From its inception, the Dubai International Financial Centre (the “DIFC”) intended to establish an example for regional dispute resolution. In addition to the now well-known DIFC Courts, an arbitration Centre was created to provide alternative dispute resolution services (i.e., Arbitration and Mediation as “ADR”) for local and foreign businesses in the region. In 2008 the DIFC negotiated an agreement with the LCIA pursuant to which arbitrations under DIFC-LCIA Rules would be managed and administered with LCIA’s assistance.
To deal with the alleged jurisdictional issues, Dubai Law 7 of 2014 was passed to amend Dubai Law 9 of 2004, the founding law of the DIFC. Pursuant to the Amended Law, the DIFC Dispute Resolution Authority (the “DRA”) was created, which comprises the DIFC Courts, the Academy of Law, the DIFC Wills, and Probate Registry, and the DIFC Arbitration Institute (“DAI”).
In November 2015, DAI entered into agreements with LCIA to manage and administer arbitrations in which the parties had selected DIFC-LCIA Rules, leading to the re-launch of DIFC-LCIA. However, on 14 September 2021, The Ruler of Dubai issued Decree No. 34 of 2021 (the “Decree”), accompanied by the Statute of Dubai International Arbitration Centre (the “Statute”). The decree came into effect on 20 September 2021 (the “Effective Date”) and took many within the dispute resolution community by surprise as it introduced fundamental amendments to the arbitration framework in the Emirate of Dubai, including the offshore free zone commonly known as the Dubai International Financial Centre (DIFC). Wherein, the same abolishes both the: (i) Emirates Maritime Arbitration Centre and; (ii) DIFC’s Arbitration Institute (DAI) (collectively the “Abolished Centres”); and provides:
- for the Dubai International Arbitration Centre (“DIAC”) to assume the rights and obligations of the Abolished Centres and, after that administer cases; and
- Lays down key details relating to the objectives, scope, and organization of DIAC.
From the Effective Date, the following (in respect of each Abolished Centre) shall be transferred to DIAC:
- ownership of properties, movables, assets, devices, equipment, and funds;
- employees (subject to a decision by the DIAC Board Chairman);
- financial allocation designated to the Abolished Centres by the Government of Dubai; and
- The Abolished Centre’s arbitrators, conciliators, and experts list.
In view of the above, the main concerns are as follows:
Impact on the maritime sector
DIFC’s Arbitration Institute was the administering body of the DIFC-LCIA Arbitration Centre. DIFC-LCIA Arbitration Rules are similar to LCIA rules, and this was a convenient option available to the parties in the maritime sector resorting to arbitration in their agreements.
This move certainly has repercussions in the UAE Maritime sector as EMAC was considered a specialized centre created for dealing with maritime disputes predominately. Though the decree ensures that the experts of EMAC will be retained, this decision has created much confusion and a lack of confidence in the maritime sector of UAE. Unlike the US, India, London, etc., UAE lacks an Admiralty Court.
Validity of existing arbitration agreements:
All agreements entered into before the Effective Date that refers to dispute resolution through an Abolished Centre’s regulations shall be deemed valid and effective unless otherwise agreed by the parties to such an agreement. In such circumstances, DIAC shall replace the Abolished Centres in considering and determining disputes. With regard to any agreement entered into after the Effective Date providing for the jurisdiction of an Abolished Centre will not be valid.
Competent Courts:
Dubai Courts and DIFC Courts will continue to consider cases, requests, and challenges relating to any arbitration award or procedure issued by arbitral tribunals within DIAC and the Abolished Centers, in accordance with their respective procedures and standards.
Default Seat
Pursuant to the Statute, the Dubai International Financial Centre shall be designated as the default seat of DIAC arbitration proceedings except where the parties do not agree to a seat or place of arbitration pursuant to their arbitration agreement or otherwise.
Transition Period
The decree provides DIAC with six months from the Effective Date to coordinate with all concerned entities and give effect to the transition set forth in the Decree and the Statute.
Described as aggressive yet progressive, the decree has taken the masses by surprise, and it is for the parties to take immediate action on any references in existing standard terms and conditions or existing and/or new contracts that are being currently negotiated that provide for arbitration in an Abolished Centre should be urgently reviewed and revised.
It is also expected for DIAC to issue new arbitration rules, form a new arbitration court similar to that of the ICC International Court of Arbitration, and a new board and a new administering body.