On 20 September 2021, Decree No. 34 of 2021 concerning the Dubai International Arbitration Centre ("DIAC") (the "Decree") came into force. The Decree brings significant changes to Dubai's arbitration landscape bringing the Emirates Maritime Arbitration Centre and DIFC Arbitration Institute under the umbrella of DIAC.
The purpose of this Newsflash is to provide a high-level overview of the implications of the Decree, together with further considerations for debt finance transactions that provide for DIFC-LCIA arbitration as the relevant dispute resolution authority. While the Decree has taken immediate effect, the overall impact of the Decree on the UAE loan market remains to be tested.
Implications
In summary, the Decree has the following implications:
- Pursuant to Article 4(1) and (2) of the Decree, the Emirates Maritime Arbitration Centre ("EMAC") and DIFC Arbitration Institute (the administering body of the DIFC-LCIA) shall be abolished (the "Abolished Arbitration Centres");
- Pursuant to Article 5(b) of the Decree, DIAC will substitute the Abolished Arbitration Centres in all their rights and obligations;
- Pursuant to Article 6 of the Decree, agreements to arbitrate with the Abolished Arbitration Centres will remain effective, however, DIAC will replace the Abolished Arbitration Centres, unless if the parties to the relevant dispute agree otherwise. Any ongoing arbitrations (with a formed tribunal) will continue under the Abolished Arbitration Centres. DIAC will however be the new administrative body for new arbitrations.
Notwithstanding the abolishment of the Abolished Arbitration Centres, the former trustees of the DIFC Arbitration Institute, the administering body of the DIFC-LCIA, released an official statement confirming that consultation is taking place between the London Court of International Arbitration and the Government of Dubai to seek to ensure the good management of existing and future cases where parties have agreed to arbitration and mediation under the DIFC-LCIA Rules.
Considerations
While consultation is still taking place between the Abolished Arbitration Centres and the Government of Dubai, it is advisable that all parties consult with their legal advisors to: (a) determine whether any loan or other agreements to which they are a party incorporates the EMAC or DIFC-LCIA Arbitration Rules; and (b) seek legal advice on the implications of the Decree on any such agreements.
To the extent that the Decree impacts an agreement, careful consideration will be required as to whether the relevant parties should enter into a new arbitration agreement. Any new arbitration agreement that provides for a different institution will need to be made with the consent of all parties to the existing arbitration agreement (subject to any pre-agreed loan amendment thresholds contained within any loan agreement).
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