Brief Overview On Arbitration Law in UAE

Sir Herbert Read, an English art historian, quoted,

“I can imagine no society which does not embody some method of arbitration.”

The fortune of the United Arab Emirates (UAE) experienced a great turn over from a quiet desert land to the most popular business hub today in the Middle East, with the discovery of oil in the year 1950. 

In 1952, the dispute between the Sheikh of Abu Dhabi and Petroleum Development Ltd. concerning a 75-year oil concession agreement was known to be the first case of arbitration dispute in UAE, that was referred to the international arbitration. This case was the advent of arbitration in the UAE. At present, UAE is globally popular for its oil-exporting businesses, along with its manifold economy which includes tourism, international finance, shipping and logistics, construction, retail and manufacturing. Thus, UAE recognizes the need to have a strong legislation on arbitration to welcome the inflow of more commercial activities from all across the world with an assurance of sorting out the delicate disputes that might arise during the course of business activities in various sectors in a more quick and effective manner. 

Before the introduction of a dedicated law on arbitration, arbitral disputes were dealt under the Articles 203-218 of the Federal Law Number 11 on the Civil Procedures Law (the Civil Procedure) of the UAE. UAE being the center for many major business transactions and set ups in the Middle East, foresees the importance of having a strong and modern federal law on arbitration to help sort out various kinds of disputes that might arise during these commercial transactions. 

Accordingly, UAE on 3 May 2018, issued Federal Number 6 of 2018 concerning arbitration (the Arbitration Law), the first stand-alone legislation, which came into effect on 14 June 2018, repealing the chapter containing the arbitration provisions in CPC. Undoubtedly the Arbitration Law was enacted with an intention to match with the existing modern global arbitral practice as the Arbitration Law is framed in line with the United Nations Commission on International Trade Law (UNCITRAL), a mandate formed to promote progressive harmonization and unification of international trade law through conventions, model laws and other instruments to address key issues. 

 

Scope of the application of the Law: 

Article 2 lays down the scope of application of this law to be all across the UAE, unless the parties have agreed to be governed by another arbitration law, provided it is not in contradiction with the public policy and morality of the UAE. And also, In case of international commercial arbitration where the parties have agreed to be regulated by the provisions of this law and any arbitration arising out a dispute, whether contractual or non-contractual in regards to legal relationship established by the Law in force by the State. 

 

The Arbitration Agreement 

Arbitration is a procedure in which a dispute between two or more parties is submitted, on agreement, to one or more arbitrators, who has the authority to make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court. Articles 4 to 8 of the Arbitration Law, contains the provisions on who can enter into, the forms of, separability of and the requisites of the arbitration agreements. According to Article 4, an arbitration agreement can only be entered into by a person who has a legal capacity to do so or by a representative authorized by the juristic person, otherwise the arbitration agreement would be invalid. Any matters where the scope of conciliation is not possible cannot be submitted to arbitration. 

The matters affecting the public policy or the morality of the state, which includes, criminal offences, insolvencies, fraud and so on which cannot be resolved through conciliation. Also, Article 4 (4), protects the arbitration agreement from being discharged even in the case of the death of either party, or withdrawal and allows it to be enforced by or against the legal successor of the said party. Article 7 of the Arbitration Law, states that an arbitration agreement should be a written document and the conditions under which the arbitration agreement in writing is considered to be valid are:

• When the document in which it is mentioned is signed by the parties, or where it expressly states in the exchange of letters or any other means of written communication. The arbitration also expands its interpretation of the agreement to be in writing to the electronic means of communication as per the applicable rules in the state concerning the electronic transactions, for instance agreement made through emails could also be considered as a valid arbitration agreement.
• Furthermore, it also provides that the reference to the arbitration agreement could be made in another written document, model contract or international agreement, but such reference should be clear enough to indicate that the arbitration clause is part of the contract.

 

Interestingly, the disputes which are pending before the competent courts can also have the scope of entering into an arbitration agreement on the approval of the courts, thus, allowing the litigants to commence the arbitration proceedings at the time and place as agreed by them in line with requisite provisions of such agreement. An arbitration agreement could be made irrespective of before or after the rise of the disputes, even when such disputes are present before the court. 

Article 6 of the Arbitration Law also contains a key feature of the separability of the arbitration agreement from the other clauses mentioned in the contract, whereby even at the nullity, rescission or termination of such contract shall not affect the arbitration agreement mentioned in it if such agreement is valid by itself, except for when the matter is related to the incapacity of any party. This article is included in the Arbitration law in line with UNCITRAL Model Law, making the arbitration agreement independent of the other clauses mentioned in the contract. Also, an argument on the nullity, rescission or termination of the contract which includes the arbitration agreement shall not put a hold on the arbitration proceedings and allows the arbitral tribunal to decide on the validity of the said contract. Lastly, Article 8 grants that the court may dismiss any action that falls within the scope of an arbitration agreement, if existence of such agreement has been brought to the notice of the court before any substantive claims or defenses on the merits has been made by the court, unless the court declares that such arbitration agreement is invalid or impossible to perform. Also, filing of such a plea shall not preclude the commencement or continuance or arbitral proceedings or even the issuance of the arbitral award. 

 

Arbitration Proceedings Commencement: 

Article 27 of the Arbitration Law contains the commencement of arbitration proceedings to begin on the next day, subsequent to the full composition of the arbitral tribunal. Also, when a notice of request for arbitration has been made, for the purpose of imposing the provisional seizure, it shall be deemed to be as good as filing a case. As per Article 23, the parties have the option of deciding upon the procedures to be followed by the arbitral tribunal and these procedures shall be conducted in line with the applicable rules in any arbitration institution or organization inside or outside the state. The party who proceeds with arbitration proceedings even upon being aware of the requirements of the agreement that has not been met or if the agreement is made contrary to any of the provisions of the present law in the state and has failed to take any action against such information within the time limit as agreed between the parties or within seven days of the date on which the party has come to the knowledge of such information, shall be considered to have waived his right to object. 

 

Place of arbitration:

As per Article 28, the place of arbitration can be decided by the parties themselves, unless such agreement has not been successful, the place of arbitration will be determined by the arbitral tribunal on consideration of the circumstances of the case and the convenience of the parties. where the parties failed to agree on the place of arbitration, the arbitral tribunal may conduct the arbitration hearings as it considers appropriate to carry out any of the arbitration proceedings with a summon as to the date of hearing issued to the parties in a reasonable time. Also, the scope of the arbitration proceedings has been extended to be able to be performed by all means of communication like by using the modern electronic technologies. 

 

Language of arbitration:

In general, the arbitration proceedings shall be carried out in Arabic. At the same time the arbitration law also provides an option for the parties to choose the language in which such proceedings and all the related aspects can be conducted. After all the essentials to arbitration proceedings are met, Articles 30 – 36 lays down the process of the general arbitration proceedings, it is suggestable to have knowledge on the order of proceedings to be done. The first step in the proceeding begins with exchange of the statement of claims and defense by the claimant and respondent. 

Article 30 contains the time in which such statements should be delivered to another party as well as the arbitrator of that party, and also the details that such statements must constitute. The claimant’s statements shall include his name, address, the name and the address of the respondent, an description of the facts of the claim, the points of contention, and pleas, along with any other matter as required in line with the agreement of the parties and the same shall be delivered within fourteen (14) days from date of the formation of the arbitral tribunal, unless the parties have already agreed to the number of days within which such statement can be sent. Likewise, the respondent shall revert to the claimant’s statements with a statement of defense, which may also include any incidental pleas or counterclaims pertaining to the subject matter of the dispute, within fourteen (14) days from the date of receipt of the statement sent by the claimant. The respondent may also raise a right arising from it in order to claim offset, even at any subsequent stage of the proceedings if the arbitral tribunal considers that such delay is justified.

If you are wondering, if either party may amend or supplement his claims or defense or even file for a counterclaim during the course of the arbitral proceedings, by all means they are allowed to do except if the parties have agreed to the contrary, or the arbitral tribunal upon considering the delay in raising of such amendments would be inappropriate or such claim tends to be beyond its authority, provided that arbitral tribunal while making its decision has considered the principles of litigation and also the rights of defense. Along with the statements of claim and defense, the parties may submit any documents in support of their statements. The parties are obligated to comply with the provisions of Article 30 of the Arbitration Law, unless they have agreed otherwise, regarding the exchange of the statements of claim and defense. 

In any case, if the claimant fails to communicate his statement in line with the provisions mentioned in Article 30 to the arbitral tribunal without any reasonable excuse for such failure, can lead to the termination of the arbitration proceedings by arbitral tribunal, if it is convinced that such delay is undue and inappropriate by the claimant in presenting his claim and causes a prevention of a fair resolution or injustice against the respondent. 

 

Similarly, in any case the respondent fails to submit his statement of defense, the arbitral tribunal may still continue the arbitration proceedings considering such failure by the respondent to be as admission to the claimant’s allegations and same provision shall be applicable to the claimant on his failure to submit his statement of defense against a counterclaim. Even if either of the party fails to comply with required obligations, or appear at the hearing or produce documents without a due cause, then the arbitral tribunal may still proceed with the arbitration proceedings and conclude whatever it may deem appropriate on considering the other relevant facts and issue the award in the following dispute based on the evidence before it. Arbitration proceedings shall be conducted in private meetings, unless otherwise agreed by the parties. Article 33 provides the format of hearings and production of evidence is done. Unless otherwise decided by the parties, the arbitral tribunal is at discretion to decide as to how the evidence or the arguments should be produced, whether in form of an oral hearing or to proceed on the basis of documents and other material evidence on the request of the party. The Arbitration Law also provides for the parties at their own costs to seek the assistance of experts and legal representatives such as attorneys and others to represent them before the arbitral tribunal. One important thing to note regarding the expert is that he should be of impartial and independent nature. For the purpose of production of evidence, the arbitral tribunal may on its own initiative or on the request of the party, seek the help of the court in taking evidence. 

 

Arbitral Tribunal

As per the definition given in Article 1 of the Arbitration Law, a tribunal which consists of one arbitrator or more to adjudicate the dispute referred to arbitration is known as the arbitral tribunal. To be fully aware of who constitutes the arbitral tribunal, the requirements and the powers of the arbitrators, holding the position of delivering awards with regards to the dispute is very essential to ensure favorable results. The Arbitration Law lays down detailed information on arbitral tribunal under Articles 9 to 21. As agreed by the parties, the arbitral tribunal shall be composed of one or more arbitrators and in the absence of such agreement by the parties, there shall be three arbitrators as appointed by the relevant authority. One of the significant points to take note of is that in case of more than one arbitrator, then the number of arbitrators shall be in odd, otherwise such arbitration shall be declared as null and void. Article 10 of the Arbitration Law, sets out the requisites to be met by the arbitrator. Apart from the requirements as agreed by the parties, the arbitrator shall be a person who is not a minor, incapacitated or deprived of his civil rights due to the reason of being bankrupt unless he is rehabilitated. Furthermore, any person who has been sentenced for a felony or misdemeanor involving immorality or dishonesty, even if he is rehabilitated will be deemed to be unfit for the role of arbitrator. Any person who is a member of the Board of Trustees or administrative branch of the competent arbitration institution administering an arbitration case in the state shall not be eligible to be appointed as an arbitrator. The arbitrator can be of any gender or nationality, unless the parties have agreed or is provided by law. One of the important requisites of any arbitrator is that he should always be sure of his impartial nature during the course of the proceedings. It is mandated that he must declare in writing if there are any circumstances which are likely to cause doubts as to his impartiality or independence and he shall from the date of and throughout the arbitration proceedings hold the responsibility of notifying such circumstances which may give rise to doubts as to impartiality. The parties have the right to decide on the procedures to be followed for the appointment of the arbitrators, along with the time and method of their appointment. Article 11 of the Arbitration lays down the method of appointing the arbitrator. Where the arbitral tribunal is composed of sole arbitrator, the time limit to decide on the arbitrator shall be fifteen (15) days from the date of filing of the request by one party; on the failure of agreeing upon the arbitrator, the relevant authority appoints the arbitrator upon the request of a party without causing prejudice the provisions mentioned in Article 14. In cases where the arbitral tribunal consists of three arbitrators then each party shall appoint one arbitrator and the two arbitrators thus appointed shall appoint the third arbitrator. On the failure to appoint the arbitrator by either of the parties or if two arbitrators failed to agree on the third arbitrator within the course of fifteen (15) days, then the appointment of arbitrator shall be promptly done by the relevant authority without prejudicing Article 14. The parties may approach the court to take the necessary procedures for the completion and composition and appointment of the arbitrators where the authorized entities have failed to comply with the requirement of the agreement to which the parties have agreed or even failed to act in line with provisions of the law. Such election by the court shall not be appealable through means of any recourse. The decision-making power rests with the majority of the members of the arbitral tribunal where there is more than one arbitrator. However, matters concerning the procedures shall be decided either by the presiding arbitrator if authorized by the parties or the remaining members of the arbitrators. Article 14 of Arbitration Law sets the bar when an arbitrator can be disqualified or challenged. An arbitrator may not be challenged in his position unless in the circumstances amounting to impartiality or independence or if it is proven that the requirements agreed upon by the parties or the provision of the law are not met. As per Article 16, the arbitrator can be terminated by the relevant authority in case he failed to perform his functions or causes undue delay in the arbitration proceedings or he deliberately neglects to act in accordance with the arbitration agreement and upon reasonable notifications has not withdrawn by himself. Apart from this, the arbitrator shall be terminated by his death or loss of capacity, or on failure to meet any of the appointment requirements. On termination of the arbitrator, the Arbitration Law provides the parties with an option to appoint a substitute arbitrator. The competent court can examine the jurisdiction of the arbitration matters in accordance with the applicable procedural law in the state, if referred by the present law and also, the court has the sole power over this matter, until the termination of the arbitration proceedings. The president of court can pass orders as to interim or precautionary measures upon the request of the party or the arbitral tribunal. Article 19 of the Arbitration Law reflects the jurisprudential doctrine of Kompetenz-Kompetenz, or competence-competence, through which a legal body, such as a court or arbitral tribunal, may competence, or jurisdiction, to pass orders as to the extent of its own competence on an issue before it. The doctrine of Kompetenz-kompetenz is the concept enshrined in the UNCITRAL Model Law on International Commercial Arbitration and Arbitration Rules and has also been adopted by the Arbitration Law of UAE. The arbitral tribunal may decide on a plea pertaining to its jurisdiction, including pleas which are based on the non-existence or validity of the arbitration agreement or that the subject matter in dispute is not governed by such agreements. The arbitral tribunal may decide on such pleas, either as a preliminary question or in a final award based on the merits of the dispute. Article 21 of the Arbitration Law allows the arbitral tribunal to order interim or precautionary measures as it may consider necessary based on the nature of the dispute, either upon the request by the party or on its own initiative. During the course of exercising the power to pass interim or precautionary measures, it may pass orders as:

1. To preserving of the evidence which is essential to the resolution of the dispute,
2. To take necessary step to preserve the goods that constitute a part of the subject-matter of the dispute,
3. To take measures to preserve the assets and property of which a subsequent award may be enforced
   1. In order to maintain or restore the status quo of the pending dispute
   2. Take action that would prevent, or refrain from such taking actions that may cause, current or imminent harm or prejudice to the arbitral proceedings itself.

 

The significant arbitral institutions in UAE:

• Dubai International Arbitration Centre (DICA),
• Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC),
• The Ras Al Khaimah Centre of Reconciliation and Commercial Arbitration,
• The Ajman Centre for Commercial Conciliation and Arbitration, and
• The Tahkeem Sharjah International Arbitration Centre.

 

Arbitral Award 

Article 37 to 57 of the Arbitration Law. constitutes the provisions pertaining to the arbitral award. The parties may choose as to the rules of law that are applicable to the substance of the dispute. In case the parties failed to agree on the rules of law, the arbitral tribunal shall apply the substantive rules of law which it considers to have the closest connection with regards to the subject-matter of the dispute. The arbitral tribunal may also issue interim awards or awards in part of the claims before issuing of the award terminating the dispute. One of the noteworthy provisions under the arbitral tribunal is that, the parties may settle the dispute mutually before the issuance of the final judgment in the proceedings and may request the terms of such settlements to be taken into consideration by the arbitral tribunal. Article 41 of the Arbitration Law sets out the form and the contents of the arbitral award as following:

• The arbitral award shall be in writing
• The arbitral award must be signed by the majority of the members of the arbitral tribunal where there is more than one arbitrator. In any case, the award is not signed by the majority of members, then the president of the arbitral tribunal shall grant the award attached with the dissenting reasons.
• The arbitral award shall include the names of the litigants, their addresses, the name of the arbitrators, their nationalities and addresses, along with the arbitration agreement and a summary of the claims of the litigants, statements, documents and the operative part of the award and the award’s reasoning if their statement is mandatory and also it shall add the date and place of issuance.
• The award can be signed by the members even outside the place of arbitration, irrespective of the method used to sign the award, whether the award is signed in the presence of the members, or if the award has been sent to each member separately or even through an electronic mode.
• The date of issuance of the award will be the date on which the award has been signed by the sole arbitrator or where there is more than one arbitrator then the last signature will be considered for this purpose.

 

Article 53 sets forth the objections that can be raised to the arbitral award. To raise an objection against an arbitral award it requires to be lodged with the court for nullity. During the examination of the request for recognition of the award or when the applicant seeks for the annulment of the award, he shall provide a proof that:

1. That the arbitration agreement was null and void, or the absence of any such arbitration agreement or its been objected by law chosen by the parties or as per the present law no reference has been made to a certain law.
2. A proof that a party has been incapacitated or lacks incapacity as per the law governing his legal capacity to enter into an arbitration agreement.

 

Where a party to the arbitration was unable to submit his statement of defense for the reasons that he was not given a proper notice of the appointment of an arbitrator or the arbitration proceedings, or where the arbitral tribunal failed to comply with the principles of litigation or for any other such reason which was beyond his control.

1. Where the arbitral tribunal failed to apply the law as agreed by the parties to cover the subject-matter of the dispute.
2. Where the composition of the arbitral tribunal or appointment of an arbitrator has not been done in accordance to the provisions of the present law or to the agreement of the parties
3. The arbitration proceedings are void for reasons that the award has been influenced or issued after the termination of its specific period

 

Where the arbitral award was decided on matters out of the purview of the arbitration agreement or falls beyond the scope of the said arbitration. However, if the decisions on matters submitted to arbitration can be separated from those which are not submitted, then the only last said parts of the award will be considered null and void.

 

The court can on its own initiative declare the arbitral award to be null on finding the following:

1. That the subject-matter of the dispute cannot qualify to be settled by arbitration.
2. When the arbitral award is in conflict with the public order and the public morality of the state.

 

Article 54 clarifies as to the action of nullity of the arbitral award by the court shall be final and may only be subject to appeal by cassation. Nullification of the arbitral award shall result even in the termination of such award, either partially or completely based on the type of nullification rendered. Nullification of the arbitral award shall not affect the arbitration agreement and it can still be effective unless the reason for such nullification is based on non-existence of such agreement or any other such reasons. 

 

Article 55 puts forth on the steps for the enforcement of the award as: 

Any person with an intention to enforce an arbitral award shall first submit a request for the recognition of the arbitral award and for the issuance of an enforcement order to the president of the court, attached with following documents:

• The original award or a duly certified copy thereof.
• A copy of arbitration agreement
• A translation into Arabic of the arbitral award which is duly certified by a duly recognized entity where the award has been made in another language.
• A copy of the minutes of deposit of the award in the court.

 

After the submission, the president of the court or a delegated judge shall order the recognition of the arbitral award and its enforcement within sixty (60) days from the date of filing of such request, unless one or more reasons for the nullification of the arbitral award are furnished as per Article 53 of the Arbitration Law. However, the filing of an action in nullity of the arbitral award shall not hold the stay of the enforcement of the award. Nevertheless, the court which is examining such action in nullity may order a stay on the enforcement of the arbitral award upon the request of the party and such request is based on serious grounds. The arbitration law also provides an option to file for a grievance against the court ordering or denying the enforcement of the arbitral tribunal with the competent court. The arbitral award which is issued in accordance with the provisions of the present law shall be binding to the parties and will hold the same enforceability as that of a court judgment. The arbitrator can refuse to issue the final arbitral award if the parties have failed to meet the expenses and fees of the arbitration proceedings. 

 

Termination of the arbitration proceedings:

The arbitration proceedings will be terminated by the issuance of the award terminating the disputes. Also, the arbitral tribunal may terminate the proceedings in the following cases:

• Where the parties have given consent to the termination of the arbitration proceedings in accordance with the provisions of the present law
• If the claimant himself abandons the case of arbitration and the arbitral tribunal may consider proceeding upon the request of the respondent and is convinced as to the importance of resolving such dispute.
• If the arbitral tribunal considers that the continuation of the arbitration has for other reasons become unnecessary or impossible.

 

The UAE has taken major steps towards bring forth a specific legislation in line with UNCITRAL Model Law, to deal with the matters concerning arbitration in a more effective manner and fill the voids in the arbitration chapter of the Civil Procedures Law (the Civil Procedure) by replacing it with the Federal Number of 6 on the Arbitration Law (the Arbitration Law) and aiming to provide with the best arbitration system. In this article, our employment practice has brushed through the significant features of the Arbitration Law to enlighten on things one should be aware of while proceeding with a dispute to arbitration.