Dubai Government Decree abolishes the DIFC Arbitration Institute impacting current and future DIFC-LCIA arbitrations
Dubai Decree No. 34 of 2021 (the Decree), which came into force on 20 September 2021, impacts current and future DIFC-LCIA arbitrations. All arbitration users in the region will have to take its effect into account in determining how to resolve their disputes as we move into 2022.
DIFC Arbitration Institute abolished and operations transferred
In an unexpected move in September 2021, the Dubai Government issued the Decree, which abolished, with immediate effect, the DIFC Arbitration Institute (the DAI). The DAI was a key stakeholder and administrator of the DIFC-LCIA Arbitration Centre (the DIFC-LCIA), one of the most widely used arbitration institutions in the region. The Decree also provided for the transfer of the DAI’s assets and operations to the Dubai International Arbitration Centre (the DIAC), which is the main onshore Dubai arbitration institution and is undergoing a number of constitutional changes pursuant to the Decree.
Varying impact on DIFC-LCIA arbitrations and arbitration agreements
No material impact on DIFC-LCIA arbitrations commenced prior to 20 September 2021
There should be no material impact on DIFC-LCIA arbitrations commenced prior to 20 September 2021.
It is understood that the LCIA Arbitration Centre in London (the LCIA) has been invited to assist in administering such arbitrations under the DIFC-LCIA arbitration rules until their conclusion, with assistance from the DIFC-LCIA casework team on secondment from the DIAC.
Potential challenges to arbitration agreements and awards in DIFC-LCIA arbitrations commenced on or after 20 September 2021
DIFC-LCIA arbitrations commenced on or after 20 September 2021 will be administered by the DIAC under the DIAC arbitration rules.
Since this is not what the parties had agreed in their DIFC-LCIA arbitration agreements, this gives rise to complex legal issues, which may result in challenges to the validity of the DIFC-LCIA arbitration agreements, and any arbitral awards that are issued pursuant to such proceedings. Those challenges may need to be finally determined by the courts of the arbitral seat or during enforcement proceedings in other jurisdictions.
No impact on the DIFC as an arbitral seat
The Decree has no legal impact on the Dubai International Financial Centre (the DIFC) as an arbitral seat. It is, therefore, still a valid choice to specify the DIFC as the seat of arbitration in agreements, but it will be key to select an alternative set of arbitration rules to the DIFC-LCIA arbitration rules.
Administrative delays and challenges going forward
There has been very limited guidance on the implementation of the Decree since it came into force. So far, DIFC-LCIA arbitrations commenced prior to 20 September 2021 which A&O is acting on have proceeded without administrative issue. However, we understand that parties have experienced administrative delays in commencing DIFC-LCIA arbitrations after 20 September 2021.
Going into 2022, parties should not be providing for DIFC-LCIA arbitration in their new contracts and we anticipate that parties will want to obtain legal advice on the risks associated with either:
- commencing or participating in any ongoing DIFC-LCIA arbitrations commenced on or after 20 September 2021; and
- any existing DIFC-LCIA arbitration agreements, and may want to consider amending those agreements to provide for another set of arbitration rules, if an agreement is possible between the parties. This would reduce the potential uncertainties and risk of challenges to the validity of the clause down the line.
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