As of June 16, 2018, the UAE has a new arbitration law (Federal Law 6 of 2018). Representing a significant step forward for businesses using arbitration to resolve disputes, it is based on a modified version of the United Nations’ “Model Law on International Commercial Arbitration” and so broadly adopts international best practice by giving parties the power to choose the procedure for the arbitration.
As with the Model Law, the arbitral tribunal has robust procedural powers and the support of national courts. The tribunal can rule on its own procedure and jurisdiction. The tribunal must be independent and impartial so that business can be assured that parties are treated fairly and are afforded a full opportunity to present their cases. The tribunal is empowered to order interim measures and, in a welcome departure from the Model Law, the court can enforce such orders.
There is a focus on efficiency. The law provides for a default procedure with tight deadlines and permits the use of modern technology so that hearings can be held electronically and the parties need not physically be present. The law scraps the unpopular requirement for arbitrators to physically be present in the UAE to render an award.
Unfortunately, the law preserves the parochial rule that parties must obtain express authority to enter into arbitration agreements (in the UAE, usually a tailored power of attorney in favour of the company’s authorised signatory). In reality, parties frequently forget about such formalities leading to bad faith arguments after a dispute has arisen to frustrate the arbitration. There are also some significant ambiguities in the law, including critical issues such as its scope that will need to be clarified in due course.
Arbitration is only useful if awards are recognised and enforced by national courts efficiently. The award is binding on the parties when issued but is only enforceable after it has been ratified by the court. Ratification has been streamlined so any challenge must be made within 30 days from notification. The court may set aside an award if it determines that the dispute was not susceptible to arbitration or on nebulous public policy grounds. As per the Model Law, the losing party can challenge the award on precise and familiar procedural grounds (e.g. lack of proper notice of the arbitration). Worryingly, enforcement may also be refused if the court considers that the tribunal has applied the wrong law.
The scope of this power is unclear. It could be limited to rare circumstances where the tribunal simply applied the wrong choice of law (e.g. the parties choose UAE law but the tribunal applies English law) but it could be taken to mean that the court has power to review whether the law has been correctly applied by the tribunal. If so, this could open the floodgates to court challenges and amount to a major step backwards.
Subject to clarification of the ambiguities identified above, the new law should make it quicker, cheaper and easier to resolve disputes and, most importantly, turn arbitral awards into cash.
Any opinions expressed here are the author’s own.
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