The United Arab Emirates (UAE) is a federation formed of seven individual emirates, with its administrative capital in Abu Dhabi. The UAE was formed on 2 December 1971, following the dissolution of the former Trucial States.
The UAE Provisional Constitution was adopted upon the UAE's formation. It defines the political and legal framework of the UAE, including the allocation of powers between the federal government and the government of each individual emirate. While the individual emirates are subject to UAE federal law, they retain the right to pass their own laws in areas that are not otherwise reserved for federal jurisdiction, and they remain in control of their own internal administration. Laws that were in effect in the individual emirates prior to the formation of the UAE also continue to remain in effect unless they are superseded by federal law, conflict with federal law or are repealed by the government of the relevant emirate.
As an Islamic country, UAE law is heavily influenced by the Islamic shariah, and shariah still applies directly in areas such as family law and the law of succession. The UAE is predominantly a civil law jurisdiction, with a codified system that shares many features with Egyptian law. In common with other civil law jurisdictions, the UAE does not recognise a system of binding precedent, although decisions of the higher courts can be used as persuasive (but not binding) authority. There can be practical difficulties in obtaining copies of decided cases, however, as there is no regular system of reporting and copies of decisions are sometimes only made available to the parties involved.
Three emirates (Dubai, Abu Dhabi and Ras Al Khaimah) continue to maintain their own individual court systems, which apply both federal law and the laws of the relevant emirate. The remaining four emirates (Sharjah, Ajman, Um Al Quwain and Fujairah) all participate in a federal court system, which has the Federal Supreme Court (sometimes referred to as the Union Supreme Court) at its head. Each of the federal courts and the courts of individual emirates conduct proceedings entirely in Arabic. Lawyers must be licensed as advocates to file cases and to appear before the courts, a requirement that essentially limits rights of audience to Emirati nationals.
An important feature of the UAE legal landscape is the existence of freezones. These are defined areas that are exempted from aspects of both UAE federal law and local emirate law. The two most significant freezones for the purposes of arbitration in the UAE are the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). The DIFC and the ADGM each have separate and distinct systems of law, which are based predominately on English common law. They each also have their own courts, which operate in English and apply rules of procedure that are based heavily on those used by the English High Court. The DIFC has been in existence since 2002, and in operation since 2004. The ADGM is much newer, having been established in 2013.
Each of the DIFC and ADGM have modern and well-drafted arbitration laws. The DIFC Arbitration Law2 was adopted in 2008 and amended in 2013. It closely follows the 2006 version of the UNCITRAL Model Law. The DIFC's reputation as a 'pro arbitration' jurisdiction is further enhanced by a high-quality bench, which has a track record of decisions that demonstrate their willingness to support arbitration proceedings and properly to enforce awards. The ADGM has an arbitration law3 that is based on the 2006 version of the UNCITRAL Model Law, together with elements of the English Arbitration Act.4 Like the DIFC, the ADGM also has a high-quality bench, although it is relatively new and so has yet to establish a track record of positive decisions on arbitration-related cases.
In a major, and very welcome, development there is now also a UAE Federal Arbitration Law (Arbitration Law). This was issued only very recently and (at the time of writing) has not yet come into force.5 As set out further below, the Arbitration Law is based broadly upon the UNCITRAL Model Law, although there are several differences that are likely to be of significance. Once the new Arbitration Law enters into force, it will replace the existing provisions of the Federal Civil Procedure Law that currently deal with arbitration in the UAE.6
There are three main arbitral institutions in the UAE, two of which are based in Dubai and the third in Abu Dhabi. These are the Dubai International Arbitration Centre (DIAC), the DIFC-LCIA and the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC). DIAC is the older and more established of the two Dubai-based institutions, and is often seen as synonymous with arbitration seated 'onshore' (i.e., outside of the DIFC) Dubai. The DIFC-LCIA is an offshoot of the LCIA based in the DIFC. ADCCAC is based in Abu Dhabi and is still the institution of choice for many entities based in the capital. This may change, however, as a representative branch office of the ICC is due to open in the ADGM at some point this year.
II THE YEAR IN REVIEW
i Further decisions of the joint judicial tribunal for the Dubai courts and the DIFC courts
As detailed in the previous edition of this publication, a major development last year was the establishment of a joint judicial tribunal (also referred to as the joint judicial committee) pursuant to Decree No. 19 of 2016. This committee is tasked with resolving conflicts of jurisdiction between the Dubai courts and the DIFC courts,7 and was commonly thought to be a response to the DIFC courts' willingness to allow the DIFC to be used as a 'conduit' for the enforcement of arbitral awards and foreign judgments in 'onshore' Dubai. Although welcomed by many, the so-called 'conduit jurisdiction' of the DIFC courts was controversial, as it was seen by some as an unwarranted overreach on the part of the DIFC courts.
Although the judicial tribunal is comprised of judges from both the DIFC courts and the 'onshore' Dubai courts, there is an in-built majority for the 'Dubai court' members of the committee. It was clear from the first batch of publicly available decisions that this was significant, as two of the first four cases were resolved by a majority in favour of the Dubai courts (with the DIFC court judges dissenting in each cases).8 Those cases involved attempts to enforce 'onshore' Dubai-seated arbitration awards through the DIFC courts, although one was not a true 'conduit' jurisdiction case as there were some assets in the DIFC against which enforcement was sought.9 In those first cases, it was only where there were no parallel proceedings in the Dubai courts that the case was resolved in favour of the DIFC courts.10 These first decisions of the committee were addressed in more detail the last edition of this work.
A total of nine further decisions have since been made publicly available.11 Four of these decisions concern the enforcement of arbitral awards or foreign court decisions, two of which were resolved in favour of the Dubai courts and two in favour of the DIFC courts. Gulf Navigation Holding P.S.C v. Jinhai Heavy Industry Co Limited12 concerned an attempt to enforce a London-seated award that had been issued in accordance with the rules of arbitration of the London International Maritime Arbitrators Association. In response to enforcement proceedings in the DIFC courts, the award debtor filed a case with the Amicable Settlement of Disputes Centre of the Dubai courts (a part of the Dubai courts that seeks to facilitate settlement of disputes between parties). It then referred the matter to the committee alleging a conflict of jurisdiction between the DIFC courts and the 'onshore' Dubai courts. Consistent with its previous decisions, a majority of the committee found in favour of the Dubai courts, again on the basis that 'the Dubai courts have general jurisdiction'. This was even though there was no formal claim before the Dubai courts, only a request to the Amicable Settlement of Disputes Centre. The DIFC court judges dissented, explaining in a powerful dissenting opinion why they did not consider there to be any principle of law that would establish the 'general jurisdiction' of the Dubai courts. The DIFC court judges were also of the opinion that there had been a submission to the jurisdiction of the DIFC courts as the award debtor had taken various steps in the DIFC court enforcement proceedings without contesting the jurisdiction of the DIFC courts. Finally, the DIFC court judges explained that it would be contrary to the UAE's obligations under the New York Convention to allow the award debtor to seek to challenge substantive issues that had already been determined by arbitration in proceedings before the Amicable Settlement of Disputes Centre of the Dubai courts.
Ramadan Mousa Mishmish v. Sweet Homes Real Estate LLC13 concerned an attempt to enforce an 'onshore' Dubai arbitration award through the DIFC courts. It was a true 'conduit jurisdiction' case in that there were no assets in the DIFC against which enforcement was sought. A DIFC court judgment was therefore sought so as to enable enforcement in 'onshore' pursuant to the Judicial Authority Law.14 It would appear that the award debtor brought proceedings in the Dubai courts to challenge the award, before referring the matter to the committee. Once again, a majority of the committee found in favour of the Dubai courts, and ordered the DIFC courts to 'cease from entertaining the case'. The DIFC court judges again dissented, explaining in a dissenting opinion that there was no conflict between the exclusive jurisdiction of the DIFC courts to determine an application for recognition and enforcement of the award and the exclusive jurisdiction of the Dubai courts (as the courts of the arbitral seat) to determine a challenge to the validity of the award.
Of the two decisions that were in favour of the DIFC courts, the first was decided on the now well-established basis that there were no parallel proceedings before the Dubai courts and so no conflict of jurisdiction. That case, Emirates Trading Agency LLC v. Bocimar International NV,15 concerned an application for the recognition and enforcement of two English Commercial Court decisions that had been themselves been issued to recognise two London-seated arbitral awards. The other decision, Assas Investments Limited v. Fius Capital Limited,16 arose out of an attempt by an award creditor to enforce a DIFC-seated arbitral award by issuing enforcement proceedings in both the DIFC courts and the 'onshore' Dubai courts. The award debtor referred the matter to the committee, arguing that there was a conflict of jurisdiction between the DIFC courts and the 'onshore' Dubai courts and so a risk of either double recovery or inconsistent decisions. The committee rejected that assertion, finding that it was perfectly proper for an award creditor to pursue enforcement actions in multiple jurisdictions against different assets at the same time, and that this did not give rise to any conflict of jurisdiction between the DIFC courts and the 'onshore' Dubai courts. In reaching this conclusion, the committee appears to have had particular regard to the fact that the award debtor was a DIFC-registered and DFSA-regulated company, and that there was a specific agreement to arbitrate disputes in the DIFC pursuant to the rules of the DIFC-LCIA and under the substantive laws of the DIFC.
Two of the other most recent decisions are also concerned with arbitration (albeit not with issues of recognition or enforcement). Al Zaitoon, Olive Group v. Al Delma17 concerned a disputed tenancy contract that contained a DIFC-LCIA arbitration clause. When one party referred the dispute to the Amicable Settlement of Disputes Centre of the Dubai courts, the other referred the matter to the committee arguing that the Dubai courts did not have jurisdiction because there was an arbitration agreement. The committee declined to make the order sought, on the basis that there were no parallel proceedings before the DIFC courts and so no conflict of jurisdiction upon which it could decide. Assas OPCP Limited v. VIH Hotel Management Ltd18 concerned claims under a hotel management agreement, which were subject to an arbitration clause in the agreement. Although the DIFC courts issued an interim injunction in support of arbitration proceedings, the respondent argued that the arbitration agreement was invalid due to a lack of authority and started its own proceedings in the Dubai courts. The respondent then referred the matter to the committee arguing that there was a conflict of jurisdiction between the DIFC courts and the 'onshore' Dubai courts. Encouragingly, the committee disagreed, on the basis that the DIFC courts' injunction had been issued on an interim basis and with the aim of preserving the status quo until the underlying dispute had been resolved. As a result, there was not at that stage a conflict of jurisdiction between the DIFC courts and the 'onshore' Dubai courts.
The rest of the most recent committee decisions do not deal with arbitration specifically but are nonetheless of interest given the limited body of decisions that have so far been made available publicly. Investment Group Private LTC v. Standard Chartered Bank19 involved a claim before the DIFC courts in which one party was seeking to contest jurisdiction. This was resolved in favour of the DIFC courts on the basis that there had been an express submission to the jurisdiction of the DIFC courts. Although this decision was rendered at around the same time as the first set of four decisions of the committee, it was not made public until sometime later. The appellant in that case then made a further reference to the committee in 2017, however, essentially seeking to have the committee reconsider its previous decision. Perhaps unsurprisingly, the committee found against the appellant again, primarily on the basis that there were no ongoing Dubai court proceedings and so no conflict of jurisdiction.20 The committee also went on to find that the appellant was bound by the previous decision of the committee, which was final and binding on the parties and so res judicata.
Endofa DMCC v. D'Amico Shipping21 involved a shipping dispute between an 'onshore' Dubai entity and an Italian company. Although it is not clear from the committee's decision whether there were any agreed dispute resolution provisions, the Italian company appears to have started proceedings the English commercial court, followed by proceedings in the DIFC courts. The 'onshore' Dubai company then started proceedings in the Dubai courts and referred the matter to the committee. A majority of the committee found that there was a conflict of jurisdiction between the DIFC courts and the Dubai courts, and resolved that conflict in favour of the Dubai courts, once again on the basis that the Dubai courts 'have the general jurisdiction embodied in the procedural laws'.
Taken together with the first set of the committee's decisions, these most recent decisions concerning the recognition and enforcement of arbitral awards and foreign court judgments are discouraging for anyone who may be considering making use of the DIFC as a conduit jurisdiction. Indeed, it would appear that a party seeking to resist an enforcement action through the DIFC courts has only to start its own case before the 'onshore' Dubai courts, and then to refer the matter to the committee. The most likely result will then be an order from the committee directing the DIFC courts to 'cease from entertaining' the matter. This applies even in the case of foreign arbitral awards, where the 'onshore' Dubai courts do not have jurisdiction to consider a challenge to the award, and even where the Dubai courts' only involvement is through its Amicable Settlement of Disputes Centre. Given the pro-enforcement provisions of the new Arbitration Law, however, this may not be anywhere near as significant as previously thought. This is because the use of the DIFC as a conduit jurisdiction was primarily the result of perceived difficulties in enforcing arbitral awards directly through the 'onshore' Dubai courts, and it is hoped that those difficulties may now become a thing of the past.
Other than this, however, the most recent decisions are somewhat more encouraging. In particular, the Assas Investments case shows the committee's endorsement of an award creditor's right to peruse parallel enforcement actions in a number of jurisdictions, including both the DIFC and 'onshore' Dubai. The VIH Hotel Management case further suggests that the DIFC courts are still able to issue interim injunctions in support of arbitration and that the effect of these injunctions will not necessarily be frustrated by a reference to the committee. These are very positive decisions, and may signal a more 'pro-DIFC' stance among the members of the committee. Given that there is still only a small number of publicly available decisions, however, it may still be too soon to make any absolute predictions for future developments in this area.
ii Possible restrictions on party representation in arbitrations
In November 2017, Ministerial Resolution No. 972 of 2017 (the Regulations) of the Executive Regulations to the Federal Legal Profession Law No. 23 of 1991 came into force. The Regulations caused great consternation within the UAE legal community as, on one possible reading, only registered advocates would be permitted to represent parties in UAE-seated arbitrations. As only UAE nationals (with only very limited exceptions) are permitted to be registered as advocates, there was a significant concern that the effect of the Regulations was to prevent any foreign national from appearing as an advocate in UAE-seated arbitrations. This would be very significant, as currently there are a large number of foreign nationals (both those who live in the United Arab Emirates and who those operate on a 'fly in, fly out' basis) that represent parties as advocates in UAE-seated arbitrations.
This concern was the result of Article 2 and Article 17 of the Regulations, read together. Article 2 of the Regulations provides (in translation) that 'no person may practice the profession in the State unless his name is registered in the Roll of Practising Lawyers. Furthermore, courts, arbitration tribunals and judicial and administrative committees may not accept a person to act as a lawyer on behalf of another person unless his name is registered in the Roll of Practicing Lawyers.' Article 17 of the Regulations then provides that only a UAE national is entitled to be registered on the Roll of Practising Lawyers. On its face, therefore, the effect of the Regulations is to extend the restriction against UAE nationals from appears as advocates in 'onshore' court proceedings to arbitration proceedings taking place in the United Arab Emirates.
Compounding the potential difficulties caused by the first part of Article 2 of the Regulations, Article 2 goes on to provide that '[a] power of attorney, which includes any of the duties of the profession, may be issued only in favor of practicing lawyers for appearing or pleading in court or taking any other judicial action before any of the authorities stated in paragraph 1 of this article.' It is an established principle of UAE law that an individual requires a power of attorney in order to represent a party in a UAE-seated arbitration,22 and so any restriction on a foreign national's ability to obtain such a power of attorney would effectively prevent them from representing a party in arbitration proceedings in the United Arab Emirates.
There was an almost immediate reaction to this aspect of the Regulations, and a number of commentators expressed publicly the view that the Regulations may be the beginning of the end for the United Arab Emirates as a seat for arbitration proceedings. This was despite the fact that there was never any credible argument that the Regulations applied to arbitrations seated in the DIFC or the ADGM, and also with regard to the impact of the UAE Constitution. Pursuant to the UAE's Federal Constitution, regulation of civil procedure is not within the competence of the UAE federal government, rather it a matter that is reserved to the individual emirates.23 As a matter of UAE constitutional law, therefore, the Regulations could apply only to the UAE federal courts (and potentially to arbitrations that are subject to the supervisory jurisdiction of the federal courts). Both Dubai and Abu Dhabi do not operate within the federal courts system, however, and so the Regulation should not conceptually have any effect upon arbitrations seated in Dubai or Abu Dhabi.
Very creditably, the government of Dubai Legal Affairs Department (the regulator of the legal profession within the emirate of Dubai) moved quickly to dispel much of the negative publicity regarding the potential impact of the Regulation. In a letter that has been widely circulated within the Dubai legal community, the government of Dubai Legal Affairs Department confirmed specifically that foreign lawyers (both those based in Dubai and those resident overseas) could continue to appear as advocates in arbitration proceedings seated in Dubai. As a result, within the emirate of Dubai at least, the issue was essentially laid to rest within weeks of it first coming to the attention of the legal community.
The position may now be beyond doubt even at the UAE federal level following the passage of the Arbitration Law. This is because Article 33 of the Arbitration Law provides (in translation) that parties to UAE-seated arbitrations may be represented by their choice of 'lawyers and others'. As a piece of UAE federal legislation, this would take precedence over the Regulations, which are only a secondary legislative instrument. In fact, Article 60 of the Arbitration Law provides expressly that the Arbitration Law repeals any prior inconsistent legal provisions.
iii Arbitration centre in the ADGM
In July 2017, the ADGM announced its intention to construct a purpose-built arbitration centre on Al Maryah Island, together with the establishment of an Middle East representative office of the ICC within the ADGM. Although it was widely expected that an arbitration institution would be established within the ADGM, the popularity of the ICC both within the UAE and across the region meant that this was seen as something of coup for the ADGM. The move was clearly intended to boost the reputation of the ADGM as a seat for arbitration proceedings, and to provide a clear alternative to ADCCAC, the only other significant Abu Dhabi-based arbitral institution.
The arbitration centre and representative office are understood still to be under construction, with completion now expected to be at the end of the second quarter of 2018. The centre is said to include state-of-the-art hearing facilities, with both video-conferencing and software that will allow for the electronic presentation of evidence during hearings. There will also be arbitration training courses run from the arbitration centre, although the content of these courses have yet to be confirmed.
It is notable that the ADGM has chosen to adopt a somewhat different approach to the DIFC, which formed an exclusive partnership with the LCIA to form the DIFC-LCIA. The relationship between the ADGM and the ICC is understood not to be exclusive, and there will not apparently be a bespoke version of the ICC rules to govern arbitrations seated in the ADGM. Instead, the ICC representative office will follow the same model as the ICC representative office recently established in Singapore, and will administer arbitrations that relate both to the ADGM and across the Middle East.
This is only one aspect of the continued development of the ADGM as jurisdiction. The ADGM courts held their first hearing in December 2017, and there have now been a total of three published ADGM court of first instance decisions. There is also now a formal memorandum of understanding between the ADGM courts and the 'onshore' Abu Dhabi courts, pursuant to which there should be straightforward reciprocal enforcement of judgments (including recognised arbitral awards) in between the ADGM and 'onshore' Abu Dhabi. Also of note is the ADGM eCourts initiative, which allows hearings to take place by video-conference and facilitates the filing of documents (including documents for trial) electronically.
iv Other arbitration developments
The DIFC courts have this year heard their single biggest case, an application for the enforcement of two London-seated LCIA arbitration awards that together were worth in excess of US$2 billion. That application was brought by Pearl Petroleum Company Limited (Pearl) against the Kurdistan regional government (KRG), as part of an enforcement strategy that sought to use the Riyadh Convention24 to enforce the resulting DIFC court judgment against the KRG's assets in Iraq. The KRG sought to resist enforcement on the grounds of sovereign immunity. In particular, the KRG argued that the DIFC courts lacked jurisdiction to determine the question of sovereign immunity as involves issues of public policy that can only be determined in the UAE at a federal level.
Although there were potentially difficult issues of law raised by the KRG's defences to the application, the DIFC courts decided the application in Pearl's favour based on a finding that the KRG had waived any entitlement to sovereign immunity as a matter of contract.25 This leaves open a number of broader issues of sovereign immunity, both as a matter of DIFC law and of UAE law, for future cases.
Although there have been a handful of arbitration-related cases decided by the 'onshore' Dubai courts over the last year, the long-term impact of many of these is likely to be limited. This is because they were decided under the relevant provisions of the UAE Federal Civil Procedure Law, which are soon to become defunct once the Arbitration Law comes into effect. It may be, therefore, that decisions of the UAE courts on arbitration-related issues are now of historic interest, rather than as potential guidance for future cases.
In Dubai Court of Cassation Case No. 79 of 2017, for example, it was argued that a party had waived its contractual right to arbitrate a dispute because that party had not raised the existence of an arbitration agreement at proceedings before the Amicable Settlement of Disputes Centre of the Dubai courts. This argument was based upon Article 84 of the UAE Civil Procedure Law, which requires a party seeking to dispute the jurisdiction of the courts to raise that dispute at the first hearing. In that case, it was held that the right to arbitrate had not been waived because hearings before the Amicable Settlement of Disputes Centre were not court hearings for the purposes of Article 84 of the UAE Civil Procedure Law. As a result, there had been no waiver of a right to arbitrate simply because the existence of an arbitration agreement had not specifically been raised during (ultimately unsuccessful) amicable settlement proceedings.
III OUTLOOK AND CONCLUSIONS
The Arbitration Law is, quite literally, a game-changing development. Although the possibility of a Federal Arbitration Law has been discussed for at least the last 10 years, it is finally a reality. As a result, almost overnight many of the perennial difficulties that were inherent in arbitration in the UAE will be swept away, and there is now a strong sense of optimism that the UAE will now take its place as a key regional and global arbitration hub.
Although this optimism is well-founded, there are nonetheless potential areas of concern with the Arbitration Law. Some of these may be addressed by regulations that are expected to be issued pursuant to the Arbitration Law, although there is currently no indication of when they are likely to be published. Even despite the anticipated regulations, many issues are likely to be left to the courts to resolve, and there is still a possibility that the judiciary will continue to be somewhat hostile to arbitration even despite the new Arbitration Law. Until that becomes clear, however, we must all prepare ourselves for the brave new world of arbitration under the new Arbitration Law, with the hope that the UAE is finally ready to join the ranks of arbitration-friendly jurisdictions across the world.
1 Stephen Burke is a partner at Baker Botts LLP.
2 DIFC Law No. 1 of 2008, as amended by DIFC Amendment Law No. 1 of 2013.
3 ADGM Arbitration Regulation 2015.
4 Arbitration Act 1996.
5 Law No. 6 of 2018.
6 Law No. 11 of 1992, as amended by Law No. 10 of 2014.
7 Article 2 of the Decree.
8 Cassation Case No. 1 of 2016 (Daman Real Estate Capital Partners Limited v. Oger Dubai LLC) and Cassation Case No. 2 of 2016 (Dubai Waterfront LLC v. Chenshan Liu).
9 Cassation Case No. 1 of 2016 (Daman Real Capital Partners Company LLC v. Oger Dubai LLC).
10 Cassation Case No. 5 of 2016 (Gulf Navigation Holding PJSC v. DNB Bank ASA), relating to the enforcement of a foreign judgment, and Cassation Case No. 3 of 2016 (Marine Logistics Solutions LLC v. Wadi Woraya LLC), relating to the enforcement of a foreign arbitral award.
11 Decisions are published on the DIFC courts' website at https://www.difccourts.ae/judgments-and-orders/joint-judicial-commitee-decisions/.
12 Cassation Case No. 1 of 2017.
13 Cassation Case No. 3 of 2017.
14 Dubai Law No. 12 of 2004, as amended by Law No. 16 of 2011.
15 Cassation Case No. 5 of 2017.
16 Cassation Case No. 6 of 2017.
17 Cassation Case No. 2 of 2017.
18 Cassation Case No. 8 of 2017.
19 Cassation Case No. 4 of 2016.
20 Cassation Case No. 7 of 2017.
21 Cassation Case No. 4 of 2017.
22 Article 58(2) of the Federal Law No. 11 of 1992 (the UAE Civil Procedure Law).
23 Article 121 of the UAE Constitution.
24 The Riyadh Arab Agreement for Judicial Cooperation 1983.
25  DIFC ARB 003.