Tag: Dispute Resolution

The approval of the long awaited Federal Law on Arbitration by the Federal National Council was announced in March this year. The introduction of a comprehensive stand-alone law on arbitration is a welcome development in the UAE, and the new law will replace the provisions of Chapter Three, Volume II of Federal Law 11 of 1992 (the Civil Procedure Code) which to date comprise the only legislative provisions on arbitration in the UAE (outside of the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM)).

 

We set out below some of the highlights of the new law approved by the Federal National Council. Since this article was written, Federal Law No. 6 of 2018 has been issued promulgating the new law. The official gazetted version of the law is yet to be released, and there is a possibility that some of the articles of the new law referred to below have undergone further amendment, although it appears to be unlikely.

 

Application of the Law

 

Article 2 of the new law provides that its provisions shall apply to all arbitrations conducted in the UAE unless parties “agree to submit to another arbitration law”. It is likely that this provision is intended to accommodate parties who have chosen the DIFC or ADGM as their seat of arbitration. Article 59 of the new law goes on to state that the provisions shall apply to every arbitration “effective” at the time when it comes into force, which would include ongoing arbitration proceedings. Article 3 of the new law appears to envisage extra-territorial application where (a) the parties have agreed to be bound by this law for arbitrations conducted overseas, and (b) where the underlying dispute arises with regard to a legal relationship “organised by the applicable laws of the country”. It is unclear how the latter will operate in practice.

 

New Provisions 

 

The new law addresses a number of issues hitherto unaddressed in legislation (unsurprisingly, given that the previous legislation comprises only 15 articles in the UAE Civil Procedure Law) and addresses other issues in greater detail. A few examples are set out below.

 

a. The Arbitration Agreement

 

The new law maintains the requirement that an agreement to arbitrate should be in writing. However, the new law provides that this requirement may be satisfied by reference to communications between the parties. This is consistent with case law on this point such as the judgment of the Dubai Court of Cassation in Civil Petition for Cassation No. 73/2010, which held that a written agreement to arbitrate may be evidenced through written correspondence between parties. It is helpful to have legislative affirmation of this point.

 

The new law has expressly permitted electronic means of agreement to arbitrate in accordance with the laws in relation to electronic agreements. The new law also provides that an arbitration clause will be valid by reference if contained in standard form conditions, provided that the reference is clear and explicit.

 

Article 6 of the new law recognises the concept of severability of an agreement to arbitrate, which is a well-established principle in arbitration and is reflected in the arbitration rules of the DIAC, DIFC-LCIA and the ADCCAC.

 

Article 8 of the new law provides that where a party institutes proceedings in court notwithstanding the existence of an agreement to arbitrate, the court shall dismiss the proceedings if the defendant asserts a jurisdictional objection based on the arbitration agreement before making submissions on the merits of the dispute. This is a more flexible requirement contrasted with the provisions of Article 203(5) of the Civil Procedure Code, which requires the defendant to assert the jurisdictional objection at the first hearing. Article 8 goes on to provide that arbitration proceedings may be instituted or continued notwithstanding that judicial proceedings have been instituted challenging the validity of the arbitration agreement.

 

b. Jurisdiction

 

Article 19 of the new law provides that an arbitral tribunal may rule on its jurisdiction (or lack thereof) (kompetenz-kompetenz) including objections with respect to non-existence, expiration or nullity of an arbitration agreement by way of a preliminary judgement. Such decision is appealable within 30 days of such decision to a competent court whose decision would be final. The tribunal may continue with the arbitration notwithstanding the appeal being pending.

 

c. Limitations for Preliminary Objections before the Tribunal

 

Article 20 sets out a deadline for submitting a plea for the lack of jurisdiction of the Arbitral Tribunal on the following grounds:

 

i. A defence that the tribunal has no jurisdiction has to be submitted not later than the  time fixed for the respondent to submit his statement of defense.

 

ii. A defence that the matters raised by the other party are outside the scope of the arbitration agreement has to be asserted immediately upon such matters being raised in the arbitration by the other party.

 

These limitations may be waived by the tribunal, provided reasonable justification for delay is provided by a party.

 

Article 25 provides that a party who continues to participate in an arbitration, without objection notwithstanding being aware of violation of the arbitration agreement or the law will be presumed to have waived his right to subsequently rely on such violation. Such an objection must be made within any agreed time limit, or in the absence of an agreed time limit, within seven days from the date of becoming aware of such violation. The provisions of Article 25 do not apply where matters of public policy are concerned.

 

d. Interim Awards and Supporting Orders

 

The new law has the welcome addition of specifically recognising interim or partial awards and provisional measures granted by an arbitral tribunal which would facilitate emergency arbitrations and interim awards in the nature of injunctions available under certain institutional rules (e.g. ICC Rules and DIFC-LCIA Rules). Article 21 sets out provisional awards that may be issued by the tribunal:

 

a) Awards preserving evidence that is likely to be essential in the dispute resolution.

 

b) Awards to take the necessary measures to protect the goods that constitute a part of the dispute subject matter (e.g. to deposit goods with a third party, to sell damageable goods).

 

c) Awards to preserve the assets by which a subsequent decision may be implemented.

 

d) Awards to preserve the situation as it is (i.e. maintain status quo) or to be resorted to its previous position until a decision on the dispute.

 

e) Awards to take appropriate measures to prevent a current or imminent damage or a prejudice to the arbitration proceedings, or abstention from any act that may cause damage or prejudice to arbitration.

 

Such awards will now be enforceable through court and will have the effectiveness of a court order, once recognised. Article 21 of the new law further allows a party issued with a provisional measure to request a court to order the execution of such a measure.

 

An arbitral tribunal on its own accord or upon the request of either party is empowered to apply for a court order to obtain any evidence it requires, including the ability to compel a witness to give evidence and produce documents. While similar powers are given to arbitrators under Article 209 of the Civil Procedure Code, the new law does not require that the arbitration proceedings be suspended until such an order is obtained from court as presently required under Article 209.

 

e. Awards

 

Absent an agreement between the parties on the length of an arbitration, the new law (as is the position under the Civil Procedure Code) sets a time limit of six months from the date of the first hearing for the issuance of an award, with the arbitral tribunal having been given the power to extend the deadline for up to a further six months. Article 42(1) suggests that the parties may agree to an extension of more than six months. Article 42 of the new law provides that any extension of time beyond this period needs to be by way of a court order. Many existing arbitration rules provide that the administering institution has the power to extend the deadline for an award. Examples of such provisions are found in the DIAC Rules and the DIFC-LCIA Rules as well as the ICC Rules of arbitration. How the provisions of the new law will interact with such provisions (particularly the DIAC Rules, which are issued by Decree of the Ruler) will have to be seen.

 

A party may also apply for a court order terminating the arbitration proceedings in the event the arbitration award is not issued within the requisite time period. In the event of such termination, either party may file a case before a competent court to rehear the dispute.

 

Article 212(4) of the Civil Procedure Code required an award to be issued in the UAE, failing which the award will be treated as a foreign award. This requirement is commonly interpreted to mean that the arbitrators must sign the award in the UAE. However, Article 41 of the new law dispenses with this requirement and recognises that domestic arbitration awards may be signed outside of the place of arbitration and may even be signed electronically.

 

f. Challenges to Arbitration Awards

 

Article 53 of the new law provides that an arbitration award may be nullified on the following grounds:

 

a) Where no arbitration agreement exists, or if the arbitration agreement is void, or the time limit for rendering the award has expired.

 

b) Where one of the parties at the time of entering into the arbitral agreement was a minor or lacked capacity pursuant to the law governing his capacity.

 

c) If one of the parties to the arbitration was unable to present a defence because such party was not properly notified of the appointment of an arbitrator or of the arbitral proceedings, etc.

 

d) If the arbitral award discarded the application of the law agreed to by the parties on the subject matter of the dispute.

 

e) If the composition of the arbitral tribunal or the appointment of the arbitrators has occurred in a manner contrary to the law or the agreement of the parties.

 

f)  If the arbitral proceedings “are tainted by nullity” affecting the arbitral award.

 

g) If the award contains decisions on matters not included in the arbitration agreement or beyond the scope of such agreement (any portion of the award separable from the rest which comes within the scope of the agreement may be held valid).

 

These grounds appear to be a restatement of the present grounds set out in Article 216 of the Civil Procedure Code in more detail and increased scope.  These provisions also mirror the grounds for refusal to enforce an arbitral award as recognised by the New York Convention with the exception of the ability to refuse recognition on the basis that the award may not yet have become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made- a recognised ground under the New York Convention.

 

The new law requires that a court execute a ratified arbitral award unless it finds a cause for nullity as set out above. An execution can be stayed only by a decision of court.

 

Article 54 provides that if a party wishes to annul or set aside an arbitration award, it should commence court proceedings for an order of nullification within thirty days of receiving the award.

 

In circumstances where proceedings have been filed for the nullification of an award, Article 54 of the new law provides that the judgment of such an action shall be appealable only by way of cassation. ■

 

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The foregoing is only a preliminary view on some of the features of the new arbitration law, which will come into effect in 30 days of being published in the gazette. Afridi & Angell will be releasing a more in-depth commentary shortly.

Abu Dhabi has introduced new rules governing the functioning of the Emirate’s judiciary. The new rules appear in Abu Dhabi Law 13 of 2018, which amends Abu Dhabi Law 23 of 2006 on the Abu Dhabi Judicial Department.

 

The new provisions largely address internal matters related to the functioning of the courts, such as the composition of panels of the courts and the accountability of judges. But two features could be of more general interest.

 

First, the Chairman of the Judicial Department is accorded the power to establish specialised courts. This would be a major advance, as the need for specialised courts (such as maritime courts) has long been recognised. Moreover, the existence of specialised courts is expressly contemplated by other recently enacted statutes, such as the Federal Bankruptcy Law. The Chairman of the Judicial Department may determine the competence of the specialised courts, and may establish Departments of First Instance, Departments of Appeal and Departments of Enforcement in such specialised courts.

 

Second, a formal procedure has been introduced for the overruling of precedents. The new provisions introduce a General Assembly of the Abu Dhabi Court of Cassation comprised of all of the Court’s judges and having general administrative authority for the functioning of the Court. Two panels, each composed of nine judges, are formed within the General Assembly, each headed by the Chairman of the Court or another senior judge. One panel is specialised in criminal matters and the other in civil, commercial, personal status and other matters.

 

If a panel of the Court of Cassation, while considering a case, wishes to consider overruling a legal precedent established by previous judgments, or wishes to pronounce on an issue on which contradictory principles were previously articulated in the Court’s judgments, then it must refer the matter to the Chairman of the Court for presentation to the competent panel of the General Assembly. A decision to overrule a legal precedent would require an affirmative vote of at least six members. The Chairman of the Court, if he considers the same appropriate, may present the matter to both panels sitting en banc, in which case a decision to overrule the precedent would require an affirmative vote of 13 members.

 

The amendments also reduce the size of the panels of the Abu Dhabi Court of Cassation that consider disputes before the Court, from five judges to three. ■

 

 

 

Abu Dhabi has put an end to a four-year experiment – widely viewed as unsuccessful – with uncapped court fees.

 

Prior to 2013, court fees in Abu Dhabi were calculated as a percentage of the amount in controversy, subject to a cap of AED 20,000. But Abu Dhabi Law 6 of 2013 introduced a new formula of 3% of the amount in controversy without any cap. This imposed significant costs on claimants, even taking into account the power of the courts to charge fees to the losing party. Resort to the courts was deterred, even for an action such as the enforcement of an arbitral award where the role of the courts was restricted.

 

This has now been remedied by Abu Dhabi Law 13 of 2017, which repealed Law 6 of 2013. Law 13 of 2017 provides for a court fee of 5% of the amount in controversy, provided that the fee shall be not less than AED 100 and not more than AED 40,000. The formula is the same for appellate fees, but with a maximum fee of AED 10,000. For a lawsuit of indeterminate value, a fixed fee will be charged initially depending on the type of case, with the balance of the fee to be calculated following pronouncement of judgment on the basis of the amount of the award using the normally-applicable formula.

 

Law 13 of 2017 also sets a cap of AED 10,000 for fees for additional electronic services provided by the Abu Dhabi Judicial Department. ■

 

The Centre for Amicable Settlement of Disputes (the “Centre”) was established by Dubai Law No. 16 of 2009 and is entrusted with the task of attempting to mediate disputes, prior to such disputes being referred to court. The Centre is affiliated with the Dubai Courts and the mediators appointed in the Centre act under the supervision of a judge. If the parties reach a settlement, such a settlement must be recorded in writing, signed by the parties and attested by a judge. Such settlement agreement is legally enforceable and is equivalent to an executive instrument which may be directly enforced through the Execution Courts. In the event no settlement is reached between the parties, the case is referred to court.

 

The Centre acquires jurisdiction over a dispute either on the application of a party to a dispute or when the dispute relates to a subject specified in Dubai Law No. 16 of 2009 to be a dispute that must be first reviewed by the Centre prior to the dispute being referred to court. However, there are certain disputes that the Centre does not have jurisdiction over (such as Labour disputes, disputes relating to personal status, summary and interim orders and actions, actions to which the Government of Dubai is a party, etc.).

 

A party to a dispute may opt to refer a dispute to the Centre under the following circumstances:

 

1. If a party (or parties) to a dispute request that the dispute be referred to the Centre;

 

2. On the request of all parties to a dispute which is pending before the Dubai Court of First Instance, Commercial Courts or Real Estate Courts (regardless of the value of the suit), upon the approval of the chief judge of the circuit;

 

3. On the request of a party for the appointment of an expert.

 

The following disputes are disputes that must be reviewed first by the Centre prior to the case being referred to court:

 

1. Division of undivided property;

 

2. If the value of the debt in the dispute does not exceed AED 100,000.

 

Prior to Administrative Decision No. 1 of 2017, all disputes to which a bank was party had to be first referred to the Centre. Such disputes were rarely, if ever, settled and the dispute resolution process was merely prolonged unnecessarily. However, consequent to Administrative Decision No. 1 of 2017, the Centre no longer has jurisdiction over any dispute to which a bank is a party. The significance of this amendment is that no dispute that a bank is a party to can be referred to the Centre, even for the limited purpose of appointing an expert to opine on a matter. Therefore, all disputes where a bank is a party must be referred directly to court. ■

Article 257 of the UAE Penal Code (Federal Law No. 3 of 1987) was recently amended by Federal Law No. 7 of 2016 to introduce the concept of criminal liability for arbitrators, experts, and translators who issue decisions and opinions ‘contrary to the duties of impartiality and honesty’. Article 257 as amended provides (in translation) as follows:

 

“Whoever issues a decision, makes an opinion, files a report, presents a case or asserts a fact in favour of or against someone, contrary to the required duties of impartiality and honesty, in their capacity as arbitrators, experts, interpreters (translators) or fact finders appointed by the administrative or judicial authority or nominated by the parties shall be punished by temporary imprisonment. The above said categories shall be prohibited from taking up any new assignments and shall be subject to the provisions of Article (255) hereof.”

 

Article 255, referred to in Article 257, provides for reduced sentences in certain circumstances. An unofficial translation is set out below:

 

“Shall be exempted from penalty:

 

• The witness who, if he tells the truth, shall be subject to a severe prejudice in his freedom, honour or shall expose to such severe prejudice his spouse, even if divorced, one of his ascendants, descendants, brothers, sisters or in-laws of the same degrees.

 

• The witness who reveals before the court his name, surname and nickname and who had not to be heard as a witness or if he has to be told that he has the right, if he wishes, to abstain from testifying.

 

• In the two above instances, if such perjury exposes another person to legal prosecution or to a judgment, the author shall be sentenced to detention for a minimum term of six months”.

 

Article 255 refers to witnesses and their testimony, and therefore appears more likely to be relevant to expert witnesses, and not arbitrators.

 

Article 257 prescribes a punishment of temporary imprisonment. Pursuant to Article 68 of the Penal Code, temporary imprisonment constitutes imprisonment of between 3 and 15 years.

 

The amendment became effective on 29 October 2016.

 

Prior to its amendment, Article 257 was confined to the criminal liability of experts appointed by the courts. Subsequent to the amendment, Article 257 has been expanded to apply to arbitrators and experts who are appointed by an administrative or judicial authority, or nominated by the parties. Ostensibly therefore, arbitrators and experts appointed in Dubai under institutional or ad hoc rules will be subject to Article 257.

 

It is yet to be seen how Article 257 will be interpreted and applied in practice. It would conceivably be a difficult task to establish that an arbitrator or an expert has failed to act in an honest and impartial manner. However, the prospect looms where parties dissatisfied with the outcome of an arbitration will pursue complaints under Article 257, and this prospect is one that potential arbitrators will now have to take into account when accepting appointments. ■