7 September 2018
After more than a decade of anticipation and consultation, the President of the United Arab Emirates (“UAE”) has issued a new arbitration law based on the UNCITRAL Model Law on International Commercial Arbitration, and with the intention of cementing the country’s reputation as a world-class arbitration hub.
In a move which has been welcomed across the legal and business community, the new law represents an attempt to bring arbitration in the UAE in-line with international norms, while providing greater assurance for companies conducting business in the GCC that arbitral awards can be secured and enforced in a more cost- and time-efficient manner.
Law No.6 of 2018 (the "New Law") entered into force on 16 June 2018. The New Law specifically repeals the previous law relating to arbitration and any other provisions contrary to the New Law.
As is the norm in the UAE, the law has only been published in Arabic. An unofficial translation into English may be issued by the Ministry of Justice in due course, but please note that the Arabic wording in the Official Gazette will always prevail.
The New Law applies to:
The New Law provides that it will apply to all existing arbitrations, even if they were commenced prior to 16 June 2018. On this basis, parties involved in any arbitrations falling within the scope of the New Law will need to seek advice on the potential effect on those proceedings. This is particularly important for any party who has recently received an award in a UAE-seated arbitration, as the procedure for enforcement or challenging of an award has changed (as discussed below).
It is understood that the New Law will not apply to proceedings where the parties have agreed that the arbitration is subject to the arbitration law of the Dubai International Finance Centre, or where the dispute is to be seated in the DIFC.
Some of the most note-worthy changes in the New Law include:
As with the old law, the New Law requires that arbitration agreements are recorded in writing. However, while the term "in writing" was previously considered ambiguous and capable of multiple interpretations, the New Law seeks to resolve this issue by providing that an arbitration agreement shall be deemed to be "in writing" if, (among other things):
The New Law also recognises that an arbitration agreement is "separable" from the underlying contract, meaning that it will not be automatically invalidated by the nullity, rescission or termination of the underlying contract.
A common concern raised by claimants is the ability for a Respondent to delay proceedings by applying to the Courts to either challenge a tribunal’s jurisdiction or seeking the removal of an arbitrator. This is frequently used to stay proceedings pending resolution of the challenges. The New Law seeks to resolve this issue as follows:
Issues around enforcement of awards have been a common cause of discussion amongst businesses in the Middle East for some time. While the UAE Courts have recently developed a strong track record of enforcing foreign awards pursuant to the New York Convention, the ability for domestic awards to be overturned on matters of both form and substance is something for which the New Law has provided a helpful overhaul. This overhaul includes:
This is a matter which was already accepted as forming the basis of arbitrations in the UAE, which has now been formalised.
The New Law gives tribunals the power to make a number of interim orders, including the ability to order a party to take any action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitration.
The New Law represents a significant step forward, and demonstrates the UAE’s commitment to providing a safe-harbour for transparent, regulated and flexible conflict resolution. While it has been positively received, the acid test for any new statutory instrument lies in how it is implemented. In this regard commentators have noted that the New Law was issued absent any guidance or practice notes, meaning that it might be some time before we see how the New Law will work in practice.
To the extent that the legal community prepared a "wish list" for provisions they hoped to see in the New Law prior to its publication, there remain a number of items which could form the basis of future revisions. The most notable is in the area of costs, where the wording of Article 46 leaves the tribunal’s power to make an award as to inter partes costs (i.e. the costs incurred by the parties in engaging its legal team and experts) open to interpretation.