ARBITRATION

Arbitration is a common method of dispute settlement in the UAE and other nearby countries. The increased use of arbitration in the UAE has been demonstrated by the fact that several institutions have been established to administer commercial arbitrations.

The UAE established Federal Law No. 6/2018 on Arbitration, the country’s first stand-alone legislation on arbitration (Arbitration Law), which introduced, among other things, a more streamlined procedure to enforce domestic arbitrations, as well as changes to the UAE Civil Procedure Code to make it easier for foreign arbitral awards to be recognized and enforced.

The following are the most prominent arbitral bodies in the UAE:

• The Dubai International Arbitration Centre (DIAC) is the official institution that administers arbitrations under the DIAC Arbitration Rules 2007 (DIAC Rules).
• The DIFC London Court of International Arbitration (DIFC-LCIA) Centre is responsible for the administration of arbitrations conducted under the DIFC-LCIA Arbitration Rules.
• The Abu Dhabi Conciliation and Arbitration Centre (ADCCAC), which runs arbitrations according to the ADCCAC’s Procedural Regulations.
• The Emirates Maritime Arbitration Centre (EMAC).
• Sharjah International Commercial Arbitration Centre (Tahkeem).
• Ras Al-Khaimah Centre for Reconciliation and Commercial Arbitration.

Advantages/Drawbacks

The following are some of the benefits of arbitration over litigation:

• The hearing is private and confidential (unless the parties agree to the contrary).
• Arbitrators with the appropriate experience may be designated to handle technical subject-matter issues.
• Arbitrations can be held in English, or in any other language specified by the parties; whereas local court litigation is always conducted in Arabic.
• In arbitration, oral evidence is permitted, whereas only written arguments are generally allowed in courts.
• An arbitrator’s decision is final and cannot be reversed. There are few paths to appeal an arbitral award, and the validity of a decision cannot be disputed.

Arbitration has several drawbacks when compared to litigation, including:

• The costs of arbitral proceedings are often higher than those of domestic litigation.
• To be enforceable, an arbitrator’s decision must be ratified by the courts. The enforcement of a judgment may be delayed or more expensive as a result of this, although the Arbitration Law has made things easier.

Arbitration Agreements

The following standards must be observed when drafting an arbitration agreement:

• The contract must be in writing, which includes any written or electronic communication.
• The reference to another document containing an arbitration clause can be made clear by incorporating the agreement, provided that the incorporation is stated clearly.
• If a corporation or other legal entity wants to pursue an action in court, it can only do so if the person agreeing to arbitration on its behalf has the necessary authority. Typically, this power must be demonstrated by a company’s shareholders’ agreement or by its corporate documents.
• If the contract is made by a natural person, he or she must have the legal authority to sell his or her rights.

Additionally, the language of the arbitration agreement must be precise and unequivocal. Arbitration agreements are interpreted narrowly.

Although the Arbitration Law does not contain a provision requiring that documents containing an arbitration clause must be signed by the parties, the courts generally require that such documents be signed. The court will also want to ensure that the reference to arbitration is explicit. As a result, it’s not unusual to see standard terms attached to the main contract, which are also initialed by the parties.

Arbitrators (number and qualifications)

There is no legal obligation for the number of arbitrators. However, an odd number of arbitrators must be employed (if there are more than one).

The following arbitrator restrictions are in place:

• An arbitrator must be a non-corporate individual with no vested interest in the dispute, who is not:
• a minor;
• a court-ordered restraining order; or
• A person who has been convicted of a felony, misdemeanor, or crime involving moral turpitude or breach of trust loses their civil rights due to bankruptcy.
• An arbitrator cannot be a member of the institution administering the arbitration (the arbitral institution).

Furthermore, the Arbitration Law allows for the selection of an arbitrator’s gender and nationality.

Appointment/Removal

Appointment of Arbitrators

In the absence of a contract between the parties, according to the Arbitration Law, three arbitrators should hear any arbitration unless otherwise specified by the body that is overseeing it. An arbitrator is chosen by the parties, and the chairperson of the tribunal will be nominated by the competing arbitrators. The appointment of the chairperson will be made by the arbitral institution if the party-designated arbitrators are unable to reach a decision.

The institution is allowed to pick arbitrators under certain institutional regulations.

Removal of Arbitrators

An arbitrator can be removed and replaced under the Arbitration Law:

• The failure or incapacity of an arbitrator following his or her death or incapacitation.
• Following a challenge to his appointment.
• If the arbiter determines that the arbitrator:
• is unable to fulfill their functions or has stopped performing them;
• acts in a way that causes arbitral proceedings to be delayed in an unreasonable manner; or
• Failure to act in accordance with the arbitration agreement on purpose.

Arbitration Procedure – Commencement

Unless otherwise agreed by the parties, proceedings under the Arbitration Law are initiated on the day following the formation of the tribunal. A request for arbitration is filed to start arbitrations. The requirements for requesting arbitration are often included in the institution’s regulations. If you want to start an arbitration proceeding with attorneys, you’ll need proof of authority via a power of attorney.

Depending on the arbitration rules in use, additional procedures are used to begin proceedings.

Applicable Procedural Rules

The Arbitration Law provides both parties with the option of agreeing on the alternative procedures, subject to any additional requirements set forth in the agreed rules. In the absence of an agreement, the tribunal is free to adopt whatever procedures it considers appropriate, subject to any applicable legislation and international pacts.

The procedures set forth by the institution in which you are involved will apply.

Default Rules

If the parties are unable to reconcile their substantive positions, the arbitrator(s) must select the applicable rules.

Statement of Facts and Evidence

There is no legal procedure for document discovery and inspection in the UAE judicial system, with the exception of laws and regulations that govern the DIFC and ADGM Free Zones. However, the Arbitration Law allows an arbitration court to request a court to order a party or a third person to give oral testimony or produce any document in their possession if such item is “necessary for the decision of the dispute.”

• Each side is obligated to provide the documents it intends to rely on in court. There is no need for a party to submit anything that would be harmful to its case, thus discovery is restricted. The Arbitration Law states that:
• An arbitrator has the authority to order any party to provide original records, which have already been produced by another.
• At the request of a party or on its own initiative, a tribunal can seek an order from the Court of Appeal to sanction a witness who does not appear or answer questions, or to compel the production of documents in possession by a third party that is necessary to resolve the issue.

In practice, the IBA Rules on Taking of Evidence in Arbitration are frequently agreed to by parties. In some instances, arbitrators may also take administrative rules into account while issuing such orders.

Legal Costs

The cost of legal representation is not determined by law. Hourly fees and fixed-fee agreements are popular. Contingency payments are not permitted in the UAE. In arbitrations in the United Arab Emirates, third-party funding is not prohibited or regulated.

Cost Allocation

Unless otherwise agreed by the parties, a tribunal can assess costs in an arbitration under the Arbitration Law, which includes arbitrators’ fees and expenses. In addition to arbitrators’ and institutional costs, expert fees are also considered. As a matter of practice, the UAE courts have required express agreement between the parties empowering them to order legal fees in recent cases.

Cost Calculation

Costs can be awarded by arbitral tribunals at the court’s discretion. The court may grant a request for a change in costs assessment by one of the parties.

Factors to consider

The majority of the time, costs are determined on the basis of:

• Parties’ submissions.
• The degree of complexity and the nature of the argument.
• Time spent.
• Discretion of the tribunal.

It’s a good idea to include an express clause in the arbitration agreement that specifies who is responsible for what expenses.