The issuance on 14 September 2021 of Decree 34 of 2021 (the “Decree”) concerning the Dubai International Arbitration Centre by the Ruler of Dubai, Vice President and Prime Minister of the United Arab Emirates, His Highness Sheikh Mohammed bin Rashid Al Maktoum, has consolidated the Emirate’s three principal arbitral institutions into a single body.
The major achievements of Decree 34 of 2021.
Dubai is strongly committed to strengthening itself as a leading global arbitration center. The recent recognition awarded to Dubai as one of the Top 10 preferred arbitration destinations worldwide (in Survey led by the School of International Arbitration (SIA) at Queen Mary University of London) evidences this fact. The new Decree supports Dubai’s efforts to reinforce its growing status as a global arbitration hub, promoting alternative dispute resolution mechanisms and serving the emirate’s financial and business community. The following measures have been adopted in the Decree to enhance the status of Dubai as leader in international arbitration:
Firstly, the “Decree” has carried out a transformation of Dubai´s arbitration centres.
Pursuant to Decree 34 of 2021, the Emirates Maritime Arbitration Centre (“EMAC”) and the DIFC Arbitration Institute (“DAI”) will be abolished, assigning their obligations to the Dubai International Arbitration Centre (“DIAC”).
Whilst there is no express mention of the DIFC-LCIA in the Decree, it is expected that this center will be abolished as a result of DAI’s removal. The Former Board of Trustees of Dubai International Financial Centre Arbitration Institute has issued a statement confirming that “Consultation is taking place between the London Court of International Arbitration and the government of Dubai to seek to ensure the good management of existing and future cases where parties have agreed to arbitration and mediation under the DIFC-LCIA Rules.”
Secondly, it seeks to consolidate all arbitration proceedings within Dubai into a singular autonomous arbitration center, namely the Dubai International Arbitration Centre (“DIAC”), as an empowered force of arbitral institutions in purse of its building legacy.
The Decree aims to provide arbitration parties with a united arbitration center irrespective to the subject matter. Even if the Decree may appear as an acquisition of two existing DIFC arbitration centers by an on-shore center, the existing DIAC has become a new DIAC after its new organizational structure and its financial and administrative independence of the Dubai Chamber, with a branch offshore in the DIFC district, in addition to having its onshore headquarters in Dubai, needless to say that parties are free to choose either as the seat of their arbitration.
While the Decree is effective as of its publication date, on 20 September 2021, DIAC has been granted a grace period of no more than six months to effectively replace the EMAC and the DAI and readjust its position in line with the provisions of the Decree, what is expected to include transitional arrangements and promulgation of new DIAC arbitration rules. DIAC is empowered to coordinate, collaborate, and/or enter into agreements and/or Memoranda of Understandings with local and international arbitration institutions, as well as local and national courts, in order to achieve these objectives.
The impact of Decree 34 of 2021 in the arbitration agreements and ongoing proceedings.
The aim of the Decree is to accomplish the integration of arbitral rules and proceedings provided through one arbitration center in Dubai. The Decree expressly provides for the continuity of existing arbitration agreements and proceedings. However, considering the stipulations of the Decree, the parties should be aware of the following recommendations:
For now, businesses should no longer include a reference to the DIFC-LCIA in any new contracts currently being negotiated. Rather, the reference should be to DIAC or any other arbitration institution of the parties’ choice – with viability to exist by the time a potential conflict arises. The Decree has also clarified that the choice of the seat would be the determining factor to ascertain which court would act as the supervisory court over arbitration proceedings.
- When parties select the DIFC as the seat of an arbitration, the DIFC Arbitration law (as amended or replaced) shall apply and the DIFC Courts shall have jurisdiction to determine any case, application or challenge concerning arbitral procedures or the arbitral award issued in an arbitration administered by DIAC. If no seat is agreed between the parties, the DIFC will be the default seat.
- Whether the arbitration agreement specifies Dubai as the seat of arbitration, the applicable law shall be the UAE Federal Arbitration Law and the Dubai Courts shall be the curial courts.
- Designating the Abu Dhabi Global Market (ADGM) as an alternative dispute resolution seat, could be another option, but parties should be aware of the time and cost implications that may arise at the time of the enforcement in situations where the award debtor’s assets are not readily accessible in the ADGM, but in other emirates where a memorandum of understanding on enforcement of awards does not exist.
- DIFC-LCIA arbitrations, we would suggest that parties wait to hear for further direction from the DIFC-LCIA and/or DIAC. For now, businesses should no longer include a reference to the DIFC-LCIA in any new contracts currently being negotiated (at least temporarily until further clearance is released). Rather, the reference should be to DIAC (if the choice is DIAC or DIFC-LCIA).
**For more information on the importance of Arbitration Agreements you may check one of our earlier publications here.
Agreements in force
We highly recommend that the parties agree to update their existing arbitration agreement under any of the abolished arbitration centres (or thereafter agree in a submission agreement) to assess whether any changes and/or updates are necessary.
Tribunals which have been already constituted prior to the coming into effect of this Decree (September 20 202) shall remain validly so, and the centers shall continue hearing disputes under the same rules already agreed to “without interruption” (whilst moving to being under the administration of DIAC), unless the parties agree to otherwise.
Predictions of the future of arbitration in Dubai. What is going to happen after Decree 34 of 2021?
It is precipitous to approach the long-term impact of the Decree. However, there is widespread optimism that these changes will reinforce the Emirate as a leading hub for arbitration.
Subject to clarification of the significant impact of Decree No. 34 of 2021 to ongoing arbitration proceedings or if you require legal advice on arbitration clauses in existing contracts that shall require amendments, please do not hesitate to contact us so we can provide our best expertise according to your needs on this subject. Evidently the present text is not intended to serve as legal advice and rather as general information of the information known to date with most imminent opinion of potential impact.
Decree No. 34 of 2021:
 Former Trustees of Dubai International Financial Centre Arbitration Institute
Statement regarding Decree No. 34 of 2021