There is no doubt that the UAE has been steadily establishing itself as a global arbitration centre by developing the Dubai International Arbitration Centre (“DIAC”) , Dubai International Financial Centre–London Court of International Arbitration (“DIFC–LCIA”) and the Abu Dhabi Commercial Conciliation and Arbitration Centre amongst others. As we set out in this 21st issue of IQ, there have been a number of recent developments which have served at least to raise questions about how that development might continue.
At the end of October last year Article 257 of the UAE Federal Penal Code No. 3 of 1987 was amended by Federal Decree Law No. 7 of 2016. The UAE Federal Penal Code applies in the DIFC and ADGM just as it does elsewhere throughout the UAE. The amended article reads as follows:
“Anyone who issues a decision, expresses an opinion, submits a report, presents a case or proves an incident in favour of or against a person, in contravention of the requirements of the duty of neutrality and integrity, while acting in his capacity as an arbitrator, expert, translator or fact finder appointed by an administrative or judicial authority or selected by the parties, shall be punished by temporary imprisonment.
The aforesaid categories of persons shall be barred assuming once again the responsibilities with which they were tasked in the first instance, and shall be subject to the provisions of Article 255 of this Law.”
The essential change to Article 257 was to extend provisions that have been in existence for many years in relation to court-appointed experts and translators, to party-appointed experts and arbitrators.
Considerable concern has been expressed at the impact of this amendment. At Fenwick Elliott, we have experienced one expert resigning from their role in an ongoing arbitration, as a consequence of the change. We are aware of other experts and also arbitrators who have resigned from ongoing disputes. We have also noticed when contacting potential arbitrators and experts that some have indicated that they are currently not prepared to accept appointments where the arbitration is based in the UAE. Suggestions have been made that the seat of the arbitration should be moved away from the UAE.
The obvious reason for this is that the new provisions might possibly be misused in order to disrupt arbitration proceedings, and certainly it is easy to see how the new legislation could be used to put what would be illegitimate pressure on experts and arbitrators. There is no doubt that arbitrators and experts are concerned at the prospect of threats or actual vexatious criminal complaints being made if they are sitting in the UAE.
Everyone accepts, and more importantly expects, that arbitrators and experts will act fairly and without bias. Arbitrators are typically subject to requirements of independence and impartiality. For example, under the DIAC Rules, Article 9.1 provides that:
“All arbitrators conducting an arbitration under these Rules shall be and remain impartial and independent of the parties; and shall not act as advocates for any party in the arbitration.”
Under Article 9.8, arbitrators have a continuing duty to disclose to the DIAC, other members of the Tribunal and the parties any circumstances that may arise during the course of the arbitration that are likely, in the eyes of the parties, to give rise to justifiable doubts as to their independence or impartiality.
Article 23 of the Abu Dhabi Global Market (“ADGM”) Arbitration Regulations provides that:
“No arbitrator, arbitral institution or appointing authority, or any employee, agent or officer of the foregoing shall be liable to any person for any act or omission in connection with an arbitration unless they are shown to have caused damage by conscious and deliberate wrongdoing.”
That said, although a new arbitration law is said to be in draft, the UAE does not have a modern arbitration statute at present. The current arbitration provisions, which can be found in Articles 203 to 218 of the Civil Procedure Code, expect arbitrators to be, and remain, free of any conflict of interests. Article 207(4) of the said Code states that:
“a request for disqualification must be based on the same grounds on which a judge may be dismissed or deemed unfit for passing judgment.”
The grounds for challenging a judge mainly relate to the existence of circumstances that might affect their impartiality and independence. Therefore arbitrators can be challenged and removed for the same reason. However, as noted, Article 257 will apply, notwithstanding what the appropriate arbitration rules or regulations provide. There is no definition of the words “neutrality” and “integrity” under UAE criminal law. In theory it is possible to argue that anyone subjectively could be viewed as violating these requirements. It would be preferable for there to be a clear description and definitions of actions and inactions such that if an arbitrator or expert commits them, he or she will be deemed to have failed to maintain the requirements of integrity and impartiality.
This lack of a definition might widen the scope of the article. It might also increase the chances of an arbitration being derailed (or suspended) whilst an accusation is investigated. This could take many months. For arbitrators and experts, they also risk having their passports confiscated whilst the criminal investigations are carried out. This risk is what is leading to many arbitrators and experts deciding that they are not prepared to accept appointments.
This risk is not resulting in every expert and arbitrator declining to act. As we said previously, not everyone has responded to our enquiries by indicating that they are currently not prepared to accept appointments where the arbitration is based in the UAE. Other have indicated that, for now at least, they are prepared to continue to consider accepting appointments. However, that sentiment should not be seen in any way to lessen the concern that is being felt across the board. It remains to be seen how the new provisions will be applied. No doubt, if there is a well-publicised attempt to make use of the new law, that concern will increase. And it is likely that any attempt to make use of the new law would be well publicised, thereby also bringing what was a confidential arbitration process out into the open. Such a step would also serve to increase the viewpoint that the UAE is currently not somewhere where individuals and companies feel comfortable conducting arbitrations.
We understand that representations are being made at the highest level to amend or repeal the amendments to Article 257 and we hope that the outcome of those representations will lead to a change; otherwise it is quite possible that the efforts that have been made over the past years to promote the UAE as an arbitration centre will be seriously undermined.