UAE on track to become a global arbitration centre
The UAE’s ambition to achieve recognition as an international arbitration centre has seen extensive development and increased confidence in recent years. With eagerly anticipated legislation expected to shortly address those existing inadequacies, the UAE may yet reach desired status as a global arbitration centre.
As far as alternate dispute resolution goes, arbitration presents notable advantage, particularly in the context of commercial disputes, as a forum wherein parties elect to forego litigation and instead appoint an impartial third party to hear their matter under dispute and reach a final, binding decision in respect thereof. Typically, once an arbitrator has reached decision on a matter, the force of the law may be applied by the courts of the relevant jurisdiction in order that the award be enforceable.
Further, arbitration provides relative speed, informality and a cost-effective means at dispute resolution depending on the nature of the dispute.
Internationally, there has been a surge in demand for impartial arbitration forums that may be availed of in the case of dispute which deliver ease of access, uniformity in procedure as well as cost-effective means at reaching a resolution. The emergence of Asian jurisdictions, including Hong Kong and Singapore, as arbitral seats has provided a necessary alternative and shifted the confines of traditional arbitration venues as substitute forums to be utilised.
The UAE offers various alternatives to the litigious process with Dubai International Arbitration Centre (DIAC), DIFC London Court of International Arbitration (DIFC-LCIA) and the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC) to name a few. These arbitration centres provide parties with various options regarding the language utilised as well as, in the case of the DIFC-LCIA, common law principles being applicable. However, the enforcement of arbitral awards as well as the framework under which arbitration is conducted is limited and as such the advancement of such dispute resolution forums are hindered.
absence of a federal law
Despite demand for a more modern structure within which it may operate, arbitration in the UAE remains governed by the UAE Federal Law No. 11 of 1992 (“the Civil Code”) as amended. Although the UAE has ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention, 1958) in 2006, in the absence of a federal law outlining procedural aspects of arbitration and uniformity in application, the UAE arguably cannot compete with the likes of alternate emerging forums in their promotion of arbitration accessibility.
A federal arbitration law, understood to be in the final approval stages, is due to be enacted in the near future, which would conceivably provide stability to arbitral practice in the UAE.
Internationally, arbitration law is practically guided by the United Nations Commission on International Trade Law (UNCITRAL) Model Law and it is anticipated that the proposed legislation would encompass the same principles, including provision of clear procedural framework, as well as guidance as to court recognition of arbitral awards. Under the existing structure, these areas attract a degree of concern.
A key issue in the election of arbitration by parties to a contract is the enforceability of the decision reached and award made. Where clarity in court approach at ratification is lacking, as is sometimes the case in the UAE, it is often a deterrent for parties that would otherwise avail of such forum. Despite clear advantage to such alternate dispute resolution, the lack of a modern framework and updated legislation restricts progress and prevents the UAE competing against other emerging arbitration centres. need for an update Competing jurisdictions legislation on international commercial arbitration is regularly updated and reviewed to incorporate internationally accepted codes and rules based primarily upon UNICTRAL Model Law. Owing to the continued use of the prevailing Civil Code in the UAE to determine arbitral procedure and award enforcement, an update is all too necessary.
In the UAE, as an international financial centre and business hub, arbitration appointment has increased as confidence in the arbitral code develops. Despite the challenges faced currently, one would hope the anticipated legislation makes provision as a codified document with singular enforceability in order to achieve international status and continue to attract foreign investment and investor confidence in the region.
Arbitration provides relative speed, informality and a cost-effective means at dispute resolution depending on the nature of the dispute