Arbitration in the UAE

The sine qua non that developed the idea of modern arbitration is not exactly known. However, this is not difficult to comprehend as well. Although we have not discovered the particular time or place that led to the formation of modern arbitration, we can easily understand that the same should have resulted from an imminent need to resort to technical disputes amicably and promptly.

The principles of arbitration might be coeval with the instruments or techniques of modern-day laws. The term ‘arbitration’ has been defined in the Cambridge Dictionary as ‘the process of solving an argument between people by helping them to agree to an acceptable solution’. However, the meaning of the word has evolved as it has been over a century since the term was coined.

In today’s world, arbitration is a dispute resolution mechanism that permits parties in a transaction to resolve their matters in a dedicated forum. The dedicated forum has expertise or arbiters with specialized experience. That said, this article will briefly explain the arbitration law in the UAE – which moved from a few clauses in a statute to standalone legislation. The United Arab Emirates (the UAE) is home to numerous arbitration centres or forums such as the Dubai International Arbitration Centre, DIFC-LCIA Arbitration Centre, EMAC (Emirates Maritime Arbitration Centre), ADCCAC (Abu Dhabi Commercial Conciliation and Arbitration Centre), ADGM Arbitration Centre; among others.

Each of these arbitration centres has its own set of rules and provisions and is guided by Federal Law Number 6 of 2018 on Arbitration (the Law).

Our Arbitration Lawyers in Dubai have aimed to briefly explain the provisions of the Law in this article for readers to understand the various implications of the same in domestic and international arbitration in the UAE.

 

Arbitration 101: the Agreement and the Arbitrator

The Law has listed down various requirements that should be met for the parties to a contractual transaction or dispute to refer their matter to an arbitral tribunal in the UAE, being:

1. Arbitration agreement: the parties should explicitly enter into an arbitration agreement (in writing) to refer their disputes to the particular forum as per article 7 of the Law. This agreement could be the part of a particular contract or a written correspondence (including electronic mail), or through reference through model clause or contract; or an agreement formed during a court hearing; or is part of the submittals by the parties in arbitration or court proceedings.
2. The capacity of signatories: article 4(1) states that the signatories to the arbitration agreement are natural persons with the authority to represent the party (company).
3. Type of matter: the matter which is a matter where arbitration is permitted by law (article 4(2)).

One of the primary reasons why arbitration is continued to be chosen as a dispute resolution mechanism is attributed to the autonomy that it provides to the parties. The parties may agree on the forum, several arbitrators, language and rules to be followed, the procedure for appointing the arbitrator, and the arbitrators themselves. However, there can be disputes in the agreed process as well. For instance, in case the parties agree to appoint a sole arbitrator and are unable to come to a consensus in fifteen days, then any of the parties may submit a request with the arbitral tribunal for the appointment of the sole arbitrator. Likewise, parties are permitted to appoint one arbitrator (each) in scenarios where they have agreed to appoint three arbitrators via the arbitration agreement. The two appointed arbitrators shall then appoint the third arbitrator with mutual consent. However, the tribunal has the authority to appoint an arbitrator in the event any of the parties fail to appoint an arbitrator within fifteen (15) days from the receipt of their request to do so; or where the initial two (2) arbitrators are unable to agree on the selection of the third arbitrator. In such cases, the arbitral tribunal will exercise its right when either party submits a written request after the expiry of the prescribed period.

 

The Law also provides the parties with the option of challenging the arbitrator in the following cases:

(i) if it comes to the parties’ knowledge that such arbitrator does not possess the required qualifications;

(ii) there arises a ‘justifiable doubt’ on their independence and impartiality. 

In such predicaments, the party shall be required to follow the procedure on the flow chart on the right side of this page. However, it is pertinent to note that such a challenge against the appointment (or; continuation) of the arbitrator does not affect the arbitral proceedings as such. Therefore, the challenged arbitrator may continue to hold the proceedings and even issue an award before the arbitral tribunal delivers its decision. If an arbitrator has been (successfully) removed from his role, then, subsequently, a substitute arbitrator should be appointed in line with the procedures that were initially undertaken to choose the arbitrator who is removed.

 

Jurisdiction and Proceedings

An arbitral tribunal has been conferred with the authority to identify and rule disputes raised on its jurisdiction in a given matter. This ruling could be through a preliminary order or a final award. However, the Law also provides that the aggrieved party may request a court with competent jurisdiction within fifteen days to decide on the jurisdiction of the arbitral tribunal if the ruling (on jurisdiction is passed) through a preliminary order. The court will analyze the request of such party and issue its final decision within thirty days thereof. The Law has also restricted the plea of a party to object to the jurisdiction of the arbitral tribunal till the submission of the statement of defence in a particular matter. 

 

Under article 22 of the Law, the arbitral tribunal is also conferred with the authority to include a third party in the arbitration, provided

(i) any party to the arbitration or a third party has applied to that effect; 

(ii) all parties are provided with the opportunity to be heard;

(iii) such a third party is a party to the arbitration agreement. 

Further, the arbitral tribunal also has the authority to decide on the procedure that it finds appropriate in the event the parties have not explicitly agreed to any particular procedure. Similarly, the tribunal may also decide on the place, and language of arbitration in the event the parties have not agreed on the same.