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Dubai decree changes Dubai disputes landscape

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Dubai law makers have taken steps to abolish two arbitral bodies in a move that may fundamentally alter the arbitration landscape in the jurisdiction, according to legal experts.

Mark Raymont, Melissa McLaren and Seema Bono of Pinsent Masons in Dubai, who specialise in international arbitration, said the decision to abolish the Emirates Maritime Arbitration Centre (EMAC) and the Dubai International Financial Centre’s Arbitration Institute (DAI) and transfer their rights and obligations over to the Dubai International Arbitration Centre (DIAC) will inevitably cast doubt on the future of arbitrations administered under the rules of the DIFC-LCIA arbitration centre.

The DIFC-LCIA arbitration centre is effectively a partnership between the DAI and the London Court of International Arbitration (LCIA).

“Businesses should take legal advice before making provision for disputes to be resolved in accordance with DIFC-LCIA arbitration rules until the impact of the reforms becomes clearer”, said Raymont.

Dubai Decree No. 34 of 2021 on the DIAC came into effect on 20 September. The Decree’s effect is two-fold: it abolishes the existing EMAC and the DAI; and it empowers DIAC to effectively step into the shoes of the abolished arbitration bodies whilst laying down a detailed statute covering DIAC’s future objectives, scope and organisation.

“The extensive nature of the provisions of the Decree were not anticipated by the arbitration community and the exact scope of its impact remains to be seen,” said Raymont.

Under the terms of the Decree, all of the rights and obligations of the EMAC and the DAI pass to DIAC. This includes a transfer of ownership of property, financial appropriations and, potentially, employees.

DIAC will be headquartered in Dubai with a branch office in the Dubai International Financial Centre (DIFC). The DIAC statute within the Decree sets out DIAC’s objectives. Those are to consolidate Dubai as a reliable hub for resolving disputes through alternative means of dispute resolution; enhance DIAC’s position as one of the best options for parties to resolve disputes efficiently and effectively through applying international best practices; and enhance the use of alternative means of dispute resolution in a manner that serves the financial and business community of Dubai.

“The question at the forefront of many practitioners’ minds is what will become of the DIFC-LCIA,” said Raymont. “The DIFC-LCIA, headquartered in the DIFC, was established under an operating agreement between the LCIA and the DAI and has enjoyed great success, whilst contributing significantly to the arbitration landscape, with a caseload growing year upon year. With the DAI effectively abolished, the status of the underlying operating agreement and the status of the partnership in general is uncertain.”

The Decree makes clear that all agreements concluded as at the date of entry into force of the Decree for resorting to arbitration under the EMAC or the DAI remain valid and effective, albeit that DIAC will replace the abolished arbitration bodies in hearing and resolving disputes, unless the parties agree otherwise. The Decree also states that tribunals and committees already formed shall continue to hear and resolve arbitration cases before them without interruption, unless the parties agree otherwise, provided that DIAC and its administrative body supervise these cases.

“Whether the DIFC-LCIA falls squarely under the umbrella of the abolished arbitration bodies remains to be clarified,” said McLaren.

As regards arbitration rules, the Decree states that the arbitration and conciliation rules applicable by EMAC, the DAI and DIAC shall continue to be applied to the extent that they do not conflict with the provisions of the Decree, but only until the approval of new arbitration and conciliation rules of DIAC by the board of directors of DIAC.

McLaren said: “In 2018, a revised draft of the existing DIAC arbitration and conciliation rules was in circulation but was never formally enacted. On its face, it appears that the intention is for new DIAC arbitration and conciliation rules, once issued, to replace rules stemming from the EMAC, DIAC and the DAI. Whether this will include the DIFC-LCIA Rules or not remains to be seen.”

Bono said: “While the position regarding the DIFC-LCIA arbitration centre is unclear and the situation in Dubai is developing, seeking tailored legal advice on any proposed dispute resolution clauses is imperative.  For any contracts that already contain arbitration agreements incorporating the DIFC-LCIA rules and in respect of any arbitrations already underway pursuant to those rules, we highly recommend that parties reach out to us for guidance specific to the circumstances of their case.”

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