One Stop Arbitration Shop: DIAC Reformed as Dubai’s Central Arbitral Institution

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White & Case LLPOn 20 September 2021, Decree No. (34) of Year 2021 Concerning the Dubai International Arbitration Centre (the "Decree") came into force. The Decree introduces significant change to the arbitration landscape in Dubai. Notably, there are important implications for parties who are involved in disputes, or party to arbitration agreements, subject to the EMAC Arbitration Rules or the DIFC-LICA Arbitration Rules.

The Relevant Arbitration Centres

The DIFC-LCIA

The DIFC-LCIA was originally established in 2008. In November 2015, the DIFC-LCIA re-launched with the DIFC Arbitration Institute and the London Court of International Arbitration ("LCIA") entering into agreements for the management and administration of arbitrations. The DIFC Arbitration Institute is the body responsible for locally administering the cases which are subject to the DIFC-LCIA Arbitration Rules.

The DIFC-LCIA Arbitration Rules substantially mirror the LCIA Rules with minor variances which reflect regional expectations, such as the default seat of arbitration. The LCIA Court is the final authority for the proper application of the DIFC-LCIA Arbitration Rules.

Since its inception, the DIFC-LCIA has gained popularity with users of arbitration. The DIFC-LCIA reported an increase in the diversity of the parties and the choice of seats, as well as an increase in the number of cases registered. It is estimated that the DIFC-LCIA currently has 180 registered cases.

The Emirates Maritime Arbitration Centre

The Emirates Maritime Arbitration Centre ("EMAC") was established in 2016 in response to the region’s growing maritime activity.

A critical objective of EMAC was to offer specialized regional maritime dispute resolution services with arbitrations seated in the Dubai International Financial Centre, under the DIFC Courts' supervisory jurisdiction, unless otherwise agreed by the parties.

The EMAC Arbitration Rules are modelled on the UNCITRAL Arbitration Rules, with adaptations to promote the expeditious conduct of proceedings (for example, the addition of emergency and fast track arbitration for small claims).

The Dubai International Arbitration Centre

The Dubai International Arbitration Centre ("DIAC") was established in 2004, and administers disputes pursuant to the DIAC Arbitration Rules 2007.

New and updated rules for DIAC arbitrations were announced in 2017 and were designed with the objective of aligning DIAC practices with modern arbitration trends. These new rules have been awaiting formal promulgation for some time, but it is likely their approval will be imminent in light of the changes contemplated by the Decree. 

The Implications of the Decree

The Decree comes in the wake of Dubai being recognised, for the first time, as a top 10 arbitration seat in the 2021 International Arbitration Survey conducted by the Queen Mary University of London, in partnership with White & Case. The Decree is no doubt intended to further support the Government of Dubai's overall objective to strengthen the position of Dubai as a global centre for the resolution of disputes, and enhance the UAE's international arbitration landscape.

The key implications of the Decree are summarized below.

The Abolished Arbitration Centres

Article 4 of the Decree abolishes: 

  • the Emirates Maritime Arbitration Centre, established under Decree No. 14 of 2016; and 
  • the DIFC Arbitration Institute, regulated under Law No. 5 of 2021.

The Decree refers to the Emirates Maritime Arbitration Centre and DIFC Arbitration Institute as the "Abolished Arbitration Centres".

While the DIFC-LCIA is not expressly referred to in the Decree, since its joint venture party – DIFC Arbitration Institute – ceases to exist, the DIFC-LCIA cannot continue to operate under the existing agreements with the LCIA.

The expanded role of DIAC

The Decree includes a statute setting out the provisions that regulate and manage DIAC (the "DIAC Statute"). Article 3(9) of the DIAC Statute states that DIAC possesses any function or authority necessary to achieve the DIAC objectives. Those objectives include:

  • Strengthening the position of the Emirate as a reliable global center for the settlement of disputes through alternative dispute resolution means (Article 2(1));
  • Enhancing the position of DIAC as one of the best choices for the disputing parties to resolve their disputes in an efficient and effective manner (Article 2(2)); and
  • Promoting "the resort to alternative dispute resolution means, in a manner that serves the business community in the Emirate" (Article 2(3)).

Under Article 5(b) of the Decree, DIAC will substitute the Abolished Arbitration Centres in all their rights and obligations. Necessarily, the DIAC Statute affirms DIAC’s administrative functions and stipulates that DIAC is authorized and mandated to:

  • Supervise arbitration pursuant to the DIAC Arbitration Rules or such rules agreed upon by the parties (Article 3(1));
  • Coordinate, collaborate and enter into agreements and memorandum of understanding with all specialized arbitration institutes and centres at regional and international levels (Article 3(3)); and
  • Enter into agreements and memorandum of understanding with the competent courts inside and outside the Emirate about matters relating to enforcement of arbitral awards (Article 3(4)).

To support DIAC, the DIAC Statute also introduces a number of new roles and entities:

  • Board of Directors: The Board of Directors is tasked with the overall supervision of DIAC (Article 8). This is a wide-reaching mandate that includes approving and implementing the general policy and strategy necessary to achieve the DIAC objectives (Article 8(a)(1)) and approving the arbitration and conciliation rules governing alternative dispute resolution (Article 8(a)(2)). 
  • Court of Arbitration: The court is tasked with the overall supervision of the alternative dispute resolution means provided by DIAC (Article 11). 
  • Executive Director and Administrative Body: The Executive Director is to undertake the management of DIAC and supervise its day-to-day works (Article 15), whilst the Administrative Body, under the supervision of the Executive Director, is essentially tasked with administering disputes under DIAC (Article 16).

DIAC’s most imminent mandate, however, is to coordinate with all concerned entities in the Emirate of Dubai to “adjust its position in consistency” with the provisions of the Decree and the DIAC Statute. DIAC is tasked with doing so within 6 months of the Decree.

Default seat of arbitration

Pursuant to Article 4(b) of the DIAC Statute, if no seat or place of arbitration is agreed upon by the parties, then DIFC is deemed as the default seat or place of arbitration. In these circumstances, in accordance with Article 4(a)(2) of the Decree, the arbitration agreement and procedures are governed by the DIFC Arbitration Law (DIFC Law No. 1 of 2008).

This is a positive development and will no doubt be welcomed by arbitration practitioners and users of arbitration.

Existing arbitrations will continue and existing arbitration agreements will remain valid

Under Article 6(a) of the Decree, agreements to arbitrate which refer to the Abolished Arbitration Centres will remain valid and effective. However, DIAC will replace the functions of the Abolished Arbitration Centres. This raised the question as to whether DIAC would administer arbitrations under the rules of the Abolished Arbitration Centres, or if DIAC would subsume the Abolished Arbitration Centres in their entirety, such that the DIAC Arbitration Rules will replace the rules of the Abolished Arbitration Centres.

Under Article 6(b) of the Decree, any tribunal formed under the rules of the Abolished Arbitration Centres will continue to consider arbitration cases before them without interruption. However, these arbitrations will continue with DIAC acting as the new administrative body. This suggests that the LCIA Court will no longer have power to administer DIFC-LCIA arbitrations. If this is the case, this raises a further question as to whether the arbitration proceedings will proceed in accordance with the parties’ agreement.

In a press release dated 7 October 2021, the DIFC provided welcome clarity on the above issues announcing as follows:

"it has been proposed that LCIA will directly administer all ongoing arbitrations, mediations and other ADR proceedings referred to the DIFC-LCIA. Under this proposal, the DIFCLCIA Registrar and Secretariat will administer all ongoing proceedings for and on behalf of the LCIA on a secondment basis from DIAC until such proceedings are concluded.

From the date of the enactment of the Decree, parties to contracts should not include arbitration agreements which provide for the resolution of disputes in accordance with the DIFC-LCIA Rules or for the DIFC-LCIA to administer, or to act as appointing authority in arbitrations, mediations or other ADR proceedings, pursuant to other, ad hoc, rules or procedures. All arbitrations, mediations and other ADR proceedings arising out of agreements referencing the DIFC-LCIA and referred for resolution after the date of the enactment of the Decree will be administered by DIAC in accordance with the DIAC Rules, unless the parties thereto agree otherwise."

The press release therefore confirms that:

  1. any arbitrations subject to the DIFC-LCIA Arbitration Rules which commenced before 20 September 2021 will continue with the LCIA as the administering body; and
  2. any arbitration agreements which are subject to the DIFC-LCIA Arbitration Rules and where an arbitration did not commence before 20 September 2021, will be subject to administration by DIAC.

Considerations for Ongoing Arbitrations and Arbitration Agreements

Parties involved in existing disputes subject to the EMAC Arbitration Rules or the DIFC-LICA Arbitration Rules with arbitration tribunal and committees formed as at 20 September 2021 will continue to be governed by their applicable rules. However, this continuity does not apply to arbitrations that have not yet formed tribunals or committees. Instead, the Decree requires disputes and agreements subject to the DIFC-LCIA Arbitration Rules or the EMAC Arbitration Rules with unformed tribunals or committees as at 20 September 2021 to now fall within the purview of the DIAC Arbitration Rules, subject to any other agreement of the parties.

The practical implications of the Decree are yet to be seen and it is understood that discussions between the Abolished Arbitration Centres and the Government of Dubai is ongoing to ensure a smooth transition as contemplated under the Decree.

It is recommended that parties subject to the rules of the now Abolished Arbitration Centres seek legal advice on how to navigate the changes implemented by the Decree and the changes that are likely to follow in any transitional arrangements.

[View source.]

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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