The extremely high levels of construction work in the UAE, along with the growing popularity of the Dubai International Arbitration Centre (DIAC), the Abu Dhabi Commercial Conciliation and Arbitration Centre and the recently-established Dubai International Financial Centre Court (DIFC LCIA Arbitration Centre), have led to an increasing number of disputes being resolved by arbitration in the UAE.

Arbitration in the UAE is governed principally by the Civil Procedure Code Federal Law No. (11) of 1992 (the “UAE Code”). In fact, the UAE Procedure Code comprises only three chapters on arbitration, namely Chapter (III) “Arbitration”– Articles 203–218; Chapter (IV) “Enforcement of Foreign Awards” – Articles 235–238; and Chapter (V) “Execution Procedures” – Articles 239–243.

However, it is important to note that disputes arising out of commercial contracts to which the Dubai Government or any of its subsidiary departments are a party are not governed by the UAE Code. Such disputes, if submitted to arbitration, fall under specific laws, such as Law No. 6 of 1997.

Other legal instruments regulating arbitration in UAE include, for instance:

• Federal Decree No. 43 of 2006 regarding the UAE’s ratification of the New York Convention of 1958 on Recognition and Enforcement of Foreign Arbitral Awards;
• Gulf Cooperation Council (“GCC”) treaties ratified by the UAE for the enforcement and execution of judgments, delegations and judicial notifications delivered by the GCC countries;
• the Bilateral Agreement signed by the UAE and France in 1991 for Judicial Cooperation and the Recognition and Enforcement of Judicial Decisions (including Arbitral Awards) in Civil and Commercial Matters;
• in brief, the said agreement regulates the possibility of enforcing judgments and arbitral awards issued either in France or the UAE provided that (i) the arbitration award is rendered according to an arbitration agreement; (ii) the dispute is capable of being resolved by arbitration; and (iii) a certified copy of the arbitration agreement is submitted before the competent court in order to enforce the said arbitration award.
• International multilateral agreements and conventions relating to arbitration to which the UAE is a party for instance: the International Convention for the Settlement of Investment Disputes (more commonly known as the ICSID Convention); and
• Agreement on Encouragement and Protection of Investments between the Members of the Organisation of the Islamic Conference (Chapter (2) concerning Arbitration).

There are two different types of arbitration in the UAE depending on the terms of the arbitration agreement concluded by the parties. The parties may decide either to conclude an ad hoc arbitration agreement (pursuant to which the parties along with arbitrators shall be responsible for determining all aspects of the arbitration, such as the number of arbitrators, manner of their appointment, procedure for conducting the arbitration, applicable law, procedures and administrative support) or include a reference in their arbitration agreement to the arbitration rules of an arbitration institution, in which case the designated arbitration rules will govern the conduct of the arbitration proceedings and the designated institution will administer the proceedings. The main arbitration institutions in the UAE are as follows:

1 – The Dubai International Arbitration Centre (DIAC):
The DIAC has issued new arbitration rules by way of Decree No. (11) 2007. These new rules are considered amongst the most modern and developed in the UAE due to their inclusion of the best international arbitration practices, as followed by other well-known international arbitration institutions around the world. These rules are based upon intensive research undertaken and approved by the DIAC Board of Trustees, which consists of distinguished arbitrators specialising in the field of international commercial arbitration. The draft version of the rules was then discussed with the legal department of the Rulers Office, who published the rules through Decree No. (11) 2007, with the approval of the Ruler of Dubai on 6 May 2007. The rules came into effect on the date of their publication and are available in both the English and Arabic languages. They were originally drafted in the English language and, following their approval by the DIAC Board of Trustees, they were translated into Arabic, special attention being given to the accuracy of their translation.

The new DIAC arbitration rules replace the rules of Commercial Conciliation and Arbitration (Law No. (2) of 1994) of the Dubai Chamber of Commerce and Industry. The latter were applicable to all arbitration cases since 1994, and shall continue to be applied to all cases registered with the DIAC before 6 May 2007.

2 – The Abu Dhabi International Arbitration Centre:
On 10 February 1993, the Abu Dhabi Chamber of Commerce & Industry established a specialised Centre to settle trade disputes by reference to the Centre’s conciliation and arbitration rules. The Centre keeps lists of specialists in the fields of conciliation, arbitration, expertise and translation.

Conciliation is a form of Alternative Dispute Resolution in the UAE to which parties may resort in order to resolve their trade disputes. Conciliation is conducted through a mediator accredited by the Centre or selected by the parties. However, the conciliator’s decision is not considered binding on the ­parties; it is more in the nature of a recommendation.

Arbitration is conducted by one or more arbitrators appointed by the Centre or the parties. The arbitrator’s decision is binding and enforceable.

3 – The Dubai International Financial Centre (DIFC) Court:
The Dubai International Finance Centre (DIFC) was established by Federal Law No. 8 of 2004. It is a free financial zone within Dubai City intended to attract foreign investment. This required an amendment to the Constitution of the UAE because the Court falls outside the federal court system. A separate legal system also had to be created.

The DIFC Court operates on the basis of common law rather than civil law; the language of the Court is English; and it has its own set of Procedural Rules. It has a dedicated arbitration law and an independent legal system mandated to support arbitral proceedings. The Interim Rules are currently those of the English Commercial Court, although the DIFC Court’s own Rules are close to completion.

Arbitration according to the UAE Code
Arbitration in the UAE is principally governed by the UAE Code and, more specifically, by Articles 203–243.

The general principles underpinning the arbitration-related provisions of the UAE Code include the following:

• equality of the parties;
• autonomy of the parties;
• the right of defence and fair trial; and
• the right of the parties to submit relevant documents.

Recourse to arbitration
There are two types of arbitration agreements under UAE law. According to Article 203 of the UAE Code, the parties to a contract may generally include a clause in their contract (a clause compromissoire) stipulating that any future dispute arising between them in respect of the performance of that contract shall be referred to arbitration, to one or another uneven number of arbitrators, and may also agree to refer certain disputes to arbitration under special conditions. Alternatively, the parties may submit existing disputes to arbitration by entering into a submission agreement (a compromis).

Conditions of validity of the arbitration agreement
According to Article 203 of the UAE Code, no arbitration agreement shall be valid unless it is evidenced in writing and the subject matter of the dispute is clearly defined. The UAE courts will not uphold the validity of an arbitration agreement which is printed as a standard clause in the general conditions of an insurance policy.

The UAE Code does not specify whether it is the arbitral tribunal or the local courts that have jurisdiction to determine the validity of the arbitration agreement. However, the arbitration rules of the DIFC provide that the arbitral tribunal shall have the right to determine the validity of the arbitration agreement and therefore to decide on their own competence to resolve the matter submitted to them.

Enforcement of the arbitration agreement
According to Article 205 of the UAE Code, if the parties to a dispute agree to refer the dispute to arbitration by means of an arbitration clause or submission agreement, it is not permissible for any of the parties to file any lawsuit before the courts of the UAE. The latter will not hear an action if the parties have agreed to refer the matter to arbitration, as they will assume that the parties have waived their right to refer the matter to litigation. Notwithstanding the foregoing, if one of the parties files a suit before a local court, notwithstanding the existence of an arbitration agreement, and the other party does not object to such filing at the first hearing, the court may exercise jurisdiction over the suit, and in such case, the arbitration agreement shall be deemed cancelled.

Autonomy of the arbitration agreement: separability
The arbitration clause is, as a matter of law, presumed to be separate from the main ‘substantive’ agreement and shall survive the avoidance (though not the nonexistence) of the main agreement. This is called the principle of separability.

Scope of arbitration: arbitrability
Paragraph 4 of Article 203 of the UAE Code provides that arbitration shall not be permissible in matters that are not capable of being reconciled, i.e. in matters where the parties are not legally entitled to dispose of the disputed right. Certain other laws and regulations prohibit arbitration, for example, in disputes relating to criminal, matrimonial or labour law, and exclusive commercial agency matters.

Capacity of the parties to arbitrate
An arbitration agreement may be made only by parties who have legal capacity to enter into that agreement. Minors and convicted criminals cannot, therefore, conclude arbitration agreements.

Appointment of arbitrators
In all cases, the arbitral tribunal must consist of one or another uneven number of arbitrators.

The arbitrators can be appointed in one of three ways:

• nomination by the parties themselves: the parties may nominate the arbitrators according to the terms of the arbitration agreement;
• nomination by an arbitral institution: if the parties have submitted their dispute to the rules of an arbitration institution, those rules may provide for the institution to appoint an arbitrator in the absence of agreement between the parties; or
• nomination by the competent court: any of the parties to an arbitration agreement has the right to request the competent court at the seat of the arbitration to appoint the required arbitrator(s).

In the absence of any contrary agreement between the parties, similar recourse to the competent local court is possible if the arbitrator nominated by the parties:

• refuses, once appointed, to assume his responsibilities after being duly notified in writing by one of the parties;
• withdraws after having accepted his appointment;
• is dismissed;
• has his appointment revoked; or
• is prevented from acting due to an encumbrance. Any decision made by the local court with regard to the foregoing is final and cannot be appealed by the parties.

Conditions required to be appointed as arbitrator
The UAE Code stipulates that an arbitrator may not be a minor, a bankrupt, or someone who lacks legal capacity or is deprived of his civil rights due to the commission of a criminal offence (unless he has been ‘rehabilitated’).Arbitrators may be authorised to act as amiable compositors only if they are specifically named and empowered to act so in the arbitration agreement or in a subsequent agreement.

Removal of arbitrators
The parties can agree to remove an arbitrator. Alternatively, any of the parties may request the competent court to dismiss an arbitrator and appoint a replacement in accordance with the same procedure pursuant to which the original arbitrator was appointed. Such request may be accepted by the court only when it is proven that the arbitrator has wilfully neglected to act in accordance with the terms of reference, despite receipt of a written notice in this respect. It is to be noted that according to Article 207 of the UAE Code, the arbitrators do not have the power to remove a fellow arbitrator; such power is reserved to the parties or to the court that would have been originally competent if the case had not been referred to arbitration.

Disqualification of arbitrators
Any party to the arbitration can also submit to the competent court a request for the disqualification of an arbitrator based on reasons occurring or appearing after his appointment. Such request must be based on the same grounds as those on which a judge may be dismissed or deemed unfit to give judgment. Such a request must be filed with the court within five days of:

• the date on which the parties were notified of the appointment of the arbitrator (the “Notification”);
• the date on which the reason for disqualification arose;
• the date on which the party became aware of the reason for disqualification. Nonetheless, the UAE Code specifies that the request for disqualification shall not be granted if the arbitrator has already rendered an award or if the final hearing has taken place.

Acceptance by the arbitrator of his appointment
The arbitrator’s acceptance of his appointment shall be evidenced in writing or recorded in the minutes of the session during which the appointment took place. Once the arbitrator has accepted his appointment, he may be liable to pay damages to the parties if he withdraws from the arbitration without a valid reason.

The UAE Code requires the arbitrator, within a maximum period of 30 days from the date of acceptance of his appointment, to notify the parties of the date and venue of the first hearing. Such notification needs not comply with the usual requirements for service of notices as specified under the UAE Code. Furthermore, the arbitrator shall fix with the parties a date for the submission of their documents, memoranda and pleadings.

If a party fails to abide by any of the agreed deadlines, the arbitral tribunal has the right to issue its award based on the documents received from the other party to the dispute.

Temporary suspension of the proceedings
The arbitral tribunal shall have the power to suspend the arbitration proceedings in the event that:

• a preliminary issue arises, which falls outside the powers of the arbitrator(s);
• a challenge is filed claiming that a document has been forged; or
• criminal proceedings have been commenced in respect of such forgery or any other criminal act. The arbitration proceedings shall resume when a final judgment on the above has been issued by the competent court.

In addition, the arbitrator(s) must suspend the proceedings if they wish to make one or more of the following applications to the President of the competent court:

• an application for a judgment penalising any witness who fails to appear or who refuses to give a statement;
• an application for an order for a party to submit any documents in its possession which are necessary for the resolution of any issue relevant to the arbitration award; and
• an application to decide on evidence by commission, in other words, an application whereby the arbitrator transfers consideration of an evidential issue to the court that would have been competent to resolve the dispute in the absence of an arbitration agreement.

Duration of the proceedings
Unless otherwise agreed between the parties, the arbitral tribunal shall issue its award within a maximum period of six months of the date of the first hearing. Failure to render an award within the above timeframe will entitle any of the parties to refer the dispute to the competent domestic court or – if a suit has already been filed with such court – to proceed with such suit. The parties’ agreement to extend the six-month time limit for rendering the award can be made explicitly in writing or be inferred from the behavior of the parties, e.g. if they continue to make submissions to the arbitral tribunal after the expiry of the six-month period.

Also, the court may, at the request of the arbitral tribunal or one of the parties, extend the six-month period by whatever period the court deems sufficient to enable the arbitral tribunal to decide the dispute.

The UAE Code stipulates that the six-month period shall cease to run whenever the arbitration is suspended and shall recommence from the date on which the arbitral tribunal is notified of the removal of the reason for which the dispute was suspended. If the remaining period is less than a month, it shall be extended to one full month.

Powers of the arbitral tribunal
The Civil Procedure Code does not specify the general powers or duties of the arbitral tribunal.

It is to be noted that the arbitral tribunal can compel witnesses to give evidence under oath. If an oath is administered, any false statement made before the arbitral tribunal will constitute perjury.

Even though such arbitral proceedings in the UAE are governed by the UAE Code, the arbitrators are only bound by the rules specified in Chapter 3 of said Code (i.e. the provisions relating to arbitration) and, in addition, the rules on:

• the notification of the parties;
• the hearing of their pleas; and
• their submission of documents. Notwithstanding the foregoing, the parties to the dispute may agree that the arbitrator(s) should follow other procedures set out in the UAE Code.

Arbitration’s fees and expenses
The arbitrators shall determine their fees and the arbitration expenses and may decide that such amount, in whole or in part, be borne by the party against whom the award was issued. The competent local court may, at the request of one of the parties, amend the said estimation taking into account the work performed by the arbitrators and the nature of the dispute.

General provisions relating to the award
The award shall be:

• rendered by a majority of the arbitrators;
• made in writing; and
• accompanied by any dissenting opinion (if any).

The award itself shall contain reference to the arbitration agreement, a summary of the statements of the parties and their documents, the grounds and context of the award, the date and place of issue of the award, and the signatures of the arbitrators. Should one or more arbitrators refuse to sign the award, such refusal should be stated in the award and will not affect the validity of the award so long as it is signed by a majority of the arbitrators.

Unless otherwise agreed between the parties, the award shall be issued in Arabic. Whenever the award is issued in any other language, it must be accompanied by a legalised Arabic translation.

Arbitration proceedings may be conducted either without the court’s involvement or under its direct supervision (i.e. when an action has been brought before a court whose President decided to refer the case to arbitration). In the latter scenario, the UAE Code stipulates that the arbitrators shall, within 15 days of issuing their award, file an original copy of the award with the competent court together with the original terms of reference, minutes of sessions and documents. They shall also file with the court a copy of the award to be delivered to each of the parties within five days of the date of filing of the original copy thereof. The court clerk shall prepare a report on the said filing to be submitted to the judge or the head of the relevant court department, as the case may be, with a view to convening a hearing within 15 days for the purpose of approving the award. The parties to the dispute shall be notified of the date fixed for the said hearing.

If the arbitration is conducted under the supervision of the court of appeal, the filing of the copy of the award shall be made with the court which has jurisdiction to consider the appeal.

Finally, where the arbitration is conducted without the court’s involvement, the arbitrators shall provide each party with a copy of their award within five days of its date of issue. The court shall, at the request of one of the parties, consider whether the award shall be registered or nullified. It is to be noted that, according to Article 215 of the UAE Code, the arbitral award must be approved and registered by the competent court for it to be enforced and thus to enable the non-defaulting party to seize the other party’s goods and assets.

Whilst considering the request for approving and registering the award, the court may refer the case back to the arbitrator(s) to reconsider any issues which they have omitted or to clarify the award if it is not specific enough to be enforceable. Unless otherwise decided by the court, the arbitrator(s) shall, in both cases, issue their revised award within three months of the date on which they were notified of the court’s decision. The court’s decisions may not be contested except after the issuance of the final judgment in which it decides whether the award is registered or nullified.

The UAE Code also provides that the award may not be enforced unless the award and the terms of reference have been reviewed by the competent court, the award has been registered, and the court has ensured that there is no encumbrance to enforcement. Furthermore, the court shall, at the request of one of the parties, correct any material errors in the award.

Nullification of the arbitration award
Any party to a dispute may, whilst the award is being reviewed by the court for the purpose of being registered, request the nullification of the award if it was issued:

1. without being based on valid terms of reference or was based on terms of reference in which the dispute was not clearly defined;
2. based on an arbitration agreement which has expired by time prescription;
3. by an arbitrator who has exceeded his powers under the terms of reference;
4. by an arbitrator who was not appointed in accordance with the law;
5. by only some arbitrators who were not authorised to issue the award in the absence of the others;
6. by a person who is not competent to act as an arbitrator; or
7. by an arbitrator who does not satisfy the legal requirements.

Additionally, the award may be set aside if the award is invalid (e.g. not made by a majority of the arbitrators) or if the arbitration proceedings were not conducted in accordance with the agreed procedure.

The above grounds for nullification cannot be waived by the parties to the arbitration: the UAE Code provides that any purported waiver by any party, prior to the issuance of the award, of his right to request the nullification of the said award shall have no legal effect.

Appealing the arbitration award
According to Paragraph 1 of Article 217 of the UAE Code, the arbitration award may not be appealed in any way.

However, it is important to note that the court judgment approving the arbitration award may be appealed. Notwithstanding the foregoing, the said judgment shall not be subject to appeal if

• the arbitrator was authorised to resolve the dispute;
• the parties have expressly waived their rights to file an appeal; or
• the disputed amount was less than AED 10,000 (ten thousand Dirhams; approx. USD 2,700).

Domestic awards
The arbitrators’ award may not be enforced unless it has been approved by the court with which the award was filed. The court charged with approving the award must review the award and the terms of reference, and ensure that there is no encumbrance to enforcement.

Foreign awards
The UAE Code stipulates that an arbitration award rendered in a foreign country may be enforced in the UAE under the same conditions provided for in the law of the foreign State for the enforcement of foreign arbitration awards. Nonetheless, it is reported that the UAE courts sometimes go beyond this principle by requiring that the foreign award satisfies, in addition to the procedures applicable in the country of origin, those applicable in the UAE.

The petition to enforce a foreign arbitration award must be filed with the Court of First Instance at the place in which enforcement is sought. Enforcement may not be granted unless the following issues have been verified (Article 235 of the UAE Code):

• that the UAE State Courts are not competent to resolve the dispute in respect of which the foreign award was made and that the foreign arbitral tribunal had jurisdiction to hear the dispute;
• the award or order was rendered by a competent tribunal according to the law of the country in which it was rendered;
• the parties to the lawsuit in respect of which the foreign award was rendered were duly summoned and represented;
• the award or order is final in accordance with law of the country in which the award was rendered; and
• the award or order does not conflict with or contradict a judgment or order previously made by another court in the UAE, and does not include any violation of public morals or public policy.

Until recently, the UAE had not signed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention), and therefore lagged behind other GCC countries.

As a result of Federal Decree No. 43 of 2006 (which transposed the provisions of the New York Convention into UAE law), all contracting States will now benefit from the fact that awards rendered in their territories are in principle enforceable in the UAE.

The Levant Lawyers
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Fady Jamaleddine
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Badih Moukarzel
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