DIAC takes it all: the integration of Dubai’s arbitration institutions

UAE, Middle East

Introduction

On 14 September 2021 Decree No. 34 of 2021 (the “Decree”) was issued in Dubai in respect of the Dubai International Arbitration Centre (“DIAC”); coming into force on 20 September 2021.

The key provisions of the Decree provide that:

  1. DIAC’s headquarters shall be in the Emirate of Dubai and a branch shall exist within the Dubai International Financial Centre (“DIFC”).

  2. The Emirates Maritime Arbitration Centre and the DIFC Arbitration Institute (“DAI”) will be abolished.

Whilst the Decree seeks to streamline the arbitration system in Dubai, various questions now arise, including in relation to existing arbitration agreements and arbitral proceedings that are not related to DIAC. These are considered further below.

What is covered by the abolition of the DAI?

At first glance it is unclear whether the abolition of the DAI would extend to the DIFC-London Court of International Arbitration (“LCIA”) institution.

However, as the DIFC-LCIA essentially reflected a partnership between the DIFC Dispute Resolution Authority, DAI and LCIA it appears likely that the DIFC-LCIA will cease to exist as an arbitral institution.

Will existing DIFC-LCIA arbitration agreements be valid?

The Decree makes clear that all arbitration agreements referring to the abolished centres will continue to be valid and effective.

However, the difference going forward will be that DIAC will assume the role of the supervising institution in respect of any arbitrations that arise from these agreements (unless the parties agree otherwise).

Will the DIFC-LCIA Arbitration Rules cease to apply?

The Decree provides that where tribunals have already been appointed by 20 September 2021, the proceedings shall continue in accordance with the rules adopted (albeit with DIAC supervising the proceedings).

In terms of arbitrations that have not yet been commenced, the position is currently unclear:

  1. As above, in respect of pre-existing arbitration agreements, the Decree states that DIAC shall replace the abolished centres in hearing and resolving disputes. The reference to the resolving of disputes by DIAC could imply that the DIAC Arbitration Rules will be applied to all arbitrations that are commenced going forward.

  2. However, the Decree also states that the rules of the abolished centres (as well as the DIAC Arbitration Rules) will continue to apply until the approval of (presumably a new set of) arbitration and conciliation rules by the board of DIAC. This is provided that there is no conflict between them and the Decree, or the statute attached to it in respect of DIAC’s organisation.

  3. The LCIA’s UK website refers to the Decree and states that a consultation is ongoing between itself and the Government of Dubai to ensure the good management of existing and future cases where the parties have agreed to arbitration under the DIFC-LCIA Rules.

As such, there is currently a potential inconsistency in respect of whether the DIFC-LCIA Rules can or will apply to arbitrations commenced after the issuance of the Decree and it is likely that further clarifications may need to be issued, particularly once the consultation referred to by the LCIA has been concluded.

Does the Decree affect the seat of the arbitration?

The Decree has no impact upon contracting parties’ ability to choose between the DIFC and onshore Dubai in respect of the seat of the arbitration, or any agreements that already exist on this point.

Also unaffected is the application of the arbitration legislation applicable in the two seats that exist in Dubai. As such, the Federal Arbitration Law (Law No. 6 of 2018) will continue to apply to onshore arbitrations and the DIFC Arbitration Law (Law No. 1 of 2008) will continue to apply to arbitrations seated in the DIFC.

Further, the Decree makes clear that both the Dubai Courts and the DIFC Courts will continue to perform their permitted functions in respect of proceedings and awards relating to DIAC and the abolished centres.

Commentary

Whilst the issuance of the Decree was somewhat unexpected, its effects overall do not necessarily need to be viewed negatively. On one view, the streamlining of the arbitration system in Dubai can be considered as a welcome step in solidifying Dubai’s status as a key arbitration hub – providing an integrated arbitration institution, but also retaining the right for arbitral parties to choose between a civil law seat and a common law seat. However, until further clarification is provided in respect of some of the issues raised above, an element of uncertainty will hang over arbitration agreements subject to the DIFC-LCIA.

Either way, it will be important for parties with pre-existing arbitration agreements in their contracts to seek legal advice in order to assess the impact of the Decree and whether any amended agreements need to be considered.