The Legal 500

If enacted, two draft arbitration laws released for consultation in February 2008 stand to put the UAE at the forefront of arbitration in the Middle East.

Draft Federal Arbitration Law

The Ministry of Economy is leading efforts to introduce a world class federal Arbitration Law in the first half of 2008. Work on the current draft began in May 2007 and finished in November, after a previous version met with a lukewarm reception from local and international practitioners.

According to a press release issued by the UAE Ministry of Economy on 03 February 2008, the draft Law, which is due out within three months, is part of a root and branch reform of the country's commercial laws intended to ensure that they keep pace with the increasing diversity and sophistication of its economy.

The latest draft Law, which has been released in both Arabic and English, is an innovative piece of legislation drafted with transparency and ease of use in mind. The draft Law is distinguished from the majority of other arbitration laws by the way it incorporates the entire text of the 1985 UNCITRAL Model Law and then augments this with clearly marked Supplementary and Additional provisions set out separately from the main UNCITRAL text. All headings and paragraph numbers from the original UNCITRAL text have been retained.

The Objectives and Scope of the draft Law are stated at Article Two of Part I as being: to provide for domestic and international arbitration within the State and for the efficient enforcement of arbitration awards within its territory, in accordance with established international best practice and the international obligations of the State

The UNCITRAL Model Law is expressly incorporated into the Law by Article Three of Part II. A clear sign of the Ministry of Economy's wish to promote the UAE as a credible modern arbitral seat and regional centre appears at Article Three (1) where it is provided that: For the purpose of interpreting any Part or Annex of this Law, any arbitral tribunal, court or other authority of, or within, the State, may refer to, and take guidance from, the documents and publications of the United Nations Commission on International Trade Law relating to the Model Law, including those of the Working Groups involved in its preparation

A further interesting provision aimed at ensuring that the Law remains in tune with international arbitral best practice is that proposing the establishment of the Ministry of Economy's Arbitration Office. Article Four of Part III states:

(1) An arbitration Office shall be established in the Ministry of Economy to monitor international developments in arbitration and, in particular, the Model Law and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The Arbitration Office shall submit recommendations for the improvement of this Law to the Minister

(2) The Minister may request the assistance of experts in domestic and international arbitration from government bodies or private sectors within, or outside, the State, including any arbitral institutions or centres

Article Five of Part III aims to ensure that both the Ministry of Justice and the Ministry of Economy closely supervise the implementation of the Law by providing that the Ministry of Justice shall submit periodic reports to the Ministry of Economy concerning the Law's implementation by the Courts referred to at Article 6 of the Model Law.

Article Nine of Part III of the draft Law provides that it will come into effect when published in the Official Gazette and Article Six of Part III states that:

Unless otherwise agreed in writing by the parties, where arbitral proceedings were commenced before the publication of this Law, the law governing the arbitration agreement and the arbitration shall be the law which would have applied if this law had not been issued

The Supplementary and Additional provisions of the draft Law demonstrate a clear intention on the part of the drafters to ensure that the practical needs of parties, their lawyers and arbitrators are met. To this end, there are Supplementary Provisions dealing with: electronic agreements; the power of courts and arbitral tribunals to grant interim measures; the test to be applied by both courts and arbitral tribunals when considering an application for interim measures; the appointment of arbitrators in multi-party proceedings; the power of the courts to request assistance from any domestic or foreign arbitral institution or appointing authority when exercising its powers of appointment; disclosure by arbitrators; conflicts of interest; the definition of justifiable doubts as to impartiality or independence; removal of arbitrators and the resumption of proceedings following removal; liabilities upon removal or resignation; court enforcement of tribunal orders; the duty of the tribunal to act fairly and expeditiously; the reception of oral and documentary evidence; perjury; the power of parties to agree that the arbitral tribunal may apply the law or rules of law which it considers to be most appropriate; the power of the arbitral tribunal to deliver preliminary, interim, interlocutory, partial and final awards; costs; the withholding of awards pending payment; court assessment of disputed fees in ad hoc proceedings; the power of the parties to extend the time for applying to set aside an award and the survival of the agreement to arbitrate upon the setting aside of an award save where the agreement to arbitrate is null or void.

The Additional Provisions of the Law are rather fewer in number, but equally important. They cover: representation; confidentiality; the immunity of arbitrators, institutions and the staff of both; extensions of time for the making of awards; employment, residential property and consumer contracts and the calculation of time.

The draft Law demonstrates its modernity by attempting to address the issue of gender inequality in arbitration. For the avoidance of doubt, a Supplementary Provision to Article 2 of the Model Law makes it clear that the word Arbitrator includes the masculine and the feminine.

Party autonomy and the role of the courts is addressed unambiguously in a Supplementary Provision to Article 5 of the Model Law stating that: In the exercise of its functions the court shall act in accordance with the Law's objectives and provisions and shall at all times strive to uphold the parties' agreement to arbitrate and support the arbitral tribunal's performance of its obligations

This duty is underscored by a number of the Supplementary Provisions in the draft Law, perhaps the most important of which is that to Article 9 of the Model Law stating that any interim measure ordered by the court: shall cease to have effect in whole or part on the order of the arbitral tribunal

To ensure as high a quality of decision making as possible, the draft Law provides at Article 6 that the functions of the court under the Law shall only be exercised by the Courts of Appeal.

The drafters of the Law have had regard to a wide range of sources, including English, Irish, German, Japanese, Singaporean and Chinese arbitral legislation, the UNCITRAL Model Law 2006 and the IBA Guidelines on Conflicts of Interest. Evident regard has also been had to the arbitration rules of a number of institutions, including those introduced by the Dubai International Arbitration Centre (DIAC) in May 2007.

In addition to the Supplementary and Additional Provisions mentioned above, the draft Law includes a number of Amending Provisions, the most important of which are as follows:

(1) The Amending Provision to Article 1 of the Model Law provides that the Law shall apply to domestic and international arbitration regardless of whether it is of a commercial nature or not.

(2) The Amending Provision to Article 10(2) of the Model Law provides that in default of any agreement on the number of arbitrators there shall be a sole arbitrator.

A number of Supplementary Provisions have been introduced in order to simplify and expedite the procedure for the enforcement of both domestic and foreign arbitration awards. The most important of these are:

(1) The Supplementary Provision to Article 35(2) of the Model Law, which states that (a) an original award is authentic if signed by the majority of the arbitrators so long as reasons are given for the omitted signature and that a certified copy of an authenticated original award is any copy that is authenticated either by a public notary, consular authority or judicial officer at the place of arbitration or elsewhere (b) a certified copy of an original arbitration agreement is any copy authenticated in the same manner as an original award and (c) that a certified translation is any translation that is certified as being accurate by a translator of the languages concerned officially recognised by the state in which they carry on the profession of translator.

(2) The Supplementary Provision to Article 36(1) of the Model Law, which broadly provides that a party may not resist the enforcement of any award made in the State if it has, or could have, attempted to rely upon the identical ground in an application to set aside the award under Article 34 (2).

Revised DIFC Arbitration Law

In the second quarter of 2008 the Dubai International Financial
Centre is expected to introduce a new DIFC Arbitration Law to replace the DIFC Arbitration Law 2004. The new Law will following closely on the launch of the DIFC - LCIA Arbitration Centre which took place on 17 February 2008. Being a financial free zone, the DIFC is entitled under the UAE Constitution to enact its own English language civil and commercial laws. From the consultation paper published in January 2008, it is clear that the drafters of the amended Arbitration Law have created a far more comprehensive piece of legislation than the original law of 2004 turned out to be.

The new Law closely follows the 1985 UNCITRAL Model Law, but with the addition of a range of provisions drawn from the draft federal Law discussed above. If both laws are passed in their present form, foreign and domestic parties wishing to locate their arbitrations in the UAE will be free to choose between holding them in the DIFC - where they will be subject to the supervisory jurisdiction of the English language DIFC Courts - or anywhere else in the UAE - where they will be subject to the supervisory jurisdiction of the regular national courts. Any award made in the DIFC will still be an award made in the UAE and, as such, will be enforceable in the UAE through any national court, or abroad in accordance with the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards - to which the UAE acceded in November 2006. An arbitration held in the DIFC would not have to be administered by the DIFC - LCIA Arbitration Centre, but could be administered by any of the leading arbitration centres, such as the ICC, LCIA or DIAC.

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