The last 12 months have seen significant positive developments in arbitration in the Middle East and globally which have been welcomed by the arbitration community. These include the promulgation of the new UAE Federal Arbitration Law, the opening of Abu Dhabi Global Market Arbitration Centre, the clarification on Ministerial Resolution No. 972 of 2017 in relation to the representation of lawyers licensed in Dubai having a right of audience, the ICC's publication of guidance on the conduct of arbitration under its arbitration rules and the launch of the Prague Rules on the Efficient Conduct of Proceedings in International Arbitration ("Prague Rules"). In addition to this, there have also been other substantial changes to the law, such as the UAE's introduction of new anti-corruption laws with extraterritorial effect, the removal of the threat of imprisonment for arbitrators in the UAE and the Abu Dhabi Courts becoming the first in the region to require English translation of Court documents. Here we present a summary of these key themes from 2018 and give our thoughts on what to expect in 2019.
The new UAE Federal Arbitration Law
On 3 May 2018, HH Sheikh Khalifa bin Zayed Al Nahyan, the President of the United Arab Emirates (UAE), issued Federal Law No. 6 of 2018 promulgating the country’s much anticipated new Federal Arbitration Law ("The New Law"). The New Law, which is heavily based on the UNCITRAL Model Law on International Commercial Arbitration, replaced and superseded Articles 203 to 218 of the Civil Procedures Code (Federal Law No. 11 of 1992 (as amended)) which previously governed arbitrations seated onshore in the UAE. The New Law applies to any arbitration conducted in the UAE, unless the parties have agreed that another law should apply (Article 2) and to ongoing arbitration proceedings, even if the arbitration agreement was concluded before the New Law came into effect (Article 59). The New Law brings a number of significant changes such as rules on when an award may be challenged, as well as easing the route to enforcement of awards by significantly streamlining the procedure and giving arbitration awards the status of Court judgments which can be ratified in the UAE Courts (thereby avoiding lengthy enforcement proceedings and reinforcing the New Law's alignment with the New York Convention. The New Law also expressly recognises the authority of arbitral Tribunals to order interim or conservatory measures and to issue interim or partial awards, which will be seen as beneficial to parties seeking to enforce them. For a more detailed insight, please click here.
Craig Shepherd, Head of the Global Contentious Construction Practice at Herbert Smith Freehills and Head of the Dubai Dispute Resolution team, commented: “The new Federal Arbitration Law is a very exciting development for the whole of the UAE. While the state has developed a reputation as the pre-eminent seat in the Middle East for arbitration, it did risk falling behind other nations who have introduced comprehensive new laws. That issue has now been addressed, and I am sure the new law will help cement the UAE’s position in the global arbitration market.”
Opening of the Abu Dhabi Global Market Centre
On 17 October 2018, the Abu Dhabi Global Market Arbitration Centre officially opened its doors in Al Maqam Tower, Al Mayrah Island to any parties looking to resolve their disputes through arbitration or mediation, offering parties a venue to hold their hearings equipped with state-of-the-art technology and facilities. The Abu Dhabi Global Market (ADGM) is a financial freezone in the UAE, which was established in 2013. Similar to the Dubai International Financial Centre (DIFC), the ADGM operates its own self-contained common law legal system and has three independent authorities, the Registration Authority, the Financial Services Regulatory Authority and ADGM Courts. Unlike the DIFC, which has created its own separate body of substantive laws, with English law only applied in the event of conflict or gaps in DIFC law, the ADGM directly incorporates English common law and a list of English statutes into its legal system by reference.
Clarification on Ministerial Resolution No. 972 of 2017
Previously, we considered the potential effect of Ministerial Resolution No. 972 of 2017 of the Executive Regulations to the Federal Legal Profession Law No. 23 of 1991 (the “2017 Regulations”). Please click here for more details. There was concern amongst the legal community that Articles 2 and 17 of the 2017 Regulations suggested that only UAE nationals could represent parties in UAE seated arbitration proceedings which appeared at odds with the pro-arbitration approach taken by the UAE. However, the Legal Affairs Department of the Government of Dubai has since circulated a letter confirming that all lawyers who are licensed in Dubai have the right of audience before any arbitral tribunal in Dubai, including foreign lawyers (who are registered as legal consultants with the Dubai Legal Affairs Department). The letter also confirms that visiting lawyers may also appear before arbitral tribunals in Dubai.
ICC publishes updated guidance on conduct of arbitration under its rules
The International Court of Arbitration of the International Chamber of Commerce (ICC) published updated guidance on the conduct of arbitration under its arbitration rules on 20 December 2018. The note to parties and arbitral tribunals on the conduct of arbitration under the ICC rules is seen as an effort to increase transparency and efficiency in the arbitral process. For example, the note clarifies that disclosures regarding independence and impartiality by arbitrators should address not only parties and their affiliates but also nonparties having an interest in the outcome of the arbitration. Further, the ICC Court will publish information relating to the sector or industry involved and counsel representing the parties, in addition to ICC Court's previous policy of publishing information relating to the composition of ICC tribunals and the status of the arbitration.
The note has also been seen as an effort to widen the range of services the ICC can offer to its users. For example, parties or co-arbitrations may jointly seek the Secretariat's assistance to propose a prospective sole arbitrator or presiding arbitrator and parties may agree that the appointment procedure be made in consultation between the parties and Secretariat.
A section of the note has been devoted to compliance with the European Union General Data Protection Regulation (GDPR), advising parties and their representatives of their duties in order to be compliant with data protection rules.
For further details on the updated note, please click here.
Launch of Prague Rules
The Prague Rules on the Efficient Conduct of Proceedings in International Arbitration (Prague rules) were launched on 14 December 2018 in the Czech Republic. The Prague Rules are intended to be an alternative form of rules to the International Bar Association Rules on the Taking of Evidence (IBA rules) and are an attempt to provide a streamlined procedure for appropriate cases.
The drafters of the Prague Rules argue they are designed to address numerous problems with the IBA Rules. For example, that the IBA Rules reflect closely the common law approach to disputes, with almost unlimited rights of parties to call witnesses of fact and experts and the assumption that proceedings will feature written statements, cross-examination and extensive document production. The new rules seek to heavily restrict disclosure, with parties told they should "avoid any form of document production, including ediscovery". The Prague Rules aim to bring a shift in these assumptions and have an approach of 'fact finding', where the tribunal can appoint its own experts, proactively establish the key facts relevant to the case and order parties to produce key documents. This allows the tribunals to have a more active role in managing procedure, which indeed in some jurisdictions, such as China, is expected of arbitrators. In essence, the Prague Rules are seen to make the dispute resolution process more efficient, cheaper, faster and professional.
It remains to be seen whether the Prague Rules are in fact the solution to procedural inefficacy. More generally, the Prague Rules have prompted a renewed discussion of procedural problems in international arbitration and how best to achieve efficiency, which is a welcome development for the arbitration community as a whole.
Please click here to review our Blog on the Prague Rules.
CHANGES TO LAW
UAE introduces new anti-corruption laws with extra-territorial effect
Federal Decree No. 24 of 2018 has amended certain provisions of Federal Law No. 3 of 1987 (the "Penal Code") to strengthen anti-corruption legislation in the UAE and bring it in line with other jurisdictions by including foreign public officials within its scope.
Crucially, the provisions, which are now in force, apply outside the UAE, to any person who commits a bribery offence if either the offender or victim is a UAE citizen, if the crime is committed by an employee in the UAE public or private sector or if it involves public property. There are also new powers for the UAE authorities to confiscate the proceeds of crime.
By including foreign public servants and employees of international organisations, the scope of the application has broadened to include individuals outside the UAE who seek to receive benefits in return for committing or refraining from doing an act that is mistakenly believed or alleged to fall within their job obligations.
Interestingly, Article 236 has been amended to now include arbitrators, experts and investigators as part of the definition of 'public servants' when applying provisions of Articles 234 and 237, which set out the categories of people whose behaviour may reach the threshold of corruption. If individuals in these categories commit an offence in this amendment then they may be subjected to a term of imprisonment of five years.
Threat of imprisonment for arbitrators in the UAE has been removed
Previously Federal Law No. 7 of 2016 amended Article 257 of the UAE Penal Code and created a risk of imprisonment for arbitrators in the UAE if they failed to maintain 'integrity' and 'impartiality' in their capacity as an arbitrator. There was a tangible and negative impact on some arbitral proceedings and thus to the image of Dubai as an arbitration-friendly jurisdiction, as machine-gun practitioners used the threat of Article 257 as a tactic to disrupt proceedings where they perceived it was in their client's interests to do so.
Federal Decree No. 24 of 2018 also amends Article 257 to remove this threat. This latest amendment is seen by the arbitration community in the UAE as a tremendously positive move and it follows on the heels of the new UAE Federal Arbitration Law. The new amendment gives relief to arbitrators, practitioners and parties alike and will give them added confidence to arbitrate in the UAE without the potential and harmful effects of Article 257 hanging over their proceedings.
Although arbitrators have been removed from the scope of Article 257, experts, translators and investigators are still included and could be subject to imprisonment "if they confirm a matter contrary to what is true and misrepresent a matter while knowing the truth about it". It remains to be seen how this provision will be interpreted.
Abu Dhabi Courts become the first in the region to require English translation of Court documents
On 11 November 2018, the Abu Dhabi Judicial Department issued Administrative Circular No. 30 of 2018 which requires claimants to translate case files into English in civil and commercial cases which involve defendants who do not speak Arabic. This makes the Abu Dhabi government the first in the Middle East to require Court documents to be translated into English. The circular requires the claimant to provide English translations for summonses (the document that is sent to a defendant to start a claim against them), particulars of claim and any other evidential documents attached to the claim. English is the only language into which documents may need to be translated. The circular further provides that the claimant can claim the cost of the translation from the defendant if it eventually prevails in the proceedings. The new rules only apply to civil and commercial cases and do not apply to labour Court or criminal cases (given that in these cases individuals may be discouraged if faced with the financial burden of providing translations at the start of proceedings).
Non-Arabic speakers make up a majority of the UAE's population and multinational companies often favour arbitration (in English) or the English language Courts of the DIFC and, more recently, the ADGM as a forum of dispute resolution rather than the Arabic language Courts. However, the new rules, which came into effect on 11 November 2018, aim to boost foreign investment in line with the Abu Dhabi government's "Economic Vision 2030" to expand investment in the Emirate and allay the concerns some foreign companies have in dealing with the domestic Courts.
More UAE-seated arbitrations
The New Arbitration Law is designed to support the UAE’s unprecedented economic growth and ensure a secure environment for investments within the UAE economy, by providing a properly structured procedural framework for domestic and international arbitrations seated in the UAE. The New Law’s alignment with international standards and best practice will undoubtedly assist in building on the UAE’s reputation as the preferred seat for international arbitration in the MENA region and position the UAE as a global arbitration hub alongside Singapore, London and New York.
Increased appointments of arbitrators due to amendment of Article 257
The previous law posed a risk for arbitrators, particularly because the words ‘integrity’ and ‘impartiality’ are not defined in the UAE criminal law. As the investigatory powers of the UAE Police are wide-ranging, arbitrators risked sanctions including confiscation of their passport and temporary imprisonment whilst an investigation process ran its course. The threat of criminal sanctions led some sitting tribunal members to resign and other respected arbitrators to decline appointments to sit on UAE tribunals. The amendment of Article 257 will see a reversal of this effect and allow arbitrators to accept appointments as it gives relief to arbitrators, practitioners and parties alike and will give them added confidence to arbitrate in the UAE without any hesitation that they may be subject to criminal sanctions or involved in lengthy investigation processes.
Stricter anti-corruption laws building confidence in the community
By extending the scope of the UAE's anti-bribery and corruption laws, the UAE has taken a positive step in combating corruption, not just within its own borders, but now beyond with the extra territorial effect. We consider that the stricter anti-corruption laws will build confidence in the community to conduct business in the region and invite further opportunities for investment. These amendments may foreshadow increased enforcement activities as the greater powers available to law enforcement authorities are put into effect thus strengthening the perception that in the Middle East, the UAE is the best place to do business.
Parties opting for alternative rules of evidence
The Prague Rules will be most relevant to disputes for which limited evidence is appropriate, where the parties share the same preferences on what their procedures should look like, particularly if they are more comfortable with procedures based on civil law approaches. It is likely that we will see a number of parties from civil law jurisdictions opting for the Prague Rules instead of the IBA rules in 2019.