Parties increasingly agree to refer contractual disputes to arbitration for resolution. Arbitration clauses are particularly common in construction, real estate and commercial agreements where effective, efficient, and confidential means of dispute resolution are in the interests of both parties. Arbitration is a prominent method of dispute resolution in the United Arab Emirates (UAE). This brief overview is intended as an introduction to alternative methods of dispute resolution including arbitration, in the UAE.
UNDERSTANDING ARBITRATION
An arbitration process starts where parties in dispute find that they have agreed contractually to resolve their disputes through arbitration rather than through the traditional court system. Arbitration is a binding and enforceable process by which disputes are determined by an agreed impartial third party (called an arbitrator) – or in larger or more comples disputes by three impartial third parties (called a tribunal). Where a tribunal is to be appointed, each party usually selects an arbitrator whilst the two arbitrators then select a chairman. Where either or both parties fail to select an arbitrator or where the selected arbitrators fail to agree on a chairman, the arbitration institute the parties have selected to manage their arbitration process will usually appoint the arbitrator or the chairman on behalf of the party or parties. The arbitrator or tribunal will hear the parties’ cases and will make a determination of the matters in dispute through a written award. Providing the arbitration procees has been duly followed in accordance with the law, then the written award will be legally enforceable through the court system.
Comparatively, the arbitration process is less formal and quicker than court proceedings. It provides a structured yet flexible framework for resolving disputes. Arbitration is often favored for its efficiency, confidentiality and for the expertise of the arbitrators who may be selected to determinate a dispute.
THE EVOLUTION OF ARBITRATION IN THE UAE
The UAE’s legal system has undergone significant reforms to support arbitrations seated in the UAE. The enactment of Federal Law 6 of 2018 Concerning Arbitration provides comprehensive legal structure aligned with UNCITRAL Model Law which provides parties with greater predictability in arbitral proceedings. The law introduced provisions such as the recognition of electronic arbitration agreements, which reflect the UAE’s rapid adoption of technological development with online hearings being common practice.
Amendments made to the Federal Law 11 of 1992 Concerning Civil Procedures Law further ensure the enforceabilty of domestic and foreign arbitral awards, and align the UAE with the New York Convention to which it is a signatory.
Further, Federal Law No 6 of 2021 on Mediation has been a key factor in the rapid growth of mediation in civil and commercial dispute resolution – it has proven particularly popular in the resolution of confidential and large-scale family business disputes.
A further key development was the integration of the DIFC-LCIA Arbitration Centre’s operations into the Dubai International Arbitration Centre (DIAC) in 2021. This streamlined arbitration services in the UAE and consolidated arbitration procedures with the updated Rules of the Dubai International Arbitration Center. These served to further align the UAE’s arbitration framework with international standards and best practice.
DUBAI INTERNATIONAL ARBITRATION CENTRE (DIAC) ARBITRATION, ABU DHABI INTERNATIONAL ARBITRATION CENTRE (ARBITRATEAD) ARBITRATION AND ICC ARBITRATION
The UAE also benefits from several excellent global and regional arbitration centres. The Dubai International Arbitration Center (DIAC) in Dubai is particularly prominent following the closure of the DIFC-LCIA in 2021 with DIAC arbitration often the first choice for domestic and regional dispute resolution. Another significant institution is the Abu Dhabi International Arbitration Centre (Arbitrate AD) which is the successor to the Abu Dhabi Commercial Conciliation & Arbitration Center (ADCCAC), has recently issued the Abu Dhabi International Arbitration Centre Rules 2024.
Similarly, arbitration under the auspices of the International Chamber of Commerce (ICC), have gained traction in the region and the permanent presence of the ICC in the UAE confirms the UAE’s role as a major player in international dispute resolution. Arbitration under the rules and guidance of the London Court of International Arbitration (LCIA) is another popular alternative.
GROWTH OF ARBITRATION IN THE UAE
The popularity of arbitration in the UAE can be attributed to several key benefits:
CONFIDENTIALITY
Arbitration proceedings and arbitration awards are private and confidential, meaning that sensitive business information and details of a dispute are not disclosed.
EXPERTISE OF ARBITRATORS
Arbitration permits parties to selected independent and impartial arbitrators with specific expertise relevant to their dispute. This ensures that the decision-makers have a deep understanding of the industry and the technical aspects of the case.
SPEED AND EFFICIENCY
Arbitration is generally faster than traditional court litigation. The streamlined process and flexible scheduling often lead to quicker resolutions, which can be crucial in fast-paced business environments.
FLEXIBILITY IN PROCEDURES
Arbitration allows parties to tailor the procedures to their needs. They can agree on the rules governing the arbitration, the location of hearings and the language used, which provides a customised dispute resolution experience.
FINALITY OF AWARDS
Arbitration awards are generally final and binding, with limited grounds for appeal usually on procedural grounds. Awards are legally enforceable. This finality provides certainty for parties.
See also: https://bolzarbitration.com/blogs/f/diac-arbitration-dubai
BEST PRACTICES FOR ENGAGING IN ARBITRATION
To maximize the benefits of arbitration, parties should consider the following best practices:
CLEAR ARBITRATION CLAUSE
Incorporate a well-drafted dispute resolution clause in all key contracts. The clause should specify the governing law of the contract, the law applicable to the arbitration procedure, the institution managing the arbitration, the number of arbitrators as well as the language of the arbitration.
SELECTING THE RIGHT ARBITRATORS
Choose arbitrators with the relevant expertise and experience. Conduct thorough due diligence to ensure that the selected arbitrators possess the necessary qualifications and experience relevant to the specific dispute. Arbitrators need not be lawyers.
PREPARATION
Invest time in preparation. Gather all relevant documents, evidence and witness testimonies to present a strong argument.
ENGAGE EXPERIENCED PARTY REPRESENTATIVES
Having knowledgeable and experienced party representation can significantly impact the outcome of the arbitration. Whilst parties usually engage legal counsel to assist, this is not essential as most arbitration laws and institutional rules provide that parties can be represented by third parties other than lawyers if this is felt to be appropriate. In any event, the selected party representative should be familiar with the arbitration process and should be able to present your case and to advocate effectively on your behalf.
STAY OPEN TO SETTLEMENT
Whilst arbitration is a binding process, parties should remain open to settlement discussions throughout. Early resolution can save time, resources, and relationships.
BOLZ ARBITRATION
Bolz Arbitration was founded in 2009 in Dubai by Anja Bolz, a UK qualified lawyer who has been working in the UAE since 2006. In her role as Group Counsel for all regional and international businesses for a leading Emirate business family, Anja has extensive international legal experience covering Europe, the US and MENA regions. Given Dubai’s location as a global business hub, Anja’s arbitration experience reflects the many nationalities and legal systems of the MENA region. Anja’s first arbitration case in 2009 involved an Iranian Claimant and a UAE Respondent and ever since, her cases have involved parties from throughout the region. Dubai in itself has parallel legal systems with common law in effect in the DIFC (seat for DIFC arbitrations) and civil law in effect in the DIAC (seat for Dubai arbitrations) and accordingly Anja is experienced in both civil and common law legal systems.
Anja has been sitting as an independent arbitrator in commercial, property and construction disputes since 2009.
CONCLUSION
Arbitration has become an integral part of the legal landscape in the UAE, providing a viable alternative to traditional court litigation. With its benefits of confidentiality, expertise, efficiency, and flexibility, arbitration is well-suited for the diverse business environment of the UAE. By adhering to best practices and engaging experienced counsel, parties can navigate the arbitration process effectively.
