Arbitration will increase

By Natasha Marrian

Dubai: Commercial arbitration is likely to be sought increasingly as parties face an uphill battle to meet commitments in the face of a bruising global financial meltdown, director of the Dubai International Centre, Dr Hussam S. Al Talhuni, said on Friday.

The DIAC arbitrated 77 cases in 2007 with the monetary value of the disputes spilling over $2 billion (Dh7.34 billion). So far this year, 83 cases have been brought to arbitration with disputes totalling around Dh12 billion, Al Talhuni said. Seventy-three per cent of these cases arose in the construction and real estate sector, a key driver of local economies.

“Parties will start facing difficulty fulfilling their commitments because of the losses sustained in the crisis and this may lead them to re-discuss the commitments they had undertaken,” he said.
“Therefore, disputes are likely to arise. My advice is to try and settle the matter through mediation before bringing the matter forward for arbitration or litigation.”

Regional managing partner at Clifford Chance, Graham Lovett, said there has been an upsurge in commercial cases requiring arbitration in the region in the past 12-18 months with litigation as a remedy falling out of favour due to “nervousness” in entrusting cases to the courts.

Arbitration is preferred as it is a faster way to resolve disputes that take too long to be heard by the courts, he said.

Inherent distrust

According to James Kwan, partner at Simmons and Simmons, historically, there was an inherent distrust of international commercial arbitration in the Middle East due to some high-profile cases during the 1950s and 1960s.

However, this perception is changing as economies in the region have matured and also due to an increase in international investment.

The UAE also joined the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards in 2006, increasing confidence in commercial arbitration.

“Scepticism towards Middle Eastern arbitration is fast disappearing because of new legislation and the ascension of most countries to international conventions,” he said.

Enforcement of commercial arbitration outcomes had emerged as a problem in some Middle Eastern countries, with arbitration awards falling to the courts for ratification. Another barrier to arbitration in the region was language and a perception of prejudice, according to Dr Mahmoud Samir Al Sharkawi, professor of commercial and maritime law in Egypt.

He said prejudice usually occurs when one of the parties and the arbitrator have similar origins, prompting feelings of solidarity.

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