The UAE and the wider Middle East has always been a fascinating place for the outside world; known for its modern sophistication and exemplified by its many ground-breaking architectural and engineering achievements.
Its ability to provide an environment that’s conducive for doing business is a key reason why the UAE is quickly emerging as one of the most attractive investment destinations for global investors.
Having firmly established itself as a hub for multinational companies conducting business in the Middle East, many major international businesses have adopted the UAE for their regional headquarters, chosen for its logistics advantages and geographical proximity to the wider Middle East, Africa, Indian Subcontinent, Eastern Europe, and beyond.
In a region where trust and confidentiality are central to doing business, it is no surprise that arbitration continues to grow in popularity. In fact, arbitration remains the resolution method of choice for many multinational companies operating in the region and is an important commercial alternative to the judicial system.
After much anticipation within the legal and business community, on 3 May 2018, the new UAE Arbitration Law, Federal Law No. 6 of 2018, was issued by the government (the New Law). By enacting the New Law, the UAE now has a modern framework for arbitration which largely reflects generally accepted legislative best practice around the world, and will contribute towards ensuring that investor confidence in the UAE remains high.
I recently participated in the The Legal 500’s inaugural Middle East Disputes Summit in Dubai. The panel sessions featured some of the most high-profile and experienced general counsel (GCs) operating in the region. During a number of panel discussions, views were exchanged on some of the key topics surrounding dispute resolution and compliance in the UAE and wider Middle East region.
The first panel session discussed the role of the GC in minimising litigation and regulatory risk. Sometimes formal disputes are unavoidable, but in many cases there is often a more cost-effective outcome achievable through the implementation of the right strategy before a dispute or investigation materialises. The GCs on the panel, armed with many years of experience in managing disputes and compliance risk, provided invaluable insights into a range of diverse and sometimes high-risk jurisdictions.
During the second session, we looked at the enduring popularity of arbitration in the Middle East, with a review of the new rules, laws, and centres across the region. The panel also looked at the often convoluted range of options available to GCs when it comes to choosing the optimum seat, and the key considerations to bear in mind.
Within the Middle East, third-party funding (TPF) is widely acknowledged to be on the rise. This is in no small way encouraged by arbitration centres, and is being increasingly demanded by users. The third panel session looked at TPF in the region and asked how GCs and practitioners can utilise TPF to reduce the financial implications for disputes, as well as manage balance sheets and generate revenue.
These discussion points are important, as they provide the opportunity to inform and shape the future of the UAE’s arbitration landscape. Ensuring that the New Law provides for a more efficient arbitral process which is less susceptible to tactics that are designed to cause delay is paramount.
The New Law has strived to codify a number of principles so as to avoid this:
Procedural certainty and efficiency: arbitration proceedings can be continued notwithstanding an application to court for interim measures or an application to challenge the appointment of an arbitrator.
Separability: a fundamental principle which supports the integrity of arbitration as an effective dispute resolution process is that the arbitration clause is separable and severable from the broader agreement to which it applies. Accordingly, even if the main agreement is found to be void, the arbitration clause survives. Whilst the UAE courts have acknowledged this principle previously, it is now codified within the New Law.
Competence: another well-established principle of arbitration is that the arbitral tribunal is empowered to make decisions on its own jurisdiction and that it does not have to delegate this decision- making process (at first instance) to the courts of the jurisdiction in which the arbitration is seated. As with separability, this principle is now codified in the New Law.
Precautionary measures: the New Law provides the tribunal with powerful remedies to support the process on an interim basis. These remedies include interim awards to preserve evidence and assets with a mechanism for a party to then enforce and execute such interim awards through the courts.
Enforcement: perhaps most significantly from the users’ perspective (who ultimately want their awards to be converted into cash), the New Law significantly enhances the enforceability of the award. Award creditors will now be able to leapfrog the Court of First Instance and commence enforcement.
The UAE courts have, on the whole, adopted a progressive, arbitration-friendly approach. The emergence of the UAE financial freezones (the DIFC and the ADGM) has also provided strong support for arbitration in the UAE with each enacting their own English language, UNCITRAL Model Law-based arbitration law, and each openly cooperating with respected international arbitration bodies (the LCIA and ICC respectively).
The New Law will ensure that arbitration in the UAE continues along on its positive and progressive course, and that the UAE remains on a par with the other major arbitral seats around the world. For as long as the UAE maintains this encouraging trajectory, it should stimulate continued investment from key global markets, cementing its place as one of the strongest and most internationally diverse economies in the region.