This article was featured in Jus Mundi‘s 2024 Arbitration Year in Review, in collaboration with VYAPs, a yearly collection of articles from jurisdictions all around the globe updating you on arbitration-related developments from the previous year.
THE AUTHOR:
Grace Goh, Associate at Pinsent Masons
Continued Development of the Arbitral Landscape of the United Arab Emirates
The United Arab Emirates (“UAE”) has seen tremendous change in its arbitral landscape in recent years, from the abolition of the DIFC-LCIA Arbitration Centre in 2021, to the amendments to the UAE Federal Arbitration Law (“FAL”) and the announcement of the replacement of the Abu Dhabi Commercial Conciliation and Arbitration Centre (“ADCCAC”) with ArbitrateAD in 2023. The year 2024 has continued to usher in more change for the UAE in the arena of arbitration.
Laws and Regulatory Framework
ArbitrateAD
As announced in 2023, ArbitrateAD replaced ADCCAC from 1 February 2024, bringing with it several bold moves and changes which have sought to make it an attractive option as an arbitral institution in the Middle East as well as moving toward strengthening the reputation of the UAE as an arbitration hub.
- On 2 February 2024, ArbitrateAD announced the 15 members of its inaugural court with Ms Maria Chedid as its President, who is the first woman leading an arbitration court in the Middle East. The remaining 14 members of the court (with nearly half being women) comprise not only of well-known legal practitioners from the UAE, but also from a diverse number of other countries such as the USA, Singapore, Turkey, UK, Indonesia, Nigeria and Korea, to name a few, bringing with them a wealth of knowledge and experience.
- The ArbitrateAD Arbitration Rules 2024 have also introduced a number of new provisions which mark a significant departure from the previous ADCCAC Procedural Regulations of Arbitration 2013, which have been welcomed as making it more modern and bringing it closer with other institutional rules. For example:
- Establishment of the ArbitrateAD Court of Arbitration: unlike the ADCCAC Rules, the ArbitrateAD Rules create the ArbitrateAD Court of Arbitration alluded to above and establish the court’s powers (Article 3). The existence of the court as an independent body with supervisory authority over the arbitral institution is similar to that of the courts of the ICC, LCIA and SIAC, to name a few, providing an additional avenue for check and balance to the arbitral process under ArbitrateAD.
- Expanded Multi-Party and Multi-Contract Arbitration Mechanisms: the ArbitrateAD Rules expressly allow for multi-party and multi-contract arbitrations, joinder and consolidation (Articles 9, 10, 11 and 12) whereas the ADCCAC Rules were silent on this matter. By formalising these mechanisms, the new rules create the possibility of more streamlined proceedings where matters and/or parties are related, allowing an increase in time and cost savings and promoting procedural efficiency.
- Emergency Arbitrator and Expedited Proceedings: the ArbitrateAD Rules introduce provisions for emergency arbitrator and expedited proceedings (Articles 35 and 36).. These procedures have recently gained more recognition with arbitral institutions worldwide such as the ICC, LCIA and SIAC, allowing for parties requiring urgent relief and smaller claims a more conducive path for them to adopt arbitration.
- Explicit Recognition of Third-Party Funding: unlike the ADCCAC Rules, the ArbitrateAD Rules expressly permit third-party funding (Article 48) and require disclosure to its Case Management Office. The introduction of this provision makes the position of ArbitrateAD on third-party funding similar to that of the ICC Rules (Article 11(7)), aiming to promote transparency in arbitral proceedings as third-party funding increases in popularity among parties.
- Tribunal’s Authority to Award Legal Costs: the ArbitrateAD Rules expressly grant the tribunal the power to award legal costs (Article 50(6)), an authority not addressed in the ADCCAC Rules. This reduces the risk of post-award challenges based on contractual silence or party disagreements over cost allocation. The tribunal’s power to award legal costs is further discussed in Case No. 756 of 2024 below.
Cases
While the UAE courts, being under a civil law jurisdiction, are not bound by the concept of precedent, their decisions nevertheless remain a key avenue through which parties may better understand UAE law, including in the context of arbitration. The following decisions are but a few noteworthy highlights from the decisions of the UAE courts in 2024.
Case No. 606 of 2024 of the Dubai Court of Cassation (“DCC”)
The DCC in this case refused to nullify an award based on several grounds which the appellant raised, such as:
- The president of the tribunal being a member of the Dubai International Arbitration Centre (“DIAC”) court.
- A member of the tribunal not having signed the award but the award not stating the reason for his failure to sign and appending his dissenting opinion.
- The tribunal’s reliance on the International Bar Association Guidelines on Conflicts of Interest 2014 (“IBA Rules on Conflicts”) to exclude the appellant’s legal representative.
The DCC’s decision in this case provided key clarifications on the updated FAL and the practice of arbitration in the UAE in general, such as the following:
- While Article 10bis of the FAL (introduced in the 2023 amendment) prohibits the appointment of a sole arbitrator or president of the tribunal from individuals who serve on the board of directors, board of trustees or equivalent bodies of the arbitral institution managing the case within the UAE. Non-compliance renders any decision issued by the tribunal void. However, this rule does not apply retroactively, meaning appointments made prior to the effective date of the FAL amendments remain unaffected. Furthermore, the prohibition under Article 10bis does not extend to party-appointed arbitrators, but only where the parties have agreed specific conditions for such appointment.
- In any case, if parties do not raise their objections concerning breaches of the arbitration agreement or other matters of procedure within the time limit, they are deemed to have waived their right to object, pursuant to Articles 15(1) and 25 of the FAL.
- Where final awards are not unanimous but instead decided by majority, there is no need to attach the dissenting opinion, pursuant to Article 41 of the FAL. Where a member of the tribunal refuses to sign the award, this shall be documented but this does not affect the award’s validity as long as the majority of the tribunal has signed. In this case, the court found that the award did explain the reason for the arbitrator’s failure to sign based on his objection to the award.
- Tribunals and parties are permitted to use the IBA Rules on Conflicts. The FAL does not regulate the tribunal’s authority to remove a party’s legal representative and the tribunal’s reference to the IBA Rules on Conflicts in this case did not violate any mandatory provisions of UAE law.
Case No. 735 of 2024 of the DCC
The DCC held in this case that unilateral arbitration clauses (also known as asymmetrical arbitration clauses) are invalid and unenforceable under UAE law and therefore refused to allow a commercial lawsuit to be referred to arbitration pursuant to such a clause. This was on the reasoning that such clauses cannot constitute a binding arbitration agreement since they do not provide the mutual intention of the parties to adopt arbitration required under UAE law.
While this case reiterates the stance of the UAE courts toward such clauses since the FAL was enacted in 2018, this possibly calls for action on the part of some industries which often legitimately incorporate unilateral arbitration clauses in their contracts as a matter of practice, for example, in the banking industry for contracts involving financial transactions between lenders and borrowers, to review their terms to ensure that they will not be considered invalid.
More generally, this case reminds parties that while the UAE courts support arbitration as a means of dispute resolution, they require a clear and valid arbitration agreement. The agreement must reflect mutual consent and comply with the FAL. Without meeting these requirements, UAE courts are more likely to exert their jurisdiction over the dispute.
Case No. 756 of 2024 of the DCC
The DCC found in this case that Article 18(1) of the ICC Arbitration Rules 2021 is clear and unambiguous in entitling a tribunal to award legal costs, including that of legal representation, and therefore refused to uphold the partial annulment of an award where it related to the recovery of legal costs.
This is significant as it marks a departure from the DCC’s previous decision in Case No. 821 of 2023, where it issued a judgment annulling part of an award relating to the recovery of legal fees also under Article 38(1). The DCC had, in that case, relied on Article 46(1) of the FAL and found that this contained an exhaustive list on the costs that may be awarded by a tribunal, and this does not expressly provide for the recovery of legal costs.
The decision paves the way to resolving the disconnect in the positions between the ICC Rules and the FAL concerning the awarding legal costs. It also reduces the level of uncertainty for parties concerning their recovery of legal costs where they are involved in an arbitration seated in the UAE under the ICC Rules. Nevertheless, parties are generally still advised as a matter of prudence to explicitly provide in their arbitration agreement for the tribunal’s power to award legal costs, if this is their intention.
Case No. 449 of 2024 of Abu Dhabi Court of Appeal
In this case, the court upheld the enforcement of a DIAC despite the arbitration agreement referring to the former DIFC-LCIA Arbitration Centre. The decision was made based on Decree No. 34 of 2021, which clearly stipulating that DIAC was to be the successor to the DIFC-LCIA. As a result, the arbitration agreement remained valid.
This has provided further clarity as to how UAE courts will treat references to DIFC-LCIA arbitration agreements following the abolition of the DIFC-LCIA Arbitration Centre in 2021, although there remains some uncertainty on this matter given how some international courts (including those in Singapore, the United States and the Cayman Islands) have treated the same issue.
Case No. 486 of 2024 of the DCC
The DCC held in this case that statements made in unsuccessful settlement negotiations are not permitted as evidence, as such statements do not result in any agreement between the parties and hence cannot be used against the party making them or considered admissions of that party.
While the case does not address a matter related to arbitration directly, it has nonetheless made some waves in the arbitral landscape of the UAE (and perhaps the dispute resolution landscape of the UAE as a whole). This is because it appears to suggest the UAE courts are potentially moving toward recognising the concept of without prejudice privilege, which is usually regarded as a common law concept and is both historically and traditionally not accepted in the civil law jurisdiction of the UAE.
The possibility of the UAE courts recognising without prejudice privilege may now open the door for parties who are engaged in arbitration to more freely explore and frankly discuss settlement confidentially without fear of repercussions should the matter still proceed for a hearing. This may in fact streamline the matters that are ultimately referred to the arbitral process, saving time and cost.
It of course remains to be seen if the DCC will continue to adopt the stance that it has toward without prejudice privilege in its subsequent cases, and the concept is likely far from being codified in UAE law. Parties are hence still advised to ensure that they tread this issue carefully and seek advice from counsel when dealing with matters of settlement in their arbitrations.
ABOUT THE AUTHOR
Grace Goh is an Associate with Pinsent Masons, focusing on construction disputes in the Middle East. She has experience acting for clients in arbitrations and dispute boards/expert determinations under rules such as ICC and ArbitrateAD (previously known as ADCCAC) Rules for a variety of projects across the region. She has previously worked in Singapore and is also an alumnus of Singapore Management University.
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