The UAE’s new arbitration law: is there an easier way?

by Anthony Edwards

 In May, Construction Week reported the UAE’s plan to finalise a new arbitration law, and highlighted various criticisms of the current draft. One contributor was quoted saying that “The point (in arbitration)…is beaten if things get complicated”. Review of the current draft suggests that the criticism reported in May could hardly have abated.

The UAE has acceded to the New York Convention. The draft new law, perhaps in consequence, appears heavily reliant on the Model Law of the United Nations Commission on International Trade Law (alias UNCITRAL). Introductory notes to that law advise that “the smooth functioning of…arbitral proceedings would be enhanced if states were to adopt the Model Law, which is easily recognisable…and provides an international standard…acceptable to parties from different states and legal systems”. The UAE draft law attempts its own version of the Model Law, rather than heeding the advice to ‘adopt the Model Law’ outright.

The UAE’s existing law of arbitration is the 2005 amendment of the Civil Procedures Code of 1992. It does not provide international scope, but does provide that an arbitration agreement between parties should be in writing, and that the contracting parties are free to agree the procedures to be followed. If they do not, arbitrators are given wide powers to run arbitrations as they consider proper. Provisions are concise, as where a party loses its right to have a dispute referred to arbitration by acceding to Court authority, and for arbitrators generally producing their awards within six months. Furthermore, the Dubai International Arbitration Centre (DIAC) has recently published very well crafted procedural rules for running arbitrations where the parties fail to agree their procedures; as for example, those for exchange of pleadings, at Articles 4, 5 and 6. Thus, the existing law does have its plus points, especially if parties agree to adopt the latest DIAC rules.

The UNCITRAL Model Law begins with a straightforward statement that it applies to ‘international commercial arbitration’; surely reasonable given the universal intentions of that law, as the ‘Introductory Notes’ cite. It may be questioned, though, why the UAE’s draft attempts similar coverage (it asserts it is aimed at ‘commercial arbitration conducted abroad’) as it is essentially a local national law, not one with international reach.

Both the existing UAE law and the Model Law provide for a party losing the right to arbitrate if there is no immediate objection to court proceedings by the other party. In contrast, Article 10 of the draft new law talks only of a party being “aware that there is a violation to a condition in the arbitration agreement…” and, therefore, is being ‘deemed’ to have relinquished ‘his right to object’. It is unclear if this is intended as the same provision as in the Civil Procedure. An issue that often arises is the form of the arbitration agreement. The draft law leaves it unclear whether a standard form arbitration clause can be inferred into the parties contract to arbitrate.

A long section (Articles 27 to 42) deals with ‘Arbitration Procedures’. The draft law does at least allow parties to agree procedures. However, given the thoughtful drafting of the DIAC Rules, it would seem preferable to incorporate the DIAC Rules into the underlying contract, if only to avoid the intricate provisions of Article 35 permitting ‘the arbitration tribunal’ to “hold pleading sessions … to enable … parties to elaborate the … case and … their … evidences”. Greater certainty could surely be provided against what will become a complex and costly exercise, and the risk that parties might attend such pleading sessions ill-prepared. Article 36 provides for the claimant to submit its “written statement of claim” according to Article 32-1, but that Article does not itself provide for service of such pleading. The expert evidence provision gives the example of the divergence between the DIAC Rules and the draft law. The latter follows the Model Law in requiring that the expert advises the arbitral tribunal, without allowing for party experts. The DIAC Rules allow the tribunal considerable width to accede to party requests to appoint their own experts.

An important feature is the need for commercial disputes to be final and binding without likelihood of appeal. This element gives arbitration centres their popular commercial draw. Under DIAC Rules, the language is very clear: “all awards shall be….final and binding”. Article 56 of the draft law seems nowhere near as precise.

Clearly, the drafting of the UAE’s new arbitration law continues to be work in progress. However, whilst commendably looking to be on a par with the UNCITRAL Model, it may be more desirable to more closely align this new law with the excellent DIAC Rules, or at least not to allow them to become two diverging sets of provisions covering the same territory.

Construction week