted by the UAE Courts. Applications for ratification or challenge/annulment are now to be made directly to the Court of Appeal. Although there is a 30 day time limit for a party to apply to annul an award, there is also the right to seek annulment in response to an application for ratification, presumably at any time.
- No immunity for arbitrators: While the New Law makes it clear that arbitrators owe a duty of impartiality, there is no immunity. The New Law however removes consequences under the CPL for an arbitrator resigning unjustifiably or for failing to perform their duties.
While an arbitration law provides the overall framework within which arbitration is to be regulated and conducted, the chosen arbitration rules (if any) govern the majority of practical steps. Those practical steps tend to consume much of the time and cost faced in any arbitration. As such, where parties have agreed to conduct their arbitration under the rules of established arbitral institutions (such as DIAC, DIFC-LCIA or ICC, etc.), we expect that arbitration in the UAE will likely continue to take place, at least for now, without any significant difference.
The greatest impact will likely be seen in ad hoc arbitrations, being those where the parties have not chosen any arbitral rules. In such instances, the New Law provides a more detailed base procedural framework, with short time limits, for particular steps to take place.
The true effect of the New Law will depend, ultimately, on the extent to which the UAE Courts will be supportive of the arbitration process, mindful also that a key element of the UNCITRAL Model is to minimise court intervention. It remains to be seen whether the scope for challenge/annulment and delays during the enforcement process will be reduced.
Mindful of the above, we examine some further questions asked typically by users of arbitration in the UAE.
Will arbitrations now be concluded more quickly?
To the extent that tribunals remain sensitive about the risk of challenge to awards, timeframes are likely to remain much the same.
The New Law is far more prescriptive than the old regime, which should add force to the arbitral rules chosen by the parties (if any), and the ability of tribunals to manage the process with greater confidence. While there should now be less scope for a party to exploit uncertainties under the arbitration law to frustrate the process, this remains a hazard in the UAE.
Proceedings will no longer be suspended in certain circumstances, such as where a party challenges an arbitrator (Article 15(3)), or where an allegation of forgery or crime is raised by a party but where the tribunal considers such to be immaterial (Article 43).
Tribunals must treat parties equally, and afford each sufficient opportunity to present their respective cases. Further, there is established authority, and specific reference in the New Law (see Article 30(3)), affording a party the right to defend itself. Even though a tribunal is empowered to proceed with an arbitration where a respondent fails to submit its defence (see Article 32(2)), tribunals will probably remain inclined to adopt a conservative approach.
Can parties be represented in arbitral proceedings by any lawyers?
Article 33(5) of the New Law permits parties to be represented by any person of their choice, including lawyers. This provision should remove any doubts that remained following Ministerial Resolution No. 972 of 2017, and the concerns that only UAE advocates appearing on the roll administered by the UAE Ministry of Justice were permitted to represent parties in UAE-seated arbitration. Although The Government of Dubai Legal Affairs Department declared, in December 2017, that any person with legal qualification may act as party representative in arbitrations, the position outside the Emirate of Dubai was not certain.
In relation to proof of authority required by any party representatives, tribunals often request a notarised power of attorney, even though not a requirement under the CPL, but instead a creature of custom derived from the UAE Courts. Under Article 33(5) of the New Law, a tribunal may, if it chooses, ask any party to submit as much proof of authority as it deems fit.
Will enforcement now be easier?
Applications for ratification are now to be made directly to the Court of Appeal, presumably in the Emirate where enforcement is sought. Previously, consistent with any civil case, the Court of First Instance had original jurisdiction, thereby enabling almost any judgment on ratification/challenges to be appealed from the Court of First Instance, through to the Court of Appeal and finally to the Court of Cassation. Designating a more senior court with original jurisdiction will reduce the avenues of appeal (shortening the overall timeframe), and should provide for a more thorough process overall.
Article 53 of the New Law sets out an exhaustive list of grounds for challenging an award, which expands slightly on those available umder the UNCITRAL appear in the UNCITRAL Model. There are now more specified grounds upon which a party may seek to challenge an award than were contained in the CPL (but were in reality available). The following grounds for annulment, in particular, are broad in scope:
- The award fails to apply the law agreed by the parties to govern the subject matter of the dispute (Article 53(1)(e)).
- There were invalid procedures in the arbitration that affected the award (Article 53(1)(g)).
- The award breaches public order and public morals of the UAE (Article 53(2)(b)). A UAE Court may, on its own initiative, set aside an award on this basis.
Such broad grounds have the potential to allow an award debtor to raise spurious objections, which may risk delaying the determination of an application for ratification.
The procedures for enforcement must be approached carefully, mindful of the following:
- Unlike before, the New Law provides a party with a 30 day time limit to apply for annulment of an award (Article 54(2)). That said, a party may seek annulment in response to an application for ratification (Article 53(1)), presumably at any time as there is no time limit to seek ratification.
- Although the Court of Appeal is obliged to determine ratification applications within 60 days, such time limit does not apply where it finds that any of the grounds for annulment under Article 53(1) has been satisfied (see Article 55(2)).
- Although a judgment rendered by the Court on any action for annulment (made within the said 30 day time limit) is not subject to any appeal (Article 54(1)), there appears to be a general right of appeal of any judgment ordering or rejecting ratification (Article 57).
The UAE Courts will need to determine the interplay between the various provisions, and, ideally, establish a clear practice and approach towards enforcement. Otherwise many of the uncertainties faced under the old regime will remain, and at worst will be amplified.
Which key parts of the UNCITRAL Model are missing from the New Law?
There are a number of provisions of the UNCITRAL Model that are missing from the New Law, in particular the following, which could have an impact on its application by the UAE Courts:
- The interpretation rules under Article 2A, to recognise the international origin of the UNICTRAL Model and the need to promote uniformity in its application. These provisions could have encouraged the UAE Courts, and arbitrators, to look beyond the arbitration law and practice prevailing in the UAE and consider the general principles that have emerged, and been refined, internationally. As such, it is reasonable to expect that the New Law will be applied based only on principles that exist in the UAE.
- Under Article 5, the express restriction on courts to intervene in arbitration proceedings except where so provided in the enacted arbitration law. Such an omission is not, in itself, problematic, but the UAE Courts may infer that they have absolute power to intervene.
Parties currently involved in an arbitration: points for consideration
Any party that was involved in arbitration proceedings as at 16 June 2018, when the New Law came into force, needs to consider whether its rights and obligations have changed, depending on the particular circumstances of the dispute, and/or the arbitration procedure. At the very least, the following are worthy of consideration:
The procedure for an ad hoc arbitration currently in progress may now be more certain.
It may now be possible to apply for interim measures, either from the tribunal or UAE Court.
If a party knows that a term of the arbitration agreement or New Law has been breached, it must now lodge its objection within seven (7) days (or such other period as the parties agreed).
If any tribunal member is based overseas, he or she is now permitted to sign any award outside of the UAE, and for each tribunal member to sign at different times, which may enable awards to be rendered more quickly (and inexpensively) than before.
An application to ratify an award must now be made directly to the Court of Appeal.
A losing party now has only 30 days to seek annulment of an award under any of the specified grounds, although it may still make its case for annulment in response to the winning party’s application for ratification.