A. LEGISLATION AND RULES
International arbitration in onshore United Arab Emirates (UAE) continues to be governed by the UAE Federal Law No. 6 of 2018, to which no legislative amendment has been made ever since its promulgation.
International arbitration in the offshore Dubai International Financial Centre (DIFC) continues to be governed by DIFC Law No. 1 of 2008 (“UAE Federal Arbitration Law”). The most significant change over the past year is the dissolution of the DIFC-LCIA Arbitration Institute (“DIFC-LCIA”) and the Emirates Maritime Arbitration Centre (EMAC) and the assignment of their obligations to the Dubai International Arbitration Centre (DIAC) as per Decree No. 34 of 2021, which will be discussed under A.2 below. The new DIFC Court for the digital economy was established in December 2021, which will be discussed under A.2 below.
International arbitration in offshore Abu Dhabi Global Market (ADGM) continues to be governed by the ADGM Arbitration Regulations 2015. The ADGM Arbitration Centre also introduced a Protocol for Remote Hearings in 2021, which will be discussed in further detail under A.2 below.
A.2 Institutions, rules and infrastructure
A.2.1 DIFC-LCIA and EMAC Subsumed Into DIAC
Decree No. 34 of 2021 issued by Dubai’s Ruler Sheikh Mohammed bin Rashid Al Maktoum dissolved the EMAC and DIFC-LCIA and assigns their obligations to DIAC. Pursuant to this decree, the DIAC is now a fully autonomous entity. The default procedural and enforcement court of the DIAC will be the DIFC Courts unless an alternative seat is designated by the parties in their arbitration agreement. The decree further clarifies that the choice of the seat would determine the supervisory court over any arbitration proceedings; if parties choose for the seat to be Dubai, the onshore courts will be the curial courts with the UAE Federal Arbitration Law being the applicable law, whereas if the parties select DIFC to be the seat, the DIFC Court would be the supervisory courts and the DIFC Arbitration Law would apply. The new DIAC will also be financially and administratively independent from the Dubai Chamber, and be headquartered both in Dubai and the DIFC.
The new DIAC will have a Court of Arbitration similar to the courts within the ICC and the LCIA that will supervise arbitration proceedings and ensure draft awards are compliant with the DIAC Rules. Any cases and tribunals constituted before 20 September 2021 will continue to hear and determine the cases before them. Any contracts entered into before 20 September 2021 referring to the DIFC-LCIA Rules or the EMAC Rules will have their disputes overseen by DIAC.
A.2.2 DIFC Specialized Court for the Digital Economy
On 14 December 2021, the DIFC Courts announced the launch of a court aimed at settling complex civil and commercial disputes related to the digital economy. The court will be aimed at dealing with disputes related to the tech space, including but not limited to big data, blockchain technologies, artificial intelligence, cloud services, unmanned aerial vehicles, 3D printing technologies, and robotics as per the DIFC Courts’ statement. This is the first court of its kind and supports the UAE’s vision and strategy for the next 50 years while responding to the ever-evolving and growing digital space and technologies.
The court joins a host of other specialized courts including the Technology and Construction Division and the Arbitration Division to respond to the growing need for specialized judicial experts in various sectors and is expected to start providing services in the first quarter of 2022.
A.2.3 ADGM Arbitration Centre’s Protocol for Virtual Hearings
In May 2021, the ADGM Arbitration Centre introduced a Protocol for Remote Hearings (“Protocol”). The Protocol provides procedural and logistical guidelines for parties and tribunals for remote or hybrid hearings and can be modified to the specific requirements of the parties or tribunals for each case and aims to ensure proceedings are conducted in a fair and efficient manner. Although the Protocol was designed for metis hearings, it can be amended to be applicable for case management conferences. The Protocol provides clarity on the various considerations parties or tribunals may need to account for in relation to remote or hybrid hearings, including the functional requirements for remote hearings, which specify the need for a video conference system, an electronic document management system, and a real-time transcript.
This Protocol clarifies the difference between speakers and attendees, the use of the platform for remote hearings and emphasizes the importance of confidentiality of the proceedings. It further also clarifies the importance of ensuring parties are treated equally if the parties opt for a semi-remote hearing.
The provisions clarify a number of further procedural and logistical matters that parties may need to take into consideration for remote or hybrid hearings. Any party opting for such a hearing format may find it helpful to review the Protocol to identify any points of consideration for the parties and/or the Tribunal. The Protocol demonstrated the ADGM Arbitration Centre’s ability to adapt the format of its proceedings to ensure parties’ rights to be heard are not infringed upon and are prioritized.
B.1 Dubai Court of Cassation Judgment on reference to the arbitration clause in a FIDIC Contract (Dubai Cassation Court Judgment No 1308/2020)
The dispute arose out of a construction contract in which the parties had agreed the 1987 FIDIC Reb Book General Conditions of Contract would govern the transaction. The 1987 FIDIC Red Book General Conditions of Contract contains a multi-tiered dispute resolution clause in clause 67, which requires all disputes to be referred to the engineer in the first instance for a decision, failing which the dispute would be referred to arbitration under the ICC Rules.
The Dubai Court of Appeal found that the arbitration clause was validly incorporated by reference to the 1987 FIDIC Reb Book General Conditions of Contract on the basis of article 7(2)(b) of the UAE Federal Arbitration Law, which allows arbitration clauses to be incorporated into contracts by reference.
The Court of Cassation overturned the decision of the Court of Appeal on the basis that the reference to the 1987 FIDIC Reb Book General Conditions of Contract was only a reference to the texts of the document without specifying the arbitration clause in particular. The Court of Cassation decided that such a reference did not establish the parties’ knowledge of its existence and therefore the arbitration clause was not considered to be agreed to by the parties. Therefore, the Court of Cassation decided that the arbitration clause was not enforceable and that the Dubai Courts had jurisdiction over the dispute.
This decision establishes that if parties want a specific arbitration clause in a separate document or text to apply as the dispute resolution clause, they must reference the clause itself instead of referencing the general text to ensure the clause is applicable and enforceable.
B.2 Dubai Court of Cassation Judgment on the determination of related disputes arising from separate contracts (Dubai Court of Cassation Case No. 209/2021)
The dispute arose out of multiple construction contracts, one of which had an arbitration clause whereas the other did not. The contract between the developer and the consultant on the project had an arbitration clause. However, the contract between the developer and the contractor did not. The developer initiated proceedings against the consultant in the Dubai Courts. The Dubai Court of First Instance accepted the developer’s case giants the contractor but not the consultant as the contract between the developer and the consultant had an arbitration agreement. The developer appealed the decision to the Court of Appeal.
The Dubai Court of Appeal decided that the specific facts of the dispute meant that to determine if the consultant was at fault, the court would have to decide if the contractor was at fault. Therefore, to avoid contradicting judgments, the Court of Appeal decided that the dispute must be resolved via one forum. It found that as the arbitration clause cannot bind third parties, the only forum available capable of binding all parties was the court. The consultant appealed this judgment as it argued the two contracts are separate and that the obligations of the contractor were not connected to those of the consultant.
The Dubai Court of Cassation upheld the decision of the Dubai Court of Appeal. It decided that the dispute was so closely connected that it should not be divided. It also stated the arbitration clause was only binding on the parties to the agreement and could not bind third parties.
Following this case, the courts are likely to find that if a case was filed against multiple parties in relation to separate but closely related contracts, then, for sake of consistency, the dispute should be decided in one single forum. If one of the contracts contains an arbitration clause, the courts are likely to view that as the exception given arbitration clauses cannot bind third parties and therefore find that the onshore Court would have jurisdiction instead.
B.3 Abu Dhabi Court of Cassation on the special authority to conclude an arbitration agreement by a Power of Attorney (Abu Dhabi Court of Cassation in Case No. 922 of 2020)
The dispute related to a construction dispute, for which the main contractor has entered into two subcontracts for works, both containing arbitration clauses. The contracts were signed by a representative of the subcontractor under a power of attorney. The power of attorney did not explicitly grant the representative the power to enter into arbitration clauses – the power of attorney did however provide for the representative to act on behalf of the subcontractor without prejudice to article 58 of the Civil Procedural Law, which provides that special authorization is required for a representative to enter into arbitration clauses on a party’s behalf. Despite completing the works, the contractor did not pay the subcontractor, following which the subcontractor concluded a power of attorney which extended the representative’s power to the powers under article 58.
The subcontractor commenced proceedings in the Court of First Instance. Following the expert finding in favor of the subcontractor, the contractor objected to the jurisdiction of the court. The Court of First Instance found in favor of the dispute being referred to arbitration. The Appeals Court upheld the decision, following which the subcontractor appealed the decision to the Court of Cassation.
The Court of Cassation overturned the Appeals Court’s decision and held that the subcontractor’s representative lacked the power to enter into the arbitration clause under the first power of attorney as the first power of attorney was “without prejudice” to article 58 of the Civil Procedural Law, meaning the arbitration agreements were null and void. The reasoning employed by the Court of Cassation was that by entering into an arbitration clause, parties waive their right to refer disputes to the national courts, meaning that arbitration clauses need to be entered into by representatives with the appropriate authority to waive this right. Moreover, the Court of Cassation held that the second power of attorney cannot retrospectively apply to previous contracts, but would only apply to future contracts.
The UAE Courts often adopt the approach that arbitration is an exceptional means of dispute resolution, requiring special authority for parties to enter into arbitration clauses. This case demonstrates that the onshore courts are likely to uphold the requirement in article 58 and so if parties do with for their representatives to hold the powers specifies in article 58, it would be best practice to explicitly refer to those powers in any power of attorneys concluded.