Introductory remarks

On 16 June 2018, the UAE Federal Arbitration Law (UAE Federal Law No. 6 of 2018, also hereinafter referred as the ‘new Law’) entered into force. It repeals the UAE Arbitration Chapter,1 i.e. the arbitration-relevant provisions of the UAE Civil Procedures Code.2 The new Law finds immediate application to all ongoing domestic arbitration proceedings but, importantly, does not apply retroactively (the procedural steps already consumed in ongoing arbitrations at the time of adoption of the new Law remain valid).3

The scope of application of the new Law is comparatively wide. Most significantly, parties are expressly entitled to contract into the application of its provisions even where an arbitration is not seated in the UAE.4

The new Law also introduces a conceptual distinction between domestic and international arbitration: An arbitration qualifies as international if (i) at least one party is from outside the UAE, i.e. has its business headquarters elsewhere than in the UAE, (ii) the subject matter of the dispute relates to more than one country, or (iii) the core obligations of the agreement in dispute were or are performed by the parties outside the UAE.5 It is anticipated that this distinction will promote a more arbitration-friendly attitude towards international arbitration and ultimately assist in nuancing the definition of UAE public policy by reference to a domestic-international dichotomy as do other leading arbitration jurisdictions in the world.6

UAE adopts the UNCITRAL Model Law

The UNCITRAL Model Law 1985, as amended in 2006, has also served as a blueprint for arbitration legislation in other GCC countries, such as Bahrain and Saudi Arabia and the wider Middle East, including Egypt. The new Law sends a strong signal to the international investor and arbitration communities that the UAE are committed to embracing the challenge of modernisation and to consolidating their position as a leading arbitration jurisdiction in the Middle East. The adoption of the new Law places UAE onshore arbitration into direct competition with the two existing forms of free zone arbitration: arbitrations seated in the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), both known for their unreserved adoption of the UNCITRAL Model Law. That said, the new Law combines local specificities with Model Law language, thus creating a unique blend of local arbitration tradition and best international standards. In this context in particular, it must not be forgotten that the new Law maintains the general proposition that under UAE law, arbitration qualifies as an exceptional means of dispute resolution, in derogation from a party’s fundamental right to go to court. With that in mind, the new Law preserves a requirement for special – as opposed to general – powers of attorney to authorise a party’s submission to or its representation in arbitration through a third party.7

A significant portion of the new Law codifies existing case law precedent of the UAE courts under the UAE Arbitration Chapter. This simply confirms that the UAE courts’ interpretation of the UAE Arbitration Chapter has been much more arbitration-friendly than is often given credit for. For instance, party autonomy, the separability of the arbitration agreement,8 kompetenz-kompetenz,9 the right of a fair hearing,10 partial nullification and enforcement are all prinicples and concepts already recognised by the jurisprudence constante of the UAE courts. Following adoption of the new Law, these principles and concepts have evolved from non-binding case law precedent into the positive law of UAE arbitration. As a result, future changes of these provisions can only be initiated through the legislature (and not through the gradual evolution of existing case law precedent),11 thus removing a risk that the fundamental concepts and core procedural framework of arbitration in the UAE could change at the hand of an arbitration-inexperienced judiciary.

Given its UNCITRAL Model Law pedigree, the new Law contains welcome procedural detail designed to assist parties in an ad hoc arbitration process. By way of example, the new Law lays down provisions on the key procedural milestones of a traditional arbitration process, including the initiation of the arbitration through service of a request for arbitration,12 the constitution of the tribunal13 and the parties’ exchange of written pleadings.14 As regards the constitution of the tribunal, the new Law also contains relevant detail on i) the qualitative requirements to be satisfied by a tribunal (confirming that there are no restrictions of gender or nationality, let alone religion, nor may an official of a supervising arbitral institution be appointed arbitrator in a reference that he or she administers)15 and ii) the procedure to challenge and replace arbitrators who fall foul of those requirements, e.g. for a demonstrative lack of independence and impartiality.16 Importantly, where the courts act as a default appointment authority, they may rely upon a list of specialised arbitrators made available by eligible local arbitral institutions,17 thus facilitating the appointment of suitable candidates in the light of the procedural and substantive requirements of the individual reference.

The limited role of curial courts

The single most important change introduced by the new Law is the streamlining of the involvement of the curial courts. With the adoption of the new Law, most of the decisions taken by the curial courts in relation to e.g. default-appointment,18 the challenge and replacement of arbitrators19 as well as decisions on arbitral jurisdiction20 are final and binding and as such cannot be appealed. In addition, under the new Law, the competence of the curial courts lies with the court of appeal in a first instance, potential challenges, e.g. in defence to an order for enforcement, being open to the court of cassation only.21 In other words, the former three-stage regime of appeal under the UAE Arbitration Chapter has been collapsed into a total of two stages, which will ultimately shorten the overall duration of the enforcement process by at least four to six months.

One ground-breaking innovation under the new Law is the power conferred on the arbitration tribunal to adopt interim measures and for these to be enforced by the curial courts by means of an order of execution.22 This, no doubt, removes concerns that existed under the UAE Arbitration Chapter to the effect that such measures lack enforceability before the courts. Under the new Law, interim awards are expressly made enforceable.23 Other than that, the new Law also makes provision for the joinder of additional parties and the intervention of third parties at the hands of the tribunal (provided the joining or intervening party is party to the underlying arbitration agreement).24

Further notable features of the new Law

The new Law also recognises the arbitrability of actions in both contract and tort,25 thus resolving the uncertainty of tortious arbitrability in favour of arbitration. Moreover, the new Law carves out from its scope of application special sector regimes that proscribe the use of arbitration, such as UAE registered agencies.26

Welcome also is the express codification of what precisely amounts to an arbitration agreement in writing, including in particular an exchange of correspondence or written pleadings between the Parties, acknowledging the submission to arbitration, as well as incorporation by reference.27

The new Law further contains a waiver of right of opposition in the event that a party fails to raise objections to shortcomings in the arbitration process within seven days of having become aware of any such shortcomings,28 thus safeguarding the arbitration process from a party’s premeditated exploitation of procedural defaults in defense to enforcement or as a ground for nullification.

Further, the new Law also introduces the use of modern means of communication, such as video conferencing, for the holding of meetings and hearings,29 including for cross-examining fact and expert witnesses,30 but retains the rather cumbersome minutes requirement.31 The question as to whether witnesses must testify on oath remains uncertain under the new Law given that the express requirement to this effect under former Art. 211 of the UAE Arbitration Chapter has been lost from the text of the new Law (beware, however, of the potential mandatory nature of this requirement, which survives in relevant case law precedent).32 Finally, the parties are at liberty to choose the procedural rules governing an individual arbitration, failing which the tribunal will do so instead, subject to the ‘basic principles of litigation’, i.e. the fundamental requirement of a fair hearing.33 The determination of the rules of evidence is subject to the discretionary power of the tribunal.34

As regards form and content requirements of arbitral awards, these remain as stringent as under the UAE Arbitration Chapter, apart from adding one further (entirely superfluous) requirement, to wit the obligation to make express reference to each of the arbitrators’ nationalities.35 On a positive note, the arbiral award is deemed made at the seat of the arbitration irrespective of whether signature took place outside,36 doing away with concerns that signature abroad may convert an otherwise domestic award into an international award, which in turn prompts allegations of extra (or infra) petita.

The limited recoverability of the costs of the arbitration that gave rise to controversy under the UAE Arbitration Chapter37 appears to persist under the new Law,38 making recovery of party costs subject to express party agreement. Equally, the strict six month time-limit for rendering arbitral awards remains in place, subject to a six-month extension directed by the Tribunal, further extensions requiring party agreement or court approval.39

Recognition and enforcement

Actions for recognition and enforcement as well as the nullification of an award will be heard by the court of appeal, subject to review by the court of cassation, hence streamlining the post-award process as outlined above. Even though arbitral awards rendered under the new Law will have the same executory force as judgments, their execution remains subject to a ratification process.40 Both a supervisory court ruling ratifying an award as well as a ruling setting aside an arbitral award may be challenged.41 Further, unless the parties agree otherwise, the underlying arbitration agreement remains valid and the parties will have to resolve their pending dispute in arbitration.42

The grounds for challenge of an arbitral award under the new Law echo those of the UNCITRAL Model Law and are hence perceived as more arbitration-friendly,43 even though this will not necessarily be the case in practice given the UAE courts’ interpretation of the corresponding provisions under the UAE Arbitration Chapter in favorem arbitrandi. That said, an action for nullification must be brought within 30 days from the date of service of the subject award upon the applicant.44 This, no doubt, will assist the role of the DIFC Courts as a conduit for the recognition and enforcement of domestic (non-DIFC) awards for onward execution in onshore Dubai in situations where no onshore nullification proceedings have been brought in time.45 In essence, a recalcitrant award debtor will not be able to create a situation of parallel onshore nullification and offshore enforcement proceedings, which would prompt a referral by the DIFC-Dubai Joint Judicial Tribunal,46 to the onshore courts.

Conclusion

It is safe to say that the UAE Federal Arbitration Law brings some important changes to the positive law of arbitration in the UAE. Even though these changes do not go as deep as initially expected, the UAE legislature has struck the right tone to put the UAE on par with other leading UNCITRAL Model Law jurisdictions in the world. Time will tell what the judges (and foreign investors) will make of it!


1
UAE Federal Law No. 11 of 1992 on the Civil Procedures. For a full commentary, see Gordon Blanke, Commentary on the UAE Arbitration Chapter (Sweet & Maxwell/Thomson Reuters, 2017).

2
That is Arts 203-218 CPC: See Art. 60.1, new Law, which contains express wording to that effect. The new Law will most probably also repeal Art. 236, which deals with the enforcement of foreign arbitral awards and which loses its meaning with the entry into force of the new Law: See Art. 60.2, which extends the legal effect of the new Law to any provisions of the old Law that are inconsistent with the new Law (albeit not expressly listed under Art. 60.1).

3
Arts 59 and 60.1

4
Art. 2.2

5
Art. 3

6
Presently, no such distinction has been drawn: See e.g. Gordon Blanke, ‘On recent developments of ‘public policy’ and their potential implications for the enforcement of New York Convention awards in the UAE: is it a “camel” or a “Trojan horse”?’, 18(1) IBA Newsletter (2013), pp. 46-49, which analyses the position under Art. V(2)(b) of the New York Convention on the recognition and enforcement of foreign arbitral awards, concluding that the UAE do not distinguish between domestic and international public policy for the purposes of that article.

7
Art. 4

8
Art. 6.1

9
Art. 19

10
Art. 26

11
For the avoidance of doubt, case law predent in the UAE does not qualify as stare decisis, the principle of binding precedent in common law jurisdictions. However, the UAE courts' reliance on a jurisprudence constante means that lower courts will follow guidance from the higher courts, which in turn pay deference to the courts of cassation and the federal supreme courts.

12
Art. 27

13
Arts 9 et seq

14
I.e. the filing of a statement of claim and a statement of defense, together with supporting documents, see Arts 30-31.

15
Art. 10.2

16
Arts 14-17

17
Art. 11.8

18
Art. 11

19
Art. 15.2 and Art. 16.1

20
Art. 19.2

21
See definition of ‘Court’ as ‘local court of appeal’ under Art. 1. On the court of appeal’s role in recognition and enforcement, see below.

22
Art. 21

23
Art. 39.2

24
Art. 22

25
Art. 2.3

26
Ibid. (excepting references that ‘are excluded pursuant to a private law’)

27
Art. 2(a), 2(d) and 2(b)

28
Art. 25

29
Arts 28 and 33.3

30
Art. 35

31
Art. 28.2(b) (requiring minutes of any meetings between the parties and the tribunal) and Art. 33.6 (requiring minutes of hearings).

32
E.g. Case No. 503/2003 - International Bechtel Co. Ltd v. Department of Civil Aviation of the Government of Dubai, ruling of the Dubai Court of Cassation of 15 May 2005 and subsequently confirmed by Case No. 322/2004, ruling of the Dubai Court of Cassation of 11 April 2005.

33
Art. 23

34
Art. 33.8

35
Art. 41, in particular 41.5

36
Art. 41.6

37
See Dubai Court of Cassation Case No. 282/2012, ruling of the Dubai Court of Cassation of 3rd February 2013.

38
Art. 33.5 read together with Art. 46

39
Art. 42

40
Art. 52

41
Art. 54

42
Art. 54.4

43
Art. 53

44
Art. 54.2

45
See, e.g., Gordon Blanke, ‘The DIFC as a conduit: resurrected from the dead?’, Practical Law Arbitration Blog, Thomson Reuters, 5 April 2018, available at http://arbitrationblog.practicallaw.com/the-difc-as-a-conduit-resurrected-from-the-dead/.

46
Established by virtue of Decree No. (19) of 2016 establishing the Dubai-DIFC Judicial Tribunal.