LexisNexis

DIAC Arbitration Rules 2022 – a paradigm shift for Dubai becoming a global arbitration hub

Tuesday 14 June 2022

Jasmin Fichte

Fichte & Co, Dubai

Dr Laura Voda

Fichte & Co, Dubai

   

The Dubai International Arbitration Centre (DIAC) published its new arbitration rules (the ‘Rules’) on 2 March 2022. The New Rules replace the DIAC Arbitration Rules of 2007 and are applicable to all arbitrations commenced after 21 March 2022, regardless of when the arbitration agreement was entered into.

The New Rules are in furtherance of the major developments in the United Arab Emirates last year regarding significant changes to the institutional arbitration framework: namely, broadening the scope of the DIAC by absorbing the powers of the Emirates Maritime Arbitration Centre (EMAC) and the Dubai International Financial Centre (DIFC) Arbitration Institute. Furthermore, the New Rules also closely follow the developments in the Arbitration Rules of the International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA).

The DIAC is uniquely placed in comparison to any other arbitration centres across the globe, as it operates under two separate legal systems, that is, the common law system through DIFC and the civil law system, otherwise applicable onshore in the UAE and in most of the free zones in the jurisdiction.

The objective of the revised arbitration rules is to strengthen the position of Dubai as a hub for commercial arbitration by increasing the efficiency and flexibility of the arbitration proceedings in DIAC. The Rules bring in much needed clarity on some aspects such as recoverability of legal fees and costs of arbitration. They further introduce new provisions on consolidation of claims, joinder of parties and expedited arbitration proceedings, among others. This article discusses the significant provisions that have been introduced by the Rules.

Multiple contracts and consolidation of claims

Article 8 of the Rules introduces a new set of provisions enabling parties to submit a single request for arbitration in respect of multiple claims, arising out of more than one agreement to arbitrate. In order to consolidate multiple claims, either all parties must consent in writing to such consolidation, or the conditions laid down under Article 8 have to be fulfilled. The parties seeking consolidation under Article 8 must show, inter alia, that the claims are issued in relation to the same agreement, arbitrations involve the same parties, disputes arise out of same relationship, transaction or series of transactions or the underlying contracts consist of a principal contract and its ancillary contract in a homogenous relationship.

The Rules also make provision for joinder of additional parties to an existing arbitration if the parties consent in writing or the Tribunal is satisfied that the party may be a party to the proceedings. This may happen even after the constitution of the Tribunal, provided that all parties must consent in writing to such joinder.

Seat of arbitration and virtual hearings

The Rules state that where parties fail to agree on the seat of arbitration, the default initial seat of arbitration will now be the DIFC, as opposed to the old rules, which designated onshore Dubai as the default seat of arbitration. This provision is unique because it establishes the DIFC as the initial seat, which implies that the seat can be changed subsequently by the Tribunal as it is the Tribunal that has the final power to determine the seat as per Article 20. The concept of an ‘initial’ seat is quite a novelty in the arbitration world and commentators state it may lead to complications in case of subsequent decisions of the Tribunal to change the seat, because the arbitration would be subject to two different procedural laws. As an immediate example, the DIFC Arbitration Law would apply initially, by default; however, for an eventual change of seat to Dubai mainland, the UAE Federal Arbitration Law No 6 of 2018 would be the lex arbitri. Among other things, this will raise disputes as to the competency of curial courts and validity of commencement of various enforcement procedures.

The Rules promote the conduct of hearings and meetings through means of virtual communication such as videoconferencing. Further, recognition is given to the use of electronic signatures for arbitral awards.

Expedited proceedings

The Rules introduce a fast-track process under Article 32, with a time limit of three months within which the Tribunal is directed to issue the Final Award. The provisions of Article 32 shall apply: (1) if the amount claimed is below AED 1,000,000; (2) if the parties agree in writing;  and/or (3) in cases of exceptional urgency. The provision seeks to attract parties that can save both time and costs under the expedited process. The Tribunal has discretion to decide the procedure to be adopted in such expedited proceedings.

Alternative appointment process for the sole arbitrator

This new procedure can be found at Article 13 of the Rules and will be applicable when appointing a sole arbitrator, if the parties fail to jointly nominate a sole arbitrator, have no mechanism of appointment or otherwise agree to the alternative process.

Under the alternative appointment process, the DIAC will submit a list of three suitable candidates to the parties, which may add three more candidates of their own. The parties will then, within seven days, arrange the names in their order of preference and send them to the DIAC without copying the other party. The short-listed candidates will then be invited by the DIAC to serve as the sole arbitrator.

Exceptional procedures

Appendix II of the Rules on Exceptional Procedures sets out the grounds with regard to Interim Measures, Emergency Arbitrator, Conciliation Proceedings and the like. The appointment of an emergency arbitrator can be sought by parties in need of emergency interim relief, and the DIAC will appoint such emergency arbitrator within one day of receipt of application of the parties (subject to acceptance of the application by DIAC).

Further, the Tribunals have been granted the power to order interim measures, subject to the parties satisfying the Tribunal of the need for such orders and furnishing security where required by the Tribunal. 

Further, the Appendix also provides for parties to engage in conciliation for amicable settlement of disputes. If the parties agree, the conciliator shall facilitate a settlement agreement between the parties. If the conciliation fails, the proceedings may be terminated without prejudice to the merits of the case. The conciliation term is generally set for two months from the transmission of the file to the conciliator(s), except as the parties may agree on eventual extensions.

Third-party funding

Unlike the 2007 rules, the Rules make express provision to allow for third-party funding, provided that the existence of the arrangement and identity of the funder along with any commitment to adverse costs liability must be disclosed before the constitution of the Tribunal. The Tribunal may take into account the existence of any third-party adverse costs liability when apportioning costs between the parties.

Recoverability of legal fees

The position with respect to the power of the Tribunal to award legal fees remained unclear with the 2007 rules, making no provision on the same, and with Dubai Courts annulling the award of legal fees in earlier cases. The Rules, by contrast, expressly provide under Article 36 that the costs of arbitration include fees of legal representatives and the expenses incurred by them and further confirm the power of the Tribunal to decide on the costs of arbitration.

Additional changes

The Rules add more flexibility to the procedural terms. For instance, the timeframe under which the Tribunal may contact the parties in view of a preliminary meeting has been shortened to 15 days (as compared to 30 days in the 2007 rules); the time limits for exchanging written submissions have also been, under the Rules, given to the discretion of the Tribunal after consulting the parties.

To boost the rate of issuance of enforceable awards in the jurisdiction, the Rules include under Article 34.4 and 34.5 certain minimum and mandatory content requirements for arbitral awards.

Conclusion

The Rules represent a genuine overhaul and modernisation of the arbitration environment of Dubai. The general taxonomy of amendments can be listed as: more efficiency and transparency, a due legal process and an otherwise well preserved, genuine recovery process for various parties in the proceedings.

With regards to certain elements of novelty, such as the ‘initial seat’, it is expected that sufficient clarification will be added to avoid eventual conflicts of laws applicable to the proceedings, especially knowing that the Emirate of Dubai operates at the crossroads of both the common law and civil law legal systems.