Non-Payment of Advance on Costs in Arbitration – Waiver of Right to Arbitrate?

01 Nov 2023

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Non-Payment of Advance on Costs in Arbitration – Waiver of Right to Arbitrate?

Much needed clarity on this subject has been provided by the recent decision of the General Assembly of the Dubai Court of Cassation (Decision No. 10 of 2023 dated 24 October 2023). Since a previous decision was issued by the Dubai Court of Cassation in 2008; where a party failed to pay its share of the advance on costs, it is at risk of being deemed to have waived its right to arbitrate any dispute. In the 2008 decision a claim was filed in Dubai Courts by a claimant (whose initial claim was dismissed in the Dubai International Arbitration Centre for non-payment of the respondent’s share of advance on costs and the claimant’s refusal to step in to pay the respondent’s share). The Dubai Court of Cassation decided at that time that the defendant (respondent in the arbitration) had effectively waived the arbitration agreement by refusing to pay its share of the advance on costs.

The General Assembly has now unanimously decided that even where a party refuses to pay its share of the advance on costs or does not participate in the arbitration, the agreement to arbitrate remains valid and can be relied upon by the parties. This is an eminently sensible and clear decision; most welcomed by the local arbitration community.

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Nichola Reece-Burton is a Partner and Head of Litigation & Dispute Resolution at James Berry & Associates Legal Consultants