Richard Davies together with Charles Lilley and Raza Mithani give an overview of the new arbitration law, its key features and explain how this significant move forward is going to make arbitration in the country more efficient.
Richard Davies Our audio visual presentation on new arbitration law in the United Arab Emirates. My name is Richard Davies and together with my partners Charles Lilley…
Charles Lilley Hi there!
Richard Davies And Raza Mithani…
Raza Mithani Hello.
Richard Davies We wanted to draw out some of the key issues that explain why this is a significant leap forward for the United Arab Emirates. Raza…
Raza Mithani Let’s start off with some concepts to bear in mind. In particular the concept of the seat of the arbitration. The seat is a legal place of arbitration which may or may not be the same as the physical location where the hearing is taking place. Now why does the seat of the arbitration matter? For non-arbitration practitioners the concept of the seat is a slightly curious one but a crucial one because it determines which courts have supervisory jurisdiction over the arbitration and this in turn affects the law which governs the arbitration procedure and the extent to which the courts may involve or intervene within the arbitral process. Why does a well-regarded seat matter? Well, in short, it gives the parties comfort that their arbitration will be properly supported by the courts rather than being interfered with. Charles…
Charles Lilley And indeed, thanks Raza, that was the problem with the old arbitral regime in the UAE. This was captured in the UAE Civil Procedures Code with merely 15 articles which barely covered 4 sides of paper. Essentially that law was not harmonised with other jurisdictions which had modernised such as DIFC and the Abu Dhabi global market which had more modern arbitration regulations. And that was the problem with the old regime. Essentially the old law was generally considered to give rise to too many challenges to what otherwise would be valid arbitration laws and the reason for that was for example there were restrictive provisions in the old legislation. Again, for example, the arbitrators had to notify parties when the first session would take place within 30 days of being appointed. There were also some perceived grey areas in the old law, the handling of witnesses is a key example. Oaths that the witnesses had to swear so if an incorrect oath was given that could lead to the whole award being overturned. There was also a requirement for the arbitral award to be signed by the arbitrators in the UAE. That is something that is unusual and, as we will explain in a moment, is changed.
Richard Davies We just wanted to introduce the UNCITRAL Model Law you will see and read lots of references to this as you explore the new arbitration law and the materials being produced about it. UNCITRAL wrote a modern arbitration law in the mid-1980’s, it has been updated since and as you can see from the dark blue sections of this map of the world it’s been taken up by lots of countries and it forms the basis UAE arbitration law passed this year.
Charles Lilley And this arbitration law applies to all UAE seated onshore arbitrations so not DIFC seated and not AGDM seated but all others so the fact is if you are involved in an arbitration even if it’s part way through as of the 16th of this month this law will apply to you. The law has now clarified that the tribunal members do not need to be within the UAE when they sign the Award. This is helpful as it clears up an area which has otherwise led to a number of challenges and successful challenges in the past. The new law has some very positive inclusions regarding time limits in particular first of all there is a time bar for seeking to set aside an award and that time bar is 30 days. That’s very positive because it means that if a party wants to challenge an arbitral award they have to do so within a short period of time and they need to progress that case timeously. The second relevant time limit is the time limit for dealing with the ratification of an award. Under the new law the courts are required to deal with the ratification process within a 60 day period. So again that’s a very positive development.
Richard Davies Under the old regime there was a view taken by many tribunals that you had to be very cautious in the handling of witnesses and essentially follow the procedures that are applied in the UAE courts the new law makes it clear that that is not the case. The parties can agree to adopt what many would perceive to be more modern procedures. To give a very recent example, I was once involved in running an arbitration where we had to ship the entire proceedings over to Doha so that the arbitrators could hear the testimony of a witness who couldn’t actually get into the UAE. That caused a huge amount of disruption and cost when actually the tribunal would have been quite happy to hear that witness, the testimony of that witness via video conference. So this is a welcome reform. Another welcome reform as far as witnesses is concerned is the relaxation of the requirement of signing an oath on a holy book which has caused enforcement issues in the past. Finally in relation to the new features of the law if a tribunal rules on its own ability to hear the dispute in other words ruling on its own jurisdiction in the old days you would generally have to wait to the end of the arbitration proceedings before challenging that in the courts and then with automatic rights of appeal in the court those issues and those controversies could go on for many years. Under the new law you can apply to the courts once the tribunal has issued this ruling and the court has to decide the matter within 30 days to which there is no appeal and that means the parties will not be able to take silly points after the event they can do so during the tribunal during the proceedings and of course will be given short shrift if they are simply trying to disrupt the proceedings.
Raza Mithani The new arbitration law doesn’t fully deal with the issue of capacity. Article 4 of the new law preserves the requirement that the signatory of the arbitration agreement must have the requisite capacity to enter into the agreement. Article 58(2) of the Civil Procedure Code however has not been repealed. That stated that no admission or waiver of a right alleged or settlement or submission to arbitration or any other disposition in respect of which the law requires special authorisation may be made without special authority. What then is special authority? Special authority has been held previously by the Court of Cassation to mean express authority which usually is a power of attorney or board resolution except of course in the case of the general manager of an LLC who is deemed to have authority to agree to arbitration. It’s unclear whether the new law will be read in accordance with Article 58(2) or whether the courts might reach some other interpretation. The second point which has not really again been fully dealt with by the new law is in relation to the signing of the arbitration awards. There has previously been a practice which has arisen again due to the various decisions of the Court of Cassation for arbitrators to sign each page of an arbitration award. On the face of it that sounds like something pretty unimportant but in practice it can actually take on a life of its own because of the fact that many arbitration awards when rendered tend to be fairly long and if there is a requirement for the arbitrators to sign each and every page and of course there will be more than one copy of each award then that can be burdensome but more importantly for the parties if one page is not signed there’s an argument or a risk as to the enforceability of that award so it’s unfortunate perhaps that the new law has not clarified this point.
Charles Lilley There’s also a lack of clarity over transitional arrangements, as I mentioned earlier the law applies even to ongoing arbitrations so how exactly that’s going to work in practice we are simply going to have to wait and see and it seems likely to lead to arguments as to exactly how the new regime supplements and augments the old. Similarly, there has been no clarification as to the public policy requirements and indeed how that impacts the enforceability of an award and the need for legal representatives to have a power of attorney hasn’t been removed by the new law so it means there’s still going to be plenty of powers of attorneys required from your legal advisers but in general terms the new law is overwhelmingly a good thing for clients and practitioners alike. We think it’s going to make arbitration much more efficient which will keep costs down and remove a number of the existing uncertainties with the old law.
Richard Davies We would like to thank you very much indeed for listening to our little presentation which was necessarily a very quick canter through the issues. If you are interested in joining us in the autumn where we will be exploring these issues more thoroughly in person please let any of us know and we wish you a very pleasant day.
Charles Lilley Thank you.
Raza Mithani Thank you.
The video covers the concept of the seat of the arbitration, why a well-regarded seat matters, and why the old law was considered to give rise to too many challenges and not harmonised with other jurisdictions with more modern arbitration regulations (such as Dubai International Financial Centre and Abu Dhabi Global Market). The partners explain that in mid-1980’s, UNCITRAL wrote a modern arbitration law which has since then been updated, taken up by many countries and now forms the basis of the UAE arbitration law passed this year. They give an overview of some of the new features (for example, the fact that it has now clarified that the tribunal members do not need to be within the UAE when they sign the Award; that it has some positive inclusions regarding time limits; etc.).
There seems to be some lack of clarity over transitional arrangements, with the law being applicable to ongoing arbitrations, so it remains to be seen how exactly that is going to work in practice. It is concluded that, in general terms, the new law is overwhelmingly a good thing for clients and practitioners alike.
It is going to make arbitration much more efficient, will keep costs down and remove a number of the existing uncertainties with the old law.