By Flávia Câmara e Castro, Associate Lawyer in the Litigation and Arbitration practice area at GVM | Guimarães & Vieira de Mello Advogados, Diaz Reus’ affiliate law firm in Brazil.
On February 27, a new federal law was approved in the United Arab Emirates, regulating arbitration in the country. The approval by the Federal National Council occurred after several attempts and several changes in the text of the law. Once approved, the arbitration law will be applied in all arbitral procedures in the country, unless, of course, the parties agree to apply a different arbitration law.
So far, in the United Arab Emirates, arbitration procedures were governed by certain sections of the United Arab Emirates Code of Civil Procedure (Federal Law No. 11/1992, specifically articles 203 to 218). According to information on the Emirates Government website[1], in addition to such legal provisions, the rules of the procedure’s arbitration chamber were applied.
The country’s first measure to stimulate arbitration was taken by the Dubai government, which established free trade zones in 2004, such as the Dubai International Financial Center — DIFC. This financial center has an independent jurisdiction within the country, operating under its own legal system, which is based on the common law system[2]. Within the Financial Center, a dispute settlement center was established, which formalized a partnership with the London Court of International Arbitration in 2015, thus forming the DIFC-LCIA Arbitration Center[3]. The disputes submitted to this center are settled under the UNCITRAL arbitration rules.
Another similar trading area is the Abu Dhabi Global Market, located on Al Maryah Island. In 2016, the United Arab Emirates Minister of Justice agreed with the representatives of the Global Market’s arbitration chambers that all necessary measures would be taken to ensure that the chamber’s arbitral awards could be enforced before the all the country’s federal courts.
The first step taken by the United Arab Emirates in order to regulate the arbitration institute was taken in 2006, when the country became a signatory of the New York Convention. This Convention is an international treaty, which ensures the execution of arbitral awards in all signatory countries on a reciprocal basis.
Since then, the UAE has been trying to enact a specific arbitration law. Two attempts were made, first in 2008 and later in 2014. The text of the 2008 law received a large number of critics, and was in general considered pro-arbitration. As an example, it had a provision about state courts only having jurisdiction to consider emergency measures in case the Arbitral Tribunal did not have the means to do so[4]. At the same time, the text mentioned various provisions taken from the Code of Civil Procedure. The law, however, was never enacted, as it was not possible to obtain its approval.
On the other hand, the text of the arbitration law written in 2014 was based on the UNCITRAL model law. In spite of this, it also contained several sections based on the Code of Civil Procedure. For this reason, it was criticized as it did not bring any innovations or improvements to existing laws. Another critic raised was that the text did not provide clear information about which would be the conditions of participation for third parties outside the arbitration agreement. This is a relevant problem in the sense that, eventually, the Respondent may respond to the request for arbitration claiming its illegitimacy for not having signed the agreement. This would lead to an extra work and demand from the Arbitral Tribunal, which will have to appreciate such procedural claims before considering the merits. This may delay the final solution of the dispute. In an even more serious situation, an arbitration award could be judicially annulled for the same reason. Thus, this text also failed to get approval.
Finally, the third text attempt, formulated a few months after the Abu Dhabi Global Market published a new regulation for arbitrations within its commercial zone, was approved. This text was based on UNCITRAL’s model law and was able to comply with international arbitration rules and standards, considerably reducing the correlations with the domestic laws[5]. It bears little resemblance to national legislation and only determines that arbitration procedures in the country must not conflict with public order and morality.
This change represents an undertaking of efforts from the Emirates to strengthen their position as an international economic center, supported by modern arbitration rules. Dubai’s Al Bayan newspaper informed that the new legislation emphasizes the stimulation to economic development, investor attraction and economic stability within the country[6]. All of these aspects are evidently strengthened with the new arbitration law, which provides greater security to arbitration procedures in the settlement of various sorts of disputes.
———————————————————————————————-
[1] Available at: https://government.ae/en/information-and-services/justice-safety-and-the-law/litigation-procedures/alternative-methods-to-settle-disputes- . Access: 03/21/2018.
[2] Available at: https://globalarbitrationreview.com/chapter/1036963/united-arab-emirates . Access: 03/16/2018.
[3] Available at: http://www.difc-lcia.org/ . Access: 03/22/2018.
[4] Available at: https://www.beale-law.com/uploads/files/beale_and_company/publications/642/Article_-_A_new_arbitration_law_for_the_UAE-_third_time_lucky.pdf . Access: 03/20/2018.
[5] Available at: https://globalarbitrationreview.com/jurisdiction/1003147/united-arab-emirates . Access: 03/16/2018.
[6] Available at: https://www.law360.com/articles/1017367/united-arab-emirates-advances-new-arbitration-law . Access: 03/18/2018.
