In Short
The Situation: Dubai Decree No. 34 of 2021 (the "Decree") was issued on
The Result: The Decree provides that the rules of the Cancelled Centres shall continue to apply, to the extent they do not conflict with the provisions of the Decree, until
Looking Ahead: Parties seeking to agree to arbitration in the
The Decree mandates that
As a result of the Decree, it is understood that
The Decree makes clear that the Dubai Courts and the DIFC Courts will continue to serve in their capacity as the curial jurisdiction for any matters that arise where the seat of the agreement was "onshore" Dubai or "offshore" DIFC, respectively.
Impact on Contracting Parties
The Decree affects parties differently, depending on where they are in the lifecycle of their contracts and/or disputes, as follows:
- Ongoing Arbitrations and Mediations: Existing DIFC-LCIA and
- The Commencement of Arbitration or Mediation in the Future is Anticipated but the Applicable Rules Are Not Amended: The Decree is silent on the rules to be used for future DIFC-LCIA or
EMAC proceedings if they are commenced after 20 September but before the newDIAC rules are published. This silence creates a potential gap for parties with contracts referring to DIFC-LCIA orEMAC rules. Parties now wishing to commence such proceedings should therefore seek legal advice and consult with the relevant institutions before filing a request for mediation or arbitration. - Existing Contracts With No Arbitration Pending or Contemplated: Existing dispute resolution clauses referring to the Cancelled Centres have effectively become subject to
DIAC's administration and its new rules (which are yet to be published) in the absence of a separate agreement from the parties. Parties should review their existing agreements and determine ifDIAC , and its yet-to-be-published arbitration and mediation rules, are their choice for dispute resolution, and if not, to amend their agreements accordingly. - Future Contracts: Parties to future contracts should not include references to the Cancelled Centres. Given that the new
DIAC arbitration rules have not yet been published, parties should seek legal advice when selecting rules for an arbitration seated in, taking place in, or related to Dubai. Parties can continue to select either the DIFC or "onshore" Dubai as the seat of their arbitration. The Decree expressly provides that the DIFC will be the default seat for anyDIAC arbitration clause that does not specify the "seat." This development is significant for arbitral parties outside theUAE because arbitration agreements that are silent on the choice of the seat will now be defaulted to the DIFC (rather than "onshore" Dubai). The DIFC as a seat for arbitration is important for international parties because it subjects the parties to supervisory courts that function in English, are based on English common law principles, and apply the DIFC Arbitration Law (which is based on the UNCITRAL model arbitration law) for supervisory and procedural issues. - Establishment of a Single Unified Arbitration Centre in Dubai: The Decree establishes a single unified arbitration centre in Dubai, the new
DIAC .DIAC was established onshore in 1994 as a not-for-profit arbitration centre by theDubai Chamber of Commerce andIndustry . Under the Decree, the newDIAC will remain an autonomous arbitral body, independent from the government, with headquarters in the Emirate of Dubai and a branch in the DIFC. - Transfer of Obligations and Assets (Including Employees and Lists of Arbitrators) to the New DIAC: All property, staff, and cases of the Cancelled Centres are transferred to the new
DIAC . This includes the transfer of properties, moveable assets, devices, equipment, funds (from the parties and their financial allocation from the government of Dubai), employees, and lists of arbitrators, conciliators, and members. Most importantly to arbitrating parties, the newDIAC will replace the Cancelled Centres and all their rights and obligations. - Continued Validity of Arbitration Agreements Referencing the Cancelled Arbitration Centres Up Until
20 September 2021 : All arbitration agreements referring to the Cancelled Centres will remain valid so long as such agreements were entered into before20 September 2021 . Going forward,DIAC will administer disputes for cases initiated under the rules of the Cancelled Centres, unless the parties agree otherwise. - Continuation of Mediations and Arbitrations Initiated under the Rules of the Cancelled Arbitration Centres: Unless parties agree otherwise, ongoing arbitrations conducted under the auspices and the rules of the Cancelled Centres will continue if the arbitral tribunals were constituted prior to
20 September 2021 . Practically, it remains to be seen how these cases will be administered during the implementation of the transition toDIAC . Delays may occur in the administration of ongoing cases as a result. - Arbitration Rules of the Cancelled Arbitration Centres Remain in Place Until the Issuance of the New DIAC Rules: Until the new
DIAC arbitration rules are issued, the Decree provides that the rules of the Cancelled Centres, as well as the 2007DIAC arbitration rules, will continue to be in force as long as they do not conflict with the Decree and the DIAC Statute.DIAC's ability to administer cases under DIFC-LCIA rules may raise intellectual property and other concerns, given the many references to the LCIA and the LCIA Court in those rules. We understand that the relevant institutions and authorities are in discussions to address these concerns, and that there exists a proposal for LCIA, on a secondment basis fromDIAC , to directly administer all ongoing arbitrations, mediations, and other ADR proceedings referred to the DIFC-LCIA until such proceedings are concluded. A revised draft of theDIAC arbitration rules was circulated in 2018; however, the new DIAC Rules will need to be reviewed to conform with the Decree and the DIAC Statute, and then would need to be adopted by the newly revampedDIAC . - Establishment of an Arbitration Court to Support the New DIAC: The new
DIAC will be assisted by an arbitration court composed of no more than 13 independent members with local and international arbitration experience. TheDIAC arbitration court will assist the revampedDIAC in the administration of cases, including by reviewing draft awards prepared by tribunals-similar to the scrutiny process undertaken by the ICC Arbitration Court. This reform will bolster confidence in arbitration by ensuring that proceedings are conducted in an effective, expedited, and independent manner. - The parties' agreement remains the central principle of arbitration clauses impacted by the Decree: Contracting parties, with the advice of counsel, should ensure that their contracts reflect their continued agreement on specific dispute resolution rules and the institution that will administer those rules. Depending on their position in the contract's lifecycle and the potential emergence of a dispute, parties should amend or update any agreements containing dispute resolution clauses that are affected by the Decree-contracts that have DIFC-LCIA,
DIAC , orEMAC rules. - The DIFC increases in prominence: The Decree does not impact the ability of parties to select the DIFC as an arbitral seat. And the DIFC's prominence will increase as a result of the Decree because the DIFC has now become the default seat for all future
DIAC arbitrations where the arbitration clause is silent on the selection of the seat. - Parties should not wait for a dispute to arise before amending their agreements: Experience shows that after a dispute has arisen, parties have difficulty agreeing even on the simplest terms. We encourage parties with arbitration agreements affected by this Decree to seek legal advice on these developments and amend their arbitration agreements now, before a dispute arises.
Impact on Seat, Arbitrator Selection, and Costs
Five important drivers of the arbitral experience include: (i) the arbitration law at the seat of the arbitration; (ii) the effective support by the seat's courts; (iii) confidentiality; (iv) the selection of arbitrators who will decide the dispute; and (v) costs. At the time of this Commentary, none of the first three factors have been directly impacted by the Decree or Statute. However, it is important to note that (1) the DIFC will be the default seat for future
The Decree did directly impact the last two considerations affecting the experience of arbitral parties, namely the selection of arbitrators and the determination of arbitrators' costs. Parties currently referring future disputes to DIFC-LCIA arbitration will no longer have their arbitrators selected or confirmed by the LCIA Court, but rather by the soon-to-be-established
The Decree and
Below are the key features of the Decree and its DIAC Statute, which will drive parties' choice of arbitral institution, as outlined above:
- Reinforcement of the DIFC as an Arbitral Seat: The DIAC Statute provides that parties may continue to choose between an "onshore" Dubai seat for their arbitration or an "offshore" seat in the DIFC-while stating that the DIFC will be the default seat of future
Six-Month Regularization of Status Period: The Decree provides for a period of six months during which the new
Three Key Takeaways
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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