1. USE OF COMMERCIAL ARBITRATION
Arbitration in the United Arab Emirates (UAE) is governed by arts 203–208 of the UAE Civil Procedure law, Federal Law no 11 of 1992 (the ‘UAE Civil Procedure Law’). The relevant section stipulates how arbitration is conducted in the UAE. The section also contains rules and regulations governing arbitration, the conduct of arbitration in the UAE and the enforcement of local and foreign arbitration awards. There are a number of active arbitration centres in the UAE, including the Dubai International Arbitration Centre (DIAC) and the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC). Other Emirates in the UAE are in the process of establishing arbitration centres and publish independent rules for governing arbitration.
The UAE has not yet acceded to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958) (the ‘New York Convention’), although it is expected that the UAE will ratify the Convention in the near future. The UAE has entered into a number of bilateral, multilateral, regional and international agreements and co-operative arrangements with other countries regarding judicial co-operation, the enforcement of foreign judgments and foreign arbitration awards. The UAE is also in the process of negotiating Free Trade Agreements, each of which will have various mechanisms for dispute resolution, with other different countries.
Local arbitration in the UAE is usually conducted under the rules of the DIAC or the ADCCAC. Arbitration conducted on an ad hoc basis is becoming more common, whereby the parties enter into an agreement to arbitrate after a dispute has arisen.
The DIAC is particularly active and has a highly effective and knowledgeable Secretariat with international credentials. In recognition of Dubai’s key role in international commerce, the DIAC offers a sophisticated level of conciliation and arbitration services. The UAE government has also taken positive steps towards granting a greater degree of international recognition to the arbitral awards made under the DIAC Arbitral Rules (the ‘DIAC Rules’).
The ADCCAC is also renowned for its expeditious and flexible management of arbitration. The DIAC and the ADCCAC have both administered local as well as international arbitrations. The UAE has ratified the Gulf Cooperation Council (GCC) treaties for the enforcement of both judgments of GCC courts and arbitral awards from GCC countries (see the Riyadh Convention ratified by the UAE on 15 April 1999 by Federal Decree no 53 of 1999). The UAE has also entered into bilateral agreements with France and India with respect to the enforcement of foreign arbitral awards. The UAE has recently signed a treaty with the government of the Republic of Sudan with respect to the enforcement of foreign judgments and arbitral awards.
* The author wishes to thank Arabella Z Anani, Justin A Connor and Jason K Majid for their contributions to this chapter
The principal source of law and regulation is arts 203–218 of the UAE Civil Procedure Law. As discussed in section 1.1 above, this law provides rules governing arbitration, the enforceability of arbitration clauses, the validity of the arbitration awards, the appointment of arbitrators and some relevant procedures on the arbitration process in a relatively simple manner. However, for the arbitration clause to be valid it must be in writing and clearly evident that the parties have agreed to submit their dispute to arbitration under particular rules or law. Challenges to any claim made to the court must be brought to the attention of the court on the first court hearing for the court to stay the proceedings and refer the matter to arbitration.
In principle, the UAE courts will uphold the parties’ agreement to foreign governing law and foreign jurisdiction and to have their arbitration administered internationally. However, in practice, it is difficult to enforce a foreign arbitral award in the UAE if arbitration was conducted under foreign law, as opposed to foreign jurisdiction. Domestic public policy concerns are fundamental in the UAE and national courts will apply domestic law with respect to the enforcement of a foreign arbitral award. If the arbitration has an international dimension, eg the arbitration was conducted under foreign law or in a foreign venue, the UAE judicial authorities will be conservative in their decision with respect to enforcement and will analyse the matter under domestic law.
In the UAE, an arbitral award must be ratified by the national courts in order for it to be equivalent to a court judgment and thereby enforceable against the losing party’s assets. This also applies to foreign arbitral awards. At present, in order to enforce a foreign arbitration award, an action must be brought before the UAE courts by way of a normal statement of claim, with supporting documents to be filed with the court in the normal course. The party entitled to enforcement may make an application to the UAE court requesting to ratify and grant judgment enforcing the award. Matters of public policy and procedural issues are often raised during the ratification process.
At present, the UAE does not have an independent arbitration law; however, the UAE is currently in the process of reviewing a draft independent arbitration law based on the UNCITRAL Model Law.
In the UAE, arbitral awards are normally decided by panels using majority voting. Dubai also has local laws referring matters relating to the awarding of government contracts to arbitration. This Dubai law also governs the process and the enforceability of local and international arbitration awards against governmental entities or quasi-governmental entities (See Dubai Law no 6 of 1997 concerning Contracts of Government Departments in the Emirate of Dubai). The Dubai International Financial Centre (DIFC) in Dubai has its own independent law and regulations governing and regulating arbitration for financial entities licensed under the DIFC rules. DIFC is a financial free zone created in 2004 in the UAE.
As noted above, the UAE has not acceded to the New York Convention and therefore the only applicable law governing the enforcement of foreign arbitration awards in the UAE is local law and procedure. Should the UAE ratify the New York Convention, it will likely require changes with respect to UAE arbitration law. The UAE is party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1966 (the ‘ICSID Convention’).
The Dubai International Arbitration Centre (DIAC), originally established in 1994 as the Centre for Commercial Conciliation & Arbitration by the Dubai Chamber of Commerce, has the experience of administering local and international arbitration. The DIAC is currently in the process of developing new rules for its arbitration centre. At the time of writing, the rules have been approved by DIAC’s board of trustees and were influenced by other model rules such as the International Chamber of Commerce (ICC) rules. The DIAC is independent both from the government and the Dubai Chamber of Commerce, and is run by a respected board of trustees from international and local backgrounds.
The second most recognised arbitration centre in the UAE is the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC). It also has experience of administering local and international arbitration, but to a lesser decree than DIAC. The Emirate of Sharjah is in the process of setting up its arbitration centre, and may be established soon by the Sharjah Chamber of Commerce and Industry.
The UAE also has extensive experience in conducting arbitration under the ICC rules locally and internationally. The ICC has a presence in the UAE by virtue of the UAE national committee that has been active in enhancing the knowledge of ICC rules as well as administrating arbitration in the UAE.
The London Court of International Arbitration (LCIA) has also become more active in administrating and hosting events in the UAE. The Chartered Institute of Arbitrators has recently established a branch office in the UAE for its members and has become more actively involved in monitoring arbitration, organising training programmes and seminars jointly with the DIAC and other institutes in the UAE.
In recent years, the UAE courts have been increasingly recognising arbitral awards and the parties’ agreement to arbitrate. The courts now show greater acknowledgement than in the past of the parties’ agreement to arbitrate and have recently been less inclined to entertain arguments by parties to avoid the enforceability of the arbitration clause or to invalidate the parties’ agreement to arbitrate. The UAE courts now generally respect and frequently uphold parties’ decision to arbitrate where there is clear evidence of an agreement to arbitrate.
The courts regularly dismiss arguments made to challenge a valid arbitration clause. If, however, one of the parties undertakes legal action despite the existence of an agreement to arbitrate and if the other party fails to object thereto at the first hearing, the case will be heard in court and the arbitration clause will then be held to be void (see art 203(5) of the UAE Civil Procedure Law). If the arbitration clause is in writing in a signed agreement, the court will apply the clause and stay any action that is filed in court. The court will order arbitration provided that a challenge to the arbitration is made by the responding party on the first hearing of the court. This is also true with respect to an agreement in either local or international arbitration. The parties to the arbitration may apply to the court to stay the arbitration in order to challenge the parties’ agreement to arbitrate.
There remain weaknesses in the UAE legal system and there is a risk that the court may not recognise the independence of an arbitration clause from the main contract, and invalidate the parties’ agreement to arbitrate if the contract itself is deemed invalid. The court retains the power to reassume jurisdiction despite the parties’ agreement to arbitrate. This occurs eg if an arbitral award is issued but the arbitral award is held invalid due to a procedural defect or a matter of public policy. Upon the invalidation of the arbitration award, the court automatically reassumes jurisdiction to hear and adjudicate on the matter if either of the parties wish to initiate action under the contract.
The doctrine of competence-competence, applicable in the UAE, recognises the inherent power of the arbitral panel to rule on its own jurisdiction. The effect of this doctrine in the UAE has not yet been tested. The UAE courts will permit the arbitral tribunal to determine its own jurisdiction; however, always subject to court control.
The arbitrator can refer the matter to court to resolve any challenge or suspend the arbitration pending the outcome of the court ruling, should one of the parties challenge the jurisdiction of the arbitral panel. There are no rules in the UAE that govern these issues and the precedents on these matters are not clear. The general rule as it stands today is that arbitrators generally can assume jurisdiction and may determine their jurisdiction, subject to public policy. It is advisable that the court rules on issues relating to public policy and exercises its discretion to mitigate the risk of the award being challenged on the basis of jurisdiction.
Books
E Al Tamimi Practical Guide to Litigation and Arbitration in the United Arab Emirates (The Hague: Kluwer Law International, 1st edn, 2003) E Al Tamimi Setting up in Dubai (Dubai: Cross Border Legal Publishing FZ LLC, 2003) D M Cato Arbitration Practice and Procedure: Interlocutory and Hearing problems (London: Lloyd’s of London Press, 3rd edn, 2002) Y Derains A Guide to the new ICC rules of Arbitration (The Hague: Kluwer Law International, 1998) A H El-Ahdab Arbitration with the Arab countries (The Hague: Kluwer Law International, 2nd edn, 1999)
R Garnett, J Epstein, J Waincymer and H Gabriel A Practical Guide to
International Commercial Arbitration (New York: Oceana Publications,
2000)
R Price and E Al Tamimi United Arab Emirates Court of Cassation Judgments 1989–1997 (The Hague: Kluwer Law International, 1998) R Price and E Al Tamimi United Arab Emirates Court of Cassation Judgments 1998–2003 (Boston: Brill, 2005) V Vahrenwald Law of Online Arbitration – 2005 (Germany: News & Highlights Ltd, 2005) D Wood Handbook of Arbitration Practice (London: Sweet & Maxwell, 4th edn, 2003) Journals and publications Al Tamimi & Co Law Update Publications, published by Al Tamimi & Co, Dubai, UAE The Chartered Institute of Arbitrators Arbitration The Journal of the Chartered Institute of Arbitrators, published by Thomson in association with Sweet & Maxwell Ltd Abu Dhabi Commercial Conciliation & Arbitration Centre’s Procedural Regulations, published by Abu Dhabi Commercial Conciliation & Arbitration Centre Rules of Commercial Conciliation and Arbitration, published by Dubai International Arbitration Centre UNCITRAL Arbitration Rules, published by United Nations (1997) Dubai International Arbitration Centre DIAC Journal, published by Cross Border Legal Publishing FZ LLC, Dubai, UAE E Al Tamimi ‘The Status of Arbitration in the UAE’ [2004] 1 DIAC Journal 1 at 36. N G Bunni ‘Construction Arbitration in the Middle East’ [2004] 1 DIAC Journal l 1 at 6 D M Cato ‘The English Arbitration Act 1996: a comparison of UNCITRAL model law and the rules of law of the UAE’ [2005] 1 DIAC Journal 4 at 17–37 H A Haddad ‘Written Form and Interpretation of the Arbitration Agreement in the Arab Law’ [2004] 1 DIAC Journal 1 at 17 J K Majid ‘An Overview and Prospectus for Commercial Arbitration in Iraq’ [2005] 1 DIAC Journal 4 at 43–48 A E Motei ‘Local Court Intervention in International Arbitration’ [2005] 1 DIAC Journal 4 at 64–72 R Rebelo ‘Enforcement of Arbitral Awards in the Middle East’ [2004] 1 DIAC Journal 3 at 41
In the UAE, a submission of parties to arbitrate must be evident. The UAE Civil Procedure Law sets out the requirements for arbitration proceedings. Article 203 of the UAE Civil Procedure Law states that:
‘(1) Contracting parties shall be permitted in general terms to stipulate in the basic contract or in an attached agreement that any dispute arising between them from a certain contract be submitted to one or more arbitrators. Agreement may likewise be made for arbitration in a certain dispute according to specific conditions.
(5) If the adversaries agree upon arbitration in a dispute it shall not be permissible for a claim to be filed in it before the law. Nevertheless, if one of the parties resorts to the filing of a claim without relying on the condition of arbitration and the other party makes no objection at the first session the claim may be heard and the condition of arbitration shall be deemed cancelled.’
The arbitral award usually has to be delivered within six months from the first hearing. Otherwise, either party may pursue its case through the court, irrespective of the agreement to arbitrate. However, the parties may directly or by implication authorise the arbitrator to extend the period. Pursuant to art 29 of DIAC’s Rules, arbitrators have the power to extend the time of the arbitration for an additional period.
An arbitral award must also satisfy art 216 of the same law in relation to invalidation of the arbitrator’s ruling, and art 235 governing the implementation of foreign rulings, orders and documents. The key provisions of the UAE Civil Procedure Law (arts 203–218) are mandatory and the parties have no choice but to ensure compliance. In the event of non-compliance, the arbitral award will not be ratified.
There are no restrictions on the types of normal commercial matters that may be referred to arbitration. However, it remains to be seen which disputes will be referred to the new arbitration centre in the new Dubai International Financial Centre (DIFC).
As mentioned in section 2.2 above, the DIFC is a financial free zone that opened in 2004, and is a separate jurisdiction with an independent legal system governed to international standards by an independent regulator, the Dubai Financial Services Authority (DFSA).
At the time of writing, the DIFC’s court, arbitration centre and dispute resolution scheme are still under formation. DIFC Law no 8 of 2004 (the ‘DIFC Arbitration Law’) has recently been enacted and applies in the jurisdiction of DIFC. The DIFC Arbitration Law will apply where parties to arbitration choose the DIFC as the seat. If the arbitration is in relation to a dispute arising out of or in connection with the DIFC and to which one party is an arbitration party (an ‘arbitration party’ within the meaning of the DIFC Law is ‘any person who would be entitled to bring an action in the Court [of the DIFC] in relation to a matter which is to be the subject of an Arbitration’) then the DIFC Arbitration Law will apply.
UAE civil and commercial laws will not be applicable. Further, the DIFC Arbitration Law grants the arbitrators the power to issue interim and protective measures, unless otherwise agreed by the parties (see art 20 of the DIFC Arbitration Law). The influence of the English Arbitration Act 1996 is apparent in the provisions of the new DIFC Arbitration Law. This presents parties to an arbitration with an advantage, as flexibility of procedure and party autonomy are key objectives of both statutes.
As a general rule, arbitration is available to all disputes and to all types of matters, with the exception of matters relating to commercial agency or labour, regardless of whether the parties have agreed to refer their dispute to arbitration.
In the Emirate of Dubai, parties entering into agreement with a governmental entity or quasi-governmental entity cannot refer any matter to arbitration unless the Ruler’s Court in the Emirate of Dubai consents to arbitration. (See also Dubai Law no 6 of 1997, generally prohibiting foreign arbitration clauses with Dubai government bodies/departments.) In respect of disputes relating to land these are referred to the Land Department for determination. The Land Department is the municipal authority in Dubai responsible for land registration and the issuance of title deeds.
If the dispute cannot be resolved by the Land Department, the parties shall require the approval and consent of the Land Department prior to proceeding with arbitration.
The UAE courts are increasingly recognising the doctrine of separability and regard the arbitration clause within a contract as distinct from the main contract itself. However, the UAE Civil Procedure Law does not deal with the doctrine of separability and in the event that this issue is raised, there is a risk that an arbitration clause will be held to be invalid if the main contract is held to be void. Pursuant to art 5 of the DIAC Rules, the agreement to arbitrate shall be considered an agreement independent from the contract itself which is the subject of the dispute. If the contract is held to be void or terminated for any reason, the arbitration agreement shall remain in effect.
As a general rule, there are no formal citizenship, residency or professional requirements for arbitrators. As elsewhere, all arbitrators must be independent and impartial. Arbitrators must also disclose any circumstances likely to give rise to justifiable doubts as to their impartiality or independence. This is a strict requirement in the UAE and applies to both domestic and international arbitration. (See arts 114, 115 and 116 of the UAE Civil Procedure Law, the unfitness of judges, rejection and withdrawal. These provisions are also applicable to arbitrators.) The UAE courts generally accept and apply international standards in this regard and would not entertain malicious allegations and challenges. The evaluation will always be based on merit and facts and decided on a case-by-case basis.
Article 207(3) of the UAE Civil Procedure Law governs the challenge and removal of arbitrators and states that:
‘He [the arbitrator] may not be removed except by the agreement of the adversaries jointly. The court which essentially has jurisdiction to hear the dispute may, however, at the request of one of the adversaries dismiss the arbitrator and appoint a substitute by the means by which he was appointed in the first instance. This shall be in the case where it is proved that the arbitrator deliberately neglected the task according to the arbitration agreement despite it being brought to his attention in writing.’
Article 207(4) stipulates that the arbitrator ‘may not be rejected from ruling except on grounds which occur or become apparent after his appointment …’ and further states that:
‘Rejection may be requested on the same grounds on which a judge may be rejected or on which it may be considered that he cannot validly rule. The application for rejection shall be submitted to the court which essentially has jurisdiction to hear the claim within five days of the adversary being notified of the appointment of the arbitrator or from the date of the occurrence of the cause of rejection or of his knowledge of it if this is subsequent to his being notified of the appointment of the arbitrator. In all cases the application for rejection shall not be accepted if the ruling of the court has been issued or if the arguments in the case have been closed.’
The same law obliges the arbitrator to comply with the agreement to arbitrate, under penalty of dismissal. Liability for fees and expenses of arbitrator is governed by art 218 of the UAE Civil Procedure Law.
An order to dismiss an arbitrator is possible under the UAE Civil Procedure Law if it can be established that the arbitrator deliberately failed to comply with the terms of the agreement to arbitrate, and was warned in this respect in writing (see art 207(3) of the UAE Civil Procedure Law).
Objection to an arbitrator must be made in the same manner and on the same grounds as an objection to a judge in a court proceeding and within the prescribed periods (see art 207(4) of the UAE Civil Procedure Law).
A challenge to the appointment of an arbitrator can be made by separate application to the court independently by one of the parties or at the time when the application is made to enforce the arbitration award. The provisions relating to the fitness of judges, and their rejection and withdrawal in Chapter 8 of the UAE Civil Procedure Law, will apply.
An action for compensation for wrongs committed by arbitrators, including resignation for unacceptable reasons, shall be subject to the general principles of civil liability. Further, pursuant to art 207(2) of the UAE Civil Procedure Law, the arbitrator may be contractually liable if he fails his duty: art 207(2) states that: ‘If the arbitrator withdraws from undertaking his task after accepting it without a serious reason, a ruling for compensation may be made against him.’
In principle, an arbitrator may be exposed to a claim if he withdraws from the arbitral proceedings at an inappropriate time and without justification, subject to proof of damages. Arbitration, however, cannot be dismissed without the parties’ joint agreement or by order of the court as provided in art 207(3) of the Civil Procedure Law. The parties cannot remove arbitrators from the proceedings or challenge the arbitrators unless the conditions provided under arts 207(4) and 115 of the UAE Civil Procedure Law can be satisfied. Such challenge cannot be brought after a case is reserved for judgment or after an award is delivered.
The liability of an arbitrator, however, is not easy to prove or common in the UAE and can only be raised in very strict circumstances. These will occur where the arbitrator has committed either a gross negligence or fraud in the arbitral proceedings.
10. PARTY REPRESENTATION
The UAE Civil Procedure Law does not impose any formal requirements for party representatives who act as ‘counsel’ on an arbitration in the UAE. In the UAE the parties are free to choose counsel that are not licensed to practise law in the UAE if they wish and this also applies to the choice of arbitrator(s). However, authority to act on behalf of one of the parties must be confirmed and submitted to the arbitrators as evidence of their representation. In the UAE, a notarised power of attorney in favour of the selected counsel is generally prepared.
The section on arbitration in the UAE Civil Procedure Law does not specify where arbitral proceedings may take place. In general, the parties determine the location of the arbitration. Further, the UAE Civil Procedure Law does not define a local award, nor does it define what makes an award registrable for enforcement. As a result, if Dubai is the juridical seat of the arbitration and the award is issued locally then it will be regarded as a local arbitration award, enforceable by the UAE courts. In the event that the parties’ arbitral clause fails to include the location, then the tribunal shall determine the place it considers appropriate for its own consultations and hearing witnesses, experts and parties. If the parties agree to have their arbitration administered by one of the centres in the UAE, it is always assumed that arbitration will be in the Emirate where the centre is located. However, the arbitral tribunal may hold one of two hearings outside that jurisdiction unless specifically provided otherwise by the party or the arbitrators in their decision. Arbitration awards are deemed to have been delivered at the place of arbitration.
In the UAE, there is great flexibility over the form of ‘pleadings’ and the tribunal or the parties can tailor the arbitration to suit their needs and/or circumstances. Arbitrators in the UAE may therefore use their discretion to choose and determine the procedure to be followed in domestic arbitration, subject to the parties’ agreement to the contrary. The UAE Civil Procedure Law does not specify any procedures for international arbitration; as a result there is no differentiation under the UAE Civil Procedure Law between domestic and international arbitration. Article 208(1) of the UAE Civil Procedure Law provides that the arbitrator need not follow the procedures that are applicable to the court process in conducting arbitration. This power is given to the arbitrators if the parties cannot agree in this respect.
Procedural and evidential matters for arbitration are governed by arts 211 and 212 of the UAE Civil Procedure Law. In practice, the respondents are free to make any number of procedural challenges or requests to the arbitral tribunal. Under art 209(2)(4) of the UAE Civil Procedure Law, the court can order a third party to produce a document necessary to enforce an award. However, the UAE legal system has a limited discovery process, as is usual in a civil law system.
The UAE Civil Procedure Law does not provide any distinction between domestic and international arbitration in respect of the gathering and tendering of evidence. However, the personality and qualifications of the arbitrator will determine the quality of the process and guide the arbitration relative to the discovery process, evidence and hearing of witnesses. Arbitrators (international and domestic) need not follow the legal process which has been set out under the UAE Civil Procedure Law designed for courts actions. Arbitration will be conducted in accordance with the rules governing the arbitration or as agreed by the parties or as conducted by the arbitrator in the absence of rules (see Dubai Court of Cassation on Judgment 260/94 and 261/94 dated 16 October 1994, Supreme Court of Cassation judgment 433 for the year 17 dated 26 February 1997, Dubai Court of Cassation Judgment 173/96 dated 16 March 1997).
Those who have experience in international arbitrations have more freedom in determining the rules on evidence, discovery and hearing of witnesses. International arbitrators conducting arbitration in the UAE can apply standards and limitations applicable in a common law system. There will be limited access to discovery and privileged information; however, application to go to the national courts for interim relief can be made. Witness statements are not valid unless the party puts forward a witness for cross-examination by the arbitrator.
As provided by the law, the arbitrator must ask the witnesses to swear under oath in an open hearing in order to give legal value to the statement. The law provides that a person giving a false statement under the oath before the arbitrators commits the offence of perjury (see art 211 of the UAE Civil Procedure Law).
In the UAE, there is no litigation privilege on settlement correspondence and as a result parties to a court action or arbitration can disclose privileged documents or information at either the discovery or hearing stage of the arbitral/court proceedings.
In domestic arbitrations (the seat is the UAE), an arbitrator may request the assistance of the court to enforce one of his directions by communicating such an order to the Chief Justice of the court. The intervention of the courts is a necessary and integral part of the UAE arbitration system. In effect, arbitrators have no power to compel any party to do anything other than through the medium of the court.
Express powers in relation to court assistance under bilateral or multilateral treaties (in which the UAE is a party to) vary. Each treaty has different and specific provisions in relation to court assistance.
Arbitrators do not have jurisdiction in relation to preliminary relief or interim relief in any arbitration proceedings unless the arbitration clause or the party thereafter specifically grants the arbitrators such power and jurisdiction. Interim measures and relief are granted by the courts and it is for the parties to seek such release from the court directly even if the matter was heard before or after in an arbitration process.
The fact that parties have agreed to refer a matter to arbitration does not prevent the courts from hearing urgent applications. Arbitrators have limited powers when it comes to dealing with urgent and interlocutory applications as such measures do not constitute an award. It is established that even where an arbitration agreement exists, the power to grant such interim measures remains with the court. Thus, only the court may hear applications such as the appointment of a custodian or liquidator or for ordering an attachment against assets locally in the UAE. The court will always have jurisdiction to hear urgent applications or applications for an attachment against assets irrespective of whether the parties have agreed to arbitration.
Reference to protective and conservatory measures is found in art 22 of the UAE Civil Procedure Law, which stipulates that the UAE courts will have jurisdiction in making orders for urgent and precautionary procedures which are to be executed within the UAE even if it does not have jurisdiction in the primary claim. The court therefore has the power to deal with such measures. However, the only exception to this is if the parties have agreed in their agreement to refer all disputes, including any urgent applications or interlocutory applications that may be made by parties in the future, to arbitration as well. Limitation in this regard is provided in art 209(2) of the UAE Civil Procedure Law. While this is possible, the rules on this issue are unclear and there is no precedent clarifying the issue.
Further, it is not clear how the parties would proceed with an attachment against assets in the UAE or file for an urgent application while the main action is being arbitrated locally or internationally. Amongst others, one of the issues which is of concern is the requirement under art 255(2) of the Civil Procedure Law for the parties to bring the main action within eight days after attachment.
The question that arises is whether bringing the arbitration proceedings within eight days will satisfy the requirement under this article or whether the party needs to bring an action before the court within eight days, to uphold the attachment proceedings, in addition to the arbitration proceedings. The law is silent on this issue and there has been no clear indication from the court of the position. The principle in general, however, is that it is possible to obtain an attachment against an asset or to apply for an urgent application even if the parties have agreed to refer the matter to arbitration since urgent applications and orders for attachment fall outside the scope of the arbitrator unless the parties agree otherwise in their arbitration clause or during the arbitration process.
The UAE contains a number of economic free zones, which have various economic incentives to encourage investment and commercial development. At present, there is no corporate value added or income taxes in the UAE. Therefore, local and international arbitrators based in the UAE will not be taxed on their income or fees for any arbitration seated in the UAE or internationally.
Article 208(2) of the UAE Civil Procedure Law permits an arbitration to continue in the absence of the defaulting party.
In both domestic and international arbitration the tribunal may continue the proceedings and make an award on the evidence if the party fails to appear at the hearing or produce documents or evidence without providing a satisfactory explanation. It is advisable, however, that proper notice of the arbitration hearing is effected and to ensure such notice is served to both parties to the dispute. If after proper notice is given the party fails to appear before the tribunal in the hearing, the tribunal may proceed with arbitration in absentia. However, if during arbitration it is required to suspend the proceedings then notice must be duly served again notifying the parties of the suspension.
Awards in both domestic and international arbitrations must be made in writing and proper reasoning must be given by making references to the defences, arguments, witnesses and submissions made by both parties. The arbitrator will then decide on the liability for each point in dispute and the quantum. The challenges, arguments and the selection of the evidence raised must also be included in the arbitration award. A copy of the award must be delivered to the parties. In accordance with art 212 of the UAE Civil Procedure Law, arbitrators in the UAE need not follow procedures applicable to court judgments in delivering awards but are only required to follow provisions specifically applicable to arbitration appearing in the relevant section of the UAE Civil Procedure Law (in the absence of any specific set of rules agreed).
The existence of an arbitration award will not prevent both parties from pursuing their claims through court, on condition that they both agree to do so. This will consequently override the arbitration award and render it redundant.
However, the arbitral award must be signed and dated and the seat of arbitration mentioned in the award for the award to be valid. In an arbitration made with the assistance of the court, the arbitrators register the documents with the secretariat of the court within 15 days. A hearing is set for approval of the award (ie granting leave to enforce) and this is notified to the parties. This means that leave to enforce is granted or refused during proceedings where both parties are present.
There are no rules governing what arbitrators are required to determine on cost, interest, damages or punitive damages. Therefore no restrictions or guideline are imposed. However, the arbitrators must be reasonable and their decisions based on facts and evidence and in accordance with the rules agreed by the parties. The UAE Civil Procedure Law does not recognise punitive damages, excessive award of interest or the concept of injunctions. Therefore it is likely that if such remedies were granted, that the court (which is empowered under UAE law) would refer the matter back to the arbitrators to correct the measures with respect to the remedy granted or the court may even reduce those remedies, especially if it is in relation to interest or punitive damages. It is unlikely that the court will wholly invalidate the award based on such remedies. The courts may send the matter back to the arbitrator for modification, under the guidelines of the court.
In accordance with art 214 of the UAE Civil Procedure Law, the court is empowered on application from one of the parties to refer the matter back to the arbitral tribunal to correct a particular issue or to bridge a particular gap in the arbitral award which the arbitrators think is not sufficiently clear. This applies to both domestic and international arbitration. The court can give guidelines and directions to the arbitral tribunal to correct its award. However, an application from either party must be made and such modification does not amount to a total invalidity of the award. If the rules allow or the party has agreed to such right the arbitral tribunal may provide for the clarification or correction of the award. In general, arbitrators do have the power to correct errors in the nature of typographical, computation or similar errors in the award not material to the substance of the award.
Arbitral awards delivered in the UAE are not subject to appeal under the UAE Civil Procedure Law. Pursuant to art 216 of this law, six grounds are listed to allow an award to be set aside. They are as follows:
Awards in domestic arbitrations may not be appealed but may be sent aside by the court on certain enumerated grounds such as jurisdiction and procedural fairness or defect.
It will not be possible for either party to waive their right to challenge the arbitration award if the grounds for annulment are based on one of the above. Parties are entitled to raise such a challenge even if they have waived their rights during the arbitration process.
In an application to ratify or to annul the arbitration award, the matter will follow the normal course of action before the court. The same procedures, applications, hearings and submissions will apply to the case and the period for appeal and other process will be identical to any other process as provided for in a normal action. Therefore, in the UAE, in contrast to other jurisdictions, the ratification or nullification of the award becomes effectively the subject of a separate legal action.
In the UAE, if the arbitration is conducted independently of the court, the arbitrator will deliver the arbitration award and a copy of it will be delivered to the parties within five days from the date on which the arbitration award is delivered. As previously mentioned, an award must be ratified by the courts for it to be equivalent to a court judgment and thereby enforceable against the losing party’s assets.
In respect of international awards, one of the main concerns is that the UAE has not ratified the New York Convention. Until such time, the UAE Civil Procedure Law is the sole governing law on the enforcement of foreign arbitral awards in the UAE.
The conditions set out under the Arab Convention on Judicial Cooperation (the ‘Riyadh Convention’), the GCC Treaty or other co-operative arrangements or the bilateral arbitration agreements with France and India will apply to the enforcement of GCC state judgments or judgments delivered in France or India or vice versa. Accordingly, the conditions set out in the GCC Treaty or the bilateral agreements will supersede the conditions set out in arts 235–238 of the UAE Civil Procedure Law regarding the enforcement of foreign arbitration awards involving the GCC states, France or India and the UAE.
In general, at present, in order to enforce a foreign arbitration award, an action must be brought before the UAE courts in the normal course requesting the court to ratify the foreign arbitration award and enforce the same locally. The court will only ratify the judgment after ascertaining that the following conditions, contained in art 235 of the UAE Civil Procedure Law, have been satisfied that:
Each of these conditions may prove problematic and should be considered individually.
As the UAE is fast developing as a commercial hub, the business community in this region is rapidly becoming aware of the advantages of arbitration over dispute resolution in courts. One perceived advantage is it is a private determination. However, there are no legislative provisions at this time governing the confidentiality of the arbitration tribunal or arbitration process under the UAE law. In general, it is common for the parties to agree between themselves that some or all aspects of the arbitration are to be confidential. Generally, third parties cannot access records, data or information relating to the arbitration.
In light of the construction boom in the UAE and the development of its commercial community, parties are increasingly opting for arbitration as the dispute resolution mechanism. As a result, the UAE courts have been compelled to recognise and enforce arbitration agreements and awards.
The importance of developing and issuing an independent arbitration law in the UAE has been identified, in addition to establishing a set of international arbitration rules that conforms to international standards.
The plans for the UAE to ratify the New York Convention will also develop and facilitate international arbitration in the UAE.
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