Arbitration as a Form of Dispute Resolution
26 Jan 2022
Introduction
When entering into an agreement with another party, the optimal outcome is to avoid any future litigation or dispute in respect of that agreement. However that is not always the case and where a dispute does arise it is important for parties to be aware of the various roads to resolution available to them aside from going to Court. One such alternative route is arbitration, arbitration has gained considerable traction over the last decade, particularly here in the United Arab Emirates, and many consider it to be the preferred route when it comes to resolving a dispute.
So what is Arbitration?
Arbitration is a private form of dispute resolution, which means, all parties to an agreement must agree for the dispute to be referred to arbitration. This arbitration agreement can be entered into by the parties within the main agreement or after a dispute arises.
Disputes referred to arbitration are dealt with by an “Arbitral Tribunal’’. Proceedings before the Arbitral Tribunal will usually be heard and decided by one or more arbitrators (but usually with an odd number of arbitrators to avoid a deadlock). Each party will be given equal opportunity to represent their case and this is typically done through written submissions, witness statements and expert reports amongst other relevant documentation. Having reviewed the dispute in its entirety the Arbitral Tribunal is obligated to apply the law and to issue a ‘’Tribunal Award’’ which outlines its decision on the dispute. The Tribunal Award issued is binding on the parties to the arbitration, and while an Arbitral Award may be challenged depending on the contents of the arbitration agreement and the arbitral ‘seat’ amongst other factors, a challenge to the finding of fact is rarely successful.
Pro & Cons
While the Arbitration procedure may on the surface look similar to courtroom litigation, there are many factors which encourage parties to engage in arbitration, most notably the privacy, flexibility, and choice which can be exercised by the parties to the dispute.
The arbitration agreement itself allows parties to determine the procedures which shall apply to the proceedings, giving them a unique opportunity to engage in procedures specifically tailored towards the particulars of their dispute. Parties can agree to select the arbitrator handling the dispute between themselves, this is hugely significant, particularly in disputes of a technical nature as parties may appoint arbitrators who are experts in the relevant field and with a deep understanding of the technical issues at hand. At arbitration, the parties dictate where the arbitration proceedings will take place or which arbitral ‘seat’ shall have jurisdiction. This choice can create a neutral platform for the dispute to be heard, in contrast to litigation where the court of the state will generally have jurisdiction over the dispute. One of the most attractive features of arbitration is the international recognition and enforceability of Tribunal Awards, most often pursuant to the foreign jurisdiction’s own laws on the recognition and enforcement of Arbitral Awards, or through the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), rendering the ability to recognise and enforce Arbitral Awards in most countries worldwide. Court orders and judgments on the other hand are subject to the foreign jurisdiction’s laws on the recognition and enforceability of foreign judgments and/or treaties or memorandums between individual countries and can be difficult to enforce in many cases.
Similarly there are factors of arbitration which are considered disadvantageous and circumstances where court litigation could be a more suitable route. The Arbitral Tribunal does not have the same sort of powers as a court and where a party is not acting in good faith, it can be difficult to deal with such obstructive conduct. The pre-arbitration procedures and remedies cannot generally be enforced by the Arbitral Tribunal, and appeals are usually very limited in nature, even where an erroneous decision has been made.
The factors discussed above are not extensive but can all have a significant impact on the time, cost and outcome of a dispute based on any given agreement. Therefore, it is always advisable to seek expert legal advice before entering into an agreement as to the most suitable choice of dispute resolution and governing law.
Arbitration in the UAE
For a long time, the UAE has widely accepted arbitration as a method of alternative dispute resolution, and as such has been committed to facilitating its development in the region. In Dubai up until recently, there were two main arbitration centers, the Dubai International Arbitration Centre ("DIAC”) where the law supporting and governing the arbitration and its process is the UAE Federal Law No. (6) of 2018 on Arbitration, and the DIFC-LCIA Arbitration Centre ("DIFC-LCIA") where the law supporting and governing the arbitration and its process is the DIFC Law No. 1 of 2008 Arbitration Law. However, the Dubai Decree No. 34 of 2021 (the "Decree") which came into effect on the 20 September 2021 has made crucial changes to the landscape of arbitration in Dubai.
The Decree will abolish the DIFC-LCIA along with the Emirates Maritime Arbitration Centre ("EMAC") and divert all operations to DIAC. The net effect of this will vary depending on where in the arbitration lifecycle a particular or potential dispute sits. Despite the uncertainty surrounding the effects of Decree, it is a further example of how the UAE continues to modernise and adapt its legislation in relation to arbitration in the region.
If your agreement contains an arbitration agreement referring all disputes to the DIFC-LCIA it would be wise to seek legal advice on the necessary action (if any) you should take in respect of these changes.
Author: Charlotte O’Neill
Editor: Nichola Reece Burton
This is a general guide on the subject matter and should not be construed as specific legal advice.
Contact details
Nichola Reece-Burton | Partner and Head of Litigation & Dispute Resolution
Charlotte O’Neill | Paralegal Litigation & Dispute Resolution
Please click here to contact Nichola Reece-Burton or Charlotte O'Neill.