A. LEGISLATION AND RULES
A.1 Legislation
International arbitration in onshore United Arab Emirates (UAE) continues to be governed by UAE Federal Law No. 6 of 2018 (“UAE Arbitration Law“). In September 2023, amendments were introduced to the UAE Arbitration Law, which continues to be one of the highlights of discussion in the arbitration community in the UAE. As we previously reported, most of the changes incorporate recent developments in UAE case law or arbitration practice generally, but some leave room for further consideration. The amendments include the following:
- Appointment of members of the supervisory and controlling bodies as arbitrators (Article 10 bis): The amendments introduce conditions for the members of arbitral institutions’ supervisory and controlling bodies to be appointed as arbitrators. A violation of the relevant conditions could lead to the award being invalidated.
- Stronger emphasis on arbitrator impartiality and independence (Article 10): The amended UAE Arbitration Law also reaffirms that arbitrators should not have any direct relationship with any of the parties to the arbitration that may affect their impartiality, integrity or independence. While the principles of arbitrator impartiality are not new, it may signify a higher standard of evaluation required when there is a “direct relationship” with a party.
- Broader confidentiality principle (Article 33): The Arbitration Law used to provide for the privacy of hearings and confidentiality of awards as a default rule, although the Dubai Court of Cassation has held that arbitration is confidential unless agreed otherwise. The amendment broadens the scope of the confidentiality principle to expressly cover the hearings as well as the “proceedings” (unless otherwise agreed by the parties).
- Tribunal’s discretion over the rules of evidence (Article 33(7)): While the tribunal’s discretion to determine the applicable rules of evidence has been reaffirmed, the amended UAE Arbitration Law introduces a limit to such discretion by specifically recording that the rules of evidence shall not conflict with public order.
- Extended use of virtual proceedings (Article 28(1)): The amendments extend the use of virtual proceedings, allowing the parties to agree “to determine [their] place in reality or virtually by modern technological means or in technical media.” This extension may foreshadow an emphasis on fully virtual proceedings in the future.
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 (“DIFC Arbitration Law“) and ADGM Arbitration Regulations 2015 – Amendment No. 1 of 2020, respectively.
A.2 Institutions, rules and infrastructure
A.2.1 Abu Dhabi Chamber of Commerce and Industry launches arbitrateAD
In December 2023, the Abu Dhabi Chamber of Commerce and Industry announced the launch of the Abu Dhabi International Arbitration Centre (arbitrateAD). From 1 February 2024, abitrateAD will replace the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC). This is a long-awaited and welcome development in the arbitration landscape in Abu Dhabi and the UAE, which will continue to strengthen and promote the UAE as an arbitration hub for complex commercial disputes.
Cases ongoing or pending before the existing rules of ADCCAC will continue to be administered by the existing team under ADCCAC. From 1 February 2024, any “new” disputes will be referred to and administered by arbitrateAD under the new arbitration rules. As of writing, the new arbitration rules are yet to be published.
Parties to contracts referencing ADCCAC would be well advised to revisit their dispute resolution clauses as soon as possible to avoid any potential disputes regarding the appropriate dispute resolution forum, as set out in more detail below in section B.2.
A.2.2 Second Edition of SCCA Arbitration Rules released
We previously reported that the Saudi Center for Commercial Arbitration (SCCA) opened its first office outside of Saudi Arabia in the DIFC, which became operative on 2 February 2023, offering a comprehensive suite of ADR services to local and international businesses based in the UAE and/or operating in the Middle East.
In other developments, the SCCA also released the second edition of the SCCA Arbitration Rules, which became effective on 1 May 2023. A comprehensive review of the earlier edition has resulted in several revisions, which ensure that the SCCA Rules remain up to date and in line with international best practices. This is a further positive extension of the work being done by the SCCA to promote itself as the Middle East’s preferred center for ADR.
A.2.3 CRCICA launches new Arbitral Rules
Earlier this year, the Cairo Regional Centre for International Commercial Arbitration (CRCICA) launched its new arbitration rules, effective 15 January 2024. This is a welcome update since the last version of the rules was published in 2011. In official communications, CRCICA stated that the Rules were updated to “meet the needs of users and evolving dispute resolution and trade landscapes.” The Rules now deal with issues such as online arbitration filings, remote hearings, laws applicable to the arbitration agreement, consolidation, third-party funding, Emergency Arbitrator Rules, and Expedited Arbitration Rules, which had previously not been dealt with under the 2011 Rules.
B. CASES
B.1 Dubai Court of Cassation confirms the validity and enforceability of arbitration agreements where there is non-payment of arbitration costs
In a recent Dubai Court of Cassation case,[1] the Cassation Court provided helpful clarification on the effects of a party’s failure to pay the arbitration costs on the validity of the arbitration agreement.
In a unanimous judgment, the Court of Cassation found that in cases where an arbitration center closes a case due to non-payment of arbitration costs, and provided that there has been no award or ruling by the tribunal that brings an end to the dispute, the arbitration clause will remain valid.
In coming to this decision, the Court of Cassation relied on Article 45(1) of the UAE Arbitration Law, which provides that arbitral proceedings are only terminated by an award of the arbitral tribunal, bringing an end to the dispute. In addition, the Court of Cassation also relied on Article 54(4) of the UAE Arbitration Law, which states that the arbitration agreement remains valid even after the arbitration award is set aside (provided the arbitration agreement is valid and enforceable).
State court jurisdiction, therefore, remains excluded as long as the arbitration agreement is valid and enforceable and there is no waiver or repudiation of the arbitration agreement.
B.2 US court rules that it cannot compel arbitration where parties agreed to arbitrate pursuant to the DIFC-LCIA Rules
In September 2021, the DIFC-LCIA Arbitration Center and the Emirates Maritime Arbitration Centre were abolished, and all respective assets, liabilities, rights and obligations of these institutions were transferred to the newly established Dubai International Arbitration Center (DIAC) by way of Decree 34 of 2021 (“Decree“). As such, the DIFC-LCIA Arbitration Center and its relevant rules ceased to exist, and the Decree further mandated DIAC to register and administer all arbitrations, mediations and other ADR proceedings referring to the DIFC-LCIA rules that were commenced on or after 21 March 2022 (unless the parties agree otherwise).
Baker Hughes Saudi Arabia Co. Ltd. (“Baker Hughes“) and Dynamic Industries Saudi Arabia, Ltd. and related entities (“Dynamic“) had entered into a supply agreement prior to the Decree coming into effect, referring all disputes under the agreement to arbitration under the Arbitration Rules of the DIFC-LCIA.
Subsequent to the abolishment of the DIFC-LCIA Arbitration Center, Baker Hughes filed suit against Dynamic in the United States District Court for the Eastern District of Louisiana, New Orleans,[2] claiming damages of USD 1.3 million for unpaid services. Among other defenses, Dynamic sought to compel arbitration in accordance with the agreement and the Decree.
The court, however, confirmed that in line with prevailing precedent, arbitration could not be compelled when the agreed arbitral tribunal is unavailable or no longer in existence. The court further emphasized that the contractual choice of forum was an integral part of an agreement between parties and that the court could not rewrite the parties’ agreement to order that arbitration be held in a forum to which the parties did not agree.
The court also found that despite the Decree having designated DIAC as the default arbitration center, given that DIAC was not the same forum as the parties had initially agreed, neither the court nor the Dubai government had the authority to unilaterally change the arbitration forum that had been agreed on by the parties.
The effect of this going forward remains to be seen. Parties are therefore reminded to consider whether they are impacted by the abolishment of the DIFC-LCIA Arbitration Center and to update their agreements accordingly to avoid any potential disputes on the forum in the future.
B.3 DIFC Court holds interim awards to be enforceable
In September 2023, the DIFC Court of First Instance considered whether a provisional award (not seated in the DIFC) introducing interim measures is enforceable in the DIFC as an “award.”[3] In particular, the question that arose in this case was whether interim measures ordered by tribunals not seated in the DIFC could be enforced under the DIFC Arbitration Law. The dispute further centered around the controversial issue of whether interim awards are final awards capable of recognition, including under the New York Convention.
Examining the DIFC Arbitration Law, the DIFC Court concluded that Article 24 allows interim measures to be “in the form of an award or in another form.” The DIFC Court also found that nothing in the Arbitration Law suggested that a measure in the form of an award within the meaning of Article 24 would not be an award for the purposes of Articles 42, 43 and 44 (dealing with the enforcement of awards).
Accordingly, the DIFC Court held that such interim awards could be recognized in the DIFC.
B.4 DIFC Court limits Worldwide Freezing Orders in support of foreign court proceedings where there is no nexus to the DIFC
In a landmark judgment issued by the DIFC Court of Appeal in September 2023[4], the DIFC Court of Appeal overturned a Worldwide Freezing Order (WFO) issued by the Court of First Instance on the basis that the DIFC Courts did not have jurisdiction to grant the WFO against the parties who had no jurisdictional nexus to the DIFC.
The Court of Appeal overturned the principles previously decided in Jones v. Jones[5]and limited the availability of interim remedies to cases where the jurisdiction of the DIFC Courts can be established independently on the basis of Article 5A(1)(a)-(d) or 5A(2) of the Dubai Judicial Authority Law 12/2004 (JAL). This means that interim remedies may not be available from the DIFC Courts where: (i) the potential judgment debtor is not based or licensed in the DIFC; (ii) the contracts are not performed or partly concluded within the DIFC; and (iii) parties have not agreed to the jurisdiction of the DIFC Courts.
Notably, the judgment did not overturn the principles outlined in DNB Bank v. Gulf Eyadah Corporation,[6] specifically that if the enforcement of an existing foreign judgment is sought in the DIFC Courts, DIFC Courts do have jurisdiction to enforce it in appropriate circumstances, despite the debtor having no assets within the DIFC.
The judgment was therefore particularly significant as it limits the availability of interim measures that can be adopted in the DIFC in support of foreign judicial proceedings for cases that do not fall within the gateways for the jurisdiction of the DIFC courts outlined in Article 5A of the JAL.
B.5 Supreme Court of Oman allows review of London seated Award
In June 2023, the Supreme Court of Oman overturned a decision by the Muscat Court of Appeal, in which it declined jurisdiction over the challenge to the validity of an arbitral award in a London-seated ICC arbitration. The Supreme Court held that a lower court in Oman may hear a challenge to the validity of an award, as the judgment debtor is an Omani company.
The ICC award in question determined that an Omani engineering company, Vijay Tanks, was required to pay QAR 1.8 million, plus costs to Cape East, a Qatari subcontractor. The contract between the parties was governed by Qatari law. Following the issuance of the ICC award, Vijay Tanks applied to the Muscat Court of Appeal to declare the award invalid, alleging that the arbitrator had not applied the relevant contractual provisions and had failed to comply with the principles of impartiality and due process. The court did not make a finding on the substantive issues but agreed that the lower courts may review the award in question.
As such, this case raises questions regarding the enforcement of awards in circumstances where disputes involve an Omani party and are of importance to clients contracting with Omani parties. The outcome of the review in the lower court in Oman is yet to be seen.
[1] Appeal no. 10 of 2023.
[2] Baker Hughes Saudi Arabia Co. v. Dynamic Industries, Inc., Civ. A. No. 2:23-cv-1396 (E.D. La. Nov. 6, 2023).
[3] Muhallam v Muhaf [ARB 021/2022].
[4] (1) Sandra Holding Ltd (2) Nuri Musaed Al Saleh v. (1) Fawzi Musaed Al Saleh (2) Ahmed Fawzi Al Saleh (3) Yasmine Fawzi Al Saleh (4) Farah El Merabi [2023] DIFC CA 003.
[5] [CFI 043/2022].
[6] [CA-007-2015].
