The Arbitration Law of the Dubai International Finance Centre

• Author: Sam Luttrell
• Position: Lecturer in law Murdoch University
• Pages: 170-177

Keywords: Law, Dubai, United Arab Emirates, International Commercial Arbitration.

Page 170

Introduction

The Dubai International Finance Centre (DIFC) was established by Federal Law No.8 of 2004.¹ It is a free financial zone within Dubai city. Dubai is one of the seven Islamic principalities that make up the federation of the United Arab Emirates. At the federal level, measures have been taken to bring UAE arbitration law into line with the international norms. On 13 June 2006 the United Arab Emirates (UAE) ratified the New York Convention on the Recognition and Enforcement of Arbitral Awards 1958². Rumor has it that a UNCITRAL Model Law statute is being discussed. Although the UAE is yet to pass a federal arbitration statute the creation of Special Economic Zones³ like the DIFC has raised its status as a seat. This is because the DIFC is 'arbitration friendly' - it has a dedicated arbitration law⁴ and an independent legal system mandated to support arbitral proceedings.

Arbitration under DIFCAL

Articles 203 to 218 of the UAE Federal Code of Civil Procedure concern arbitration. In the absence of contrary election by the parties, the Federal Code of Civil Procedure stands as lex arbitri in the UAE (including Dubai). For reasons outside the scope of this paper, the Federal Code is not ideal. One way of disputing parties safely contracting out of it is to select DIFC law. The lex arbitri of the DIFC is Law No.8 of 2004 (Arbitration Law)⁵. DIFCAL governs the actual conduct of arbitral proceedings and the recognition and enforcement of foreign arbitral awards in the DIFC. Process before product, it is appropriate to review the procedural rules and requirements of DIFCAL before we consider its enforcement provisions. Under DIFCAL:

1. Arbitration agreements must be in writing (which includes exchanges of letters and data messages⁶) and may take the form of arbitration clauses concerning future disputes, or submissions in respect of existing disputes (Art 11(1)). Arbitration clauses may be incorporates by reference in a contract (Art 11(5)). It is notable that, in contrast to the approach taken by UAE courts⁷, the DIFCAL states expressly that arbitration clauses in standard form agreements will be considered binding arbitration agreements (Art 11(2)).

2. The parties are free to choose the number of arbitrators, but it must be an odd number (Art 13(1)). Failing specification in the arbitration agreement, the number of arbitrators will be three (Art 11(2)).

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3. Article 14(2) confers general party autonomy over appointment procedure. Even where appointment procedures are tailored, the Court may still intervene by request of any party and appoint where the appointment procedure has not been carried out (Art 14(4). Where the parties fail to agree as to the appointment of a sole arbitrator within 30 days of request, then the Court is empowered to make the appointment (Art 14(3) (b)). The same 30 day time limit is applicable where party appointed arbitrators fail to agree on a chairman (Art 14(3) (a)). All appointments by the Court are final and not subject to appeal (Art 14(5)).

4. There is no requirement that the arbitrator be a UAE national. Article 14(1) allows the parties to exclude persons of certain nationality from appointment. When the court is asked to or is required to appoint and arbitrator, Article 14(5) requires that the court shall have due regard to the nationality of the parties.

5. An arbitrator must be independent and impartial, meaning that he (or she ⁸ ) must not sit as arbitrator if there are circumstances which exist 'that give rise to justifiable doubts as to his impartiality or independence'. This is the same as the standard for impartiality and independence for arbitrators set by Article 10(1) of the UNCITRAL Arbitration Rules. It is imposed 'indirectly' by way of the obligation of arbitrators to disclose conflicts of interest before accepting appointment (Art 15(1)). There is the right of the parties to challenge the arbitrator if they become aware of such circumstances (Art 15(2)).

6. Unless the parties agree otherwise⁹, challenges to arbitrators must be brought within 15 days of becoming aware of the Article 15 circumstances (Art 16(2)). After this time, if no challenge is made then the parties are deemed to waive their right to object. If an alterative challenge procedure is agreed, and a challenge is made unsuccessfully in accordance with the tailored procedure, then the aggrieved party may apply to the Court for determination of their challenge (Art 16(3)). Any such 'second run' must be made within 30 days of being advised of first failure, after such time waiver will apply.

7. There is no express right to counsel in the DIFCAL. It is submitted that the right to be represented by a lawyer is implied in the requirement that the parties be given a full opportunity to present their cases (Art 21).

8. There is no reference in the DIFCAL to the privacy or confidentiality of arbitral proceeding.

9. The parties are entitled to equal treatment and to obtain the equal benefit of the principles of procedural fairness (Art. 21). The use of the word 'shall' in this article requires that natural justice be observed and cannot be contracted out of. This limits party autonomy as the parties may not agree to 'rapid fire' arbitral procedures that cause them to be treated unequally. 'Baseball' or 'Last/Best Offer Arbitration' may not, for example, be possible under DIFC law.

10. The arbitrator may make preliminary and interim orders, including orders for collateral confiscation, attachment, bailment to third parties, and sale of perishable goods.

11. The positions of the parties must be stated in writing within a period of time agreed by the parties. Statements of claim and defence are mandatory under DIFCAL Article 26(1). It appears from Article 26(2) that unless the parties agree otherwise, amendments to pleadings may be made at any time unless they will cause undue delay. It is notable that sub-article (3) of Article 26 contains a number of blanks and is, to the writer, unintelligible. It is respectfully submitted that it needs to be removed or corrected.

12. There is no mandatory requirement for an oral hearing - unless the parties agree that an oral hearing is necessary. Ultimately it is for the tribunal to determine if oral hearings will take place (Art. 27). It follows that DIFCAL arbitrations can be entirely 'on the papers', and will be unless the parties agree (or the tribunal forms the view) that oral hearings will take place.

13. Default judgment may be ordered by the tribunal if a party fails to appear at the hearing (Art 28(c)), fails to file a statement of claim (Art 28(a)) or fails to file a defence (Art 28(b)). When proceedings are Page 172 conducted in the absence of the respondent, it appears that default judgment may be ordered even where the claimant has no case.

14. The tribunal may appoint expert witnesses to report on specific issues (Art 29(1) (a)).

15. The tribunal does not have the power to subpoena witnesses, but may request the DIFC Courts to assist in taking evidence (Art 30). It can be assumed from the express reference to the competence and rules of the court in Article 30 that the tribunal has the power to request subpoenas to attend (ad testificandum) and produce documents or things (duces tecum).

16. The DIFC Court must stay court proceedings where there is a valid arbitration agreement, so long as a request for stay has been made by one party concurrent with or before the filing of their statement of claim/defence in the Court (Art 12(1). The DIFC Court of First Instance has jurisdiction over default appointment, challenges to arbitrators and requests to enforce preliminary, interim and conservatory measures ordered by arbitral panels.

17. The Doctrine of Kompetenz-Kompetenz is recognised at DIFC law. The tribunal may rule on objections to its own jurisdiction (Art 19(1)). Positive findings of jurisdiction may be appealed to the DIFC Court while the hearings on the merits are under way (Art 19(3)). A thirty day time limit (from the date of the positive finding) applies to such appeals.

18. The Doctrine of Separability is recognised at DIFC law. Article 19(1) provides that an arbitration clause shall be treated as a contract separate from that in which it is embedded.

19. The tribunal has wide powers to order interim measures of protection that it deems necessary for the proper conduct of the arbitration. These measures include prohibitive and mandatory injunctions (Articles 20(4(a) and (c)). The tribunal also appears to have the power to make Mareva orders¹⁰ - Article 20(4) empowers the tribunal to grant an interim measure 'providing a preliminary means of securing or facilitating the enforcement of an award'. Whether this is only a power to order security is unclear. A Mareva injunction is not an order for security, but it may be within the tribunal's power to order security due to the drafting of this sub-article of the DIFCAL. When interim measures are ordered, the tribunal has the power to require the applicant to provide appropriate security for such measures (Art 20(4)). Presumably this means payments into escrow and undertakings to pay damages.

20. The parties are free to choose any substantive law they wish. Failing designation of substantive law in- contract, the tribunal is to determine the applicable substantive law by application of the conflict of laws rules it 'considers appropriate' (Art 31(3)). Naturally, what conflicts rules are appropriate would depend upon the nationality of the parties. Given the common law outline of DIFC law, it is submitted that English conflict of laws rules would be the most probably default rules where nationality was not determinative.

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