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On 20 September 2021, Decree No. (34) of Year 2021 Concerning the Dubai International Arbitration Centre (the “Decree”) issued by the Government of Dubai came into force.
Shaken, not stirred, appears to be the preference for the sudden reform brought about by the Decree. The Decree was issued on 14 September 2021 and came into force just six days later, bringing about, overnight, significant changes to Dubai’s legal landscape for the resolution of disputes. The changes made by the Decree came as a surprise to the arbitration and business communities.
The Decree abolishes with immediate effect the Emirates Maritime Arbitration Centre (“EMAC”) and the Dubai International Financial Centre Arbitration Institute (the “DAI”). In so doing, the Decree has spawned concerns over the status of the DIFC-LCIA Arbitration Centre and EMAC, as well as arbitration under the DIFC-LCIA Arbitration Rules and EMAC Arbitration Rules.
The DIFC-LCIA Arbitration Centre is a concept established by agreement between the London Court of International Arbitration (“LCIA”) and, in essence, the Government of Dubai with the DAI employing the centre’s secretariat in charge of locally administrating arbitration cases subject to the DIFC-LCIA Arbitration Rules. The DAI also performs other administrative functions in connection with the administration of cases under the DIFC-LCIA Arbitration Rules.
The Decree establishes a single unified arbitration centre for Dubai named the Dubai International Arbitration Centre (“DIAC”) with a structure that replaces the existing Dubai International Arbitration Centre as we know it.
Article 1 of the Decree provides that the new DIAC is a non-governmental centre with financial and administrative independence from the Dubai Government and others. Article 2 of the Decree provides that the new DIAC shall have its headquarters in the Emirate of Dubai and a branch in the Dubai International Financial Centre (the “DIFC”).
The Decree transfers to the new DIAC the assets and employees of EMAC and of the DAI, as well as the financial allocations previously granted to the abolished centres by the Government of Dubai.
Article 9 of the Decree provides the new DIAC with six months from 20 September 2021 (until 20 March 2022) to give effect to the transition prescribed by the Decree.
The changes brought about by the Decree are especially of relevance to parties involved in arbitration under the EMAC Arbitration Rules and the DIFC-LCIA Arbitration Rules. The changes are also of relevance to businesses that have concluded transactions which include an agreement to resolve disputes under the DIFC-LCIA Arbitration Rules or EMAC Arbitration Rules.
It is estimated that 180 ongoing arbitration cases are currently administered under the DIFC-LCIA Arbitration Rules. Thousands of agreements provide for the resolution of disputes under the DIFC-LCIA Arbitration Rules, a practice which was trending towards becoming a staple of business transactions involving the Middle East.
Article 6(A) of the Decree provides that all agreements which have been concluded by 20 September 2021 providing for arbitration under the rules of one of the abolished centres shall be considered as valid and effective. Article 6(A) proposes that the new DIAC shall substitute the abolished centres in the administration of disputes under such agreements unless the parties agree otherwise.
With regard to the ongoing cases under the rules of one of the abolished centres, Article 6(B) of the Decree provides that arbitral tribunals constituted by 20 September 2021 shall continue to hear and determine all arbitration cases before them without interruption and under the same arbitration rules which currently apply to such arbitrations. Article 6(B) also proposes that the new DIAC supervise these cases.
Article 7 of the Decree provides that each of the Dubai Courts and the DIFC Courts shall continue to hear cases concerning arbitration awards and other measures relating to arbitration under the rules of one of the abolished centres.
The abolishment of a regional centre involving the LCIA is not unprecedented. LCIA supported arbitration centres in India and Mauritius were terminated in 2016 and 2018 respectively. In both cases, the LCIA continued to administer ongoing arbitration cases. The DIFC-LCIA Arbitration Rules are conducive to a similar outcome given that they ultimately provide for the critical aspects of arbitration case administration (for example the appointment of arbitrators) to be performed by the LCIA, and for less critical aspects to be performed under the LCIA’s supervision.
For India and Mauritius, the LCIA also accepted to administer new arbitration cases arising out of agreements that had been concluded before the change was effected and referencing the rules of the terminated arbitration centres.
The examples of India and Mauritius offer some welcome guidance as to what businesses who have referenced the DIFC-LCIA Arbitration Rules in their agreements and parties involved in arbitration under the same rules might expect.
The six month transition period provided for in the Decree should allow for the institutions involved to shed more light on the transitional arrangements concerning the administration of arbitration under the DIFC-LCIA Arbitration Rules and EMAC Arbitration Rules. A statement released by the DAI on 20 September 2021 confirms that consultation is taking place between the LCIA and the Government of Dubai to seek to ensure the good management of existing and future cases.
In the meantime, parties involved in arbitration under the EMAC or DIFC-LCIA arbitration rules and businesses having referenced the EMAC Arbitration Rules or the DIFC-LCIA Arbitration Rules in their agreements would be well advised to take advice as to the legal implications resulting from the Decree.
Businesses who had adopted the DIFC-LCIA Arbitration Rules or EMAC Arbitration Rules as their model dispute resolution clause must immediately take legal advice on the adoption of a new model clause.
Dubai has emerged as one of the top 10 international arbitration hubs according to a study published in May 2021 by the School of International Arbitration at Queen Mary University of London (the “SIA”), a leading arbitration related institution.
While the immediacy of the changes effected by the Decree has initially ruffled some feathers, the idea of a united international arbitration centre for Dubai is not a bad one. It is, for example, in line with the model adopted by other arbitration centres rated in the top 10 by the SIA.
All told, the success of a unified arbitration centre for Dubai will ultimately depend on the quality of the people it will employ and the trust that businesses are prepared to place in the new DIAC to secure their transactions.