Following the Abu Dhabi Chamber of Commerce and Industry’s (Chamber) announcement launching the new Abu Dhabi International Arbitration Centre (ADIAC), the ADIAC has, on 1 February 2024, unveiled its updated arbitration rules (ADIAC Rules) to supersede those of its predecessor, the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC).
On the whole, the improvements in the ADIAC Rules are similar to those made by Dubai’s International Arbitration Centre (the DIAC) in its 2022 update to its arbitration rules (DIAC Rules).
In this article, however, James Baldwin examines three key differences between the rules of the UAE’s two main arbitral centres which may warrant consideration when deciding which institution to include in an arbitration agreement:
- the ADIAC Rules incorporate an "early dismissal" procedure aimed at addressing unfounded claims or defences, a feature absent in the DIAC Rules
- ADIAC has a higher claim value threshold for its expedited arbitral procedure (AED 9 million compared to DIAC’s AED 1 million)
- the ADIAC Rules are potentially unclear regarding a tribunal’s power to award legal representative’s fees, unlike the DIAC Rules which unambiguously addressed this issue.
Scope of Application
As of 1 February 2024, the ADIAC Rules shall apply where parties have agreed to refer their disputes to arbitration under the ADIAC Rules, the ADCCAC Rules (except the “emergency arbitrator” or expedited” procedures), to the ADIAC, or to the Chamber. The ADCCAC Rules shall continue to apply to any ongoing arbitrations being administered under those rules as of 1 February 2024.
Early Dismissal
A potential landmark in the UAE’s arbitration offering, is the ADIAC’s “early dismissal” procedure. Similar to the “immediate” or “summary” judgment procedure familiar in common law courts, Article 45 of ADIAC’s Rules empowers a tribunal to order the early dismissal in whole or in part of one or more claims, defences, counterclaims or defence to counterclaims where it decides it is manifestly without legal merit.
It offers tribunals a useful weapon to quickly determine a futile claim or defence instead of putting the parties to the time and cost of lengthy proceedings, which is often seen as an advantage of using a court over arbitration.
Early dismissal procedures already exist in some of the major arbitral institutions, including the SIAC, HKAC and LCIA, however, tribunals are faced with balancing those powers against a fundamental duty to adequately hear a parties’ case to ensure the enforceability of an award. In arbitrations seated in the Abu Dhabi Global Market (ADGM), where appropriate a tribunal may be more confident of using the early dismissal procedure, as Section 42 of the ADGM Arbitration Regulations already recognises the summary disposal procedure. Having already included reference into the ADGM legal framework tribunals ought to have less concern about the future ratification of such orders by the ADGM Courts.
Notably, the DIAC Rules did not include a similar summary disposal procedure, therefore, its incorporation into the ADIAC Rules could become a differentiator for parties considering the pros and cons of the two main UAE institutions. One would not be surprised if the DIAC Rules were amended in due course to ensure parity with the ADIAC.
Expedited proceedings
The former ADCCAC Rules did not provide for the appointment of an emergency arbitrator or an expedited arbitral process, leaving it outdated and behind most other recognised institutions.
Article 35 of the ADIAC Rules plugs this gap by including a process for appointing an emergency arbitrator where a party is seeking urgent preliminary measures prior to the constitution of the tribunal. This aligns with many other institutional rules, including the DIAC Rules.
In addition, Article 36 sets out the new expedited arbitral procedure which may be used for claims valued at up to AED 9 million ($ 2.5 million). Once a claim is assigned to the expedited procedure, the arbitrator envisages dealing with the case and issuing an award within four months (extendable by up to two months).
The claim value limit dwarfs that of the expedited procedure under the DIAC Rules which is currently set at AED 1 million. Furthermore, it is far higher than that of the ADGM Courts’ Small Claims Division (ie less than $100,000) and DIFC Courts’ Small Claims Tribunal (ie less than AED 500,000). Consequently, ADIAC could become the stand-out choice for parties looking to bring expedited claims for lower value disputes.
Legal fees and expenses
During the ratification stage in the onshore courts of the UAE, it has been a longstanding bone of contention about whether the various institutional rules in the UAE explicitly empower an arbitrator to award the costs of parties' legal representation.
Back in 2013, a landmark decision of the Dubai Court of Cassation (Case 282 of 2012) nullified a DIAC costs award on the basis that the DIAC’s 2007 Rules did not expressly give a tribunal the power to award lawyers’ costs and expenses. Fortunately, after nearly a decade of uncertainty, in 2022 the DIAC Rules were updated to expressly state that: “the costs of the arbitration shall include…the fees of the legal representatives”. Since then, the Dubai Courts have ratified and enforced DIAC awards containing awards of lawyers’ costs.
Unfortunately, the wording in the ADIAC Rules might have kept the door open to interpretation by the UAE’s onshore courts. Article 50(1) lists the “costs of the arbitration” as “(i) the fees of the Tribunal; (ii) the Administrative Fee; and (iii) the expenses of the Tribunal and the Centre”. Missing from that list is the fees of the legal representatives.
On a plain reading, Article 50(6) appears to try to address this issue by stating that the tribunal shall “apportion the costs of the arbitration and the parties’ legal costs and expenses, between the parties”. Nevertheless, in the absence of expressly defining what “legal costs” comprise of, there would still appear to be scope for the onshore UAE Courts to deny that this is an express power to award the fees of the legal representatives.
A similar concern arose recently in the Dubai Court of Cassation (Case No. 821/2023) where it has been reported that it rejected a claim that Article 38 of the ICC Rules granted the arbitrator the power to award the fees of the legal representatives. Similar to the ADIAC Rules, Article 38(1) of the ICC Rules refers only to awarding “the reasonable legal and other costs incurred by the parties for the arbitration”
Although this judgment concerning the ICC Rules is unsatisfactory, if the onshore courts are required to consider the similar wording in the ADIAC Rules, it would not be a surprise if they also rejected a similar ADIAC costs award.
Therefore, as the recoverability of lawyers’ costs is key to a party’s decision to bring a claim, the current wording of Article 50 may require an immediate amendment to follow the DIAC Rules’ example of ensuring absolute clarity that arbitrators may award the “fees of legal representatives”.
Conclusion
The 2022 revamp to the DIAC Rules drastically improved the procedures in Dubai’s main arbitration institution. The new ADIAC Rules now bring Abu Dhabi’s arbitration offering into line with its UAE counterpart for the first time. As a result, parties should have no doubts in choosing either institution in their arbitration agreements.
In our next article we will be looking at some of the other features of the ADIAC Rules and how they mark a giant leap forward for arbitration in the UAE’s capital city.
If you require further advice regarding the institutional rules of the ADIAC or the DIAC, please contact James Baldwin or any other member of our Dubai office’s disputes team.
