Infra.Law

International Arbitration 2023: Practical cross-border insights into international arbitration work in the UAE (part 1)

By Thanos Karvelis & Mazin Al Mardhi

Arbitration Agreements

What, if any, are the legal requirements of an arbitration agreement under the laws of your jurisdiction?

Federal Law No. 6 of 2018 (“the Arbitration Law”), as applicable to arbitrations seated (onshore) in any of the seven Emirates of the UAE, provides the substantive and formal requirements for a valid arbitration agreement.

In particular, any agreement to refer disputes to arbitration must be in writing, either in the form of an arbitration clause or by reference to a separate document, such as an addendum. As an exception to the rule, any oral agreement to arbitrate will only be considered binding if such agreement occurs during court proceedings and is recorded in the relevant court judgment.

An arbitration agreement may only be validly entered into by a person with the requisite capacity to do so, which means that one should carefully review the constituting documents of any counterparty to ensure that such authority is in fact granted.

What other elements ought to be incorporated in an arbitration agreement?

One should consider all aspects of the proceedings including, amongst others, the seat of the arbitration, application of bespoke or institutional procedural rules where appropriate, applicable substantive law, language of the proceedings and the arbitral institution (if any) required to conduct the proceedings.

What has been the approach of the national courts to the enforcement of arbitration agreements?

The importance of protecting the free will of the parties to enter binding arbitration agreements is vital and recognised as such by the national courts. Where a valid arbitration agreement is concluded, the national courts will dismiss an application to initiate court proceedings, subject to the defendant raising the objection to court proceedings on the basis that an arbitration agreement exists prior to submitting any request or pleading on the merits of the case.

Governing Legislation

What legislation governs the enforcement of arbitration proceedings in your jurisdiction?

Article 55 of the Arbitration Law sets out the necessary procedure for the filing of an application for enforcement of arbitral awards. Where a party refuses to voluntarily comply with an award, enforcement measures conducted by the Execution Court may be adopted as prescribed under Federal Law No. 5 of 1985 (“Civil Code”).

Does the same arbitration law govern both domestic and international arbitration proceedings? If not, how do they differ?

Unless the parties have agreed otherwise, the Arbitration Law applies to any arbitration conducted in the UAE (international or domestic).

Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?

There is no doubt that the UAE’s Arbitration Law is based on the UNCITRAL Model Law. However, this is not to say that the Model Law is mirrored without deviations. In particular, the following deviations are noteworthy:

Article 4 provides that a signatory must be specifically authorised, whether in the form of a power of attorney or board resolution, in order to enter into the arbitration agreement, otherwise the arbitration agreement is considered null and void. Proof of a signatory’s authority is not required under the Model Law.
Article 22 permits the arbitral tribunal to join a third party to the arbitral proceedings, following the request of either party or the third party itself, provided that the third party is party to the underlying arbitration agreement. The Model Law does not provide for third-party joinder.
Article 27 provides that arbitral proceedings are deemed to have commenced from the date following the formation of the arbitral tribunal, unless otherwise agreed by the parties. In contrast, Article 21 of the Model Law provides that the arbitral proceedings are deemed to have commenced on the date on which the request for arbitration is received by the respondent.
Article 28 provides that, unless otherwise agreed by the parties, the arbitral tribunal may hold the arbitration hearings (a) at any physical venue it deems appropriate, or (b) through modern means of communication and technology (e.g., video conferencing). However, the Model Law does not provide the option for the arbitral tribunal to hold the arbitration hearings through modern technological means. The UAE Arbitration Law introduces technological advancements in an effort to provide flexibility to international arbitrators and parties.
Articles 33 and 48 protect the confidentiality of arbitration hearings and arbitral awards, unless otherwise expressly agreed by the parties. Whilst the parties remain entirely free to agree confidentiality terms between them, the Model Law does not expressly protect the confidentiality of arbitral hearings and awards.
Article 54 provides that the party seeking to set aside the arbitral award must submit its request within 30 days from the date of the notification of the award, whereas the Model Law affords a party three months from the date of receipt of the award.
Finally, where a party submits an application to annul or set aside the award, the Model Law allows the relevant court where recognition or enforcement is sought to stay enforcement proceedings, even if the parties have not requested it (Article 36.2). However, the Arbitration Law (Article 56.1) provides that the court before which a request for annulment is heard may not stay enforcement without receipt of a request by either party.

To what extent are there mandatory rules governing international arbitration proceedings sited in your jurisdiction?

Firstly, the aforementioned requirements of a valid arbitration agreement must be observed in order for the arbitral tribunal to have jurisdiction over the matters referred and deliver an enforceable award. Secondly, the procedural rules and substantive laws adopted by the parties in respect of the arbitration must not conflict with State public policy or morality. Any agreement otherwise would be null and void. Equally, the subject matter of a dispute must be capable of settlement by arbitration; for example, disputes involving criminal activity may not be settled by arbitration. The Arbitration Law (Article 10) imposes certain requirements applicable to the members of the arbitral tribunal, including, amongst others, that the arbitrator must be a natural person who is not a minor or someone under court interdiction or criminal conviction for a crime relating to a breach of State morality. In addition, there are a number of other mandatory rules set out under Article 53 of the Arbitration Law that, if breached, would provide grounds for an arbitral award to be subject to challenge and set aside. Generally, arbitral proceedings must be conducted in a fair and equitable manner. Failure to do so will likely cause any application for enforcement of an arbitral award to be dismissed and the award set aside. An action to set aside an arbitral award remains admissible even if the party invoking nullity has waived its right to do so prior to issuance of the award. Any such agreement would not be enforceable.

Jurisdiction

Are there any subject matters that may not be referred to arbitration under the governing law of your jurisdiction? What is the general approach used in determining whether or not a dispute is “arbitrable”?

Article 53 of the Arbitration Law provides that the subject matter of the arbitration must be capable of settlement by arbitration.

Disputes concerning criminal activity may not be settled by arbitration. The Public Prosecution has exclusive jurisdiction to prosecute criminal acts as a matter of public policy; therefore, parties may not refer disputes arising from violations of the Penal Code to arbitration.

Disputes arising from commercial agency contracts are also precluded from arbitration, provided that the agency agreement in question is registered with the Commercial Agency Registrar at the Ministry of Economy. No such restriction applies to non-registered agency agreements.

Similarly, the UAE’s Trademark Law vests the UAE Trademark Office and the civil courts with exclusive authority to settle disputes related to trademark acceptance and registration. However, disputes concerning trademark ownership or distribution may be referred to arbitration, as confirmed by the recent landmark decision in Alfahim vs Alfahim Case No. 205 of 2020.

On the other hand, disputes concerning trademark infringement are generally not capable of settlement by arbitration due to the fact that trademark infringement constitutes a criminal act under the UAE’s Penal Code. However, the national courts have handed down judgments whereby disputes relating to the infringement of non-registered trademarks may be referred to arbitration. It remains to be seen whether criminal courts in the UAE will surrender jurisdiction to hear such disputes, given that trademark infringement remains punishable as a criminal offence.

Is an arbitral tribunal permitted to rule on the question of its own jurisdiction?

What is the approach of the national courts in your jurisdiction towards a party who commences court proceedings in apparent breach of an arbitration agreement?

Yes, the Arbitration Law expressly provides that a validly constituted arbitral tribunal may rule on its own jurisdiction.

In such case, the party seeking to invoke the arbitration clause must raise an objection to the commencement of court proceedings, citing a valid arbitration agreement (with proof) prior to filing any request or plea on the merits of the case. The court should dismiss the application to initiate court proceedings where its jurisdiction is precluded by means of an arbitration agreement.

Under what circumstances can a national court address the issue of the jurisdiction and competence of an arbitral tribunal? What is the standard of review in respect of a tribunal’s decision as to its own jurisdiction?

In the event that a party challenges the arbitral tribunal’s jurisdiction or competence, even after the tribunal has issued a ruling in respect of the same, the national courts may issue a judgment on the validity of the tribunal’s jurisdiction. Such jurisdiction will only be set aside subject to one or more of the following grounds being established:

the arbitration is void or never existed;
the signatory to the arbitration agreement was incompetent;
the signatory to the arbitration did not have the requisite authority to bind the other party to arbitration;
the party was not afforded a fair opportunity to present its case, either as a result of not receiving notice of the appointment of the arbitral tribunal or proceedings or breach of due process;
the arbitral award excludes the application of the parties’ choice of governing law;
composition or appointment of the arbitral tribunal was not in accordance with the Arbitration Law or agreement of the parties;
the arbitral proceedings were marred by irregularities that affected the award or the award was not issued within the specified timeframe;
the award contains decisions on matters falling outside the terms or beyond the scope of the submission to arbitration, in which case the award may be partially set aside in respect of those matters if the court considers it possible to separate those issues from the remainder of the award;
the subject matter of the dispute is not capable of settlement by arbitration; or
the arbitral award conflicts with State public order and morality.

Under what, if any, circumstances does the national law of your jurisdiction allow an arbitral tribunal to assume jurisdiction over individuals or entities which are not themselves party to an agreement to arbitrate?

What laws or rules prescribe limitation periods for the commencement of arbitrations in your jurisdiction and what is the typical length of such periods? Do the national courts of your jurisdiction consider such rules procedural or substantive, i.e., what choice of law rules govern the application of limitation periods?

None; jurisdiction over individuals or entities may only be established by virtue of a valid arbitration agreement.

Unless the parties have an agreement in place establishing a limitation period for the commencement of the arbitration, the UAE Civil Transactions Law (also referred to as the Civil Code) contains specific prescription periods that differ depending on the nature of the claim. Limitation periods contained in the Civil Code are treated as a matter of substantive law.

What is the effect in your jurisdiction of pending insolvency proceedings affecting one or more of the parties to ongoing arbitration proceedings?

The UAE’s Bankruptcy Law (Federal Law No. 9 of 2016) provides that where insolvency proceedings are initiated in respect of a party involved in an ongoing arbitration, notice must be given to the court-appointed trustee administering bankruptcy proceedings on behalf of the court. Whilst the arbitration may continue in parallel to bankruptcy proceedings, enforcement of the arbitral award would become subject to the outcome of those bankruptcy proceedings by order of the court.

Choice of Law Rules

How is the law applicable to the substance of a dispute determined?

Firstly, by agreement of the parties, which is normally contained in the arbitration agreement or a clause within the contract. Where no such agreement exists, UAE law will apply to any arbitration conducted in the State.

In what circumstances will mandatory laws (of the seat or of another jurisdiction) prevail over the law chosen by the parties?

If the parties choose a law that happens to conflict with the mandatory laws of the seat or another jurisdiction, such mandatory laws should prevail.

What choice of law rules govern the formation, validity, and legality of arbitration agreements?

The Arbitration Law governs as such.

Selection of Arbitral Tribunal

Are there any limits to the parties’ autonomy to select arbitrators?

Article 10 of the Arbitration Law imposes a number of requirements that must be satisfied when parties appoint an arbitral tribunal, which primarily relate to the capacity and impartiality of the arbitrator. There are no mandatory requirements in respect of the arbitrator’s gender or nationality.

If the parties’ chosen method for selecting arbitrators fails, is there a default procedure?

In such case, Article 11 of the Arbitration Law sets out a default procedure for appointment of the tribunal. Such procedure allows for the parties to request that the appointment be made by the arbitral institution responsible for administering the arbitration (if any). Alternatively, where no such institution is agreed by the parties, recourse to the national courts may be sought in order to make the necessary appointment(s).

Can a court intervene in the selection of arbitrators? If so, how?

Yes; parties in deadlock may request intervention by the national courts for the appointment of an arbitrator, having due regard to the nature of the dispute. The court’s decision in such case is not subject to appeal.

What are the requirements (if any) imposed by law or issued by arbitration institutions within your jurisdiction as to arbitrator independence, neutrality and/or impartiality and for disclosure of potential conflicts of interest for arbitrators?

Arbitrators are required to declare their independence, neutrality and impartiality prior to their appointment in an arbitration. The standards of independence and impartiality mirror those required of judges in onshore courts. Circumstances giving rise to serious doubts as to the impartiality or independence of an arbitrator shall be grounds for that arbitrator to be recused and for an arbitral award issued by that arbitrator to be set aside.

Procedural Rules

Are there laws or rules governing the procedure of arbitration in your jurisdiction? If so, do those laws or rules apply to all arbitral proceedings sited in your jurisdiction?

The Arbitration Law contains provisions relating to procedure which the parties may adopt if they so choose. Alternatively, the parties may adopt their own bespoke set of rules or refer to institutional rules of procedure, such as those issued by the International Chamber of Commerce (“ICC”), London Court of International Arbitration (“LCIA”) or Dubai International Arbitration Centre (“DIAC”) by way of agreement. Where the parties fail to agree, the provisions of the Arbitration Law shall apply.

In arbitration proceedings conducted in your jurisdiction, are there any particular procedural steps that are required by law?

Yes, there are certain procedures that are mandatory to ensure that due process is adhered to and that the proceedings are conducted fairly. In particular, parties must be given adequate notice of the appointment of an arbitrator and commencement of proceedings.

Are there any particular rules that govern the conduct of counsel from your jurisdiction in arbitral proceedings sited in your jurisdiction? If so: (i) do those same rules also govern the conduct of counsel from your jurisdiction in arbitral proceedings sited elsewhere; and (ii) do those same rules also govern the conduct of counsel from countries other than your jurisdiction in arbitral proceedings sited in your jurisdiction?

There is no defined code of conduct specifically relating to the conduct of counsel in arbitration; however, all legal practitioners are required to adhere to the ethical regulations applicable in the UAE.

What powers and duties does the national law of your jurisdiction impose upon arbitrators?

Article 21 of the Arbitration Law explicitly recognises the arbitral tribunal’s power to award interim or conservatory measures, either on the request of a party or of its own motion. When approached in connection with possible appointment as an arbitrator, an individual must disclose, in writing, anything likely to give rise to doubts as to their impartiality or independence. Arbitrators are, of course, obliged to conduct proceedings in a fair and equitable manner with due regard to all applicable laws, including those of the arbitral seat.

Are there rules restricting the appearance of lawyers from other jurisdictions in legal matters in your jurisdiction and, if so, is it clear that such restrictions do not apply to arbitration proceedings sited in your jurisdiction?

No, there are no provisions prohibiting the appearance of lawyers from other jurisdictions in arbitral proceedings. There are, however, strict rules with respect to the appearance of non-Emirati advocates appearing before the national courts, as they require a special licence to do so.

To what extent are there laws or rules in your jurisdiction providing for arbitrator immunity?

Following the introduction of the Arbitration Law, the UAE enacted Federal Law No. 24 of 2018 amending certain provisions of the UAE Penal Code. In particular, Article 257 was amended, which previously imposed criminal liability on arbitrators and experts found to have issued decisions or opinions in a manner inconsistent with their duties of impartiality and neutrality. As a result of the amendment, issued in September 2018, Article 257 shall only apply to experts, translators and fact finders appointed by the judicial or administrative authority in criminal or civil cases who knowingly and deliberately confirmed a false fact or issued an untrue interpretation. Accordingly, Article 257 will no longer apply to arbitrators, including experts in arbitration.

Do the national courts have jurisdiction to deal with procedural issues arising during an arbitration?

Yes, the national courts have jurisdiction to hear applications for interim measures and determine challenges in respect of the procedural administration of proceedings including but not limited to appointment of the arbitral tribunal.

International Arbitration 2023: Practical cross-border insights into international arbitration work in the UAE (part 2)

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