11 October 2023
The implementation of the DIAC Mediation Rules 2023 (the Rules) on 1st October 2023, represents another significant achievement for Dubai’s International Arbitration Centre (DIAC), helping to push mediation to the forefront of parties' considerations, whether they are drafting contracts with dispute resolution clauses, anticipating a dispute or dealing with one that has already arisen.
Under the Rules, any party may refer a dispute to mediation before the DIAC whether there is a pre-existing agreement to mediate or not. This flexibility offers a new avenue for parties, including for example, parties who may have already opted for DIAC arbitration in their contract but may wish to explore mediation as an initial step. Notably, the DIAC’s Arbitration Rules, revamped in March 2022, included in its Appendix a procedure allowing parties to enter into a separate conciliation procedure which, although brief, is not dissimilar to mediation. The newly implemented mediation Rules, however, take this approach a step further, introducing a structured and far more comprehensive mediation framework.
The primary aim of the Rules is to ensure that all mediations are conducted with the utmost fairness, impartiality, efficiency, and proportionality, taking into consideration factors such as the dispute's value and complexity. Parties, with the mediator's approval, have the latitude to make written adjustments to the Rules, provided such modifications are aligned with the Rules' core principles and do not hinder their functionality.
Once a party submits a mediation request to the DIAC along with the AED 2,500 registration fee, it can only proceed under the Rules if the other party replies with their consent, regardless of whether a prior agreement to mediate existed in their contract. If consent is reached, the DIAC will send the parties a notice to confirm this and the mediation process will officially commence. This consensual requirement stands in contrast to the adversarial process in arbitration and court proceedings, where the procedure can continue irrespective of the respondent/defendant's cooperation.
Under the Rules, the parties can jointly nominate a mediator, or in the absence of an agreement, the DIAC’s Arbitration Court intervenes to make the appointment. The Arbitration Court’s selection considers various factors, including the nature of the dispute, the mediator's qualifications, and nationality. In line with the objective of efficiency, the Court aims to appoint a mediator within seven days of the commencement of the mediation.
The prospective mediator is required to sign a declaration of impartiality, independence, and disclose any conflicts of interest. The parties may, however, object to the appointed mediator within a specified timeframe, with the appointment standing if no objections are raised.
The Rules require the mediator to promptly contact the parties within seven days of receiving the case file to schedule a preliminary meeting and potentially share a draft mediation agreement for review. The preliminary meeting can be conducted in person, over the phone, or, more commonly, through video conferencing. During the initial meeting, key aspects such as the mediation agreement, procedural language, logistics, confidentiality, attendees, timing of position papers, treatment of ongoing proceedings, and other relevant procedural matters are agreed upon.
The determination of the mediator's fees and expenses occurs during the preliminary meeting, accounting for the case's complexity, value, and anticipated timeline. Typically, both parties share the responsibility for an advance deposit equally, although one party may choose to cover the other's share to facilitate the mediation process. If applicable, the parties will usually deal with the issue of their legal costs during the mediation and in any settlement agreement. In the event of a successful mediation, the costs and expenses typically amount to a fraction of what they would have been had the case gone through the entire arbitration or litigation process.
On the day of the mediation, the mediator's role is to facilitate the parties in reaching a mutually agreed settlement, which is then hopefully recorded in a settlement agreement on the day or very soon after. The mediator has discretion in determining the procedure on the day, ensuring each party has a fair opportunity to present their positions. For example, to set the scene, the parties might present their respective cases before the mediator meets with the parties individually or altogether. The mediator may need to shuttle between the party’s separate breakout rooms, hold lawyers-only meetings to focus in on the legal issues, or even meet with the parties in the absence of their lawyers should that be appropriate. Mediators will undoubtedly have different methods for unlocking any deadlocks and will often have to change approach depending on the progress being made towards a resolution on the day. In the event that a mediation does not lead to a settlement, either party or both parties jointly may terminate the process, with no prejudice to the merits of the dispute.
At the heart of the Rules lies the paramount obligation of confidentiality which is crucial in fostering an environment of trust and openness during the mediation. The Rules’ confidentiality terms are especially important in a civil law jurisdiction like Dubai, where the common law concept of “without prejudice” does not apply. Under the Rules, the mediator and all attendees must maintain the confidentiality of all mediation-related information, materials created during mediation, and documents not publicly available. Private communications with the mediator must remain undisclosed, and most importantly, any statements made during mediation, whether in writing or orally, cannot be used as evidence in any subsequent judicial or arbitration proceedings against the party that made them.
In this regard, at the time of writing, it seems unlikely that a DIAC mediation will also benefit from the confidentiality provisions guaranteed by the UAE’s Mediation Law (Federal Law No. 6 of 2021) and/or Dubai’s Mediation Centre Law (Dubai Law 18 of 2021). Those provisions currently apply to mediations conducted through centres specified in each law (ie Abu Dhabi’s Mediation and Conciliation Center and Dubai’s Centre for Amicable Settlement of Disputes) to prevent a party using the information it gained in a mediation in proceedings before a court or other forum. Whist both laws provide respectively for the licencing of private mediation centres or outsourcing of mediation work to authorised entities, there is no indication that the DIAC has been granted this status at this time.
Without statutory guarantees precluding the use of confidential, mediation-related information in subsequent court or arbitration proceedings, the parties shall be relying on the subsequent arbitrator or judge to honour the confidentiality provisions in the Rules and in their mediation agreement. With this in mind, only time will tell if parties in Dubai and the wider region will be willing to fully commit to a mediation process under the Rules without a statutory comfort blanket.
In conclusion, mediation has long been recognised globally as a valuable alternative for resolving commercial disputes. When the process is successful, mediation can undoubtedly result in an efficient and cost-effective resolution of a dispute, with the added possibility of parties retaining an amicable relationship to continue doing business together. It is hoped that the introduction of the Rules will stimulate greater interest and engagement in mediation within Dubai and the broader region.
If you have found this article interesting, we invite you to contact any of Taylor Wessing’s disputes team in Dubai for a brief discussion of the process and its suitability for your specific case.