Dispute Resolution: Arbitration
Navigating the Pitfalls of Arbitration in the UAE
Introduction
While the UAE has positioned itself as a global arbitration hub, conducting arbitration there can be a minefield, especially for foreign parties unfamiliar with the nuances of its legal landscape.
The UAE's arbitration landscape is characterised by several distinct regimes. Arbitrations seated in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) are governed by offshore legal regimes. These two special economic zones have their own arbitration laws and regulations, which are largely similar to English common law principles. In contrast, the onshore legal regime applies to arbitrations seated elsewhere in the UAE.
Parties unfamiliar with this segmented system often do not fully appreciate the nuances and potential pitfalls associated with each arbitration regime. The offshore regimes are generally perceived as more arbitration-friendly due to their common law heritage and specialised judiciary, and the onshore regime is often viewed as more challenging by international practitioners.
While Article 20 of the Dubai Internation Arbitration Centre (DIAC) Rules 2022 and Article 22 provide for the default seat to be in the offshore legal regimes (DIFC and ADGM respectively), many arbitration agreements provide for the seat in the onshore UAE.
This publication aims to highlight potential pitfalls of the onshore arbitration regime from the perspective of an international arbitration practitioner or in-house counsel. It may be particularly useful during the early stages of a dispute for forming an initial opinion about potential challenges or when drafting dispute resolution clauses, particularly concerning the selection of the seat of arbitration. The same pitfalls may be relevant when a foreign arbitral award (including one issued in the DIFC or ADGM seated arbitration) needs to be recognised and enforced in onshore UAE.
Judicial System, Mindset, and Interpretation
The onshore UAE operates under a civil law system, while international commercial arbitration largely stems from common law traditions. This fundamental difference can lead to variations in judicial interpretation, even for laws based on the UNCITRAL Model Law. The absence of binding judicial precedents further contributes to less predictable outcomes compared to common law systems. Many judges and practitioners also retain a traditional civil law view of court supremacy over arbitration, considering arbitration an "exceptional" method of dispute resolution. This often results in a more rigid and less arbitration-friendly interpretation of legal provisions than seen in common law jurisdictions. Collectively, these factors can lead to unexpected annulment decisions or challenges during enforcement.
Specific Authority for Arbitration Agreements
A significant requirement in onshore UAE arbitration is that an individual entering into an arbitration agreement on behalf of a company must possess specific authority to do so. Typically, this necessitates a shareholders' resolution or an express grant of authority within the articles of association. Concepts of apparent authority and implied authority are generally not recognised in onshore-seated arbitrations, as opposed to offshore-seated arbitrations. The practical implication is that a company may claim an arbitration agreement is not binding if the signatory lacked this specific authority, even if it was a director or top executive who signed it, and the company participated in the arbitration. For example, the Abu Dhabi Court of Cassation recently set aside an award because the agreement containing an arbitration clause was signed by the company CEO, whereas the company articles of association authorised the Chairman of the Board of Directors to enter into arbitration agreements. The company’s participation in the arbitration and failure to object did not constitute a waiver of its right to invoke invalidity of the arbitration clause (Case No. 902 of 2024).
Arbitration Agreement Incorporated by Reference
UAE courts typically require that the document containing an arbitration clause be signed by the parties, even though this is not explicitly mandated by law. This requirement can raise questions about the validity of an arbitration agreement when a contract incorporates an arbitration clause by reference to another document, such as terms and conditions.
Formalities
Non-compliance with formalities can lead to the invalidation of an arbitral award. For example, although Article 41(3) of the UAE Arbitration Law simply states that "the award shall be signed by the arbitrators," UAE courts have interpreted this to mean that the award must be signed by the tribunal on every page containing the reasoning and dispositive section. The best practice, therefore, is to sign every page of the award to ensure compliance and avoid potential disputes. While certain exceptions exist, they have been interpreted very restrictively. A failure to comply with this signature requirement has been deemed a violation of UAE public policy, which is a ground for setting aside an arbitral award under Article 53(2)(b) of the UAE Arbitration Law.
Public Order or Morals
The extent of judicial scrutiny of arbitral awards in the UAE at the enforcement stage may sometimes be rather wide, occasionally delving into the merits or re-evaluating factual findings of an award. In particular, the concept of public order or morals has been interpreted widely. A UAE court may, on its own initiative, set aside an award on this basis.
Unrecoverable Legal Costs
Legal costs are largely not recoverable in onshore litigation in the UAE. It seems this practice has influenced the UAE courts in their approach to legal costs in arbitration, even when an arbitral award orders payment of legal costs. For example, the Dubai Court of Cassation confirmed the partial annulment of an ICC award in the part which concerns the allocation of legal costs (Case No 821 and 857 of 2023). The court reasoned that the costs of arbitration, as defined by the UAE Arbitration Law (Federal Law 6/2018), do not include legal costs paid by the parties to their legal representatives. It held that the parties' arbitration agreement did not explicitly include an agreement on holding either party liable for legal expenses or authorising the arbitral tribunal to determine them. Consequently, the relevant part of the award was annulled, and the award debtor was not obligated to pay legal costs of the opponent. This intervention was surprising and unexpected, given that the ICC arbitration rules, which were incorporated into the parties' agreement, expressly defined arbitration costs to include legal and other costs incurred by the parties.
On the other hand, the Dubai Court of Cassation held recently that a party may recover the full amount of legal fees in onshore litigation (Judgment No. 503/2025). It remains to be seen whether this judgment has created a uniform general rule on recoverability of legal costs.
Confidentiality
Established common law arbitration hubs prioritise the preservation of arbitration confidentiality, often through anonymisation, redaction, and private hearings for arbitration-related court matters. In the UAE, while the confidentiality of the arbitration itself is recognised, the default is that any court case pertaining to an arbitral award will be heard publicly, like any other case. The burden rests heavily on the party to persuade the court to grant exceptional privacy measures for related judgments, which are not routinely granted. This implies a higher likelihood of case details becoming public.
Interim Measures
While the UAE federal arbitration law permits tribunals to issue interim measures and allows for court assistance, the scope and speed of obtaining certain types of injunctive relief from onshore UAE courts can be more limited or slower compared to common law arbitration hubs. For example, relief such as worldwide freezing orders, asset disclosure orders, specific performance orders, pre-action document disclosure orders, perpetuation of evidence orders, and anti-suit injunctions are either not available, difficult to obtain, or limited in scope. Regarding anti-suit injunctions, the Dubai Court of Cassation recently held that an arbitral tribunal possesses the authority to issue such injunctions (Appeal No. 657 of 2025, 3 July 2025); however, the consistent application of this principle by lower courts will need to be observed over time.
Arbitrability of Disputes
Certain types of disputes are considered non-arbitrable in the onshore UAE due to public policy. The scope and depth of such disputes are generally broader than in common law arbitration hubs. For instance, commercial agency disputes, particularly those registered under the UAE Commercial Agencies Law, have been considered non-arbitrable or subject to specific jurisdictional requirements due to their perceived public policy implications. Further, a wide range of bankruptcy-related issues are non-arbitrable.
Unilateral Arbitration Clauses
A unilateral (also known as optional or asymmetric) arbitration clause grants one party the right to choose between arbitration and litigation, while confining the other party to a single forum. The Dubai Court of Cassation has held that such clauses do not constitute a binding arbitration agreement under UAE law (Commercial Appeal No. 735 of 2024, 29 October 2024).
Less Predictable Court Decisions
Although the UAE continues to evolve into a more arbitration-friendly jurisdiction, court decisions often remain less predictable than in more established jurisdictions, especially concerning legal concepts with limited or no prior judgments. For instance, the inconsistent rulings on unilateral arbitration clauses highlight this unpredictability. Shortly before the case on unilateral arbitration clauses mentioned above, the same Dubai Court of Cassation rendered another judgment upholding a unilateral arbitration clause (Dubai Court of Cassation Commercial Appeal No. 1522/2023).
Sudden Changes in Law
Laws and regulations are frequently enacted without prior public discussion and with little to no advance notice. Furthermore, these laws often lack detailed provisions, making their application difficult, unpredictable, and sometimes impossible. A notable example is Decree 34/2021, issued on 20 September 2021, which abolished the DIFC-LCIA and Emirates Maritime Arbitration Centre (EMAC) with immediate effect, taking all legal community by surprise. Although the Decree provided for the transfer of cases and assets to DIAC, no specific mechanism for this transfer was prescribed, leading to many cases being in limbo for months.
Language Barrier and Translation
While arbitration proceedings can be conducted in English or any other agreed language, interactions with the onshore UAE courts — such as for interim measures, arbitrator appointments, or, crucially, for the ratification, annulment, and enforcement of awards — require documents to be translated into Arabic by a sworn legal translator. This not only adds time and cost but also frequently results in inaccurate translations, as some terms may be difficult or nearly impossible to translate correctly due to linguistic differences. This can result in the loss of nuances and misinterpretation, potentially leading to an unexpected or unfavourable court decision. Alternatively, if a translation error is identified by the opposing party, this may serve as grounds for challenges.
Conclusion
For in-house counsel and international practitioners, understanding these jurisdictional nuances is essential. A strategic choice of seat, robust arbitration clauses, and awareness of procedural quirks can significantly reduce the risk of unenforceability, delay, costs and other issues.
Arthur Dedels, Senior Associate, Fichte & Co
29 August 2025