Understanding The UAE Arbitration Law: A Detailed Guide
The UAE arbitration law is a legal rule that regulates the arbitration procedure in this country. This is the first specific law on arbitration since 2018. It was a replacement for articles 203 to 218 of the Civil Procedure Law of 1992. These articles were intended to address some provisions on arbitration in the Emirates. United Arabs. Currently, there are some updates on this law that it is essential to know for its correct compliance.
In this article, we will analyze the most relevant aspects of the UAE arbitration law. Among the most important will be the scope of the application, the labor court, the arbitration agreement, the arbitration award, the arbitration procedure, and its execution. Likewise, we will show you what the international arbitration laws are and some treaties between countries. The idea is to be able to make a comparison between the DIFC arbitration law and the UAE arbitration law.
Importance of Arbitration in UAE
Arbitration is a method controlled by the UAE arbitration law. The is that through an arbitration panel, the decision of a binding ruling is made between two or more parties. Specifically, based on the agreement of the parties. The parties may agree to arbitration before or after the dispute arises. It can even happen before or after an agreement between the two parties or authorization between them.
That is, whenever any dispute is between the parties or may arise due to a contractual or non-contractual relationship, it must be presented to one or more arbitrators. In other words, resolve the dispute without necessarily having to resort to the ordinary judiciary to decide between a binding ruling between the opponents.
The importance of the UAE arbitration law is because it is about eliminating the speed in resolving a dispute. In addition, the confidentiality of the deliberations between the parties in dispute and the arbitration panel and the control of the parties in the procedures. Also, the idea is to provide the freedom to the parties to choose the people involved in the dispute.
Something important to know is that there are different types of arbitration. According to the UAE arbitration law, there are three of them:
- · Mandatory arbitration: That is, the parties appoint an independent arbitrator. Thus, both parties to the dispute can be part of the final decision.
- · Non-binding arbitration: Each party reserves the right to litigate in court. Specifically, in case of not accepting the arbitration decision.
- · Arbitration by referral: It has to follow a clause in the contract that refers to an external document. It may be completely independent of the transaction or be part of the transaction documents. Specifically, those that contain the arbitration clause.
Commencing Arbitration Proceedings in the UAE
The principle of arbitration is achieved by the agreement of both parties to be bound by the provisions of the UAE arbitration law. To do this, it is essential not to come into conflict with public order and public morality of the state. In addition, any international commercial arbitration by a foreign party may agree to subject it to the provisions of this law.
Any arbitration that involves a controversy related to a legal relationship, whether extracontractual or contractual, must be regulated by the laws in force in the country. However, there is an exception and that is when the dispute is over a special text that you will see below.
Before starting arbitration, it is essential to know which aspects cannot be involved in the process. You have to know that it is not illegal to arbitrate in matters in which reconciliation is not admissible. However, they are matters that are part of the human person without the economic rights of these matters that result. For instance, divorce, marriage, inheritance, filiation, interdiction, custody and legal capacity.
That is, the issues that can be part of an arbitration are the economic effects of these matters. For example, custody fees, alimony, or divorce compensation. Other matters that cannot be part of an arbitration are those regarding public order. For instance, any crime like domestic violence or any other. In addition, arbitration can be used if it is about compensation derived from the commission of the victim's crimes.
On the other hand, you have to know that arbitration ends with the expiration of the agreement. The other option is upon completion of the execution of all the terms of the contract and the jurisdiction of the arbitration. Specifically, about the dispute that ends with the issuance of a final ruling in the case.
Filing a Request for Arbitration
According to Article 27(1), the arbitration procedure begins on the day following the constitution of the arbitral tribunal. The only exception to this rule is if both parties have a different agreement. Regarding the procedural requirement, for a substantive claim to be valid, you have to read Article 27(2). Which says that the arbitration procedure begins on the day of the date of notification of the arbitration request. Although the relationship between judicial and arbitral procedures on arbitration is not yet under the New UAE arbitration law.
On the other hand, to advance the start date of the arbitration procedure for precautionary seizures is a new provision. Furthermore, according to the new UAE arbitration law, the language of arbitration is Arabic. If you want a different language you have to reach an agreement with the other party. Therefore, foreigners need to reach a different language agreement and avoid arbitration proceedings in Arabic. Agreements may be explicit, through an arbitration agreement, for example, or implicitly, by accepting the institutional rules request.
Another aspect that you have to know about the UAE arbitration law is confidentiality. The common belief is that these agreements have to be confidential, but the reality is that this is not mandatory. According to Article 33(1) of the New Arbitration Law, hearings will be confidential unless there is an agreement otherwise. The confidentiality of arbitration awards is implicit in Article 34.
However, the law does not explicitly take into account the confidentiality of documents, evidence, or allegations. Specifically, those who are present by the parties and the court during the procedure. Ideally, the parties should discuss confidentiality before the arbitration proceedings. This may be through an explicit agreement, or implicitly through an agreement to apply institutional rules. Specifically, those that establish confidentiality obligations.
Selection of Arbitrators
The New UAE arbitration law provides clarity on the requirements of arbitrators. Article 10(1) specifies that an arbitrator cannot have any of these characteristics. The first is that you have to be of legal age, the second is that you cannot be judicially incapacitated and you cannot be deprived of civil rights either. However, individuals may face bankruptcy or conviction for a crime, even if they have undergone rehabilitation.
Furthermore, Article 10(2) states that an arbitrator cannot be a member of the board of directors. Nor can the request for participation come from the administrative body of the arbitration institution administering the arbitration. It is important to highlight the broad application of this provision to arbitrations administered by national arbitration centers. For instance, the Dubai International Arbitration Center and the DIFC-LCIA Arbitration Center.
The other option is to look for international arbitration centers. For example, the International Court of Arbitration of the International Chamber of Commerce. Another possibility is the London Court of International Arbitration and the Singapore International Arbitration Centre.
Unfortunately, the law does not make a distinction between party-appointed arbitrators. Furthermore, given the retrospective application of the New UAE Arbitration law to ongoing arbitrations, it may lead to the resignation of some arbitrators.
In addition, the Ministry of Justice or the President of the competent Judicial Authority has to draw up a list of arbitrators. To appoint one will depend on whether or not an agreement is reached between the parties on the appointment of an arbitrator.
Finally, by Article 58, the Ministry of Economy has to issue a letter on the professional conduct of arbitrators. All this has to be in consultation with the arbitration institutions in the UAE. Importantly, the law does not address issues relating to the liability of arbitrators.
Arbitration Rules and Procedures in the UAE
Before carrying out an arbitration it is essential to know the basic rules and procedures to follow. That is why below you will see some of the rules according to the UAE arbitration law:
Recognition of modern media: Currently, there is a desire to involve technology more in the new UAE arbitration law to make the procedures more efficient. For instance, written correspondence can now be delivered by other means, such as email. Furthermore, according to Article 28(2) arbitration deliberations and hearings can be carried out through modern means of communication.
Conduct: The new UAE Arbitration Law attempts to instill efficiency and discipline in the conduct of arbitration proceedings. It is important to note that this new law attempts to put an end to disruptive guerrilla tactics. Specifically, through repetitive challenges to an arbitrator. Furthermore, the law grants broad freedom to the parties and the arbitral tribunal to decide on the conduct of the arbitration process.
Provisional and conservation measures: You have to know that provisional and precautionary measures are crucial tools in arbitration proceedings. One of the best provisions of the New UAE Arbitration law is Article 21. Thanks to this article, and unless the parties agree otherwise, the power of the court can issue precautionary measures. This may be at the request of a party or by an official, it may even be at the request of one of the parties.
The award: With the issuance of the award, Article 42(1) states that the award has to be issued within 6 months from the date of the first hearing of the arbitration. To avoid this, it is essential to have a prior agreement between the parties. Furthermore, with the new UAE arbitration law, this period can be increased by six more months.
Recent Developments and Amendments in UAE Arbitration Law
On September 15, 2023, the UAE published an amendment to Federal arbitration law number 6 of 2018; which came into force on September 16, 2016. In this way, the amendment aims to clarify the independence of the arbitrators. Additionally, update the rules for arbitration procedures, clearly allowing for remote hearings.
The amendment is also intended to maintain the confidentiality of all arbitration proceedings. Additionally, be able to allows arbitrators to handle disputes that are solely in documentary presentations. Also, in order to clarify all the rules of evidence that are applicable.
The UAE is recognized globally as a leading center for international arbitration. For this reason, in order to improve its arbitration framework, an amendment to its arbitration law of 2018 was recently implemented.
Notable Changes in Legislation
Among the most notable changes in the UAE arbitration law, we find the following:
Applicable procedures: Article 23 has been modified to exclude any type of reference to the old Article 10. Its purpose was to prevent an arbitrator from being a member of the board of directors or being a member of the board of directors of the arbitration institution.
Location of arbitration: The update of Article 28 was to authorize the parties to agree to conduct arbitration hearings remotely or in person. If an agreement is not reached, the arbitration court can decide on this. This is based on the nature of the controversy and the convenience of the place of arbitration for the parties.
The arbitration hearing: Article 33 emphasizes that the court has the discretion to determine the rules of evidence if these were not designated by the parties. Also, in case the designated rules do not provide a basis for deciding the matter, as long as these rules do not contradict public policy.
Impact on Arbitration Practices
The changes in the UAE arbitration law provided a positive and significant impact. In this way, they have been able to improve the legal certainty, effectiveness, and flexibility of these arbitration procedures.
Therefore, the UAE has not only had an impact on its economic sector thanks to its wide range of employment opportunities such as remote jobs; but also, they have been able to generate a great impact on their arbitration law. Among the highlights of these new arbitration practices are:
- · Freely choose the place, language, and rules of the arbitration, as well as the number and nationality of the arbitrators.
- · Introduction of precautionary and provisional measures, such as the emergency arbitrator. This allows the parties to request urgent relief before or during the arbitration.
- · Reform and consolidation of arbitration centers in the UAE. In this way, it reflects the latest advances in the field of international arbitration and all the needs of the business community.
Legal Framework of UAE Arbitration Law
Recently there are modifications in the UAE to its Federal arbitration law number 6 of the year 2018. All this through the federal law number 15 of the year 2023. In this way, after the issuance of the new DIAC rules, the amendment law provides a series of key changes to the FAL.
These changes are to streamline the arbitration process, introduce and implement new cost-saving mechanisms, and regulate the appointment of arbitrators.
UAE Federal Arbitration Law
Currently, there is a new article 10, which relaxes all restrictions on the appointment of arbitrators who are part of the administrative bodies of arbitration institutions or who are part of the board of directors. Previously, the FAL prohibited such members from acting as arbitrators in proceedings that are administered by the competent institution.
On the other hand, Article 28 now imposes the obligation on arbitral institutions to provide the necessary technology to hold virtual hearings. Also, ensure that this technology is safe and complies with local laws.
Therefore, arbitral institutions must provide certain electronic services, such as virtual hosting platforms and electronic package services. Previously, parties had to outsource these services. In addition, the confidentiality of arbitration has been extended to the entirety of this procedure.
In this way, article 33 was originally only for hearings. This change is therefore in line with modern arbitration laws and international institutional rules. These international rules generally include a requirement to keep all proceedings and not just hearings confidential.
International Treaties and Conventions
The arbitration process is quite controversial, not only in the UAE but all over the world. This is why there are many treaties and conventions to which the UAE is a party in the recognition and enforcement of arbitration awards. The most important international treaties on arbitration:
- · Convention on Settlement of Investment Disputes between National States and Nationals of Other States (1965).
- · Riyadh Convention on Judicial Cooperation between States of the Arab League (1983).
- · GCC Convention for the Execution of Delegations, Judgments and Judicial Notices (1996).
- In addition, the United Arab Emirates enters into bilateral treaties regarding judicial cooperation, which are:
- · Convention on judicial cooperation, extradition of criminals, and execution of sentences between the United Arab Emirates and the Republic of Tunisia (1975).
- · Convention on Legal Assistance between the government of the People's Democratic Republic of Algeria and the United Arab Emirates (1984).
- · Treaty between Northern Ireland and the United Kingdom of Great Britain on legal assistance in civil and commercial matters (2007).
- · Treaty with Afghanistan by Federal Decree No. 23 (2009).
- · Legal and Judicial Cooperation Agreement between the United Arab Emirates and the Syrian Arab Republic.
- · Convention on Legal Assistance in Civil and Commercial Matters between the Republic of China and the United Arab Emirates.
- · Treaty of Judicial Cooperation in Extradition of Criminals, Criminal Matters, Cooperation in Civil, Commercial, and Personal Matters with Morocco.
- · Convention on judicial assistance, recognition, and execution of judgments in commercial and civil matters. Specifically, between France and the United Arab Emirates.
- · Legal and Judicial Cooperation Agreement between the Arab Republic of Egypt and the United Arab Emirates.
- · Agreement on Enforcement of Judgments and Recognition in Civil and Commercial Matters between the Republic of Armenia and the UAE.
- · Legal and Judicial Cooperation Agreement between the Hashemite Kingdom of Jordan and the United Arab Emirates.
Role of Sharia Law in UAE Arbitration
In some ways, arbitration has been around for thousands of years. This way of resolving disputes was later recognized and confirmed by Islam. Furthermore, arbitration is also mentioned and promoted in the Quran. In this way, the Quran and Sunnah repeatedly emphasize the benefits of resolving any dispute quickly and discreetly.
However, what we consider arbitration today is different from the process in those days. Therefore, arbitration is not a process that is foreign or incompatible with Sharia. Generally speaking, Sharia rules regarding arbitration are not unusual for modern professionals.
The 4 main schools agree that a dispute must exist and that an agreement must be established between the parties. However, in practice, the arbitration processes are not greatly influenced by Sharia, but it has an impact just as in the UAE. In this way, although there have been changes in arbitration, Sharia influences arbitration laws.
The UAE Arbitration Law is the legal framework that is responsible for regulating commercial arbitration in the country. Furthermore, it is according to the model of the UN Commission for International Trade Law. In this way, these new modifications to this law have achieved a significant impact on the country.
Therefore, knowing the details of these additions to the arbitration law in the UAE is of utmost importance. For this reason, choosing one of the best firms in the UAE can help you understand more about this important law.
Also, if you want professional advice, do not hesitate to contact us. At Connect Legal you will find advice according to your tastes from experts in the laws and regulations of the UAE.