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The UAE Federal Arbitration Law, 2018

  • UAE
  • Litigation - Middle East
  • Litigation and dispute management

17-05-2018

After much anticipation, on the 3rd of May 2018, His Highness Sheikh Khalifa bin Zayed Al Nahyan, the President of the United Arab Emirates, issued Federal Law No.6 of 2018 (the “Arbitration Law”).

A significant development for arbitration in the UAE

The Arbitration Law has been long-awaited by UAE legal practitioners.

Since the UAE acceded to the New York Convention in 2006, a substantive arbitration law was said to be “imminent”, with draft laws even being released as early as 2008. Many commentators felt the lack of specific formal arbitration law had led to ambiguity & inconsistency in the arbitral process, as well as hesitancy by parties in choosing to arbitrate in the UAE.

Enter, the Arbitration Law, which is designed to address those concerns and reinforce the UAE as a jurisdiction that has a modern, international arbitration framework with familiar and effective laws in place to deal with multijurisdictional disputes on a local, regional and global scale.

Old law vs. new law

UAE arbitral proceedings are currently governed by articles 203 to 218 of the Civil Procedures Law No.11 of 1992 which, following the publication of the new Arbitration Law in the Federal Gazette, will be cancelled and replaced by the new Arbitration Law pursuant to article 60.

The Civil Procedures Law provisions, whilst satisfactory in many ways, have been deemed as “not going far enough” by the legal community, lacking certain fundamentals which many practitioners consider significantly important (such as enforcement and nullification of awards). The Arbitration Law, however, contains 61 articles and is largely based on the UNCITRAL arbitration rules, including an article repealing the arbitration chapter contained in the Civil Procedures Law.

This is of significance as it means the Arbitration Law will apply to ongoing arbitration proceedings.

Highlights of the Arbitration Law

Set out below is a summary of key provisions contained in the Arbitration Law. Of course, it remains to be seen how these provisions (particularly in relation to jurisdictional challenges and execution/annulment of an award) will be applied in practice when it has the effect of amending established case-law principles, and we will continue to monitor the position carefully:

1. Applicability (article 2): the new law applies to (i) all local arbitration taking place inside the UAE (unless agreed otherwise); (ii) any international commercial arbitration taking place outside the UAE, where the parties have agreed to apply UAE arbitration law; and (iii) all arbitrations arising as a result of a contractual or non-contractual relationship governed by UAE law, unless expressly excluded.

It is our understanding that, in respect of point (iii), this refers to situations where there is a specific law that precludes settlement of disputes through arbitration (for example, agency disputes under UAE law).

2. Capacity (article 4): that the person entering into an arbitration agreement has the requisite capacity to do so remains of fundamental importance in arbitration proceedings. The consequence of not having capacity can include a challenge to the agreement’s validity under article 8 and/or a defunct arbitration award.

3. Jurisdictional challenge (article 8): the Arbitration Law provides that, where a party commences action in the UAE courts (effectively ignoring an arbitration agreement), the court should declare it has no jurisdiction to determine the dispute provided only that the opposing party has challenged jurisdiction before submitting any substantial defence to the claim. This is a marked deviation from the existing law, which provides that any jurisdictional challenge should be raised at the first hearing, but it is more in line with the UNCITRAL rules.

4. Competence-Competence Principle (article 19): again, in line with the UNCITRAL rules, the Arbitration Law allows the tribunal to review, and make a determination on, its jurisdiction whether via a partial final award on jurisdiction or within the final arbitral award closing the proceedings. However, what is of most pertinence is that, in the event of the issuance of a partial final award on jurisdiction, a party may request the (local) courts to make its own determination on the jurisdictional challenges, and the arbitration proceedings may be (but are not automatically) stayed as a result. The application of this article may become complicated, and may cause concern in ongoing arbitrations where there is a partial final award issued on jurisdiction. Monitoring the courts’ application of this article will be vital in understanding its applicability and effectiveness.

5. Cross-examination (article 35): the Arbitration Law expressly provides that witnesses and experts can be cross-examined through electronic means. This reflects the modern approach taken by the Arbitration Law, and the flexibility of providing evidence under the UAE law. This will need to be assessed against other material legal elements to be satisfied prior to a witness provide his/her testimony (i.e. giving evidence under oath).

6. Annulment (article 53 and 54): marking another significant change to the existing law, under the Arbitration Law, a party can challenge an arbitral award directly to the UAE Court of Appeal (thus forgoing the Court of First Instance) either before or during the process of the award being ratified. However such proceedings must be commenced within 30 days of notification of the award to the parties. Again, how this is implemented and enforced will be a matter of significant interest in assessing where the new Arbitration Law leaves the arbitral process in the UAE; and

7. Execution of an award (article 55): the UAE Courts will, under the Arbitration Law, be required to decide upon a request to ratify an award within 60 days. This time limit is laudable in terms of reducing delays, but may be somewhat optimistic, particularly if ratification is challenged by the losing party.

Closing remarks

The Arbitration Law goes some way to developing the UAE’s arbitration laws, but comes with some early concerns and a ‘health warning’ until it becomes clear how tribunals and the courts are implementing the law. For example, the Arbitration Law appears to allow a party to raise jurisdictional challenges at a later stage than the existing law provides and applies to ongoing arbitral proceedings, which could result in a change of tack and/or a careful assessment as to the legality of the arbitration proceedings or any award, with potential challenges to either.

Nevertheless, the implementation of a comprehensive arbitration law is a welcome move, and will undoubtedly enhance the UAE’s reputation and standing as a reliable seat for arbitration.

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