Guest blog: International arbitration advances in the UAE and MENA region

Like many countries in the Middle East, the UAE has a civil law system largely inspired by principles of Sharia law. However, the UAE has become a rather unique jurisdiction in the region with the establishment of the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). These “offshore jurisdictions”—established as financial free zones—operate in English and have their own common law based laws, including financial services regulation and a common law court system. These financial centres help facilitate trade by offering a legal framework adapted to the needs of the international business community in Dubai and Abu Dhabi—as has the Qatar Financial Centre in Doha—as well as companies wishing to expand their operations in neighbouring jurisdictions based out of one of these free zones.

Widening its global reach, the ICC International Court of Arbitration is scheduled to open a case management office later this year in the ADGM’s new Arbitration Centre. This step is a welcome addition to the arbitration landscape in the MENA region. In 2017, the ICC Court of Arbitration registered cases involving 46 parties from the UAE. Although the figures show a slight drop from previous years—with 56 and 57 parties from the UAE involved in cases filed in 2015 and 2016 respectively—the UAE and Qatar remain the most frequently selected seats of arbitration in the Gulf. For instance, in 2017, the UAE was selected as the seat of arbitration in 12 cases. While the ICC Court will not administer arbitrations through this office, its presence in the Middle East should help increase its visibility with users in the MENA, as well as companies involved in projects beyond the region.

The financial free zones in the region have become an attractive option for users of international arbitration because they offer a predictable legal framework in terms of the courts’ supervisory powers in aid of arbitration and enforcement of awards. Both the DIFC and ADGM adopted arbitration laws based on the UNCITRAL Model Law with some influence from the English Arbitration Act, including provisions on the enforcement and annulment of arbitral awards. By way of arrangements on reciprocal recognition of judgments, orders and awards with domestic courts in the UAE, arbitral awards ratified by DIFC and ADGM courts should be easily enforceable by Dubai and Abu Dhabi courts.

The attractiveness of free zone arbitration is also due to some challenges with the UAE arbitration law. The federal UAE arbitration law consists of ten articles in the UAE Code of Civil Procedure (Federal Law No 11 of 1992). Given the broad and not always arbitration-friendly language used in the current law, the UAE courts have sometimes tended to issue restrictive or inconsistent decisions, which have led parties to become wary of the courts’ powers to intervene in or interfere with the arbitral proceedings.

While the UAE Government has attempted in recent years to find solutions to issues that have arisen, some of these attempts have resulted themselves in further scepticism. One example is the 2016 revision of Article 257 of the UAE Penal Code, which introduced criminal liability for arbitrators sitting on arbitrations in the UAE (whether onshore or in the DIFC and ADGM) where they are considered to have breached their duties of impartiality and integrity. Arbitrators sitting in the UAE are consequently at risk of facing criminal liability. Further to the arbitration community’s strong reaction to this amendment, the UAE announced in November 2017 that it intended to review Article 257. It remains to be seen, though, if and when this provision will be amended. Another piece of legislation that created confusion was Ministerial Resolution No. 972 of September 2017, calling into question the ability of parties to choose their counsel in arbitration proceedings, since it appeared to have the effect of limiting legal representation in arbitral proceedings to Emirati nationals registered to practise law in the UAE. Fortunately, the Dubai Legal Affairs Department reacted quickly, confirming in December 2017 that the law should be read as allowing both foreign practitioners and local practitioners licensed to practice in Dubai to act in arbitrations seated in the emirate.

One highly-anticipated development is the federal UAE arbitration law, which is expected to be enacted following the approval by the UAE’s Federal National Council in February 2018. The draft law, which should replace the relevant articles in the UAE Code of Civil Procedure, is awaiting final review and approval by the Supreme Council and UAE Ruler. Unlike its predecessor, the new law will be a free-standing arbitration law and is largely inspired by the UNCITRAL Model Law. The enactment of the new federal UAE arbitration law would be a welcomed enhancement for arbitration in the UAE, as well as in the MENA region.

The last two years have seen many developments in arbitration in Dubai and in the MENA. The ICC MENA Conference will offer an ideal opportunity to exchange additional insights on the future of arbitration in the region and on the ways in which Dubai, and the UAE more generally, may further establish itself as an attractive and arbitration-friendly hub.

Learn more about the ICC MENA Conference on International Arbitration.

*Disclaimer: The content of this interview does not reflect the official views of the International Chamber of Commerce. The opinions expressed are solely those of the authors and other contributors.