Key points of arbitration in the United Arab Emirates

The UAE is unique because it has two forms of arbitration jurisdictions in one country.

In this regard, the UAE offers a number of popular seats, including onshore Dubai and Abu Dhabi, and the offshore financial centres such as the Dubai International Financial Centre (“DIFC”) and Abu Dhabi Global Market (“ADGM”), with each having their own legislative framework for arbitration.

Recent trends have shown parties’ willingness to submit their general commercial disputes to arbitration, rather than only their specialized disputes (e.g. construction). The UAE Federal Arbitration Law No. 6 of 2018 on Arbitration (“UAE Arbitration Law”) governs arbitrations in the United Arab Emirates.

The law, which came into effect on 15 June 2018, repealed Articles 203-218 of Federal Law No 11 of 1992 Concerning the Issuance of the Civil Procedures Code (as amended), commonly referred to as the Civil Procedures Code (“CPC”), which previously governed arbitrations seated in the UAE. Several provisions of the UAE Arbitration Law can be traced to the UNCITRAL Model Law.

The UAE Arbitration Law applies to all ongoing and future arbitral proceedings, even if these were based on an arbitration agreement entered into prior to the entry into force of the UAE Arbitration Law.

Arbitration in the DIFC is governed by the DIFC Law No. 1 of 2008 (“DIFC Arbitration Law”), which was enacted in September 2008 and amended in December 2013. Arbitration in ADGM is governed by the ADGM Arbitration Regulations of 2015 (“ADGM Arbitration Regulations”), which were enacted on 17 December 2015 and amended on 23 December 2020.

1) Key places of arbitration in the jurisdiction?

The key places of arbitration in the UAE are Dubai (onshore and offshore through the DIFC), Abu Dhabi (onshore and offshore through ADGM) and Sharjah.

2) Civil law / Common law environment?

Onshore UAE is a civil law environment. The DIFC and ADGM are common law jurisdictions. Confidentiality of arbitrations? As regards onshore arbitration, the UAE Arbitration Law provides that arbitration hearings and arbitral awards are confidential, unless otherwise agreed by the parties (see Arts. 33 and 48 of the UAE Arbitration Law). However, the UAE Arbitration Law permits the publication of judicial orders dealing with arbitral awards (see Art. 48 of the UAE Arbitration Law). As for offshore arbitration: the ADGM Arbitration Regulations (Art. 45) prohibit parties from disclosing any confidential information to a third party, unless otherwise agreed by the parties, ordered by the arbitral tribunal or as may be required by a legal duty or to protect or pursue a legal right; and the DIFC Arbitration Law (Art. 14) provides that all information relating to the arbitral proceedings shall be kept confidential, unless otherwise agreed by the parties, and except where disclosure is required by an order of the DIFC.

3) Requirement to retain (local) counsel?

There is no requirement, whether onshore or offshore, to retain counsel. Parties can either retain outside counsel (local or foreign) or be self-represented.

4) Ability to present party employee witness testimony?

There is no prohibition on parties from presenting employee witness testimony.

5) Ability to hold meetings and/or hearings outside of the seat and/or remotely?

Parties can hold meetings and hearings at any location of their choosing or through modern means of communication. In the absence of the parties’ agreement, the arbitral tribunal will decide the location of meetings and/or hearings while taking into consideration the circumstances of the claim and the parties’ convenience (Art. 28 of the UAE Arbitration Law; Art. 27 of the DIFC Arbitration Law; Art. 43 of the ADGM Arbitration Regulations).

6) Availability of interest as a remedy?

Onshore, the parties can recover interest as a remedy subject to certain limitations provided by the applicable laws in the UAE. Offshore, the DIFC Arbitration Law does not expressly address the arbitral tribunal’s power to award interest. In the ADGM, subject to any contrary agreement by the parties, the arbitral tribunal’s powers as regards the awarding of interest shall be in accordance with the substantive law governing the claim for which an award of interest is sought and include the possibility of awarding simple or compound interest (Art. 52 of the ADGM Arbitration Regulations).

7) Ability to claim for reasonable costs incurred for the arbitration?

In onshore arbitration, an arbitral tribunal can assess the costs of the arbitration, unless the parties agree otherwise (Art. 46 of the UAE Arbitration Law). The Law defines the ‘costs of arbitration’ as including the fees and expenses incurred by any member of the arbitral tribunal in the exercise of their duties including expenses of appointed experts. The arbitral tribunal may order either party to bear all or part of the expenses. Upon the request of a party, and unless there is an agreement as to the apportionment of the costs, the competent Court of Appeal may amend the sum of expenses to be awarded (Art. 46 of the UAE Arbitration Law). In such an exercise, the Court will be guided by considerations of the arbitral tribunal’s efforts, the nature of the dispute, and the arbitrators’ experience. Unless expressly mentioned in the arbitration agreement or otherwise agreed, counsel’s fees cannot be recovered by the parties. In offshore arbitration, the DIFC Arbitration Law (Art. 38(5)) and the ADGM Arbitration Regulations (Art. 55(6)) both provide that the arbitral tribunal may fix the costs of the arbitration in the award. They also both enable the arbitral tribunal to include the legal costs of the successful party within the meaning of arbitration costs to such extent that the arbitral tribunal determines that the amount of such costs, or a part of them, is reasonable.

8) Restrictions regarding contingency fee arrangements and/or third-party funding?

Onshore, UAE law does not expressly prohibit or allow third-party funding. However, contingency fee arrangements are prohibited in the UAE (see Art. 31 of the UAE Federal Law No. 3 of 1991 Regarding the Regulation of the Legal Profession; and Art. 7(c) of the Draft Charter for the Conduct of Advocates and Legal Consultants in the Emirate of Dubai).

Offshore, the ADGM enacted Litigation Funding Rules, which apply to ADGM arbitration and ADGM litigation proceedings. The rules focus on certain fundamental issues, such as qualifying requirements for third-party funders, financial and other interests in third-party funders, litigation funding arrangements, and conflicts of interest (Section 225 of the ADGM Courts, Civil Evidence, Judgments, Enforcement and Judicial Appointments Regulations 2015). In addition, the ADGM Arbitration Regulations regulate third party funding in arbitration proceedings. While they do not restrict third party funding, the ADGM Arbitration Regulations do provide that a party must notify the parties and the arbitral tribunal in writing of the existence of any third party funding agreement and the identity of the third party funder (Art 37 of the ADGM Arbitration Regulations). Practice Direction No. 2 of 2017 on Third Party Funding in the DIFC Courts (the “Direction”) permits third-party funding in the DIFC Courts, subject to certain requirements, including a notice requirement where the funded party is required to notify every other party to the proceedings of the identity of the funder and the fact that a litigation funding agreement has been entered into. However, neither the Direction nor the DIFC Arbitration Law provide express provisions relating to third-party funding in DIFC-seated arbitrations. Notwithstanding this, it is our view that the DIFC’s friendly approach to third-party funding implies that such an arrangement should not be of an issue. Particularly, the DIFC Courts, as the supervisory court of a DIFC-seated arbitration, are unlikely to refuse to recognise and/or enforce an arbitral award resulting from an arbitration in which one of the parties benefited from third-party funding.

9) Party to the New York Convention?

The UAE is a signatory of the New York Convention (see Federal Decree No. 43 of 2006). The UAE’s accession to the New York Convention was effected on 21 August 2006, and the New York Convention entered into force in the UAE on 19 November 2006. The UAE made no reservations to the New York Convention. The DIFC and the ADGM are also bound by the New York Convention by virtue of the fact that they are part of the UAE.

10) Party to the ICSID Convention?

The UAE signed and ratified ICSID Convention on 23 December 1981, which entered into force for the UAE on 22 January 1982.

11) Default time-limitation period for civil actions (including contractual)?

UAE Federal Law No. 5 of 1985 regarding civil transactions (“UAE Civil Code”) contains general rules relating to limitation periods in the UAE. Generally, a claim is time-barred after 15 years, unless a specific provision states otherwise.

Subject to the exceptions, the limitation period for contractual disputes is 15 years (Art. 473 of the UAE Civil Code). Additionally, UAE Federal Law No. 18 of 1993 regarding commercial procedures contains specific provisions dealing with limitation periods for commercial contracts subject thereto. The limitation period is 10 years for commercial contracts that are subject to the UAE Commercial Transactions Law (Art. 95 of the UAE Commercial Transactions Law).

12) Other key points to note.

Some “unusual features” may sometimes arise. For example, the representative of a corporate entity must be expressly and duly authorised to agree to arbitration as a means of resolving disputes in order to bind the company to arbitrate (see Art. 4(1) of the UAE Arbitration Law).

The UAE Courts adopt a formalistic approach and often scrutinize, in much detail, the authority granted to the parties agreeing to arbitration. The UAE Arbitration Law reaffirms the requirement that the signatory to an arbitration agreement must possess the requisite authority. In more recent cases, the Dubai Court of Cassation has adopted a less stringent approach in determining this question, yet it remains to be seen whether this relaxed approach will constitute a jurisprudence constante. Nevertheless, it remains prudent, for an arbitral tribunal to request proof of authority of the signatory of the arbitration agreement, notably in circumstances where the arbitration agreement is reconfirmed in writing (e.g. terms of reference) or varied at the outset of the proceedings. Historically, the UAE Courts set aside awards because one or more witnesses did not swear the oath set out under UAE law before giving evidence. For that reason, it would be prudent for the arbitral tribunal, absent an agreement to the contrary by the parties, to continue to administer the oath of the witnesses and experts (see Art. 33(7) of the UAE Arbitration Law).

In addition, experts, translators and investigators may be criminally liable where they knowingly make a false statement. An arbitrator could be held criminally liable if s/he was held guilty of corruption. The standard applied to an arbitrator’s potential criminal liability for corruption is the same as that applied to public servants.

Under the old regime, as per Art. 257 of Federal Law No. 3 of 1987 (the “UAE Penal Code”), an arbitrator could be exposed to criminal liability for issuing a decision “in contravention of the requirements of the duty of neutrality and integrity”. However, this is no longer the case. On 23 September 2018, Federal Decree Law No. 24 of 2018 amended Art. 257 of the UAE Penal Code by excluding arbitrators from being subject to criminal prosecution as a result of a breach of their duty of “neutrality and integrity”.