Dubai has taken a decisive step towards becoming a leading arbitration centre in the Middle East.
The Dubai Decree No. 34 of 2021 abolished the Emirates Maritime Arbitration Centre (EMAC) and the Arbitration Institution of the Dubai International Financial Centre, which included the DIFC-LCIA arbitration centre (DIFC-LCIA Centre).
Under the Decree, the rights, obligations and caseloads of the abolished centres were transferred to the Dubai International Arbitration Centre (DIAC), which was established in 2004. The Decree also created the Arbitration Court, replacing the Executive Committee.
Pursuant to the Decree, the DIAC issued new rules (DIAC 2022 Rules), which govern all new requests for arbitration in Dubai since 21 March 2022.
The DIAC and the London Court of International Arbitration (LCIA) have agreed for the LCIA to continue administering all existing DIFC-LCIA arbitrations commenced and registered by the DIFC-LCIA on or before 20 March 2022.
The DIAC 2022 Rules represent a progressive move from the previous DIAC Rules introduced in 2007 (DIAC 2007 Rules). They address shortcomings of the DIAC 2007 Rules while maintaining some favoured provisions from the abolished DIFC-LCIA 2021 Rules.
By dealing with a number of the concerns previously raised by lawyers, the DIAC 2022 Rules bring the DIAC centre in line with the rules of other leading arbitration institutions.
The objective for the DIAC is to cement Dubai as a "reliable international arbitration centre" and promote DIAC's position as one of the best options for parties to "resolve their dispute efficiently and effectively" in the Middle East.
The key developments in the DIAC 2022 Rules are summarised below.
- Seat of Arbitration and Place of Hearing
Under the DIAC 2022 Rules, if the parties have not agreed on the seat of arbitration, but have agreed a location and venue for the arbitration, that chosen location and/or venue for the arbitration will be the seat of arbitration.
However, if the parties fail to decide on the seat, location and venue of arbitration, the DIFC will be the "initial" seat of arbitration by default (rather than "onshore" Dubai, as provided by the DIAC 2007 Rules). The constituted Tribunal has the power to determine an alternative "initial" seat of arbitration.
The parties are free to provide observations on where they think the seat of arbitration should be if not the DIFC, and the constituted Tribunal is encouraged to have "due regards to any observations from the parties and any other relevant circumstances."
2. Alternative Appointment Process
The arbitration agreement ordinarily provides the method and mechanism that the parties are to follow to appoint the arbitrator(s), usually within a prescribed period. This position is recognised in Article 12 of the DIAC 2022 Rules.
The alternative appointment process applies when:
- The parties are unable to reach an agreement within the prescribed time limit; or
- The parties fail to stipulate a mechanism for appointment; or
- The parties notify the DIAC that they submit to the alternative appointment process.
How the Alternative Appointment process works
- DIAC will provide the parties with a list of a minimum of three suitable arbitrators.
- Each party has seven days to rank the candidates in order of preference, having carried out their conflict checks. If a party fails to return its preferred list within the prescribed time, the DIAC will deem all candidates acceptable to the party who failed to provide its list.
- The DIAC will then invite the candidates on the list in order of preference, until one of the preferred candidates accepts the invitation.
The parties should carry out conflict checks on their preferred candidates before submitting their preference to the DIAC.
3. Multiple contracts and Consolidation
While the DIAC 2007 Rules were completely silent on this, under the DIFC-LCIA 2021 Rules, the Tribunal had the power to conduct two or more arbitrations concurrently and to consolidate multiple proceedings.
The DIAC 2022 Rules contain consolidation procedures to allow for multi-contract and/or multi-party dispute arbitrations.
Prior to the Tribunal being constituted, a party may apply to the Arbitration Court for arbitrations to be consolidated. The parties are then invited to provide their comments, after which, the Arbitration Court has the complete discretion to allow consolidation if (i) the parties agree in writing; or (ii) the Arbitration Court is satisfied on a prima facie basis that;
- All claims in the arbitrations are made under the same arbitration agreement to arbitrate; or
- The arbitrations involve the same parties, the agreement to arbitrate are compatible; and
- The disputes arise out of the same legal relationship(s); or
- The underlying contracts consist of a principal contract and ancillary contract(s); or
- The claims arise out of the same transaction or series of related transactions.
If the Arbitration Court decides against consolidating the multiple claims and the claimant wishes to proceed with one or more of the claims, the claimant has 15 days from the date of the notification not to consolidate to re-submit a Complete Request to the Arbitration Court. The claim will be withdrawn if the claimant fails to re-submit the request and the claimant will have to pay for a new application.
Where the Tribunal has been constituted under one agreement to arbitrate, and not under any other, the application must be made to the Tribunal (not the Arbitration Court) and the conditions mentioned in Article 8.2 of the DIAC 2022 Rules must be satisfied.
The parties can to opt-out of the consolidation provisions, in writing, in the agreement to arbitrate.
Under DIAC 2022 Rules, third parties can be joined in the arbitration before or after the Tribunal is constituted, provided that:
(i) All the parties (those party to the Request for Arbitration and any to be joined) have given written consent to the joinder; or
(ii) The constituted Tribunal or Arbitration Court is prima facie satisfied that any such party "may" be a party to the agreement to arbitrate.
This provision is therefore broader than comparable provisions in other arbitration institutional rules.
5. Emergency Arbitrators and Interim Measures
The DIAC 2007 Rules did not cater for emergency arbitrations and interim measures. While the DIFC-LCIA 2021 Rules did allow for emergency arbitrations, the interim measures available were limited compared to the DIAC 2022 Rules.
Appendix II to the DIAC 2022 Rules deals with "Exceptional Procedures", which include interim measures and the appointment emergency arbitrators.
Article 1 of Appendix II details the interim measures available to the Tribunal. These include, but are not limited to, security for costs of the arbitration, injunctive reliefs, orders to preserve evidence, and orders to prevent dissipation of assets.
This is intended to provide swift relief in urgent circumstances. An application can be made with or following the Request for Arbitration. The DIAC 2022 Rules provide that the DIAC will seek to appoint an emergency arbitrator within one day of receiving the application. The emergency arbitrator must then establish a timetable for determining the relief application within two days of receiving the relevant files and documents.
Parties can again chose to opt-out of this provision, but must do so in writing.
5. Expedited Proceedings
Proceedings will be expedited where the DIAC considers it appropriate and where:
- The total amount in dispute is no more than 1 million Dirhams (c.£207,470) (excluding interests and legal costs); or
- The parties agree in writing; or
- The case of exceptional urgency.
Where expedited proceedings are adopted, a sole arbitrator will be appointed. This sole arbitrator will adopt a procedure to determine the dispute within three months and he or she may decide to limit the scope of evidence submitted by the parties, if necessary.
6. Legal Costs
The DIAC 2007 Rules lacked any provision for parties to claim back their legal costs. It only provided for recovery of the Tribunal's and DIAC costs. Under the DIAC 2007 Rules, in the absence of any express agreement, the successful parties could not recover their own costs.
The DIAC 2022 Rules adopt the DIFC-LCIA 2021 rules' position on cost recovery, which is consistent with other arbitration institution rules.
The DIAC 2022 rules expressly provide that the costs of arbitration shall also include the parties' legal costs, as well as DIAC registration costs, administrative fees, legal expenses, expert fees, and any other expenses incurred.
Once DIAC and Tribunal fees and expenses have been deducted, the DIAC will reimburse the parties of any unused sums left in their respective arbitration accounts.
7. Third Party Funding
The DIAC 2007 Rules were silent on third party funding whereas the DIAC 2022 Rules expressly permit this, subject to some restrictions on any arrangement that could create a conflict of interest between the third party funder and a member of the Tribunal.
Third Party funding is permitted as long as the following disclosures are made to the DIAC and all parties:
- The third party funding arrangement;
- The identity of the funder; and
- Whether that funder has committed to an adverse cost liability.
8. Virtual Hearing
The DIAC 2022 Rules allow the Tribunal to use its discretion to decide whether any hearing should take place in person, virtually or by telephone. This reflects modern practices adopted by the courts and the arbitral community in response to the Covid-19 pandemic.
Under the DIAC 2022 Rules, the default method for parties or the arbitrators to communicate with the DIAC is either by email or through an alternative case management system for communications. This would allow filings to be issued electronically, starting with the request for arbitration.
Most significantly, the DIAC 2022 Rules expressly give the Tribunal the authority to accept oaths and conduct examinations by means of virtual communication. This is important because an uncooperative party can no longer use this as a technical or procedural ground to challenge the proceedings.
The DIAC 2022 Rules are a significant upgrade from the DIAC 2007 Rules. By adopting key provisions in the DIAC-DIFC 2021 rules and adding to its own existing rules, the DIAC has modernised its approach to arbitration. They offer a flexible and cost effective process in line with other leading arbitration centres.
While the DIAC 2022 Rules provide a foundation for the DIAC to become one of the leading arbitration institutions in the Middle East, they also help place Dubai as a credible alternative to leading arbitration hubs such as London and Singapore.
This article was authored by Fieldfisher dispute resolution partner Aymen Khoury and trainee solicitor Habibah Alao.
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