By Sarah Townsend
The GCC's first arbitration centre for shipping disputes is already making waves
Dubai has historically been the busiest trading port in the Arabian Gulf, and now the UAE national government is taking steps to ensure the entire country remains a hub for maritime commerce.
Many industries in the UAE have been hard hit by the stagnant global economy. But maritime is one industry that has held up. Estimated by the government in 2015 to be worth $60bn, the sector is witnessing steady growth as Dubai in particular works to become one of the world’s top shipping destinations through its Maritime Vision 2030.
The maritime industry in Dubai is expected to be worth $66bn by 2018, according to Oxford Business Group, with further investment planned for the established Jebel Ali Port and ongoing development at the 2 million sq m new free zone, Dubai Maritime City.
State-owned ports operator DP World reported a 3.2 percent rise in gross container volumes in 2016, along with 6 percent year-on-year growth in volumes in the fourth quarter of the year. This was despite rating agency Moody’s in December unveiling a ‘negative’ outlook for the global shipping industry for 2017, reflecting low freight rates, oversupply and subdued demand.
To support the anticipated growth of the UAE shipping industry, the GCC’s first maritime arbitration centre, the Emirates Maritime Arbitration Centre (EMAC), was established in Dubai last November. Its aim is to resolve shipping disputes through arbitration, a behind-closed-doors legal process that is typically cheaper and quicker than court action.
However, EMACs vice-chairman and secretary-general Majid Obaid Saeed Bin Bashir tells Arabian Business it is quite possible the centre will not hear a single case in its first year of existence.
This is because it is intended to play a far broader role in supporting the industry than pure arbitration. It is expected to promote the industry both in the UAE and overseas by forming a membership network of maritime professionals, staging seminars and other events to spread expertise, and raising regulatory and other issues with government departments.
“The initiative was driven first and foremost by the private sector, which felt it was important to have this centre because of the growth of the maritime industry and the substantial investment being made in ports, shipping and related industries,” Bin Bashir says in an interview at his office in Dubai International Financial Centre (DIFC).
“Of course, the rationale was also about filling the vacuum between the maritime industry and the courts. EMAC as an arbitration and mediation centre offers specialised abitration services — with specialist private judges — that were not available before.
“There were other arbitration centres in the UAE, established maybe 25 years ago, but nothing specifically for maritime.” The other centres to which Bin Bashir is referring include the Dubai International Arbitration Centre (DIAC) and Abu Dhabi Conciliation and Arbitration Centre, for both of which Bin Bashir has worked.
The Emirati lawyer, a registered arbitrator, is well known within the UAE’s legal and business community. He has served as a public prosecutor and member of several government departments’ judicial committees. As conciliator of the Dubai Chamber for 13 years, he drafted the chamber’s bylaws and served as secretary-general of its Arbitration Centre, and previously held CEO and board member posts at the Dubai Development Board.
He currently serves on the board of trustees at DIAC, and is also chairman of the Islamic International Arbitration Centre and a member of the board of trustees of the International Islamic Centre for Reconciliation and Arbitration (IICRA).
During a recent visit to the UK, Bin Bashir met with representatives from the London Maritime Arbitrators Association (LMAA) to discuss a possible memorandum of understanding between the two bodies to increase cooperation.
EMAC hopes to form partnerships with other martime arbitration centres across the world, including in China and Singapore, to increase its profile and share best practice. And it submitted a bid two weeks ago for Dubai to host the International Congress of Maritime Arbitrators in either 2019 or 2020. A decision is expected from the event organisers in September.
It is no surprise that someone with Bin Bashir’s credentials is a staunch advocate of arbitration over often costly and lengthy court action to resolve commercial disputes, particularly in an industry as complex and global as ports and shipping.
“People tend to prefer arbitration where there are foreign parties involved and a decision would otherwise have to go through local courts,” he says.
“If you look at the history of arbitration, the [approach] has taken off because people like the idea of having a confidential process to get a fast decision, and to have their case dealt with by a specialised arbitrator.
“It could also be seen as cheaper, because in court the process can take at least two years because there are three degrees [in the UAE, there is the Court of First Instance, Court of Appeal and Court of Cassation], whereas arbitration could take as little as two months, depending on the complexity of the case.”
Typically, an arbitration case takes between six months and 24 months to resolve.
There is also the added benefit that arbitration is conducted confidentially. “Trade and business secrets are tackled in private and it is more likely [than court action] to maintain friendly relations between the two parties,” Bin Bashir says.
As a result of the higher profile and accessibility of arbitration centres in the region, the number of cases are rising, he says, while declining to provide figures. To give some context, DIFC Courts’ arbitration tribunal handled a 10 percent year-on-year increase in the number of cases in 2016, the first year of operation since it relaunched in 2014 under a new name, the DIFC Arbitration Institute (DAI). DAI operates the DIFC LCIA Arbitration Centre, which is a joint venture with the London Court of International Arbitration (LCIA).
A spokesperson for Dubai Chamber of Commerce said DIAC, which is an initiative of the chamber, registered 214 arbitration cases in 2016 (of which 170 were resolved by the end of the year) marking a 13 percent increase compared to the same period in 2015.
However, lawyers have highlighted concerns over the UAE’s future as an international arbitration centre following an amendment to article 257 of the Penal Code in October, which criminalises arbitrators who act ‘unfairly’ and ‘without integrity’ even if such action was not carried out ‘knowingly’. This has made UAE-based arbitrators nervous and reportedly prompted some to resign.
Bin Bashir declines to comment on the UAE’s legislative framework — including shipping, investment or other laws — insisting that his expertise is as an arbitrator, not a policymaker. However, he is hopeful that a proposed new arbitration law could be ratified by the end of this year. It has been drafted and is awaiting approval from the relevant authorities, he says. This could go some way towards addressing lawyers' concerns.
“The new legislation will enhance the role of, and give more power to, the [arbitration] tribunal, strengthening the process and streamlining it,” Bin Bashir says. It will also prevent parties from filing ‘parallel actions’ in court. That is, the main courts will not entertain the possibility of hearing a legal case if there is already an arbitration over the same case.
Overall, the legislation will make the process more transparent, he adds.
Maritime-related disputes specifically are likely to rise in the UAE over the coming years as the sector achieves further growth, and a significant portion of those cases could be resolved thorugh mediation or arbitration.
According to Oxford Business Group, the maritime sector contributed some 4.6 percent to Dubai’s gross domestic product in 2016, at around $3.9bn, and is poised for further growth, says Jasamin Fichte, Dubai-based founder and managing partner of shipping law firm Fichte & Co.
“The outlook for the UAE’s offshore and marine sector continues to remain resilient and is expected to see robust growth over the next decade,” she says, citing signs of recovery in the dry bulk sector, an increase in Chinese sentiments and a predicted increase in world trade as contributing factors.
“With extensive infrastructure through Dubai’s ports, and large liner companies adopting business models based on primary trade routes between hubs and trans-shipment through feeder vessels to save costs, the UAE has strengthened the region’s position as a global hub, providing a trading corridor between East and West.”
When asked whether maritime disputes are rising due to factors such as a more complex global business landscape, Bin Bashir is tentative. “I don’t think so — at least this was not the reason we set up EMAC. You simply cannot avoid having such a service. You can’t say, I don’t need to have a court in a country because the people there are very nice and very good.
“By its nature, commerce gives rise to disputes, for example, if some misunderstanding occurs during the performance of a contract between two parties.”
He says while the centre may not hear its first case for another year it is not failing in its role. “It takes time to build awareness of EMAC within the industry and we are only just starting out. Realistically, people will need time to learn about us, go through our rules and decide whether to bring their case to us.
“The door is open; we have a panel [of nine specialist arbitrators and four mediators] ready to provide such services, but it is up to the industry as to when it is convinced.”
The Emirati vice-president — EMAC’s president is UK-based chartered arbitrator Sir Anthony Colman — says the types of cases the centre is likely to hear include “pure” maritime disputes, such as over shipments or charter party contracts (legal agreements between shipowner and merchant), and related maritime disputes, such as those between insurers and beneficiaries.
Anyone can bring a claim — whether they are based in the UAE or elsewhere (EMAC sits within the DIFC free zone and is governed by an international common law-based regime) — and there is no cap on the value of the claim that can be heard.
“At the end of the day, we are offering all services and have no expectation or estimation in our minds about case sizes,” Bin Bashir says.
“We have two routes: the first is for any type of case, and the second is an expedited procedure to tackle small claims of $2m or under. The shipping industry will normally have a range of big and small claims. If we are talking about a claim between ship suppliers I would estimate not that big; if we are talking about a dispute over banking provisions or charter parties, that could reach into the tens of millions of dollars. We are ready for it all.”
To increase awareness of its services, EMAC organises topic-based seminars to examine particular strands of the industry. For example, last week, it staged one on cargo claims. Bin Bashir says buy-in from stakeholders and lawyers that have attended the events suggests an overall positive response from the industry to the establishment of the centre, and several more serious enquiries have been made as to the process of lodging a claim.
With Bin Bashir at the helm, EMAC is sure to navigate a steady course through the straits of maritime trade — one of the most complex but growth-ready sectors in the Gulf.For all the latest transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.