Legal Alert | Unification of Arbitration Centres in Dubai

On 14 September 2021, the Ruler of Dubai issued Decree No. 34 of 2021 (the Law) relating to the Dubai International Arbitration Centre (DIAC) and the unification of different arbitration centres in Dubai under the DIAC. The Law was gazetted and came into force on 20 September 2021.

The Law abolishes, with immediate effect, the Emirates Maritime Arbitration Centre (EMAC) and the Arbitration Institution of the Dubai International Financial Centre (DAI).

As part of DAI’s initiatives to promote arbitration as a form of dispute resolution in the DIFC, DAI had entered into an agreement with the London Court of International Arbitration (LCIA) for the establishment of the DIFC-LCIA arbitration centre in the DIFC. As the Law abolishes DAI, this impacts the existence of the DIFC-LCIA arbitration centre; in other words, it is understood that the DIFC-LCIA arbitration centre will cease to exist. Although no formal clarification on the status of the DIFC-LCIA arbitration centre has been issued since the promulgation of the Law, DIAC has been granted a grace period of six months from the effective date of the Law to replace DAI under the DIAC’s reformed administrative regime.

The Law also provides clarity on the interpretation of contractual provisions relating to the seat of arbitration in the Emirate of Dubai. In this regard, if an agreement between parties provides for the seat or place of arbitration as:

  1. Dubai (excluding the DIFC), then the agreement and procedures relating to the arbitration proceedings are governed by Federal Decree 6 of 2018 (UAE Arbitration Law), and the Dubai Courts have jurisdiction over disputes relating to the arbitration; or
  2. DIFC, then the agreement and procedures relating to the arbitration proceedings are governed by DIFC Law No. 1 of 2008 (DIFC Arbitration Law), and the DIFC Courts have jurisdiction over disputes relating to the arbitration.

If an agreement is silent on the seat or place of arbitration, the DIFC will be considered as the default seat for the arbitration proceedings and the DIFC Arbitration Law will apply accordingly.

It is worth noting however that the Law creates uncertainty on existing contracts which include the DIFC-LCIA arbitration centre as their dispute resolution forum. At present, the Law provides that arbitration agreements that have been concluded before 20 September 2021 with dispute resolution centres being EMAC or DAI (that is the DIFC-LCIA arbitration centre) shall be considered valid and effective and DIAC will substitute EMAC or DAI (that is the DIFC-LCIA arbitration centre) in the administration of the dispute under such agreements unless the parties agree otherwise.

Based on the above, it is advisable for parties that are currently engaged in arbitration proceedings under the EMAC or the DIFC-LCIA arbitration rules to take advice on the legal implications resulting from the Law. In addition, parties that have used the rules as a dispute resolution forum in their existing contracts ought to seek legal advice when addressing and implementing any changes required as a result of the Law.

Going forward, parties should carefully consider and assess the dispute resolution forum for their contractual arrangements and cease using the DIFC-LCIA arbitration centre as a possible dispute resolution forum until there are further developments based on the Law.

The Law will result in the creation of a unified arbitration centre in Dubai. While this is a welcome and positive change, it remains to be seen whether businesses and contracting parties will place trust in this new arbitration centre for contractual disputes.

We will keep you updated on further developments in this area of law. Should you require more information or have any other queries relating to this legal alert, please do not hesitate to contact Adil Shafi or Devvrat Periwal.

Adil Shafi
Partner
ALN UAE | Anjarwalla Collins & Haidermota

ashafi@ach-legal.com

Devvrat Periwal
Senior Associate
ALN UAE | Anjarwalla Collins & Haidermota

dperiwal@ach-legal.com

 


The content of this article is intended to be of general use only and should not be relied upon without seeking specific legal advice on any matter.