Arbitration remodelled - UAE approves New Arbitration Law

Introduction

The much anticipated new UAE arbitration law, has been signed by the President of the UAE as Federal Law No. 6 of 2018 (the “New Law”). The New Law, which contains 61 articles divided between 6 chapters, will come into force one month after its publication in the official gazette.

The New Law is largely based on the UNCITRAL Model Law 1985. As such, it marks a new dawn for arbitration in the UAE by repealing the 16 articles of the Law of Civil Procedures (Federal Law No. 11 of 1992) (the “Old Law”) that previously governed the procedural aspects of arbitration in the UAE.

The application of the New Law

Parties can agree to apply the New Law whether the arbitration is conducted in the UAE or abroad. However, if no agreement is made, the default position is that the New Law will apply to any arbitration conducted in the UAE (Article 2).

Key developments

The New Law contains a comprehensive procedural framework and has significantly expanded upon the provisions of the Old Law. The key developments include:

• Confirming that a written arbitration agreement will exist if contained in documents signed by the parties, in exchanged letters, other written communications or emails (Article 7(2)(a)).
• Providing expressly for arbitration agreements to be incorporated into an agreement by reference (Article 7(2)(b)).
• Expressly upholding the principle of kompetenz-kompetenz (i.e. permitting the tribunal to decide its own jurisdiction) (Article 19(1)), with a requirement that any objection to such decision must be filed with the court within 15 days.
• Issuing detailed provisions as to the way the arbitration will be conducted, including in respect of the parties’ pleadings, hearings and the appointment of experts.
• Providing that a three-member tribunal will be the default position, absent any other agreement (Article 9(1)) and setting out the procedures for the appointment of arbitrators by the parties (Article 11).
• Conferring express powers for the tribunal to order provisional and precautionary measures, for example in respect of maintaining of assets and safekeeping of evidence (Article 21(1)).
• Making clear that the parties may use lawyers or others to represent them in arbitration (Article 33(5)), removing any residual doubt from earlier legislation over whether non-UAE nationals could represent parties in arbitration.
• Setting out the formalities for issuing an award, including that an award can now be signed electronically and can be signed outside of the UAE (Article 41(6)).
• Prescribing a revised list of grounds for challenging an award in line with those expected in international arbitration (Article 53).
• Stipulating that the application for the enforcement of the award should be made to the Court of Appeal (Article 55(1)), removing one level of the UAE Courts (i.e. the Court of First Instance) from the process.
• Prescribing the procedure for challenging an award, which should limit the effects of spurious nullification applications, including that the application must be made within 30 days of notification of the award (Article 54(2)) and that the court can proceed with the execution of the award irrespective of the challenge (Article 56(1)).

While the New Law undoubtedly contains many welcome developments, not all of the changes the arbitration community hoped for have been implemented. These include:

• Generally under the Old Law, only a general manager or a person acting under a special power of attorney could bind a company to an arbitration agreement (in respect of UAE entities). Article 4(1) of the New Law does not appear to have departed from this.
• Regarding legal costs, Article 46 of the New Law allows the tribunal to determine and award the costs and expenses of the tribunal in the arbitration. No mention is made of parties’ legal costs in the provision and parties must therefore continue expressly to agree (e.g. within the terms of reference) that the tribunal may award these.

In addition, some provisions of the New Law could lead to uncertain results. As such, certain issues will need to be assessed as and when they come before the UAE courts in order to obtain clarity. Some issues that might arise include:

• Article 58(2) of the New Law states that the Minister of Justice shall put in place a list of arbitrators who shall be elected in accordance with Article 11 (which prescribes procedures for appointing arbitrators). It is unclear whether this provision means that the parties are obliged to use arbitrators on the list, or whether the provision applies to situations where arbitrators are to be appointed by the court or other authority. Our view is the latter, but we recognise there may be some ambiguity.
• Article 59 of the New Law provides that it shall apply to any arbitration being conducted when the New Law comes into force, even if based on an arbitration agreement concluded prior to the law.However, Article 59 also provides that proceedings that have been conducted under the provisions of the Old Law remain valid. Presumably, this is intended to mean that the New Law automatically applies to arbitrations on foot (including those arbitrations where an award is pending), but also clarifies that concluded arbitrations under the Old Law remain valid.However, it is not entirely clear.

Conclusion

The New Law represents a much needed development to the UAE’s previous regime, providing a detailed legislative framework for arbitrations within the jurisdiction which is much more closely aligned to international standards. Although the New Law is not without potential issues, its effect generally will be to strengthen the UAE’s position as a leading jurisdiction for international arbitration.