03 July 2017
The United Arab Emirates is expected to pass a new federal arbitration law this year that could facilitate attracting more foreign investment and establish the Gulf state as an international arbitration hub, according to one of the country’s top lawyers.
There is no formal dedicated arbitration legislation in the UAE at present and arbitration is governed by articles within the UAE Civil Procedure Code.
The key difference between applying the new law over current arbitration articles would be the time saved for ratification and enforcement of arbitration awards.
“I'm hoping that by October or November we should have this (arbitration) law enacted,” Essam Al Tamimi
, founder and senior partner of Al Tamimi & Company, told Thomson Reuters Projects in an interview last month.
According to the new law, the arbitration award would not then need to be ratified.
“Arbitration awards are judgements (under the new law), you go to the execution courts to immediately execute,” Tamimi said.
If a party wants to challenge the award they can file a challenge within 30 days to challenge the award, he added, but that challenge does not stop enforcement.
“The problem we were facing with the previous arbitration law is that it did not give enough tools to the courts and to the arbitrator to advance the arbitration in the UAE in terms of time, process and procedure, or to deal with silly challenges,” said Tamimi.
“So in practice, that means after you get your award and have spent a year or two years or sometimes three years in arbitration on a big matter, you then go through another year to two to three years in court, trying to enforce,” he explained.
Dubai International Arbitration Centre was established in 2007 and has hundreds of cases on its books but losing parties usually then challenge awards in other courts, despite arbitration awards supposedly being binding.
The time taken in arbitration is about the same as a court case, but costs about three times as much, said Tamimi.
Yet is arbitration still the preferred option, despite the significantly greater cost?
“Don’t forget, if I’m a foreign person going to have a project in a foreign country, (where) I don’t know how the judicial system works, and I am contracting with a powerful local or contracting with the government, I am willing to pay the high cost of the arbitration should it come to that, rather than me fighting a government in their own court,” said Tamimi.
Usually, the winning party also wins the costs of the arbitration.
Tamimi, who has seen a draft of the law, said it is in its final stages of approval and when passed would be “a very well balanced piece of legislation” and “a very good addition to the UAE’s legal system”.
He described the arbitration law as “very relevant” to the construction sector, especially in Dubai.
Global design, engineering and management consulting company Arcadis said in its 2017 Middle East Construction Disputes Report that dispute values in the Middle East remain about $10 million higher than the $46 million global average, mostly because projects in this region are typically larger and more complex than in other parts of the world.
The study also noted the overall volume of disputes went up in 2016, although the average value went down, which suggests there was a greater number of smaller disputes.
This is especially relevant going forward as billions of dollars’ worth of mega projects are underway as Dubai prepares to host the Expo 2020. In January, the organising body said it would award 47 construction contracts worth 11 billion dirhams ($3 billion) in 2017.
The arbitration law would also ease the pressure on the courts system and its judges to decide on specific technical matters. Rather, construction litigation and arbitration experts would be better equipped to wade through the technicalities to resolve the dispute.
Complex construction matters need to be handled by a mix of lawyers and engineers sitting on a panel of arbitrators deciding on this, Al Tamimi said.
Introducing an arbitration law in line with international best practices will also strengthen the confidence of businesses operating in the UAE and help attract investment, Tamimi said.
“Having a law of this calibre will give investors confidence in the judicial system, which is an extremely important factor to investment,” he said.
“You will not invest in a country (where) you have a doubt about their laws and the judicial system. To ensure that those investors continue to come and feel very comfortable and things are transparent, you need to update these laws and provide them with the tools they need.”
Foreign Direct Investment (FDI) inflows into the UAE grew by 2.2 percent to about $9 billion last year, up from $8.8 billion in 2015, according to the World Investment Report 2017 released by the United Nations Conference on Trade and Development.
The arbitration law will also give the UAE the chance to fully establish itself as an international arbitration hub.
“Not only is Dubai aiming by this law to deal with local construction disputes, tomorrow you’ll have disputes between a Chinese and a Korean company that comes and sits in Dubai for arbitration based on this law and based on the advanced judicial process,” Tamimi said.
“We have excellent facilities in the UAE in terms of conference rooms, hotels, infrastructure, hotel connectivity, flying in and out, bilingual translators... all the facilities that the arbitration community needs are available.”
The law also provides for parties to choose their preferred language for the arbitration, unlike the UAE courts system where all documentation must be presented in Arabic.
If this law existed during the global financial crisis that put millions worth of projects on hold and saw several companies absconding, Tamimi said he believes the UAE would already have emerged as a global arbitration hub.
“We are good but we are not a major international centre yet. I'm hoping with this law, and the legal environment we have, that in a few years we can actually be able to compete with London, Paris (and) Singapore,” ” he said.
Enactment of a federal arbitration law in the UAE has been in the pipeline for several years and had been expected ever since the Gulf state acceded to the New York Convention in 2006.
“Over the last maybe seven years, I’ve seen seven drafts of the arbitration law,” added Tamimi. “It’s a very long time coming.”
© Zawya Projects News 2017