A. LEGISLATION AND RULES
A.1 Legislation
International arbitration in onshore United Arab Emirates (UAE) continues to be governed by the UAE Federal Law No. 6 of 2018 (“UAE Arbitration Law”), to which there have been no legislative amendments. Furthermore, international arbitration in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) continues to be governed by DIFC Law No. 1 of 2008 and ADGM Arbitration Regulations 2015 – Amendment No. 1 of 2020, respectively.
As previously reported, a significant recent change has been 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. We discuss below, in more detail, the further developments in this respect that have occurred over the past year.
Furthermore, the introduction of the Federal Law No. 3 of 2022, regulating commercial agencies, has also introduced significant reform in acknowledging arbitration as a permitted form of dispute resolution if agreed between the parties, whereas UAE courts previously held exclusive jurisdiction.
A.2 Institutions, rules and infrastructure
A.2.1 Newly established DIAC – key developments and the new DIAC rules
In September 2021, the DIFC-LCIA Arbitration Center and the EMAC were abolished, and all respective assets, liabilities, rights and obligations of these institutions were transferred to DIAC by way of Decree 34 of 2021. The Decree further established the DIAC Arbitration Court to supervise all cases administered by DIAC and to replace the previous Executive Committee.
The most notable implications of this dissolution, and pursuant to a further agreement reached between the DIAC and LCIA in early 2022, were as follows:
- The LCIA will continue to administer all cases duly registered and assigned a case number by the DIFC-LCIA on or before 20 March 2022
- DIAC will register and administer all arbitrations, mediations and other ADR proceedings referring to the DIFC-LCIA rules which were commenced on or after 21 March 2022 (unless the parties agree otherwise)
- DIFC-LCIA arbitration agreements entered into before the effective date of the Decree (20 September 2021) are deemed valid, however after 21 March 2022, if a party wants to commence proceedings pursuant to a DIFC-LCIA dispute resolution agreement, such proceedings must be commenced with DIAC, unless the parties amend the existing arbitration agreement or enter into a new arbitration agreement. DIAC will accept such cases and administer them under the 2022 DIAC Rules (“New DIAC Rules”)
It remains a topical issue for businesses to consider the dispute resolution provisions in their contractual arrangements timeously where reference is made to DIFC-LCIA arbitration to ensure that the parties are in agreement on the relevant dispute resolution mechanisms contained in their agreements.
The New DIAC Rules furthermore came into effect as of 21 March 2022. They introduced inter alia the following:
- The DIFC as the default seat of arbitration, in the absence of agreement between the parties (as opposed to onshore Dubai). As such, arbitrations will be governed by the DIFC Arbitration Law and the DIFC Court will have supervisory jurisdiction over the relevant arbitrations (article 20.1)
- Expedited procedures, with a dispute threshold amount of AED 1 million (article 32)
- Consolidation of multiple claims (article 8) and joinder of third parties (article 9)
- Interim measures and emergency arbitrators are specifically provided for (Appendix II)
- Third-party funding arrangements must be disclosed by parties (article 22)
A.2.2. Enforcement of English court judgments in the UAE
On 13 September 2022, the UAE Ministry of Justice issued a directive confirming the principle of reciprocity between the UAE and England in respect of the recognition and enforcement of judgments. The directive was issued following English High Court Judgment in Lenkor Energy Trading DMCC v. Puri,[1] where the English court favorably considered the enforcement of a judgment issued by the Dubai courts. Previously, the absence of a treaty in respect of enforcement between the UAE and England caused substantial uncertainty in this respect. The directive will facilitate the enforcement of English court judgments in the UAE and is expected to further increase the confidence of litigating parties in these jurisdictions and promote consistency and certainty when it comes to enforcement. However, parties must still keep in mind that this does not provide a blanket framework for enforcement, and compliance with the requirements under article 85 of Federal Cabinet Decision No. 57 of 2018 must still be adhered to.
A.2.3. SCCA Dubai opens in DIFC
The Saudi Center for Commercial Arbitration (SCCA) recently opened its first office outside of Saudi Arabia in the DIFC. SCCA Dubai started operating on 2 February 2023 and offers a comprehensive suite of ADR services to local and international business based in the UAE and/or operating in the Middle East. This is an extension of the longstanding relationship between the DIFC Courts and the SCCA, which is supported by a cooperation agreement signed between the parties in February 2020.
B. CASES
B.1 Dubai Court of Cassation judgment (Case No. 109 of 2022) on enforcement of foreign arbitral awards and adherence to formalities
In April 2022, the Dubai Court of Cassation considered whether an arbitral award issued by a sole arbitrator under the ICDR-AAA Rules could be recognised and enforced in line with the New York Convention in circumstances where the award had only been signed on the last page of the award.
Article 3 of the New York Convention provides inter alia that “[e]ach Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon…” Article 41(3) of the UAE Arbitration Law in turn states that: “The arbitrators shall sign the award, or otherwise the reason for any omitted signature shall be stated. The award shall be valid if signed by the majority of the arbitrators.”
The Court of Cassation interpreted article 41(3) of the UAE Arbitration Law to require signature by the arbitrator, and that it is necessary for an arbitrator to sign both the reasons and operative parts of an award, in which case a mere signature on the final page of the award is noncompliant.
The court accordingly reached the conclusion that the arbitral award was noncompliant with the UAE Arbitration Law, which appears to be consistent with judgments in respect of the UAE Arbitration Law’s predecessor. As such, it remains of utmost importance that, where it is anticipated that execution of an award is to take place in the UAE, the tribunal is requested to sign each page of the award to ensure compliance with local laws.
B.2 Dubai Court of Cassation Judgment on enforcement of foreign arbitral awards against a foreign debtor
The Dubai Court of Cassation recently issued a judgment in which it refused the enforcement of a foreign arbitral award against an award debtor inter aliaon the basis that the award debtor was a foreign entity and not domiciled in the UAE.
In this regard, the Dubai Court of Cassation appears to have adopted a narrow interpretation of article 3 of the New York Convention which generally provides that (i) arbitral awards are recognised as binding and enforceable in accordance with the rules of procedure of the territory where the award is relied upon and (ii) enforcement of foreign awards should not be more onerous than the enforcement of domestic arbitral awards. In this regard, the Dubai Court of Cassation appears not to have adopted point (ii) above which creates a conflicting interpretation in circumstances where it is accepted that domestic arbitral awards would be enforceable against foreign parties.
As such, the impact of this judgment will have to be closely monitored in future, as this may create potential obstacles to enforcement of foreign arbitral awards. However this should not deter from potentially seeking enforcement through other court systems in the UAE such as the DIFC and ADGM Courts.
The judgment also demonstrates the need to consider express reference in the award to the award debtor’s assets where possible (such as shares in companies domiciled in the UAE) to circumvent any potential barriers to enforcement against such assets.
B.3 Dubai Court of Cassation Judgment (Case No. 1121 of 2021) on inter alia the overarchingjurisdiction of courts
In the Court of Cassation’s decision dated January 2022, the court considered, amongst other issues, its jurisdiction given the agreement between the parties to refer the dispute to arbitration.
In this case, the dispute had initially been referred to arbitration under the then DIAC Rules. However, the DIAC decided to close the case file due to nonpayment of the arbitration costs. The court found that in this instance, the failure to pay the arbitration costs resulted in the forfeiture of the arbitration clause. The Court of Cassation confirmed the lower court’s reasoning that where an arbitration clause is not capable of being performed, the jurisdiction will revert to the court as it has the overarching jurisdiction to decide disputes.
This ensures that the claimant is not deprived of a forum for resolution of a dispute in circumstances where the other party refuses to pay the advance on costs for example. This should nevertheless be approached with caution to ensure that the other party does not seek to use this as an opportunity to unduly frustrate the arbitral process and apply pressure on the claimant to have to bear the full advance on costs despite the parties’ agreement.
[1] [2020] EWHC 75 (QB).
