Amendment to Dubai International Finance Centre (DIFC) Arbitration Law


What has happened?

The reputation of the Dubai International Financial Centre (DIFC) as a burgeoning hub for international arbitration was significantly boosted late last month, when the DIFC Authority amended the DIFC Arbitration Law (the "Law") to ensure that it now fully complies with the UAE's treaty obligations under the New York Convention.

Two decisions of the DIFC Court in 2012 highlighted that the Law as previously drafted did not comply with the Convention, in that it did not contain an express requirement that the DIFC Courts stay their own proceedings in favour of a foreign-seated arbitration - even in the face of a valid arbitration clause.

The Convention requires member state courts to dismiss or stay an action, on the request of a party, in respect of matters that fall within the scope of a valid arbitration agreement. Before the amendment, Article 13(1) of the Law only required the DIFC Courts to stay proceedings on the request of a party where an arbitration was seated in the DIFC itself.

However, Article 13(1) now also applies where the seat of arbitration is one other than the DIFC, and indeed where no seat has been determined.

DLA Piper's Litigation and Arbitration team produced contemporaneous articles for PLC which analysed the above judgments at the time that they were handed down, which can be accessed below:

Article 1: DIFC Court declines to stay proceedings in favour of LCIA arbitration
Article 2: DIFC Court determines it has inherent jurisdiction to stay proceedings in favour of DIAC arbitration.

Why is the amendment potentially important for your business?

This amendment is significant for parties involved in international arbitration proceedings anywhere in the world, where parallel court proceedings have been erroneously commenced in the DIFC Courts (for tactical, or other reasons). These parties may now rest assured that the DIFC Courts are under an express obligation to recognise foreign-seated arbitration agreements and give them precedence over pending litigation that has been brought in violation of an existing foreign arbitration clause.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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