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The New UAE Arbitration Law: it is not what it says but how you read it

The New UAE Arbitration Law: it is not what it says but how you read it

May, 2018
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by Antonios Dimitracopoulos

After what is understood to have been very lengthy and thorough deliberations, on 3 May 2018, Federal Law No 6 of 2018 concerning arbitration  (i.e. “the New Arbitration Law”) was issued, taking force and effect a month after its publication in the Official Gazette.

The New Arbitration Law repeals Articles 203 to 218 of Federal Law No. (11) of 1992, i.e. the Civil Procedure Law and hence creates a new ecosystem for arbitral proceedings to take place henceforth. It applies to arbitration proceedings that commenced before its issuance, whilst recognizing the validity of the processes followed until it comes into force.

As with most laws, it is not so much their literal text that makes a difference in its every-day application but rather the interpretation of such text by judicial authorities, as they apply its provisions to their daily caseload.

The New Arbitration Law does prescribe a few significant changes which are certainly worth mentioning.

For example, there are provisions within the New Arbitration Law that are reminiscent of the regime applying before its promulgation.

Article 4, provides that  only the natural person who is legally competent to exercise his rights or the representative of a legal person shall be permitted to enter into an agreement on arbitration, otherwise such agreement shall be considered as void.

The question that naturally arises is of course “who is that person”.

If past experience is anything to go by, the prospects of having arbitration awards still vulnerable to nullification because they were not executed by the signatory authorised to arbitrate, may still be present.

This is particularly so because Article 58 of the Civil Procedure Law which states that “The attorney may not:… go to arbitration; … abandon litigation …or undertake any other action for which the law requires special authorisation”  has not been repealed by the New Arbitration Law.

As such, the need for arbitration specific powers of attorney for senior executives other than a named General Manger in a company’s trade licence, still seems to have survived the New Arbitration Law.

Article 7 (b) of the New Arbitration Law covers issues of incorporation of an arbitration clause by reference as well as issues of how an arbitration agreement is evidenced in writing.

Specifically, Article 7 allows incorporation of an arbitration clause by reference, not only to  the provisions of a standard contract or international convention but also to any other document containing an arbitration clause. This is so, for as long as such reference makes it clear that it intends to incorporate the arbitration clause residing in such other document.

However, it remains to be seen how the UAE Federal Courts would interpret any incorporation attempt and what their expectations would be for a valid incorporation to have taken place.

Perhaps more interestingly, Article 7 of the New Arbitration Law does provide that any exchange of written pleadings between the parties that denotes an offer and an unconditional acceptance of an arbitration agreement, will actually constitute a binding arbitration agreement.

Of course, such exchange of pleadings will again be subject to the authorisation the issuer of the pleadings had in the first place, to be able to bind the represented party at all to arbitration, whether by an exchange of pleadings or otherwise.

With regard to the formation of an arbitral tribunal, the New Arbitration Law provides in Article 9 that the default number of arbitrators constituting a Tribunal will be three, unless otherwise agreed by the parties.

Furthermore, under Article 11, if the Tribunal members are not appointed, either by the parties or by the agreed arbitral authority (a circumstance that seems rather rare to imagine), the New Arbitration Law provides that the UAE Federal Courts will proceed to such appointment.

Although this would have, in any event, been the default practice even in the previous regime, what is refreshing in Article 11 is that the UAE Federal Courts may, at the request of a party, ask any arbitration institution in the UAE to provide a list of arbitration specialists for potential appointment.

This would seem to expand the possibilities for a more suitable appointment, rather than the courts resorting to their lists of experts who may not necessarily be specialised in arbitration or may not always have the type of arbitral experience, that most parties would expect.

Article 13 of the New Arbitration Law sets out the court’s powers to intervene in the procedural aspects of an arbitration, at the request of a party.

This provision, in principle, certainly seems helpful and very efficient especially because of the finality of the court’s decision and its unappealable nature.

However, it is its practical application that will determine the role it will play in arbitral proceedings.

It is hoped that the recourse to courts would in practice be used (or at least entertained by the courts) rarely and only when absolutely necessary and that it will not prove to be an effective option for a party to delay or derail the arbitral process.

Article 15 of the New Arbitration law sets out a detailed process dealing with the recusal of an arbitrator. The content of this provision is particularly helpful in ad hoc arbitrations and it could be viewed as even more detailed and thorough than the equivalent process set out in some arbitral rules of institutional arbitration proceedings.

The principle of kompetenz-kompetenz where a tribunal has the power to decide on its own jurisdiction is adopted in Article 19 of the New Arbitration Law.

A tribunal’s decision on this issue is appealable before the competent court but the time frames for doing so are exceptionally narrow (15 days) and the court decision that must then be issued within similarly narrow time frame (30 days) is final and unappealable.

Article 21 carefully regulates the power of the tribunal to order precautionary measures, such as attachments of assets or preservation of evidence.

Subject to a permission granted by the tribunal to do so, a party in whose favour such a tribunal order has been issued may seek its enforcement by the local courts.

Joinder of third parties that are also bound by the same arbitration agreement is expressly set out in Article 22 of the New Arbitration Law. This provision could for example find application in subcontracts that validly incorporate the arbitration clause of a main contract.

Arbitral awards may be nullified on a point of procedure, not simply on a question of validity of an arbitration agreement. To limit the instances where this possibility may be abused by an aggrieved party, Article 25 of the New Arbitration Law sets out that, failure to object within a very narrow time frame  of just 7 days from when a breach of the arbitral process is identified, will result in a waiver of the said breach.

There are also provisions reaping the benefits of technology within Article 28 as well as Article 33.3 and 35 and these make numerous references to modern means of communication and electronic technologies for hearings not requiring a physical presence, for example, video conferences.

There are also references to minutes of hearing to recorded and delivered to the tribunal and the parties, which would seem to ratify the widely used processes of live transcription services.

One possibly concerning feature of the New Arbitration Law is that Article 33, dealing with hearings, leaves it to the discretion of the tribunal whether to hold a hearing or not. The only instance that could override this, according to Article 33, is if both parties agree to hold a hearing.

This position, is similar to the ADCCAC rules, which also leave the decision for a hearing to the entire discretion of the Tribunal.

To the extend a hearing does take place, the process for witness testimony is to be agreed by the parties, failing which it is to take place in accordance with the laws in force in the UAE, presumably the UAE Evidence Law.

Again, it is concerning that the power to determine how witnesses are heard is taken away from the tribunal by the New Arbitration Law and is left to either the parties’ agreement or Federal Law No. 10 of 1992, i.e. the UAE Evidence Law.

A very positive development is set out in Article 34 which deals with Tribunal appointed experts. Although common arbitration practice is that a Tribunal would have (and would often exercise) the power to appoint its own experts, under this provision, this power is subject to the agreement of both parties.

Furthermore, a hearing must be held to examine the Tribunal appointed witness’ testimony, even  at the request of just one party.

With regard to the form of the Award, Article 41 covers the unusual instance of a tripartite tribunal having three different opinions and stipulates that the award may nevertheless be issued by the Chairman, unless the parties otherwise agree.

The same provision also includes an unusual requirement that the nationalities of the arbitrators be stated in the arbitration award.

One refreshing provision within Article 41 is that, regardless of the physical location of the arbitrators, the award will be deemed to have been signed at the agreed seat of the arbitration.

Starting criminal proceedings of any nature, including those for an allegedly forged document, will not suspend an arbitration under Article 43 unless the Tribunal considers the issue relevant to its decision.

Article 53 sets out the reasons for which an arbitration award may be set aside. This are broadly similar to the reasons set out in Article V of the 1958 New York Convention. The issue that remains to be seen is how these reasons will be interpreted by the enforcing  court.

The latter provisions of the New Arbitration Law form Articles 54 to 57 introduce a fast track approach to enforcement.

In short, a party has 60 days from receiving the award to apply for its nullification and request a suspension of its execution, and the Court has to decide in 15 days whether the suspension will be granted and in 60 days whether the annulment application will be approved.

The Court’s decision is only appealable at Court of Cassation level and within 30 days of its issuance. This should shorten the process of dealing with award ratification which could, in the past, have lasted in some cases as long as a normal main action on the merits.

The party seeking to enforce an award is not subject to any time bar for seeking to do so but, upon its application for enforcement, a decision by the court would have to be issued within 60 days, subject to a cross application for annulment as referred to earlier.

Article 54 contains an innovative provision in that the Court may stay the annulment proceedings for a period of up to 60 days, if it so deems appropriate and at the request of a party, in order to give the Tribunal an opportunity to remove the grounds of annulment, if it is possible to do so without affecting the substance of the Award.

This fast track approach treats annulment applications as the exception to the normal flow of efficient award execution rather than the rule.

Although in practice it is hard to imagine an instance where an annulment application will not be made by an aggrieved party, clearly any delay benefits that this may entail for the applicant are eliminated by the New Arbitration Law.

In addition, the narrow time frame available for examining an annulment application is likely to result in only the most glaring instances of objectionable awards being picked up by the courts.

These provisions, should result in a far quicker award review process and, hopefully, a lower number of award nullifications.

Finally, Article 58 indicates that a code of conduct for arbitrators will be issued after consultation with arbitral institutions in the UAE. This again is a welcome change as tribunal members have so far been unregulated in their specific capacity as arbitrators, save for the alarming provision of Article 257 of the Federal No 7 of 2016.

 

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