By Maria Mazzawi and Bill Smith
Teething problems are inevitable but the positive effect of the new Federal Arbitration Law will be overwhelming
June 16, 2018 was a day of celebration for the legal and business communities in the UAE. It marked the arrival of the new Federal Law for Arbitration, which for many has been a long time coming; it is 12 long years since the UAE acceded to the 1958 New York Convention, considered to be the foundation upon which modern international arbitration was built.
The move represents a welcome advance in the nation’s legal system and will cement the UAE’s position as the most progressive market in the Middle East in which to conduct business. It will also reaffirm Dubai as the number one hub in the region for resolving disputes.
The new law is broadly based on the internationally accepted UNCITRAL (United Nations Commission on International Trade Law) model law.
The 80 model states that have previously adopted the law are widely perceived as having the world’s most arbitration friendly jurisdictions.
The benefits of investing in and conducting business in a model state are numerous, and this will prove extremely important to the UAE as it continues to establish itself as one of the most innovative and investor friendly nations while ensuring continued economic growth.
The new law has, of course, received an overwhelmingly positive response and the issues that it will resolve are indeed great. However, as in any legal system, uncertainties are difficult to avoid and as we progress into untested waters, challenges will undoubtedly arise.
Some of the key issues resolved by the new law include the introduction of a modern and expansive description of the criteria that will satisfy the “writing” requirement of arbitration agreements.
The law also authorises arbitrators to issue interim measures, such as freezing orders, a practice which was previously exclusively reserved to the courts.
The rather costly practice that required awards to be issued physically in the UAE has also been replaced by a new article that deems awards to be made at the seat of arbitration. This will surely appeal to the business community, both locally and internationally.
The new law also makes some very practical changes that will facilitate the process of arbitration, such as the introduction of basic procedural rules that will apply by default if the parties have not previously agreed on a set of rules.
Another important change is the inclusion of a slip rule that will enable a tribunal to correct any obvious errors in its award, or even amend the form of the award to preserve its enforceability.
Overall, the new law limits the scope for court intervention in the arbitral process, and instead focuses on giving the courts a supporting role.
Perhaps the most compelling addition to the new law, which will undoubtedly be welcomed by all, is the recognition of modern methods of communication in international arbitration.
This will allow for witness testimony to be given through modern telecommunications, without requiring the witness to be physically present in the UAE. This will ensure a more cost- and time-effective process that will be particularly beneficial to the international business community.
Reforms should always be viewed as part of an ongoing journey of progress as opposed to the final destination.
Although much has been achieved through the adoption of the Federal Arbitration Law, there remain a few challenges that are yet to be addressed, as is the case in all advanced, modern legal systems.
While transitional issues are always inconvenient, they should be seen as necessary steps towards the successful implementation of such a major positive reform”
The legal authority required to bind a company or government-controlled body to arbitration remains a fraught issue.
However, this is as much the result of laws governing the management of companies as laws governing arbitration. Questions also exist around the process and criteria to be added to the approved list of arbitrators, and the code of conduct which arbitrators will need to abide by.
The new law also makes no distinction between applications to set aside awards and challenges to their enforcement. The unequal treatment of rights of appeal from such challenges, while designed to promote arbitration, is an innovation which may prove to be controversial.
There are a number of features of the new law that must still be tested, and it will be interesting to see how such changes are navigated.
Confidentiality and privacy of arbitration proceedings is a key addition, as there was previously silence on this issue. Costs of arbitration have also been addressed through an inclusive definition – although, it would have been helpful to express this in more definite terms to alleviate any room for argument.
The reforms are due to come into effect immediately upon commencement of the law, and while this will be welcome news for the UAE, teething problems will undoubtedly occur.
While transitional issues are always inconvenient, they will be short lived and should be seen as necessary steps towards the successful implementation of such a major positive reform whose effects will be widely felt across the region.
The country’s legal community has been anticipating this law for a long time and is well placed to tackle any transitional issues that might arise. The introduction of the new law will go a long way to consolidating the UAE’s position as the most attractive hub for arbitration in the MENA region.
It will undoubtedly be viewed by many as a clear manifestation of the UAE’s long-standing dedication to adopting international best practice, as well as its commitment to excellence across all its sectors.