Arbitration in the UAE is going to change. For the better? The prospects are good.
Interest in international arbitration has shot up since the United Arab Emirates acceded to the New York Convention in 2006. The arrival later this year of the UAE’s first standalone arbitration law, coupled with proposed new arbitration legislation in the Dubai International Financial Centre, will heighten that interest.
UAE arbitration law
In February, the UAE Ministry of Economy announced the final draft of a new arbitration law. This was due to be ratified “within the next three months”. The proposed law is based on the UNCITRAL model law, with a schedule of amendments appended to it.
This format allows arbitration practitioners – whether from a common or civil law background – to identify at speed where it deviates from the model law. It is intended to inspire confidence.
The arbitration law will cover domestic and foreign arbitrations. Its provisions on enforcement will align with the UAE’s international obligations, such as those set out in the New York Convention. Existing inconsistencies between the UAE’s current arbitration framework and its obligations under the Convention should be ironed out.
DIFC arbitration law
The DIFC published its draft arbitration law in February and announced a 30-day consultation period. The new law – which will replace the DIFC’s existing legislation – is due for implementation.
As with its predecessor, the proposed law is based on the model law.
The most important change is the removal of restrictions on the jurisdiction of the arbitration law. Arbitration under current legislation is restricted to disputes where at least one of the parties is entitled to bring an action before the DIFC courts. The only disputes which can be arbitrated are disputes which arise between entities based in the DIFC, or which relate to contracts executed (or transactions concluded) in the DIFC, or which arise from incidents that have occurred in the DIFC.
The new law will do away with this restriction. Parties, both foreign and domestic, may adopt the DIFC as the seat of arbitration in their contracts irrespective of whether they have a connection to the DIFC.
The provisions of the new law are simpler than the existing legislation and track the model law more closely. This affects reciprocal enforcement of awards.
Under the draft law, the DIFC courts are bound by the terms of any treaties for the mutual enforcement of judgments, orders or awards which the UAE has ratified. This includes the New York Convention.
The law includes a provision confirming the application of Dubai Law No. 12 (2004). Arbitral awards (rendered under the DIFC’s legislation and ratified by the DIFC courts) are enforceable in Dubai without any power of review by the Dubai courts.
Our own arbitration practitioners – from Norton Rose (Middle East) LLP – were closely involved in the development of the DIFC law. It is designed to meet the needs of the international corporations now established in the DIFC.
DIFC LCIA Arbitration Centre
The London Court of Arbitration is one of the oldest and best-known institutions for commercial dispute resolution. The DIFC LCIA Arbitration Centre, launched in February 2008, is a joint venture with the LCIA and gives the DIFC its first arbitration institution.
Among the benefits to come from this association is the right to access the LCIA’s database of leading arbitrators. The Centre will also learn from the LCIA’s experience in the administration of arbitration proceedings.
The DIFC LCIA Arbitration Centre has its own rules of arbitration and mediation. The DIFC LCIA rules follow the LCIA’s rules, adapted to fit within the DIFC’s legal framework. The LCIA rules provide an established basis for conducting arbitrations. They have been used for the development of arbitration centres in Hong Kong and Singapore.