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Sat 26 May 2007 12:00 AM

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Keeping parties out of the courts

With Dubai lining itself up to be an international hub for arbitration proceedings following its accession to the New York Convention, Conrad Egbert explores how any new arbitration law will have to contain significant adjustments from the current draft in order to bring itself in line with other markets.

Apart from being a logistical and commercial hub, the UAE is now aiming to attract the lucrative arbitration market that exists within the construction industry, according to legal experts in the country.

And this can be seen through the introduction of an updated set of arbitration guidlines for the Dubai International Arbitration Centre (DIAC) by the government of Dubai, which will take effect this week, once they are published in the
Official Gazette

.

And, in addition to the new guidelines, a new UAE arbitration law is expected to be introduced at the end of the year.

According to Dr Hussam Talhouni, director, DIAC, the new set of guidelines for DIAC are on a par with international arbitration guidelines, meaning Dubai could be well on its way to becoming the preferred destination by many construction companies when the new UAE national arbitration law comes out.

Previously, it was always a concern of many foreign entities that there is no universal rule in the UAE to enforce rights or a judgement under a contract. There will certainly be more confidence in contracting in the UAE as arbitration now has credibility behind it because it can be enforced under the convention.

"We have just received new rules for DIAC from the ruler's office, and in addition to the new arbitration law, Dubai will become one of the best places to conduct an arbitration. We are simplifying the procedures and taking out a lot of unnecessary provisions. Our old law was based on Egyptian law, but we're looking at the United Nations model of arbitration law now, so that the final laws meet with international standards."

Critics of the draft law believe that it will not provide the security that foreign companies look for and that it will force contractors to agree to arbitrate abroad.

According to Philip Punwar, arbitration specialist and committee member of the UAE branch of the Chartered Institute of Arbitrators, there are several provisions in the current draft arbitration law that are not up to date.

"For example, one of the suggested clauses is that a lawyer must represent both parties, which is not normally the case in international arbitration, where both parties are allowed to choose who represents them."

The New York Convention, which the UAE acceded to in November 2006, is considered a key instrument in the promotion of international trade and investment. Under the Convention, commercial arbitration awards made in the UAE can now be directly enforced in 142 other countries.

In return, foreign awards can also be enforced through the UAE's courts, which should boost investment confidence in the construction industry.

"A good arbitration law makes the UAE a more attractive option for investors," said Edward Sunna, head of construction and engineering of legal consultancy firm Al Tamimi & Company.

"Previously, it was always a concern of many foreign entities that there is no universal rule in the UAE to enforce rights or a judgement under a contract. There will certainly be more confidence in contracting in the UAE as arbitration now has credibility behind it because it can be enforced under the convention."

Cities such as Singapore, Paris and London earn a lot of money with the amount of arbitrations conducted there each year and this, in turn, fuels other sectors of the economy including investment, construction, tourism and hospitality.

"Having arbitration in one's country is good for the local lawyers and local arbitration centres," added Punwar.

"It also increases investor confidence in a country which will eventually bring in more business and more companies to the region, whether it is for arbitration purposes or investment. Cities like Paris and London earn a lot of income due to them being arbitration hotspots. So Dubai would want its arbitration laws to attract and promote arbitration."

Arbitrations are conducted on a vast scale and many construction companies constantly analyse the best places to arbitrate.

Marcelo Jardim, vice president for International business development for South American engineering and construction firm, Odebrecht said: "We usually conduct all our arbitration procedures in Paris as they have very simple and straightforward arbitration procedures that do not require us to provide any unnecessary additions. The point of arbitration is beaten if things get complicated and drawn out and the laws in Paris help us to conduct it without any problems."

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