International Arbitration 2020

Last Updated August 18, 2020

United Arab Emirates

Law and Practice

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Horizons & Co Law Firm has an arbitration team which is renowned for having expert knowledge of the new UAE Arbitration Law, and is regularly called upon by various publications to provide in-depth commentary on the new law. With the addition of two highly qualified barristers, the adept arbitration team is one of the firm's greatest assets. The firm's clients appreciate the combination of international and local lawyers, meaning arbitrations can be conducted in Arabic as well as English before the differing dispute resolution fora within the UAE. Contractors, sub-contractors, developers and suppliers make up the firm's arbitration client base, with the majority of arbitration matters entailing contentious construction and real estate matters, and public and private law disputes. The team recently acted on behalf of a major UAE contractor in a construction dispute before ADCCAC, against an Abu Dhabi state-owned entity in relation to construction upgrades to an air force military base.

Although it is true that, historically, domestic parties had a noticeable preference for local court-based litigation, arbitration has now increasingly become a popular method of dispute resolution in the UAE, which has long been a regional hub for international arbitrations. The UAE also enjoys a standalone Arbitration Law since 2018. The introduction of the Arbitration Law brought with it great improvements and a renewed appetite to arbitrate.

Many of the historic obstacles that deterred many from using arbitration have now disappeared, thus significantly improving the UAE legal regime on arbitration.

The further development of arbitration in the UAE is similarly reflected by the presence of several domestic institutions in the UAE which administer commercial arbitrations. Examples of these institutions are as follows:

  • the Dubai International Arbitration Centre (DIAC),
  • the DIFC London Court of International Arbitration (DIFC-LCIA) Centre,
  • the Abu Dhabi Conciliation and Arbitration Centre (ADCCAC),
  • the Sharjah International Commercial Arbitration Centre; and
  • the Ras Al-Khaimah Commercial and Arbitration Centre.

Given the nature of the UAE’s economy, and in particular that of the Emirate of Dubai, the majority of the arbitrations in the jurisdiction continue to be related to construction and real estate disputes.

Although construction and real estate arbitrations certainly constitute the lion’s share of cases in terms of volume, there is an increasing willingness of parties to arbitrate matters of a general commercial nature, with an increase of commercial JV disputes particularly noticeable.

International arbitrations have not been spared the chaos of the COVID-19 pandemic. Although many commentators stated at the beginning of the pandemic that international arbitration by its very nature would be able to adapt to the disruption of with the pandemic due to the flexible nature of proceedings and ease of access to/communication with tribunals, in reality, deadlines have been significantly pushed back, procedural timetables have undoubtedly been amended to absorb sizeable delays, issues such as document production requests have ceased to be adhered to, and final hearings have had to be postponed. Although the usage of modern means of communication and specifically video conferencing software has increased, as yet there is still a noticeable reluctance to agree to final hearings via conference (the preference still being an in-person hearing).

As indicated above, key industries continue to be construction and real estate arbitrations. The nature of construction disputes tends to be technical and complex and generally requires an expert to determine the issues in question. Local court-appointed experts are, generally speaking, not deemed to have the requisite experience and technical ability to deal with these types of construction disputes. Additionally, the major construction works in the UAE are predominantly procured by the Government, who in turn appoint international contractors and engineering companies. These international contractors more often than not prefer the use of arbitration in their contracts to allow any disputes to be heard by arbitration tribunals with which they are better acquainted. 

The previous arbitration chapter for the UAE was comprised of a handful of unclear provisions within the Civil Procedure Law. Significantly, in May 2018 a standalone, comprehensive Arbitration Law was announced, Federal Law No 6 of 2018. The Arbitration Law now aligns with international standards and the changes implemented are intended to increase efficiency in proceedings, reduced legal costs and offer greater confidence and certainty for dispute resolution in the UAE. 

Before the change to the law, many international companies and investors doing business in the UAE would have selected the seat of arbitration to be abroad or within a UAE-free zone, and would have chosen institutional rules which were globally recognised, such as the International Chamber of Commerce (ICC). In light of the modernisation to the arbitration law, although in its infancy, it is likely that the UAE will see an increase in the use of onshore arbitration centres such as the Dubai International Arbitration Centre (DIAC) and the Abu Dhabi Conciliation and Arbitration Centre (ADCCAC).

Unlike its predecessor, the Arbitration Law is now heavily based on the UNCITRAL-based model of arbitration legislation. The Arbitration Law also distinguishes between the characteristics of a domestic and international arbitration (Article 3 of the Arbitration Law). Article 2 of the Arbitration Law sets out its applicability, including:

6.       proceedings conducted in the UAE unless the parties agree that another arbitration law applies, but it must not be in conflict with the public policy of the State. This is because, at the point of enforcement, the court can nullify an award if it violates the public order and morality of the UAE;

7.       any international commercial arbitration conducted abroad provided the parties agree on the Arbitration Law being applicable;

8.       any arbitration arising from a dispute which is capable of being arbitrated in the UAE.

The new Arbitration Law (Federal Law No 6 of 2018) came into force in June 2018, a month after it was announced in the Legal Gazette. The Arbitration Law repealed the majority of the arbitration chapter held within the Civil Procedure Law, but not its entirety. Articles within the Civil Procedure Law relating to the enforcement of foreign arbitral awards and judgments remained unchanged. Consequently, there were question marks concerning the appropriate mechanism to enforce a foreign award on the basis of the New York Convention, or whether foreign awards could enjoy the same expedited enforcement process through Article 55 of the Arbitration Law.

In February 2019, Cabinet Resolution No 57 of 2018 came into force, which updated a number of the provisions within the Civil Procedure Law, including the clauses relating to the enforcement of foreign awards, orders and judgments. The revision to the law has established a slightly shortened procedure for the enforcement of foreign awards and much-needed clarification.

In order for an arbitration agreement to be enforceable, it must be in writing. An arbitration agreement will be considered to have met the in-writing requirement if it satisfies any of the conditions set out at Article 7(2) of the Arbitration Law, namely:

9.       it is included in a document signed by both parties, noted in an exchange of written communications or in the form of electronic message such as an email, subject to the applicable rules concerning electronic transactions in the UAE;

10.       if, in a written contract, there is reference made to provisions of another agreement or any other document containing an arbitration clause and the referral is explicit in considering that clause as part of the contract;

11.       the arbitration agreement was made during the hearing of the dispute before the competent court. In such a circumstance, the competent court would confirm the presence of an arbitration agreement, leaving the parties to commence the arbitration at such a place and time as specified under the rules governing its proceedings, while ruling that the current action is void;

12.       it is included in written submissions exchanged between the parties during the arbitration proceedings or is acknowledged before the competent court, where one of the parties requests referral of the dispute to arbitration and the other party does not object to the request. 

The legal and mental capacity of the person signing an arbitration agreement is also essential when considering the enforceability thereof and final award rendered by a tribunal.

In order for an individual to have the legal capacity to enter into an arbitration agreement, they must either hold a valid special power of attorney explicitly authorising them to enter into arbitration on behalf of the company, or be a named manager on the commercial licence. The company’s Memoranda of Association should also be reviewed to ensure that there are no restrictions on the manager(s)' powers to arbitrate.

The consequence of the signatory not having the prerequisite legal capacity to enter into arbitration will make the arbitration agreement void, and any final award issued by the Tribunal will be at risk of nullification. In addition, if the signatory lacked or had diminished mental capacity at the time of entering into the arbitration agreement, this could also be a ground for challenging the final award. 

Arbitration can be used as an alternative form of dispute resolution, provided that the dispute is not expressly excluded by a special provision of UAE law. Some matters which cannot be arbitrated are criminal acts, bankruptcy disputes, labour disputes and matters relating to public policy. 

The concept of public policy is widely defined under Article 3 of the UAE Civil Code, Federal Law No 5 of 1985 and encompasses “…matters relating to personal status such as marriage, inheritance, lineage, matters relating to systems of government, freedom of trade, circulation of wealth, rules of individual ownership and other rules and foundations upon which society is based…”.

An arbitration agreement must be in writing, unambiguous, and signed by both parties and the signatories must have the legal capacity to relinquish their right of recourse before the UAE Courts, and commit themselves or their company to arbitration. Provided the courts are satisfied to that effect, then an arbitration agreement will be enforced and the court will decline to entertain the dispute referred to them. However, the Respondent to any action must ensure they plead to the existence of a valid arbitration agreement before advancing any motion on the merits of the claim. 

The concept of separability, an arbitration agreement which is independent from other clauses within a contract, is recognised in the UAE. Article 6(1) of the Arbitration Law confirms that any nullity, rescission or termination of a contract shall not have any effect on the arbitration agreement, provided the arbitration agreement is valid.

Parties are free to select anyone as an arbitrator provided they meet the qualifications agreed upon between the parties. Such a decision is dependent on the factual background of the dispute, but may include requirements such as the arbitrator coming from a civil law background with a minimum level of experience in construction.

Notwithstanding that there are limits on who can become an arbitrator, as stated in the Arbitration Law, for instance:

13.       a minor;

14.       an individual who has declared bankruptcy;

15.       an individual who has committed a criminal offence, namely, a felony or misdemeanour conviction involving breach of trust; and 

16.       a person on a board of trustees or the administrative body of arbitration institutions responsible for administering arbitration in the UAE.

If the parties’ chosen method for selecting arbitrators fails, the Arbitration Law provides a procedure for the appointment of both a sole arbitrator and Tribunal.

If the parties cannot agree on the sole arbitrator within 15 days from a party submitting a request to the other party asking for such an appointment, the relevant arbitration centre and/or the court can appoint the nominated arbitrator, at the request of a party.

If three arbitrators need to be appointed, each party will be required to appoint one arbitrator each and then the appointed arbitrators will choose the chairperson. If one of the parties fails to appoint their nominee within 15 days of receipt of the other party’s nominee, or if the two arbitrators fail to agree on the chairperson within 15 days of the second arbitrator being appointed, upon the request of a party the relevant arbitration centre and/or the court can appoint the chairperson.

The decision of the arbitration centre and/or the court in both scenarios cannot be appealed by the parties, without prejudice to a party’s right to challenge an arbitrator on grounds of his or her impartiality or independence, or because the arbitrator does not possess the qualifications agreed upon by the parties.

There is nothing specifically within the Arbitration law that disallows multi-party arbitrations. In practice, importantly, the institutional rules of the differing arbitration centres largely recognise and accept multi-party arbitrations.

Typically, where arbitrations are subject to the institutional rules of an arbitration centre, and there is no prior agreement between the parties about the procedure of appointment of arbitrators, the arbitration centre will intervene to appoint a sole arbitrator or tribunal if the parties fail to reach agreement. 

If the arbitration is subject to the Arbitration Law without the involvement of a UAE arbitration centre, the court can intervene to complete the constitution of the tribunal, provided a party has requested such an intervention. Similarly, if a party violates the agreed procedure for the selection of arbitrators, another party can request that the court appoint an arbitrator.

The party submitting such a request to the court must forward that request to all the parties and any arbitrators already appointed. The court, when deciding on an appropriate candidate, must have regard to the qualifications of the arbitrator as prescribed by the law or through the agreement of the parties. The qualifications required by arbitrators are set out at Article 10 of the Arbitration Law.   

An arbitrator may be challenged if a situation exists that gives rise to doubts as to their impartiality or independence, or they do not possess the necessary qualifications to act as an arbitrator. Such a challenge can be initiated by a party 15 days after becoming aware of the appointment of an arbitrator, or after becoming aware of the circumstances giving rise to the challenge. If the challenged arbitrator does not withdraw or the other party does not agree to the challenge within 15 days of receiving the notice of challenge given to the arbitrator, the challenging party can bring the matter before the relevant arbitration centre or the court. The arbitration centre or the court then has ten days to decide on the challenge and their decision is not appealable.

An arbitrator can also be removed from a tribunal if they become unable to perform their duties and as a result it interrupts the arbitration in such a way that it causes undue delay, or the arbitrator deliberately neglects to act under the arbitration agreement. 

Arbitrators are required from the moment they are nominated and throughout the arbitral proceedings to disclose in writing, to all the parties and arbitrators, anything which may give rise to doubts as to their impartiality or independence (Article 10(4) of the Arbitration Law). Such disclosure would include issues like past or present affiliations to the parties, their subsidiary companies or legal representatives, knowledge of the current dispute or dealings on matters involving the same parties. Such a disclosure in relation to conflict of interest and an arbitrator’s duty to be unbiased is also required under the Dubai International Financial Centre (DIFC) Arbitration Law.

Subject-matters which cannot be arbitrated in the UAE include matters which relate to public policy, or are reserved for the jurisdiction of UAE courts only, such as:

17.       criminal acts;

18.       bankruptcy disputes;

19.       labour disputes;

20.       commercial agency and distributorship disputes which are subject to the exclusive jurisdiction of the court in accordance with Article 6 of the Federal Law No 18 of 1981, Commercial Agency Law (as amended);

21.       matters relating to public policy as defined under Article 3 of the UAE Civil Code.

A tribunal itself has the capacity to decide jurisdiction which includes a party contending the existence or validity of the arbitration agreement, or that the subject-matter of the dispute cannot be referred to arbitration. The tribunal can itself rule on jurisdiction either as a preliminary issue or in the final award on the merits.   

The court has exclusive jurisdiction over arbitrations until the conclusion of the proceedings. However, the court can only address the issue of a tribunal’s jurisdiction if:

22.       a party has requested the court to decide on the matter, following the tribunal’s ruling that they have jurisdiction as a preliminary issue (Article 19(2) of the Arbitration Law); or

23.       the tribunal rules they have jurisdiction over the arbitration within the final award, then the award debtor may challenge the validity or existence of the arbitration agreement in order to nullify the award. In such an instance, the court would then have to assess the jurisdiction of the tribunal (Article 53(1) of the Arbitration Law).

Negative rulings can be reviewed by the UAE courts only when a party challenges the award under Article 53 of the Arbitration Law or when a party invokes Article 54 to set aside the award, ie, the courts can review such rulings only within the framework of the challenge regime of final awards. Article 19(2) of the Arbitration Law which provides that a party can request the court to review the arbitral tribunal’s ruling on jurisdiction applies only when the tribunal accepts jurisdiction, but not when it declines it. 

A negative ruling on jurisdiction can only be challenged by recourse to the formal challenge provisions contained in Articles 53-54 of the Arbitration Law. This is because a negative ruling on jurisdiction will take the form of a final award, which will terminate the arbitration proceedings. It therefore follows the challenge regime of final awards under the FAL.

It is essential that parties advance any objection to the tribunal’s jurisdiction at the correct stages of the proceedings, otherwise this right will be considered waived. Any such challenge can be advanced before the tribunal is formed and after they are constituted.

Article 20 of the Arbitration Law confirms that such a challenge must be raised by no later than the submission of the respondent’s statement of defence. If a party then contends that the issues raised by the other party during a hearing go beyond the scope of the arbitration agreement, the party must raise this objection at the following hearing. 

Thereafter, the tribunal can either determine the issue of jurisdiction as a preliminary issue or within the final award on the merits (Article 19(1) of the Arbitration Law).

If a party objects to the tribunal’s decision that they have jurisdiction as a preliminary issue, a party may, within 15 days from being notified of the tribunal’s ruling, request the court to decide on the matter. The court is required to render their determination within 30 days of receiving the party’s application, which cannot be appealed (Article 19(2) of the Arbitration Law). While the court’s decision is pending, the arbitration will be suspended unless a party requests that the tribunal continue the proceedings. However, there will be cost implications for the party that requests the proceedings to continue in the event that the court rules that the tribunal does not have jurisdiction.   

An award debtor is then offered the final opportunity to challenge the tribunal’s jurisdiction once the final award has been rendered, by relying on certain provisions under Article 53(1) of the Arbitration Law, namely:

24.       that no arbitration agreement exists;

25.       that the signatory of the arbitration agreement was mentally incompetent under the laws governing capacity; or

26.       the signatory did not have the legal capacity to dispose of the right to arbitrate. 

No standard of judicial review (eg, deferential or de novo) applies in the UAE for questions of admissibility and jurisdiction.

Prior to the enactment of the Arbitration Law in late 2018, the National Courts of the UAE generally jealously guarded their jurisdiction. Since the introduction of the 2018 Arbitration Law, however, there is now legislation that goes against this trend.

Article 8 of the Arbitration Law deals exclusively with this issue.

Should court proceedings be commenced in the UAE by a party that has opted to ignore (intentionally or otherwise) an arbitration agreement and the counterparty then pleads that there is an arbitration agreement, the court is now (under the Arbitration Law) required to dismiss the proceedings unless the court is able to determine that the arbitration agreement is invalid. The previous requirement to raise the arbitration clause defence at the first hearing has now, thankfully, disappeared.

Under no circumstances does the Arbitration Law allow an arbitral tribunal to assume jurisdiction over individuals or entities which are neither party to an arbitration agreement nor signatories to the contract containing the arbitration agreement.

Under no circumstances does the Arbitration Law allow an arbitral tribunal to assume jurisdiction over individuals or entities which are neither party to an arbitration agreement nor signatories to the contract containing the arbitration agreement.

Unless otherwise agreed between the contracting parties, a tribunal is able, on the application of a party or on its own initiative, to award forms of precautionary or interim relief that the tribunal considers necessary given the nature of the dispute, including in particular (Article 21(1) of the Arbitration Law):

27.       an order to preserve evidence that may be material to the dispute;

28.       a measure to maintain goods that are the subject of the dispute, including orders to deposit those goods with a third party or sell any items vulnerable to damage;

29.       protecting assets or property which may be used to satisfy a final award;

30.       maintaining or restoring the status quo between the parties until the dispute is decided;

31.       an order for a party to take action that would prevent, or refrain from taking action that is likely to cause, immediate or imminent harm or prejudice to the arbitral proceedings. 

Relief granted by the tribunal is not binding in its own right as it requires enforcement by the court. The party awarded the interim measure, after obtaining the written permission from the tribunal, must submit an application to the court requesting enforcement of the order which will be done within 15 days from the court receiving the application. 

The court can, at the request of either party or the tribunal, order any interim relief that it considers necessary in the circumstances. Such a measure can be granted for existing or potential arbitral proceedings, whether the arbitration has been initiated or not. While the court is considering ordering a preliminary measure, the arbitral proceedings, if already commenced, will not be suspended. Therefore, parties are unable to seek interim relief as a means of frustrating or prolonging the proceedings.

The Arbitration Law has not introduced the mechanism for use of emergency arbitrators, although, as the court has exclusive jurisdiction over potential arbitral proceedings and until their conclusion, once initiated, parties can obtain interim relief directly from the court before a tribunal is constituted, as an alternative.

The ICC Arbitration Rules do include a provision for an emergency arbitrator to be appointed before the substantive tribunal is constituted, provided the interim measure sought is urgent and cannot wait until the tribunal who will hear the merits of the dispute is formed. An application must be submitted to the Secretariat of the ICC and may be issued regardless of whether a request for arbitration has been filed.       

The Arbitration Law enables a tribunal to make a party requesting an order for interim relief to provide appropriate security to cover the costs of the measure requested. In addition, the tribunal can also order the applicant to bear the costs of any damages arising in connection with the enforcement of the interim relief, if the tribunal decides that the applicant was in fact not entitled to the measure granted. 

An order for security of costs is likely to be enforced by the court in the absence of a provision within the law stating otherwise, and as long as this would not go against Shari'a law or UAE public policy. 

Federal Law No 6 of 2018 is the Arbitration Law which regulates the procedure of arbitration in the UAE. Parties are also free to agree on institutional rules of an arbitration centre in the UAE or abroad to govern the conduct of the proceedings. If parties were to decide that the seat of arbitration was a UAE-free zone such as the DIFC, however, then the DIFC independent arbitration law, DIFC Law No 1 of 2008 would be applicable, not the Federal Arbitration Law.     

Provided there is a valid arbitration agreement, the subject-matter of the dispute does not go against public policy and can be legitimately arbitrated in the UAE. Then, the parties need to choose the procedural rules which will govern the arbitration. This will either be confirmed through the arbitration agreement or be agreed upon by the parties after a dispute has arisen. Failing agreement by the parties, the tribunal has the ability to choose the procedure that they deem most appropriate, ensuring that such rules are not in conflict with principles of UAE litigation, or any international conventions to which the UAE is signatory (Article 23 of the Arbitration Law).

Regardless of whether the parties opt for established institutional rules, ad hoc arbitration or the Arbitration Law to regulate their proceedings, their chosen rules will dictate the steps to be undertaken to progress the arbitration, such as the language and place of arbitration, formation of the tribunal, deadlines for parties’ initial written submissions and defences, hearings, confidentiality, the use of witnesses, instructing experts and production of evidence.

The seat of arbitration is very important as it prescribes the procedural rules of the proceedings and enforceability of an award.

Arbitrators have the overriding duty to be impartial and independent of the parties throughout the proceedings. They must also ensure that parties are treated equally and given sufficient opportunity to present their respective cases.

In relation to their powers, arbitrators can rule on their own jurisdiction if challenged by a party, together with ordering interim relief. A tribunal can order such relief if requested by the parties, or on its own motion, if the parties have permitted the arbitrator to have such power, although any interim relief ordered by a tribunal still requires enforcement by a court. 

Legal representatives are regulated under Federal Law No 23 of 1991, the UAE Advocacy Law, together with any local laws applicable to the Emirate they are operating under. In Dubai there are two types of legal professionals, legal consultants and advocates. Legal consultants are usually foreign lawyers who advise on UAE law but do not have rights of audience before the UAE courts. In contrast, advocates are typically national lawyers who do have rights of audience before the courts and other juridical authorities.

The Arbitration Law sets out a limited number of provisions regarding the collection and submission of evidence during the pleading stage and hearing. The Arbitration Law does specify the timeframes and information which must be included in the parties’ statements of claim and defence. However, depending on the complexity of the arbitration, the parties may decide to agree separately for a second round of reply submissions.

The tribunal can decide whether hearings are required in person for the presentation of evidence or oral argument, or whether the arbitration should be conducted on the basis of written submissions only, provided the parties have not agreed otherwise. Parties are free to agree on the hearing of witnesses and experts, otherwise this will be conducted under the rules of evidence for civil and commercial cases, Federal Law No 10 of 1992.

Typically, parties agree that each side will offer evidence from their own independent expert. If no agreement is reached, the tribunal can, after receiving all the relevant information and documentation from the parties, appoint their own expert to provide a report regarding the dispute. The Arbitration Law does enable the court to compel parties, witnesses and third parties to adduce evidence or give oral testimony during the proceedings if required.

The tribunal can have a significant impact on the evidential rules of an arbitration as they are granted through Article 33(8) of the Arbitration Law, a discretionary power to decide on the rules of evidence, namely, its admissibility, the relevance and weight to put on evidence adduced by the parties in relation to fact and expert opinion. The tribunal can also confirm the time limit, method and form for exchange of evidence between the parties and its submission to the tribunal.

Parties will usually agree on established and comprehensive evidential rules to govern their arbitration, such as the IBA Rules on the Taking of Evidence in International Arbitration. However, as previously explained, the tribunal is permitted to decide the evidential rules of the arbitration as prescribed by Article 33(8) of the Arbitration Law, which could be to the disadvantage of one of the parties who is used to a more adversarial, or inquisitorial system of adducing evidence.

The rules pertaining to evidence within the Arbitration Law are set out above.

The tribunal may, on its own initiative or on the application of a party, seek assistance from the court to obtain evidence. The court can order the execution of such an application, in the presence of witnesses before the tribunal, to provide and give oral testimony, or adduce documents or any other evidentiary materials. The court, when considering the application, may decide to undertake any of the following:

32.       impose a sanction against any witness that fails to appear or answer questions without lawful excuse;

33.       direct a third party to produce documents in its possession which are crucial for deciding the dispute;

34.       request the support of a foreign court in order to obtain evidence.

Article 36(1) of the Arbitration law confirms that “The arbitral tribunal may, automatically or on an application of a party, seek assistance of the court to obtain any evidences”. Accordingly, the court’s power of compulsion to produce any evidences appears, by extension, to mean any evidence which the parties, witnesses and third parties hold. 

The Arbitration Law confirms that all arbitral hearings must be conducted in private and any award issued by the tribunal is strictly confidential, unless the parties consent otherwise. The Arbitration Law does not, however, codify the obligation of confidentiality to any other aspect of the proceedings, unlike the arbitration laws of the Dubai International Financial Centre (DIFC) and Dubai International Arbitration Centre (DIAC). Nonetheless, the UAE Courts have always taken the stance that arbitration is a private form of recourse.

Even so, it would be advisable for contracting parties who want blanket confidentiality to any future arbitration proceedings either to include such a provision within their arbitration agreement, or for the parties to choose institutional rules which provide for this.

A tribunal must issue their final award within the timeframe agreed upon between the parties. In the absence of an agreed procedure, the Arbitration Law states that the final award must be issued within six months of the date of the first hearing. Usually, the first hearing is a case-management meeting where the parties agree on the procedural timetable and terms of the arbitration going forward.

The initial six-month period can be extended by the tribunal for another six months unless the parties decide to approve a longer extension. Thereafter, if a final award is still not rendered within the specified timeframe, the tribunal or either party can request the court to issue a decision extending the period once again, or terminate the proceedings where necessary.

When preparing the final award, the tribunal is obliged to consider the conditions set out at Article 41 of the Arbitration Law to ensure the award follows the correct format and contents. The court does possess the power of being able to suspend an action to set aside the award, at the request of one of the parties, to permit the tribunal to take action or rectify the form of the award which may eliminate the grounds for setting it aside. However, this power is restricted, as the tribunal can only amend the form and not the substance of the award.   

Compensation can only be awarded for the direct loss endured by a party. In the event that compensation is not pre-agreed within the contract between the parties, the court can assess the amount to be awarded (Article 389 of the Civil Code).

In construction contracts, parties can agree on a fixed amount of compensation in the event that the contractor fails, or is late in performing their contractual obligations, known as liquidated damages. Punitive damages are not recognised in the UAE, even if an arbitrator has awarded liquidated damages as per the parties’ contract. At the enforcement stage, if the liquidated damages are considered not "equal to the loss", the agreed compensation can be dismissed by the judge (Article 390 of the Civil Code).

The tribunal is also permitted to order the performance of a contract or defer performance to a specified time by a party. Alternatively, the tribunal can cancel the contract and order compensation to be paid as prescribed by Article 272 of the Civil Code. 

In relation to legal costs, the tribunal can assess the costs of arbitration which include “the fees and expenses incurred by any member of the Tribunal in the exercise of their duties and the costs for experts appointed by the Tribunal” (Article 46(1) of the Arbitration Law). The tribunal can order that any or all costs defined under Article 46(1) be borne by one of the parties. Usually, the costs follow the event.

The Arbitration Law does not explicitly include the recovery of parties’ legal costs, independent expert fees or any other costs. Therefore, the parties should ensure the issue of costs is either dealt with within the arbitration agreement, incorporated within the Terms of Reference, or institutional rules agreed upon, such as the DIFC Arbitration Law, to enable a tribunal to award legal costs. Otherwise, such costs cannot be awarded. 

The UAE Commercial Transactions law, Federal Law No 18 of 1993, enables a creditor to receive interest at an agreed rate until full settlement is made. In the absence of such an agreement, interest will be calculated in accordance to the rate of interest current in the market at the time of the dealing, provided it does not exceed 12%.

An award debtor seeking to challenge an arbitral award has two ways in which to initiate this process:

35.       raising a challenge during an application for the enforcement of the award before the court (the court is defined under the Arbitration Law as the Court of Appeal on which the parties agreed or in which jurisdiction the arbitration is conducted); or

36.       bringing a separate action to set aside the award. It is essential that the award debtor files any such application within 30 days of being notified of the award, otherwise the court is time-barred from hearing the action. 

If the award debtor raises a challenge during the application for enforcement and the court enforces the award, then an award debtor is restricted to filing a grievance within 30 days of being notified of the court’s decision. The grievance will be lodged before the same judge who enforced the award. They will conduct hearings between the parties in order to make a determination on the complaint.

In the alternative scenario, if the award debtor issues separate proceedings to set aside and the court enforces the award, the award debtor has a higher level of recourse, as they can appeal to the Court of Cassation.     

Article 53(1) of the Arbitration Law sets out the grounds in which an award debtor can seek to nullify an award, including where:

  • no arbitration agreement exists or it is void;
  • a party had no capacity to enter into an arbitration agreement;
  • a party has not been given proper notice of proceedings;
  • the award excluded the application of the parties' choice of law for the dispute;
  • the composition of the arbitral tribunal did not comply with the law or agreement of the parties;
  • irregularities affected the award or the award was not issued within the specified timeframe; and
  • the award ruled on matters falling outside the scope of the arbitration (in which case that part of the award may be set aside).

Parties are unable to agree to exclude or expand the scope of appeal under the Arbitration Law. The grounds and processes in which an arbitral award can be challenged by an award debtor are codified under the law. 

A judicial review (either deferential or de novo) of the merits of a case is not applicable in the UAE.

The UAE ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 2006 through Federal Decree No 43 of 2006.

An arbitral award is binding on the parties and shall have the same executive force as a court judgment, although a decision confirming the award must still be obtained from the court to make it enforceable. The award creditor’s application for enforcement must be supported by the following documentation:

37.       the original award or a certified copy;

38.       a copy of the arbitration agreement;

39.       a certified translation into Arabic of the award by an approved body, if the award has not been issued in Arabic;

40.       a copy of the report lodging the award at court.

Once the court has received the application for enforcement, they have 60 days to confirm and enforce the arbitral award, provided there are no grounds for nullification.

In accordance with Article 86 of Cabinet Resolution No 57 of 2018, which has updated parts of the UAE Civil Procedure Law, an arbitral award can only been issued on matters which are capable of being arbitrated in the UAE, and the award must be enforceable within the foreign state in which it has been issued. Therefore, if an arbitral award has been set aside by the courts in the seat of arbitration, neither party can try to enforce the award in the UAE, as the foreign award has to be capable of enforcement in the state of origin. 

There is no general law on sovereign immunity in the UAE.

In accordance with Article 55(2) of the Arbitration Law which relates to the enforcement of domestic awards, “…judges shall order the arbitral award confirmed and enforced within 60 days of submission of the request for its confirmation and enforcement, unless it finds one or more of the grounds for setting aside the award under section 1 of Article 53 of this Law”. The court on its own motion can also nullify an award if the dispute cannot be arbitrated in the UAE, or if it is in conflict with public policy.

In light of the pro-friendly Arbitration Law being enacted and the introduction of Cabinet Resolution No 57 of 2018, which has crystallised the enforcement process for foreign awards, it appears the default for the courts is also to allow foreign awards as far as possible to be enforced. Undoubtedly this was intentional by the legislature, in order to bring greater international investment to the UAE and in turn, to strengthen the UAE economy.

The enforcement of a foreign award, judgment or order may be ordered only after the following has been verified:

41.       the award does not violate public policy and is not in conflict with a judgment, award or order previously issued by the UAE;

42.       the UAE does not have jurisdiction over the dispute in which an award, order or judgment has been issued, the jurisdiction lies with the foreign state;

43.       the judgment, order or award has been issued and certified in accordance with the laws of the foreign state;

44.       the parties subject to the foreign judgment, order or award have appeared before the Court and were properly represented;

45.       the award, order or judgment is binding and final. 

If the above conditions are satisfied, a petition can be filed directly to the execution judge, who is bound to rule on its enforcement within three days of receiving the application. However, the execution judge’s decision does face the normal routes of appeal.

There is no division between national and international public policy in the UAE. The courts have previously held that issues relating to the registration of real estate, the uneven number of arbitrators and a final award relying on the witness testimony which was not given under oath, all concerned matters of public policy and accordingly, the arbitral award could not be enforced.

The legal regime in the UAE does not provide for class-action arbitration or group arbitrations. 

There are a few duties and responsibilities codified within the Arbitration Law for arbitrators; for instance, they must not possess any proscribed characteristics laid out at Article 10 of the Arbitration Law, and must be neutral and independent of the parties. The Arbitration Law also confirms that the Minister of Economy will issue a code of professional conduct for arbitrators; so far, this has not been published.

The Arbitration Law is silent on third-party funding for arbitration. The activity is not prohibited by the laws of the UAE but, equally, third-party funders are not regulated onshore, so there is some ambiguity as to whether third-party funding can be used.

However, third party-funding for commercial litigation is permissible and regulated in two of the most prominent free-zone, common-law jurisdictions in the UAE, the DIFC and Abu Dhabi Global Market (ADGM). 

The Arbitration Law does not provide for the consolidation of arbitral proceedings. Consolidation is, however, possible provided that the specific institutional rules provide for consolidation and the parties agree to that consolidation.

Third parties cannot be bound by an arbitration agreement under UAE law.

Horizons & Co Law Firm

49th Floor, Burj Al Salam Office Towers
Sheikh Zayed Road
Dubai, UAE

+971 4 354 4444

+971 4 354 4445

info@horizlaw.ae www.horizlaw.ae
Author Business Card

Trends and Developments


Authors



Horizons & Co Law Firm has an arbitration team which is renowned for having expert knowledge of the new UAE Arbitration Law, and is regularly called upon by various publications to provide in-depth commentary on the new law. With the addition of two highly qualified barristers, the adept arbitration team is one of the firm's greatest assets. The firm's clients appreciate the combination of international and local lawyers, meaning arbitrations can be conducted in Arabic as well as English before the differing dispute resolution fora within the UAE. Contractors, sub-contractors, developers and suppliers make up the firm's arbitration client base, with the majority of arbitration matters entailing contentious construction and real estate matters, and public and private law disputes. The team recently acted on behalf of a major UAE contractor in a construction dispute before ADCCAC, and against an Abu Dhabi state-owned entity in relation to construction upgrades to an air force military base.

The Impact of COVID-19 on the Future of Arbitration in the UAE

Background to COVID-19

Back in December 2019, when the Wuhan Municipal Health Commission of China, identified a novel coronavirus, later named as COVID-19, few predicted the devastating global impact that would ensue. Concerned by the alarming levels of spread and severity, the virus was characterised as a global pandemic in March 2020 by the World Health Organisation (WHO) and, despite global efforts, we remain in the grip of this virus. A media briefing held by the WHO’s Director-General in July 2020 reported more than 10.3 million cases of COVID-19, and declared, now more than ever “we must act in the interests of global solidarity and our shared humanity”. Humanity is certainly one characteristic that has provided much-needed anchorage during this time, while solidarity has enabled professions to unite and perform under pressure. Those of us working in the field of arbitration are no exception. While we may take comfort in the fact that the race for a vaccination is moving at terminal velocity, until such time, arbitration as a means of dispute resolution must not only survive, but thrive.

Survive, then thrive

The last decade has been described as transformative for the dispute resolution landscape in the United Arab Emirates (UAE). The reassuring presence of secure financial centres and courts, in both Abu Dhabi, Abu Dhabi Global Market (ADGM) and Dubai, Dubai International Financial Centre (DIFC) alongside the growth of international business and investment, as well as improvements in legislation including the introduction of the UAE’s first standalone law, Federal Law No 6/2018 on Arbitration, based upon the UNICTRAL Model Law, has instilled a confidence that parties can effectively resolve commercial disputes in the UAE. Indeed, alignment with international best practice and standards has enabled the UAE to build its reputation as a preferred seat for international arbitration in the region.

Arbitration, as a dispute resolution process, has long been governed by rules, policies and procedures designed to ensure fair and efficient resolution of disputes. However, what was once considered the norm is no longer sufficient, certainly in terms of the practicalities of administering arbitrations. The focus now for the survival of arbitration is that this process must not only keep pace with users but continue to develop and adapt methods that promote ease of arbitration, especially given the surge of arbitrations that will likely be generated, in the coming months and years, as a direct or indirect result of COVID-19.

The new norm

Arbitration institutions based within the UAE, and elsewhere, such as the International Chamber of Commerce (ICC), the Dubai International Arbitration Centre (DIAC), the DIFC-London Court of International Arbitration (DIFC-LCIA) and the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), collectively reported concerns with pending arbitrations and new disputes, acknowledging that both may be difficult to progress due to safety concerns and public health restrictions imposed to limit or slow the virus’s spread. Furthermore, legal experts involved in the industry voiced concerns and predicted changes in legislation, budgets and the use of technology, as noted by an expert panel at an online event hosted by the Chartered Institute of Arbitrators (CIArb) in May 2020. Indeed, independent arbitrator and chairman of CIArb South East, Charles Brown, described the current situation as “the new normal that we can expect in the dispute resolution, as we live with Covid and recover from both the pandemic and perhaps the measures that have been taken to control it”.

React and respond

The speed in which arbitration institutions, in this region and across the globe, have reacted and responded to the pandemic has been welcomed by users in the profession. Indeed, the strength of this combined response has been conjured from arbitration’s greatest asset – its adaptability. Recommendations, precautionary measures, and guidance on how to navigate arbitration procedures through this pandemic have been published by, among others, the ICC, the DIAC and the DIFC-LCIA, which encourage greater levels of flexibility from arbitrators, lawyers, and the parties themselves. Perhaps now more than ever, the advantages of employing arbitration over litigation are apparent. Arbitration rules need not be hastily re-written but rather, creatively expanded to allow for flexible movement at all stages in an arbitration. Certainly, in the UAE, this guidance has provided reassurance that the process of arbitration can remain stable and viable, while employing innovative methods.

Procedural adaptations

Although offices are largely closed, the resounding message that has been delivered from international and regional arbitration institutions is that “the show must go on”. Access to justice and commercial relationships should not be jeopardised or put on hold, to the extent possible. Certainly, guidance provided by arbitration institutions has highlighted factors relevant to mitigate COVID-19-related delays, including, but not limited to, the following issues.

Service of documents and notifications

The ICC now expressly requires that new requests for arbitration be filed with the Secretariat in electronic form, upon which notification of the request for arbitration by email is feasible (Article 3(2) of Rules). The DIAC and DIFC-LCIA have taken a similar approach and are offering an online filing system, while the ADCCAC enables users to submit requests via email. In relation to notifications, Tribunal and parties have been encouraged by the ICC in its guidance note encouraged to sign the Terms of Reference in counterparts and electronic form.

Case management

What fundamentally underpins arbitration is the desire to conduct proceedings in an expeditious and cost-effective manner and arbitration institutions have vowed that this principle should continue to apply.

The ICC have reiterated that, while its Rules are not new, they should be reviewed with an open perspective to allow for renewed interpretation. Indeed, Article 24(3) of the ICC Rules provides that tribunals may adopt appropriate procedural measures, after consulting with parties, including but not limited to: resolving issues in disputes in stages by rendering partial awards; identifying issues that may be resolved without witness and/or expert evidence; considering whether site inspections or inspections by experts can be replaced by video presentations; and using audio/video conference where possible and appropriate.

Similarly, Article 14 of the DIFC-LCIA Rules advocates the adaptation of “procedures suitable to the circumstances of the arbitration, avoiding unnecessary delay or expense” in order to provide for a fair and efficient means for the final resolution of the parties’ dispute.

Virtual hearings

The international nature of arbitration means that parties, arbitrators, and witnesses are often in different locations, which is obviously problematic due to the currently imposed travel restrictions. In response to this, the ICC has advocated in its guidance note that, if convening in a chosen physical location is not possible, “tribunals and parties should make every effort to reschedule the hearing or conference in a way that minimises delays”  including reference to the inclusion of a virtual hearing or conference. A protocol checklist and clauses for cyber-protocol and procedurals have also been provided.

In relation to the conduct of proceedings in the DIFC-LCIA, Article 14 expressly encourages the parties to make contact by "…telephone conference call [or] video conference…" within 21 days of the formation of the Tribunal, while Article 19 equally allows for a hearing to take place “by video or telephone conference…" .

With specific reference to DIAC-administered arbitrations, Article 17 codifies the parties' ability to conduct the proceedings in accordance with any rules they agree, while Article 20.2 provides that a Tribunal may conduct a hearing at any place it considers appropriate.

At this stage, readers may question whether the use of virtual hearings are supported by the federal laws of the UAE, namely, Federal Law No 6/2018 on Arbitration, and in short, the answer is yes. For example, if an arbitration were seated "onshore" in Dubai, Article 33(3) of Federal Law No 6/2018 would allow for the hearing to be held via modern means of communication and electronic technology, such as video link or telephone.

Awards

The final procedural adaptation to be discussed is awards. The ICC have reported that the COVID-19 pandemic should not necessarily delay tribunals’ deliberations or their preparation of draft awards, as these activities can be conducted remotely. Certainly, under Article 27 of the ADCCAC Rules, an arbitration award should be issued within a maximum period of six months from the date on which the file was received by the sole arbitrator or Tribunal. Similarly, under DIAC provisions, parties are encouraged to adopt an expeditious approach and employ a six-month timeframe, unless a longer period is otherwise stipulated.

Tribunals should therefore organise their deliberations, as necessary, and take steps to progress the preparation of draft awards by all suitable means of communication. The time-limit for the submission of draft awards, as well as its policy to reduce arbitrator fees in cases of unjustified delays, remain in effect, although that policy will undoubtedly show sensitivity in cases involving genuine delays attributable to specific COVID-19-caused situations, such as the illness of an arbitrator.

The Future of Arbitration

As outlined above, a fundamental feature of arbitration is its ability to adapt to its users’ needs. It is therefore envisaged that international arbitration will continue to adapt to the new reality of its users, increasing the demand for technological tools and resources. In addition, in the instances where procedural rules governing the arbitration do not provide for specific provisions, allowances can be granted with the consent of the arbitrators and the parties.

It is further conceded that this increased reliance on technology in conducting arbitrations will lead to improved cost efficiencies and procedural timetables. We should therefore expect to see a rise in expert reports conducted virtually, and virtual conferences and hearings becoming the new standard. Certainly, if virtual hearings do become the new norm, opportunities to engage counsel and experts abroad should renew competitiveness without additional costs. Furthermore, the costs associated with hiring suitable venues to host arbitrations may no longer be contended.

In closing, the facts of our current situation cannot be disputed. We are living in a COVID-19 world and survival is not enough. We must adapt and better our profession. Opportunities must be seized, and the arbitration community is certainly well placed to rise to the challenge of this global pandemic.

Horizons & Co Law Firm

49th Floor, Burj Al Salam Office Towers
Sheikh Zayed Road
Dubai, UAE

+971 4 354 4444

+971 4 354 4445

info@horizlaw.ae www.horizlaw.ae
Author Business Card

Law and Practice

Author



Horizons & Co Law Firm has an arbitration team which is renowned for having expert knowledge of the new UAE Arbitration Law, and is regularly called upon by various publications to provide in-depth commentary on the new law. With the addition of two highly qualified barristers, the adept arbitration team is one of the firm's greatest assets. The firm's clients appreciate the combination of international and local lawyers, meaning arbitrations can be conducted in Arabic as well as English before the differing dispute resolution fora within the UAE. Contractors, sub-contractors, developers and suppliers make up the firm's arbitration client base, with the majority of arbitration matters entailing contentious construction and real estate matters, and public and private law disputes. The team recently acted on behalf of a major UAE contractor in a construction dispute before ADCCAC, against an Abu Dhabi state-owned entity in relation to construction upgrades to an air force military base.

Trends and Development

Authors



Horizons & Co Law Firm has an arbitration team which is renowned for having expert knowledge of the new UAE Arbitration Law, and is regularly called upon by various publications to provide in-depth commentary on the new law. With the addition of two highly qualified barristers, the adept arbitration team is one of the firm's greatest assets. The firm's clients appreciate the combination of international and local lawyers, meaning arbitrations can be conducted in Arabic as well as English before the differing dispute resolution fora within the UAE. Contractors, sub-contractors, developers and suppliers make up the firm's arbitration client base, with the majority of arbitration matters entailing contentious construction and real estate matters, and public and private law disputes. The team recently acted on behalf of a major UAE contractor in a construction dispute before ADCCAC, and against an Abu Dhabi state-owned entity in relation to construction upgrades to an air force military base.

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