When considering the advantages of placing an arbitration clause into contracts as the preferred and agreed method of dispute resolution in UAE, some of the considerations are as follows:
- In accordance with the Dubai International Arbitration Centre (DIAC) Arbitration Rules, if the parties to a dispute agree to refer the dispute to arbitration, the dispute will generally be determined through the agreed arbitration process rather than ordinary court proceedings, subject to the applicable UAE arbitration law and the terms of the arbitration agreement. However, if one of the parties files a claim (irrespective of the arbitration provision) and the other party does not object to the filing of the claim at the first hearing, the court may proceed with the claim in accordance with the applicable law.
- The proceedings in an arbitration are usually confidential unless the parties agree otherwise.
- The Tribunal has the power, on the application of any party or of its own motion, to extend any time-limit provided by the arbitration agreement or the applicable DIAC Rules relating to the conduct of the arbitration. This can happen as long as the Tribunal has given the parties a reasonable opportunity to state their views.
- No agreement for arbitration is valid unless it is evidenced in writing.
- Depending on the rules of the chosen arbitration centre, arbitration proceedings can be conducted in any language chosen by the parties to an agreement. The parties may therefore have greater flexibility when selecting the language and procedural framework for their arbitration.
- It is generally the case that parties to an arbitration usually have more power to agree between themselves, the administrative aspects of an arbitration. For example, by way of mutual agreement of the parties or stipulation within a contract, the parties can decide on the number of arbitrators that there should be constituting a tribunal. Further, the arbitrator can be nominated by each party and agreed upon. In the event that there is a dispute, the arbitration centre would decide.
- The ease of enforcement of an arbitration award (as compared to a court judgment) in foreign jurisdictions can often be a deciding factor in electing arbitration as the dispute resolution mechanism in contracts. The UAE is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the “New York Convention”) which, generally speaking, makes provision for the enforcement of arbitral awards made in member states enforceable in other member states. This is particularly relevant where assets are located in other/a number of jurisdictions.
For businesses operating in the UAE, arbitration can therefore provide a structured and flexible alternative to traditional court litigation. It can be particularly useful in commercial contracts where the parties want greater control over the choice of arbitrators, language, procedure and the forum for resolving potential disputes.
The choice of arbitration institution and the wording of the arbitration clause are also important. A carefully drafted arbitration agreement should clearly identify the applicable rules, seat of arbitration and other key procedural matters. An unclear or poorly drafted clause may result in unnecessary disputes over the jurisdiction or scope of the arbitration itself.
UAE arbitration law is primarily governed by Federal Law No. 6 of 2018 on Arbitration, while institutional proceedings may be governed by the rules of the selected arbitration centre, such as the DIAC Arbitration Rules 2022. The DIAC Rules are designed to complement the UAE Arbitration Law and provide flexibility for parties conducting arbitration.
Businesses should therefore consider their preferred dispute resolution mechanism at the contract drafting stage rather than waiting until a dispute has already arisen. Obtaining legal advice when drafting an arbitration clause can help ensure that the agreement reflects the parties’ commercial requirements and provides an effective framework for resolving future disputes.
Legal Advice on Arbitration and Dispute Resolution in the UAE
If you are considering arbitration for a commercial dispute, drafting an arbitration clause or need advice on the enforcement of an arbitral award in the UAE, professional legal advice can help you understand your options.
James Berry & Associates Legal Consultants can assist with UAE arbitration, commercial disputes, arbitration agreements and related litigation matters. For specific advice, please contact our Litigation Department at [email protected].
This article does not constitute legal advice and should not be relied upon as such.
