DIAC-LCIA by March 2022?: The latest on arbitration in Dubai following Decree 34 of 2021

• United Kingdom

• International arbitration
• Litigation and dispute management

22-09-2021

On 14 September 2021, a new Decree (No. 34 of 2021) concerning the Dubai International Arbitration Centre (DIAC) was issued, ordering the abolition of two arbitration centres in Dubai - the Emirates Maritime Arbitration Centre (EMAC) and the DIFC’s Arbitration Institute - with existing arbitrations under either of those two centres to be moved under the administrative roof of DIAC.

The Decree introduces a number of changes, but those attracting the most immediate attention are the provisions relating to the abolishment of the DIFC Arbitration Institute, and whether these, by extension, envisage the abolishment of the DIFC-LCIA. On our interpretation of the Decree, it is our view that there may also be a possibility that, subject to MOU renegotiations with the LCIA, DIAC would step into to the DIFC-LCIA such that, by March 2022, the legal community is introduced to a newly reconstituted DIAC-LCIA.

If you have a DIFC-LCIA (or EMAC) dispute resolution clause in your contract or are currently in arbitration in either DIFC-LCIA or the EMAC, here's what you need to know:

1. Effective date and grace period

The 10-article decree comes into force from the date of its publication, 20 September 2021, and encloses updated DIAC internal regulations, which clarify that DIAC’s objective shall be to bolster the UAE’s position as a leading global hub for Alternative Dispute Resolution (ADR) and promote the use of ADR in the Emirate. DIAC is granted six months from announcement to enforcement of the Decree, to coordinate with all concerned centres and entities in Dubai, to “readjust its position in line with the provisions of the Decree”.

2. EMAC and DIFC Abolishment

The Decree stipulates that, effective 20 September 2021, DIAC shall:

(a) “step in place” of the abolished centres in respect of any rights and/or obligations owed by or to these;

(b) be granted ownership by decree, of these centres’ budgets, movable and immovable assets, and membership databases; and

(c) as may be decided by the DIAC Board Chairman, be entitled to retain the employees of either centre to be transferred over to DIAC.

In enabling DIAC to achieve these objectives, the Decree empowers it to coordinate, collaborate, and/or enter into agreements and/or Memoranda of Understandings with local and international arbitration institutions, as well as local and national courts. The latter, in respect of matters relating to the ratification and enforcement of arbitral award issued by DIAC tribunals.

Whilst there is no express mention of the DIFC-LCIA in the Decree, concerns have been expressed within the legal community in the last 48 hours as to its future and whether it would also be abolished as a result of the Decree. Our interpretation of the Decree, in view of its objectives, as well as the powers and step in rights now granted to DIAC, is that – subject to MOU renegotiations - we could be looking at a newly formed DIAC-LCIA, instead of a DIFC-LCIA, come March 2022.

Whilst the DIFC-LCIA has yet to provide any substantive comments, it has confirmed on social media that “Consultation is taking place between the London Court of International Arbitration and the government of Dubai to seek to ensure the good management of existing and future cases where parties have agreed to arbitration and mediation under the DIFC-LCIA Rules.” The same statement has also been issued by the now Former Board of Trustees of Dubai International Financial Centre Arbitration Institute.

3. Continuity of existing arbitration agreement and live proceedings

As to continuity of existing proceedings, the DIFC-LCIA has confirmed that, whilst consultation between the LCIA and the Dubai Government is taking place: “the casework team continues to deal with the day-to-day management of cases under the DIFC-LCIA Rules”.

The Decree expressly provides for the continuity of existing arbitration agreements and proceedings and clarifies that:

(a) Arbitration agreements which provide for arbitration under the auspice of either of the abolished centres shall remain effective and take place under DIAC’s administration, unless the parties agree to the contrary; we understand this to mean in the event the parties agree to update their existing arbitration agreement (or thereafter agree in a submission agreement) to have their arbitration under the auspice of a different centre; and

(b) Tribunals which have been already constituted prior to the coming into effect of this Decree shall remain validly so, and shall continue presiding over disputes under the rules already agreed to “without interruption” (whilst moving to being under the administration of DIAC), unless the parties agree to otherwise.

It is hoped that the implications of any agreement to the contrary would be clarified by DIAC in due course, particularly in relation to the implication of any such agreement on party paid institutional costs, and whether intra-institution agreements would be put in place for the transfer of any advances on costs, to the extent that these have not already been exhausted, to the ‘new’ institution agreed to by the parties, if at all.

4. Seat related update and other notable changes

The new DIAC internal regulations now provide that where the parties are silent as to an agreement on seat, the arbitration shall be DIFC seated by default, with DIFC Arbitration Law 1 of 2008 being the applicable law of the seat.

Some of the notable changes introduced by the new DIAC internal regulations include the:

(a) creation of a new ‘arbitration court’ under DIAC, to be constituted of 13 members to be appointed by the DIAC board for a four year non-renewable term. The Court is granted a number of administrative responsibilities and adjudicative remit, including hearing disputes in relation to the removal and/or challenge of arbitrators, and scrutiny of awards. Our interpretation of the DIAC Court is that this is envisaged to be akin to the ICC Court in function;

(b) recognition of third party funders – the regulations require the DIAC Board to set requirements and rules for ‘arbitration funders’;

(c) recognition of conciliation and mediation as recognised means of alternative dispute resolution (likely to also be regulated by new DIAC rules); and

(d) inclusion of an express exemption of civil liability for Tribunals and arbitrators for unintended errors committed in undertaking their mandate.

5. Immediate next steps for prospective DIFC-LCIA arbitration parties

For live DIFC-LCIA arbitrations, we would suggest that parties and parties’ counsel wait to hear for further direction from the DIFC-LCIA and/or DIAC. In the meantime, it may be prudent for parties to revise their current arbitration agreement(s) to assess whether any changes and/or updates are necessary, particularly in respect of seat agreement.

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