International Arbitration – Trends and Developments in the UAE

Introduction

The UAE is a modern pro-arbitration jurisdiction, and a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). The Federal Arbitration Law (No 6 of 2018), the DIFC Arbitration Law and the ADGM Arbitration Regulations are all closely modelled on the UNCITRAL Model Law on International Commercial Arbitration.

The Federal Arbitration Law in particular hailed a new era for arbitration in the UAE, introducing a streamlined procedure with strict provisions designed to limit delays, both in procedure and in enforcement (eg, with enforcement proceedings commencing directly before the Court of Appeal, and enforcement required within 60 days absent grounds for annulment).

However, recent years have seen significant challenges for the arbitration landscape in the UAE, most notably with the abrupt abolishment in 2021 of the Dubai International Financial Centre Arbitration Institute, which administered the DIFC-LCIA and Emirates Maritime Arbitration Centre, and the transfer of all assets and liabilities for the centres to the onshore Dubai International Arbitration Centre (DIAC).

Current trends and developments indicate that the UAE has weathered these headwinds well, with the introduction of new robust and modern DIAC Rules and generally progressive decisions from the courts of the UAE reinforcing the UAE as an arbitration-friendly country, although a number of seemingly anomalous decisions continue to attract commentary. The UAE, DIFC and ADGM jurisdictions are popular seats of choice for arbitration in the Middle East and for international parties across the globe.

Trends

Available statistics show that UAE seats are seeing substantial numbers of new cases, with a strong international focus. For example, in 2022, DIAC registered 340 new cases with an approximate combined value of AED11.2 billion (approximately USD3.1 billion). These cases had a strong international component, with 44% involving international disputes, and parties coming from more than 48 different countries around the world. 49% of these cases involved disputes in the construction sector, with other well-represented sectors being commercial (27%) and real estate (16%).

Following the abolition of the DIFC Arbitration Institute at the end of 2021, further to an agreement between the LCIA and DIAC, DIAC took over the administration of 135 ongoing cases under the DIFC-LCIA Arbitration Rules. In 2022, 70 of these cases were closed, with a further 21 being in their final stages. 41 arbitrations remain active or stayed. Due to the closure of the DIFC-LCIA, there will be no new arbitrations under these rules in the future.

Major developments in arbitration in the UAE

DIAC Rules 2022

The new DIAC Arbitration Rules (“DIAC Rules 2022”) came into effect on 21 March 2022, adopting many principles of international best practice. The notable developments include the following.

• The designation of the DIFC as the default seat of arbitration: in a move that is likely to be popular with international parties, this triggers the application of the arbitration-friendly DIFC Arbitration Law No 1 of 2008 for procedural questions, supported by a wealth of pro-enforcement case law, and makes the offshore common law English-speaking DIFC courts the relevant supervising court.
• New consolidation and joinder provisions: the DIAC Rules 2022 set out a framework for dealing with multiple contracts and the consolidation of claims, as well as enjoining additional parties (including third parties) to an arbitration.
• Paperless communications and remote hearings: recognising the increasing use of technology in arbitration, the DIAC Rules 2022 introduce a number of key technology-related changes, including the option for arbitral proceedings to be conducted virtually and the use of electronic signatures for awards.
• Expedited procedure provisions: for claims of less than AED1 million, the default position is that the expedited procedure provisions apply, requiring the case to be heard by a sole arbitrator and requiring the award to be issued within three months of the date of transmission of the file to the tribunal (unless otherwise determined by the Arbitration Court). The expedited procedure is also applicable if the parties agree in writing or in cases of exceptional urgency.
• Emergency arbitration procedure: concurrently with or following the filing of a request for arbitration but prior to the constitution of the tribunal, parties now have the option to appoint an emergency arbitrator for emergency interim relief.
• Recoverability of legal costs: the DIAC Rules 2022 clarify that the costs of the arbitration, to be assessed by the tribunal, include the fees of legal representatives, unless expressly excluded.
• Third-Party Funding: recognising the growing importance of litigation funding, the DIAC Rules 2022 contain specific provisions in relation to third-party funding.

The DIAC has also recently revamped the secretariat with the appointments of Robert Stephen (former registrar of the DIFC-LCIA Arbitration Centre) as the Registrar, Christoffer Coello Hedberg (former legal counsel to Sweden’s SCC Arbitration Institute) as a deputy Registrar and a new case management team with civil and common law experience.

Key onshore court decisions

In 2022, in general, the decisions of the onshore UAE courts continued to underscore a pro-arbitration practice. The courts have continued the established practice of upholding agreements to arbitrate – for example, in case 310 of 2022, the Dubai Court of Cassation upheld a decision of the Court of Appeal overturning a Payment Order decision on the basis that the underlying agreement contained an arbitration clause.

The courts have also been robust to procedural challenges at the enforcement stage – for example, in case 247 of 2022 (after reviewing the evidence on record), the Dubai Court of Cassation dismissed a challenge to a DIAC arbitral award on the basis that notice had not been given, preventing the respondent from presenting its case. In a reported Abu Dhabi Court of Cassation case, the courts demonstrated intent to stringently enforce the requisite independence of arbitrators by nullifying an arbitral award on account of the arbitrator’s failure to declare in the statement of independence that the arbitrator was an ex-employee of the law firm representing the claimant in the dispute.

Notwithstanding this general trend, some reported decisions in 2022 indicate that there is a degree of unpredictability in the approach the courts will take. In a reminder of a traditionally locally adopted practice, in Dubai Court of Cassation Case 109 of 2022, the court refused the enforcement of a foreign arbitration award because the award had only been signed on the operative section page, holding that both the operative and reasons parts must be signed.

Published sources also report a decision of the Dubai Court of Cassation refusing the enforcement of an arbitration award against a foreign award debtor on the basis that the debtor did not have a domicile in the UAE and the asset sought to be enforced against was not identified in the arbitral award. A further decision of the Abu Dhabi Court of Cassation, determining that the onshore Abu Dhabi court should eschew jurisdiction to enforce an ICC award in favour of the ADGM court, because the ICC International Court of Arbitration had a case management office in the ADGM, has also attracted significant commentary. In the ensuing case before the ADGM court, the court accepted jurisdiction to enforce the award (A6 v B6 [2023] ADGM CFI 0005). The Dubai Court of Appeal also set aside an ICC award in part on the basis that the arbitration agreement did not authorise the tribunal to award legal costs, despite the provisions in the ICC Rules to the contrary.

Key developments in the DIFC

The DIFC courts continue to lead the way in providing clarity as to the role of courts when there is an arbitration agreement in consideration. This has been particularly notable in the areas of anti-suit injunctions and pre-action disclosure.

In Ledger v Leeor [2022] DIFC ARB 016 (as upheld in the court of appeal in Ledger v Leeor [2022] DIFC CA 013), the DIFC courts reaffirmed their power to grant anti-suit injunctions, and gave guidance on the pre-conditions for making such an order. The DIFC court held that, where the parties are bound by an arbitration agreement and where the seat is the DIFC, and those elements are not in issue, the DIFC court will grant anti-suit injunctions restraining the continuation of proceedings brought in breach of the arbitration agreement. However, where there is an issue as to whether there is a binding agreement to have disputes determined by arbitration in the DIFC, the applicant will need to show with a “high degree of probability” that there was such an agreement.

In dealing with an application for pre-action disclosure in support of the pre-commencement arbitration proceedings in Lunars v (1) Liuns (2) Lerstin (3) Liwt (4) Lohan (5) Lufits [2022] DIFC CFI 042, the DIFC Court, held that, whilst it would grant pre-action disclosure in support of potential court proceedings, it would not grant such relief in respect of potential arbitration.

Key developments in the ADGM

Recent ADGM cases also continue to establish the pro-arbitration approach of the ADGM courts.

In A5 v (1) B5 (2) C5 [2021] ADGM CFI 007, the ADGM court upheld an application for the recognition of an arbitral award, disposing of challenges arising from the timing for set-aside applications and the status of a tribunal’s decision as to jurisdiction.

In A6 v B6 [2023] ADGM CFI 0005, the ADGM courts accepted jurisdiction to consider an application to set aside an arbitral award issued in an onshore Abu Dhabi-seated arbitration where the underlying contract contained provisions for an Abu Dhabi seat and Abu Dhabi and UAE federal governing laws. Importantly, however (as discussed under Key onshore court decisions above), this followed the refusal of the onshore Abu Dhabi court to accept jurisdiction to set aside on the basis of the establishment of the ICC administration branch office in the ADGM, which was followed by an agreement between the parties for the application to be heard in the ADGM court, and the ADGM court found it had jurisdiction by consent.

The following ADGM arbitration developments are also of note:

• in March 2022, the ADGM entered into a co-operation agreement with the International Centre for Settlement of Investment Disputes (ICSID), providing for the possibility of holding ICSID hearings at ADGM facilities and encouraging knowledge-sharing between ICSID and the ADGM in relation to arbitration, conciliation, mediation and other methods of dispute resolution; and
• the ADGM has signified its intent to be a leader in the digital justice space with the introduction of blockchain technology for the global enforcement of commercial judgments and the world’s first “mediation in the metaverse” service.