Infra.Law

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

By Thanos Karvelis & Mazin Al Mardhi

Preliminary Relief and Interim Measures

Is an arbitral tribunal in your jurisdiction permitted to award preliminary or interim relief? If so, what types of relief? Must an arbitral tribunal seek the assistance of a court to do so?

Having due regard to the nature of the dispute, the tribunal may, either on the request of a party or of its own motion, award interim or conservatory measures that include:

orders to preserve relevant and material evidence;
orders for the preservation of goods which form part of the subject matter of the dispute, such as an order to deposit goods with a third party or to sell goods that are susceptible to damage;
orders to preserve assets and funds for the satisfaction of a subsequent award;
orders to maintain or restore the status quo pending determination of the dispute; and
orders to take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitration process itself.

The Arbitration Law also provides that the arbitral tribunal may order the party requesting an interim measure to provide appropriate security for costs.

Is a court entitled to grant preliminary or interim relief in proceedings subject to arbitration? In what circumstances? Can a party’s request to a court for relief have any effect on the jurisdiction of the arbitration tribunal?

Pursuant to Article 18 of the Arbitration Law, the Chief Justice of the High Court may, at the request of a party or of the tribunal, order such interim or conservatory measures as are necessary in respect of existing or potential arbitral proceedings. The jurisdiction of the tribunal remains unaffected in such instance.

In practice, what is the approach of the national courts to requests for interim relief by parties to arbitration agreements?

The provisions surrounding interim relief align the UAE’s onshore arbitration practice with the UNCITRAL Model Law. Applications for interim measures before national courts are normally determined within a few days if filed before the Court of Urgent Matters. Parties may apply for such measures before the arbitral tribunal pursuant to Articles 18 or 21 of the Arbitration Law and, if granted, seek enforcement by national courts.

Under what circumstances will a national court of your jurisdiction issue an anti-suit injunction in aid of an arbitration?

The national courts do not issue anti-suit injunctions as such. Where the existence of an arbitration agreement is raised as a defence, the court may dismiss an application to commence court proceedings.

Does the law of your jurisdiction allow for the national court and/or arbitral tribunal to order security for costs?

Article 21(2) of the Arbitration Law allows for arbitral tribunals to order a party to provide appropriate security to cover the costs of any interim measures and may further require that party to bear all damages arising in connection with the enforcement of such measures should the tribunal thereafter decide that the party is not entitled to secure them.

What is the approach of national courts to the enforcement of preliminary relief and interim measures ordered by arbitral tribunals in your jurisdiction and in other jurisdictions?

Applications for interim measures before national courts are determined swiftly, often within a few days if filed before the Court of Urgent Matters. Parties may apply for such measures before the arbitral tribunal pursuant to Articles 18 or 21 of the Arbitration Law and, if granted, seek enforcement by the national courts.

Evidentiary Matters

What rules of evidence (if any) apply to arbitral proceedings in your jurisdiction?

Parties may agree on the rules of evidence appropriate given the circumstances of the case. The International Bar Association (“IBA”) Rules of Evidence are the most commonly adopted in this jurisdiction.

Article 33(8) of the Arbitration Law affords the arbitral tribunal discretion to determine the rules of evidence to be followed and the admissibility, relevance or weight of evidence adduced by any of the parties in relation to facts or expert opinions. The tribunal may also specify a time limit, method, and form for the exchange of such evidence between the parties, as well as a method for its submission to the tribunal.

What powers does an arbitral tribunal have to order disclosure/discovery and to require the attendance of witnesses?

Pursuant to Articles 31 and 36 of the Arbitration Law, the arbitral tribunal may, on its own motion or if a party so requests, order the disclosure of evidence and seek assistance from the national courts, if necessary. If a party fails to comply with an order for disclosure, the tribunal may draw adverse inferences.

Under what circumstances, if any, can a national court assist arbitral proceedings by ordering disclosure/discovery or requiring the attendance of witnesses?

Subject to the arbitral tribunal’s request, the court may order witnesses to appear before the tribunal in order to give oral testimony or adduce documents or any evidentiary materials.

The court’s Chief Justice may order sanctions against any witness who fails to appear or answer questions without lawful excuse. Article 36 of the Arbitration Law also empowers the court to direct a third party to produce documents in its possession that are essential for deciding the dispute.

What, if any, laws, regulations or professional rules apply to the production of written and/or oral witness testimony? For example, must witnesses be sworn in before the tribunal and is cross-examination allowed?

When taking oral or written testimony, the witness must be sworn in, either by way of swearing a religious oath or providing a declaration as to the truth of his or her testimony, pursuant to the Law of Evidence (Federal Law No. 10 of 1992).

What is the scope of the privilege rules under the law of your jurisdiction? For example, do all communications with outside counsel and/or in-house counsel attract privilege? In what circumstances is privilege deemed to have been waived?

Whilst the UAE does not have a codified set of rules governing rules of prejudice, it is a widely accepted practice in international arbitration for parties to agree to apply “without prejudice” rules to sensitive communications as a matter of best practice. On the other hand, UAE courts are not prevented from considering “without prejudice” communications, even where such communications are exchanged strictly in the context of settlement negotiations. This means that “off the record” communications may be submitted by parties and considered by domestic courts as evidence; however, the weight of such evidence remains subject to determination by the court.

Making an Award

What, if any, are the legal requirements of an arbitral award? For example, is there any requirement under the law of your jurisdiction that the award contains reasons or that the arbitrators sign every page?

What powers (if any) do arbitral tribunals have to clarify, correct or amend an arbitral award?

Article 41 of the Arbitration Law sets out the fundamental requirements of an arbitral award. In particular:

The arbitral award shall be made in writing.
In arbitral proceedings with more than one arbitrator, the award shall be issued by majority opinion. If different opinions of the arbitrators rule out a majority, the presiding arbitrator shall issue the award, unless otherwise agreed by the parties; in which case, the dissenting opinions shall be noted in writing or enclosed and shall form an integral part of the award.
The award shall be signed by the arbitrators and the signatures of the majority of the arbitrators shall suffice, provided that the reason for any omitted signature is stated.
The award shall state the reasons upon which it is based, unless the parties have agreed otherwise, or the law applicable to the arbitral proceedings does not require reasons to be given.
The arbitral award shall include the names and addresses of the parties, the names of the arbitrators, their nationalities and addresses, the text of the arbitration agreement, a summary of the parties’ claims, statements and documents, the order made and the reasons on which the award is based, if required to be stated, and the date and place of issue of the award.
Unless agreed otherwise, the date of the award shall be taken to be the date on which it is signed by the arbitrator or, where there is more than one arbitrator, by the last of them.

The Arbitration Law allows for the clarification, correction and amendment of an arbitral award. The relevant procedural rules relating to the issuance of any such clarification, correction or amendment may be agreed by the parties or subject to Articles 49 or 50 of the Arbitration Law.

Challenge of an Award

On what bases, if any, are parties entitled to challenge an arbitral award made in your jurisdiction?

An arbitral award may be challenged if any of the following circumstances may be established:

that no Arbitration Agreement exists or such agreement is void or has lapsed under the law to which the parties have subjected it;
that a party, at the time of conclusion of the arbitration agreement, was incompetent or under some incapacity;
that a person does not have the legal capacity to dispose of the disputed right under the law governing his capacity;
that a party fails to present its case because it was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or because the tribunal breached due process or for any other reason beyond his control;
that the arbitral award excludes the application of the parties’ choice of law for the dispute;
that the composition of the arbitral tribunal or appointment of any arbitrator was not in accordance with the law or agreement of the parties;
that the arbitral proceedings were marred by irregularities that affected the award or the arbitral award was not issued within the specified timeframe; or
that the award contains decisions on matters not falling within the terms of the submission to arbitration.

Can parties agree to exclude any basis of challenge against an arbitral award that would otherwise apply as a matter of law?

If any such agreement to exclude a basis of challenge would necessarily result in the breach of public policy, such agreement would not be enforceable. For example, rules relating to the legal capacity of the parties or impartiality of the tribunal may not be waived or excluded by agreement of the parties.

Can parties agree to expand the scope of appeal of an arbitral award beyond the grounds available in relevant national laws?

There are no provisions under UAE law enabling parties to expand the scope of appeal beyond the grounds available under the Arbitration Law.

What is the procedure for appealing an arbitral award in your jurisdiction?

Article 53 of the Arbitration Law provides for grounds upon which an appeal may be set aside (not appealed), and the Code of Civil Procedures sets out the procedural requirements for an application to be set aside before national courts. Arbitrations subject to institutional rules often provide a particular criteria for the appeal of an arbitral award within a fixed period.

Enforcement of an Award

Has your jurisdiction signed and/or ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? Has it entered any reservations? What is the relevant national legislation?

Pursuant to Federal Decree No. 43 of 2006, the UAE acceded to the New York Convention in 2006 without making any declarations or reservations.

Has your jurisdiction signed and/or ratified any regional Conventions concerning the recognition and enforcement of arbitral awards?

The UAE is a party to the following treaties on the recognition and enforcement of arbitral awards, namely the:

Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965;
Riyadh Convention on Judicial Cooperation between States of the Arab League of 1983; and
Gulf Cooperation Council (“GCC”) Convention for the Execution of Judgments, Delegations and Judicial Notifications of 1996.

What is the approach of the national courts in your jurisdiction towards the recognition and enforcement of arbitration awards in practice? What steps are parties required to take?

The ratification of an arbitral award may be achieved by means of an application to the Chief Justice in accordance with the requirements of Article 55 of the Arbitration Law. Once ratified, parties may apply to the Execution Court for enforcement measures where a party fails to comply with the award.

What is the effect of an arbitration award in terms of res judicata in your jurisdiction? Does the fact that certain issues have been finally determined by an arbitral tribunal preclude those issues from being re-heard in a national court and, if so, in what circumstances?

An arbitral award delivered in accordance with the requirements of the Arbitration Law is binding on the parties, shall constitute res judicata and is enforceable as a judicial ruling. The effect of res judicata means that any issue determined by the tribunal may not be subject to another determination on the merits bynational courts

What is the standard for refusing enforcement of an arbitral award on the grounds of public policy?

National courts will strictly enforce all public policies as a matter of priority. Therefore, where an arbitral award conflicts with public policy, it may be set aside.

Confidentiality

Are arbitral proceedings sited in your jurisdiction confidential? In what circumstances, if any, are proceedings not protected by confidentiality? What, if any, law governs confidentiality?

Unless agreed otherwise by the parties, arbitral proceedings are deemed confidential as per Article 48 of the Arbitration Law.

Can information disclosed in arbitral proceedings be referred to and/or relied on in subsequent proceedings?

In the context of litigation, national courts may order disclosure of such information as may be necessary for the fair determination of certain applications and challenges to the ratification and enforcement of arbitral awards. Otherwise, unless the parties have agreed to waive confidentiality, information disclosed in arbitration may not be relied upon in other proceedings without the consent of the disclosing party. This requirement may be waived if disclosure is necessary in the interest of upholding public policy.

Remedies / Interests / Costs

Are there limits on the types of remedies (including damages) that are available in arbitration (e.g., punitive damages)?

What, if any, interest is available, and how is the rate of interest determined?

Punitive damages are not recognised in the UAE.

Pursuant to Article 76 of the Commercial Code, simple interest is recoverable and capped at 12% per annum. Interest rates are generally determined having regard for the prevailing interest rates applied by banks operating in the UAE.

As per General Assembly Decision No. 1 of 2021, which came into force on 9 June 2021, the Dubai Court of Cassation agreed unanimously to reduce the rate of interest to 5% per annum until full settlement of a debt is made, unless agreed otherwise by the parties. Such practice does not prevent the courts from awarding up to 12% interest per annum in exceptional cases.

Are parties entitled to recover fees and/or costs and, if so, on what basis? What is the general practice with regard to shifting fees and costs between the parties?

Recovery of fees and costs is permitted subject to an agreement by the parties. Generally, arbitrators have discretion to award costs as they deem appropriate given the circumstances of the case and conduct of the parties.

Is an award subject to tax? If so, in what circumstances and on what basis?

Arbitral awards are not subject to tax in the UAE.

Are there any restrictions on third parties, including lawyers, funding claims under the law of your jurisdiction? Are contingency fees legal under the law of your jurisdiction? Are there any “professional” funders active in the market, either for litigation or arbitration?

Third-party funding is permitted in the UAE; however, strict contingency fee arrangements are not. In order for an application to recover legal costs to be admissible in court, the funding agreement between a client and counsel should comprise an ordinary retainer, i.e. specifying the services and amounts payable at each stage of the proceedings.

Investor-State Arbitrations

Has your jurisdiction signed and ratified the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (1965) (otherwise known as “ICSID”)?

The UAE signed and ratified the ICSID in 1981.

How many Bilateral Investment Treaties (“BITs”) or other multi-party investment treaties (such as the Energy Charter Treaty) is your jurisdiction party to?

The UAE is currently party to 92 BITs and 12 investment treaties, and at least 11 multilateral investment-related agreements at government level.

Does your jurisdiction have any noteworthy language that it uses in its investment treaties (for example, in relation to “most favoured nation” or exhaustion of local remedies provisions)? If so, what is the intended significance of that language?

No such noteworthy language exists to our knowledge.

What is the approach of the national courts in your jurisdiction towards the defence of state immunity regarding jurisdiction and execution?

Neither the UAE nor the Dubai International Financial Centre (“DIFC”) has set out any legislation expressly conferring sovereign immunity upon foreign States

General

Are there noteworthy trends or current issues affecting the use of arbitration in your jurisdiction (such as pending or proposed legislation)? Are there any trends regarding the types of dispute commonly being referred to arbitration?

Since the issuance of Decree No. 34 of 2021, which saw the abolishment of the Emirates Maritime Arbitration Centre and the Arbitration Institution of the DIFC (formerly known as the DIFC-LCIA Arbitration Centre), a number of developments have occurred. Decree No. 34 of 2021 required that all existing cases registered with these institutions be transferred to the DIAC with immediate effect. As of 28 March 2022, the DIAC and LCIA have agreed terms enabling the LCIA to administer all existing DIFC-LCIA cases initiated prior to 20 March 2022. All proceedings conducted under the rules of the DIFC-LCIA and commenced after 21 March 2022 (or commenced before such date but not registered by the DIFC-LCIA under a designated case number) shall be registered and administered by the DIAC, unless agreed otherwise by the parties.

What, if any, recent steps have institutions in your jurisdiction taken to address current issues in arbitration (such as time and costs)?

Pursuant to the agreement reached between the DIAC and LCIA, all payments previously deposited with the DIFC-LCIA and subsequently transferred to the DIAC as per Decree No. 34 of 2021 will be transferred to the LCIA and managed by the LCIA directly.

What is the approach of the national courts in your jurisdiction towards the conduct of remote or virtual arbitration hearings as an effective substitute to in-person arbitration hearings? How (if at all) has that approach evolved since the onset of the COVID-19 pandemic?

National courts have welcomed the adoption of smart systems for the electronic administration of cases over extended periods where movement was severely restricted as a result of the pandemic. Notwithstanding the efficiency gained by technology, virtual hearings are disadvantageous insofar as witness examination cannot be conducted in person.

Reproduced with permission from Global Legal Group. This article was first published in the International Comparative Legal Guides - International Arbitration 2023 20th Edition. To read the full report, please click here.

Arbitral Awards – How Final Are They?

Read here

Alumni • Legal Notices • Accessibility • Privacy Notice • Fraudulent or 'scam' communication • Complaints Procedure • COVID Secure Certification • Pricing Information