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Amended arbitration law for the Dubai International Financial Centre

02 November 2009

This follows the establishment in the DIFC in February of a new DIFC/LCIA Arbitration Centre and will further enhance and promote the DIFC as a venue for the settlement of international commercial disputes.

Comment

The DIFC has its own courts of first instance and appeal which are staffed by a pool of international judges experienced in, and supportive of, international arbitration. It is therefore anticipated that the DIFC courts will implement the DIFC Arbitration Law in accordance with standards of international best practice, will be slow to set aside arbitral awards and will deal expeditiously with enforcement. Arbitral awards rendered in the DIFC and recognised by an order of the DIFC courts should also be readily enforceable in the rest of Dubai.

Dubai now has two modern arbitral institutions in DIAC (the Dubai International Arbitration Centre) and the DIFC/LCIA Arbitration Centre. With a new Federal Arbitration Law also expected soon, these recent developments further underline Dubai's increasing prominence as a serious centre for the resolution of international commercial disputes in the region and beyond.

Amendments

The most significant amendment to the DIFC Arbitration Law, which has always been based on the UNCITRAL Model Law3, is the amendment of Article 7 which deals with the scope of the Law's application. Article 7(3) of the old law provided that:

"Unless otherwise agreed in writing, this Law applies to Arbitration in relation to disputes arising out of or in connection with the DIFC and to which at least one party is an Arbitration Party."

An Arbitration Party was defined as "any person who would be entitled to bring an action in the [DIFC] Court in relation to a matter which is to be the subject of an Arbitration". This definition, together with the definition of Arbitration which referred to an arbitration arising out of or connected with the DIFC, effectively restricted the application of the DIFC Arbitration Law to parties and matters connected with the DIFC.

The deletion of Article 7(3) means that all parties, irrespective of any connection with the DIFC, may now choose the DIFC as their seat of arbitration.

Other amendments of note include:

A new Article 10 has been added confirming that "In matters governed by this Law, no DIFC Court shall intervene except to the extent so provided in this Law". This follows the UNCITRAL Model Law4 and confirms the application of standards of international best practice.

A new Article 14 confirms the confidential nature of DIFC arbitration proceedings, stating that "Unless otherwise agreed by the parties, all information relating to the arbitral proceedings shall be kept confidential, except where disclosure is required by an order of the DIFC Court".

Article 15 of the new law confirms that it is not inconsistent with an arbitration agreement for parties to apply to the DIFC courts for interim measures of protection before or during arbitration proceedings (although it should be noted that, unless otherwise agreed by the parties, arbitral tribunals themselves retain the power to order interim measures under Article 24).

Where the parties have not already agreed on the number of arbitrators, the number of arbitrators shall be one (Article 16 of the new law). This represents a change from the old law where the default position was a panel of three arbitrators.

Amendments have also been made to the provisions dealing with arbitration agreements. These include confirmation that an arbitration agreement can be in the form of an arbitration clause in a contract or a separate agreement, and that the requirement for an arbitration agreement to be in writing can be met by an electronic communication (new Article 12). However, arbitration agreements in employment contracts within the meaning of the DIFC Employment Law 2005 will not be enforceable except where the employee has given written consent or submitted to arbitration proceedings under the arbitration agreement. A similar provision exists in relation to consumer contracts.

Finally, for enforcement in Dubai (but outside the DIFC), parties should first obtain an order recognising a DIFC-rendered award under Article 43 of the new law. This route to enforcement is further referred to in Article 42, which also confirms that the DIFC courts will comply with any treaties entered into by the UAE for the mutual enforcement of judgments, orders and awards. This includes the New York Convention, which deals with the recognition and enforcement of foreign arbitral awards. The grounds for resisting enforcement have also been amended slightly to more accurately reflect the grounds set out in the New York Convention (see, in particular, Article 44(1)(ii)).

Model clause providing for DIFC arbitration to be administered by the DIFC/LCIA Arbitration Centre

Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the DIFC/LCIA Rules to be administered by the DIFC/LCIA Arbitration Centre, as amended from time to time and by the rest of this clause.

The number of arbitrators shall be three (Tribunal). One arbitrator will be appointed by each of the parties. The two arbitrators so appointed will choose the third arbitrator, who will act as the Chairman of the Tribunal.

The seat of arbitration shall be the Dubai International Financial Centre.

The language to be used in the arbitral proceedings shall be English.

This sample arbitration clause is only a general guide, and the actual agreement which best fits a particular situation may be different and should take into account the relevant circumstances surrounding that agreement.

Furthermore, it should be noted that a DIFC seat does not automatically lead to the choice of the DIFC/LCIA Arbitration Centre and its rules (as envisaged in the model clause above). Parties remain free to choose a DIFC seat combined with, for example, the DIAC or ICC (International Chamber of Commerce) Arbitration Rules.