Arbitration in UAE

8/9/2019 Arbitration in UAE

http://slidepdf.com/reader/full/arbitration-in-uae 1/66



ADR programs cannot be a substitute fora formal judicial system, especially under

the common legal system. It cannot

establish legal precedent or make changesin the law. ADR can complement and

support the judicial system.

Alternative dispute resolutions



To put it simple, this term refers to alldispute resolution mechanism that arealternative to the court system.

Binding and non-binding ADR:◦ ADR can be binding such as arbitration or non-

binding such as mediation.

Mandatory and voluntary ADR: ◦ Some legal systems impose mandatory ADR

before approaching the court.

What is ADR?



1. Less formality

2. Application of equity

3. Direct participation and communication

between disputants.

Main Characteristics of ADR

Approaches



ADR can complement the judicial system.This can be done by

◦ Being associated with the court. This will

reduce the caseload.◦ Resolving a case that was originally filed in the

court.

Avoid justice delay. Extreme justice delaymay deny justice.

More satisfaction with dispute resolution.



Reduce the cost (in most cases). In fact justice delay and cost can be interrelated

especially in commercial cases.

Facilitate economic restructure. Show more creativity of outcomes.

Avoid negative impact on the on-going

business or personal relationships.



Complex or technical disputes can behandled more effectively by specialized

private ADR systems.

Court system is inefficient: High costs,long delay, etc.

Keeping good relation is more significant

than the dispute solution.

You are advised to use ADR where



They do not develop the law and thepractice of law.

They do not correct systemic injustice.

They are not suitable in public offenses.

They are inappropriate to resolve

multiparty cases where some parties do

not, or cannot, participate.

ADRs seek to resolve individual

disputes on a case-by-case basis



Consensual methods of Resolving Disputes:1. Negotiations: Disputants themselves control the

process and the outcome.

2. Mediation and Conciliation: Disputants hire a

third party who controls the process and theycontrol the outcome.

3. Arb-Med / Adj -Med: the arbitrator writes theaward and put it in a sealed envelope. Then heproceeds to mediation. If the issue is settled, the

envelope will not be opened. This process becomesimportant when the parties fears that the otherwill not continue in the mediation process.

ADR Models



Resolving Disputes throughrecommendation 1. Mediator recommendation: Similar to

mediation. The mediator here makes arecommendation.

2. Early Neutral Evaluation (ENE) or(Judicial Appraisal):

In some countries, the court imposes ENE beforehearing the case. Disputants present summaries oftheir case and receive a nonbinding assessment by athird party. The third party can be a lawyer, apractitioner, a judge, etc.



Imposed Solution to Disputes

1. Arbitration: disputants hire a third party to control theprocess and the outcome.

2. Adjudication: like arbitration, the decision is binding.However, disputants may object to the decision within afixed period of time. Adjudication could be legal or byagreement. In most cases, the latter is called DisputeReview Board (DRB) or Dispute Adjudication Board(DAB). The board comprises three members. Every

disputant appoints one who must be accepted by the other.The two members select the third one who chairs theboard. The board is appointed at the beginning of theproject.



3. Med-Arb and Med-Adj: Any issue notsettled by mediation will be decided by

arbitration. The same third party will act

as mediator and arbitrator.



Hybrid Approach

Two-track approach: used in

conjunction with litigation, representativesof disputants become engaged in an ADR

form. These representatives must not be

involved in litigation. The ADR trackproceeds concurrently with litigation.



67.1 Engineer's Decision 67.1.1 If a dispute of any kind whatsoever arises

between the Employer and the Contractor inconnection with, or arising out of, the Contract…including any dispute as to any opinion,instruction, determination, certificate or valuationof the Engineer, the matter in dispute shall, in thefirst place, be referred in writing to the Engineer,with a copy to the other party... No later thanthe eighty-fourth day after the day on which hereceived such reference the Engineer shall givenotice of his decision to the Employer and theContractor. Such decision shall state that it ismade pursuant to this Clause.



• 67.1 Engineer's Decision

67.1.2 “… the Employer shall give effect

forthwith to every such decision of the

Engineer unless and until the same shallbe revised, as hereinafter provided, in an

amicable settlement or an arbitral award.”

Engineer’s decision is binding but not final



•67.1 Engineer's Decision

67.1.3 “If either the Employer or the Contractor bedissatisfied with any decision of the Engineer, or if theEngineer fails to give notice of his decision…, then either theEmployer or the Contractor may, on or before theseventieth day after the day on which he received notice of

such decision, or on or before the seventieth day after theday on which the said period of 84 days expired, as the casemay be, give notice to the other party, with a copy forinformation to the Engineer, of his intention to commencearbitration, as hereinafter provided, as to the matter indispute. Such notice shall establish the entitlement of the

party giving the same to commence arbitration, ashereinafter provided, as to such dispute and, subject to Sub-Clause 67.4, no arbitration in respect thereof may becommenced unless such notice is given.



• 67.1 Engineer's Decision 67.1.4 If the Engineer has given notice of his decision as

to a matter in dispute to the Employer and the

Contractor and no notice of intention to commence

arbitration as to such dispute has been given by eitherthe Employer or the Contractor on or before the

seventieth day after the day on which the parties

received notice as to such decision from the Engineer,

the said decision shall become final and binding uponthe Employer and the Contractor.

Engineer’s decision becomes binding and final when…



Question:

In case of lapse of the 84 days (No

decision) and lapse of 70 days followed

(No arbitration notice), how can thedispute be solved?



In cases of non-compliance with the engineer’s decision andno notice of arbitration has been given, can the other partyresort to arbitration?

Yes, direct arbitration.

67.4 Failure to Comply with Engineer's Decision Where neither the Employer nor the Contractor has given

notice of intention to commence arbitration of a disputewithin the period stated in Sub-Clause 67.1 and the relateddecision has become final and binding, either party may, if theother party fails to comply with such decision, and without

prejudice to any other rights it may have, refer the failure toarbitration in accordance with Sub-Clause 67.3. Theprovisions of Sub-Clauses 67.1 and 67.2 shall not apply toany such reference.



•67.2Amicable Settlement

Are parties obligated to attend amicable settlement in orderto start arbitration?

“Where notice of intention to commence arbitration as to adispute has been given in accordance with Sub-Clause 67.1,the parties shall attempt to settle such dispute amicablybefore the commencement of arbitration. Provided that,unless the parties otherwise agree, arbitration may becommenced on or after the fifty-sixth day after the day onwhich notice of intention to commence arbitration of suchdispute was given, even if no attempt at amicable settlementthereof has been made.”

Can negotiation or mediation last for more than the abovementioned 56 days?



Arbitration in UAE



Independence of Arbitration

“Modern international commercial arbitration hasconsequently achieved a considerable degree ofindependence from national courts. For example,◦ the arbitration clause in an international commercial

contract is generally recognised as being an independent

agreement, which survives any termination of the contractin which it is contained (the separability doctrine).

◦ The parties themselves are generally free to determinehow their disputes are to be resolved, subject only to suchsafeguards as may be considered necessary as a matter ofpublic policy;

◦ Arbitrators are free to decide on their own jurisdiction,subject only to a final decision by the relevant nationalcourt.



The parties are free to choose which system oflaw will govern the dispute between them; andindeed, may even elect general principles, suchas those of equity and good conscience or the

UNIDROIT Principles of InternationalCommercial Contracts.

Finally, judicial control of errors of law ininternational commercial arbitration has been

virtually abandoned, leaving courts the limitedrole of policing procedural due process, such asthe obligation of the tribunal to give each partya fair hearing.”



Partnership between courts and

arbitration Lord Mustill states: In real life the position is not so clear-cut.

Very few commentators would now assert that the

legitimate functions of the Court entirely cease when the

arbitrators receive the file, and conversely very few would

doubt that there is a point at which the Court takes on a

purely subordinate role. But when does this happen? Andwhat is the position at the further end of the process? Does

the Court retake the baton only if and when invited to

enforce the award, or does it have functions to be exercised

at an earlier stage, if something has gone wrong with the

arbitration, by setting aside the award or intervening in some

other way? Lord Mustill, Comments and Conclusions in

Conservatory Provisional Measures in International Arbitration ,

9th Joint Colloquium (ICC Publication, 1993)



At the beginning of the Arbitration

Three possible areas of courtintervention

1. Enforcing the Arbitration Agreement

2. Establishing the Arbitral Tribunal3. Challenges to Jurisdiction



1. Enforcing the Arbitration Agreement◦ A party may take the case to court despite

the existence of arbitration clause or

submission agreement.◦ Here, the defendant will have two choices: To

go on with litigation or to object to the court

jurisdiction.

◦ If he decides to select the latter choice, hemust raise his objection before submitting his

statement on substance – first hearing.



Article 8.1 of the UNICTRAL model lawstates that “A court before which anaction is brought in a matter which is thesubject of an arbitration agreement shall,if a party so requests not later than whensubmitting his first statement on thesubstance of the dispute, refer the parties

to arbitration unless it finds that theagreement is null and void, inoperative orincapable of being performed.”



Article 203(5) of the Federal CivilProcedural Law (CPL) states that “If theparties to a dispute agree to refer thedispute to arbitration, no suit may be filed

before the courts. Notwithstanding theforegoing, if one of the parties files a suit,irrespective of the arbitration provision, andthe other party does not object to such

filing at the first hearing, the suit may beconsidered, and in such case, the arbitrationprovision shall be deemed cancelled.”



2) Establishing the Arbitral Tribunal: thecourt will intervene in arbitrators

appointment issues if

◦ Parties fail to appoint the respondent’sarbitrators.

◦ Parties fail to appoint the sole ‘chairperson’

arbitrator.

◦ Parties challenge the impartiality of the

arbitrators.



Appointment of arbitrators: Article 204 of the Federal CPLstates that◦ “1- If a dispute arises between the parties prior to the execution

of an agreement between them to refer the same to arbitration,or if one or more of the nominated arbitrators refuses to act assuch, withdraws, is dismissed, has his appointment revoked, or is

prevented from acting due to an encumbrance, and noagreement exists between the parties in this respect, the courtwhich has jurisdiction to consider the dispute shall appoint thenecessary number of arbitrators at the request of one of theparties filed in the normal procedure for filing a suit. The numberof arbitrators appointed by the court shall be equal, orcomplementary, to the number agreed between the parties to

the dispute.◦ 2- The court's decision in respect of the foregoing may not be

contested in any way whatsoever.”



Disqualification of arbitrators: Article 207(4) of the Federal CPLstates that “An arbitrator may not be disqualified except for

reasons occurring or appearing after his appointment. A

request for disqualification must be based on the same grounds

on which a judge may be dismissed or deemed unfit for passing

judgement. The request for disqualification shall be filed with thecourt which has jurisdiction to consider the dispute within five

days from notifying the parties of the appointment of the

arbitrator or from the date on which the reason for

disqualification arose or from the time it became known if

subsequent to the notification of the appointment of thearbitrator. In all events, the request for disqualification shall not

be granted if the court has already passed a judgement or if the

hearing of pleadings has been concluded.”



Can the arbitrator be dismissed?◦ Article 207(3) of the Federal CPL states that “No

arbitrator may be removed except with theapproval of all the parties to the dispute.

However, if it is established that the arbitratorhas willfully neglected to act in accordance withthe terms of reference, despite a written noticeto him in this respect, the court which had jurisdiction to consider the dispute may, at therequest of one of the parties, dismiss thearbitrator and order a replacement in the samemanner as he was originally appointed.



Challenges to Jurisdiction◦ The tribunal will decide on its jurisdiction.

◦ However, the award can be challenged on the groundthat the arbitration agreement did not exist or it was

invalid.◦ Article 216.1 of the Federal CPL states “The parties

to a dispute may, at the time of consideration of thearbitrators award, request the nullification of thesame in the following events: (a) If the award was

issued without, or was based on invalid terms ofreference or an agreement which has expired by timeprescription, or if the arbitrator has exceeded hislimits under the terms of reference.



During the Arbitral Proceedings

The purpose of arbitration is to provide analternative to the court. So, the court roleshould be limited when the case is in thehands of the arbitrators.

However, in certain areas the tribunal mayneed some supports during the hearings. Forexample, it may need to ask the competentcourt to assist in taking evidence, or to makean order for the preservation of propertywhich is the subject of the dispute, or totake some other interim measure ofprotection.



Interim Measures ◦ They may be called as ‘interim measures of

protection’ or ‘interim or conservatorymeasures’ or provisional or conservatory

measures’. What are interim measures?

◦ “An interim measure is any temporary measure,whether in the form of an award or in another

form, made by the Arbitral Tribunal at any timeprior to the issuance of the award by which thedispute is to be finally decided.” (Article 24 (1-b)of the DIFC Arbitration Act)



The tribunal may issue interim measures.Do we need the intervention of the

court?

We do need for several reasons:◦ First, the arbitral tribunal cannot issue interim

measures until the tribunal itself has been

established. It takes time to establish an

arbitral tribunal and during that time, vital

evidence or assets may disappear.



◦ Secondly, the powers of an arbitral tribunalare generally limited to the parties involved in

the arbitration itself. A third party order, for

example, addressed to a bank holding deposits

of a party would not be enforceable against

the bank and multi-party or multi-contract

disputes may also pose similar problems.



◦ “Thirdly, interim measures ordered by an arbitraltribunal do not, by definition, finally resolve anypoint in dispute. An order or award of interimmeasures is therefore unlikely to satisfy therequirement of finality under the New YorkConvention, which may render it unenforceableinternationally. As a consequence, where theremay be a need for international enforcement ofthe interim measure, parties should consider

applying for such measures before the courts ofthe place of execution provided that this is notincompatible with the agreement to arbitrate.”



Article 22 of the Federal CPL sates that “Thecourts shall have jurisdiction to determinepreliminary issues and interlocutory applicationsin the original action within their jurisdiction and

shall also have jurisdiction to determine anyapplication connected with such action which theproper course of justice requires that it be heardwith it, and they shall likewise have jurisdiction tomake orders for expedited and preservatoryprocedures to be carried out in the Statenotwithstanding that they do not have jurisdictionin the original action.”



Some States have sought to label interimmeasures ordered by tribunals as awards,

at least as far as their own legislation is

concerned. This is the case of Scotlandwhich requires that an interim measures

order take the form of an award. Actually,

under DIAC arbitration rules, the interimmeasure can be issued as a provisional

award.



Sorts of interim measures

Article 24 (1-b) of the DIFC Arbitration Act states “…For the purposes of this Article reference to an interimmeasure includes orders that a party:

a) maintain or restore the status quo pendingdetermination of the dispute;

b) provide a means of preserving assets out of which asubsequent award may be satisfied or other means forsecuring or facilitating the enforcement of such anaward;

c) take action that would prevent, or refrain from takingaction that is likely to cause, current or imminent harm

or prejudice to any party or to the arbitral processitself; or

d) preserve evidence that may be relevant and material tothe resolution of the dispute.



Kinds of interim measures can besummarized as follows

1. measures relating to the attendance of

witnesses;2. measures related to preservation of

evidence;

3. measures related to documentary

disclosure;

4. measures aimed at preserving the status

quo.



Attendance of witnesses:◦ This is a sort of preservation of evidence.

◦ It may be necessary to resort to the courts,particularly if the witness whose presence is required

is not in any employed or other relationship to theparties to the arbitration, and so cannot be persuadedby them to attend voluntarily.

◦ The arbitral tribunal or a party with the approval ofthe arbitral tribunal may request from a competent

court of this State assistance in taking evidence. Thecourt may execute the request within its competenceand according to its rules on taking evidence.



Some arbitration laws give powers toarbitrators to carry out court procedures

related to the attendance of witnesses.

(See S44 of the English Arbitration Act1996)



Preservation of Evidence◦ If for example, the dispute is over the number

or quality of reinforcing bars used in the

concrete foundations of a road, bridge, ordam, some record must be preserved,

preferably by independent experts, before

those foundations are covered over. This is

self-evident and, on the whole,uncontroversial.



Documentary Disclosure◦ The arbitral tribunal's power to order

disclosure of documents is necessarily limited

to the parties to the arbitration. Yet in certaincircumstances, relevant documents may be in

the hands of a third party.



Preserving the Status Quo◦ For example, a pharmaceutical company may

produce a particular drug under licence and thendecide to manufacture and market a competing

product under its own name, claiming that thereis nothing in the licence agreement to prevent itdoing so. In such a case, the licensor probablywishes to argue that until the dispute is resolvedby arbitration, the licensee should be restrained

from manufacturing and marketing the competingproduct.

◦ Can this apply under the UAE law?

Whi h d id i i



Which court decides interim

measures under UAE law?◦

1 - One of the judges of the seat of the court offirst instance shall be deputed to makeprovisional rulings without prejudice to the[substantive] right in expedited matters where itis feared [that a right will be lost] by the passing

of time.◦ 2 - The trial court shall have jurisdiction to hear

those matters if they are raised before it asconsequential issues.

◦ 3 - Outside the city where the court of first

instance has its seat, such jurisdiction shall bevested in the petty court. (Article 28 of theFederal CPL)

C h bi l ib l i



Can the arbitral tribunal issue

interim measures? The current UAE arbitration rules do not

provide much on this question.

Under the UAE law, Article 209(2) of

the civil procedure code states that “If,during the course of arbitration, apreliminary issue, which is outside thepowers of the arbitrator, arises… the

arbitrator shall suspend the proceedingsuntil a final judgement on the same hasbeen passed.”



DIAC arbitration Rules

Article (31) titled ‘Interim and ConservatoryMeasures of Protection’ states

“1- Subject to any mandatory rules of the applicablelaw, at the request of a party, the Tribunal may issueany provisional orders or take other interim or

conservatory measures it deems necessary, includinginjunctions and measures for the conservation ofgoods which form part of the subject matter indispute, such as an order for their deposit with athird person or for the sale of perishable goods.

The Tribunal may make the granting of such measuressubject to appropriate security being furnished by therequesting party.



How can interim measures be enforced?◦ This can be done through state courts. In

order for the parties to be able to do so, the

tribunal may issue the interim measures asinterim or provisional award. Article 31.2 of

DIAC rules states that “Measures and orders

contemplated under this Article may take the

form of an interim or provisional award.”

Does Resorting to the state court for enforcing an



Does Resorting to the state court for enforcing an

interim measure mean a waiver of the arbitration

agreement?

Article 31.3 of DIAC arbitration rules allows resortingto state courts for interim measures albeit there is an

arbitration agreement or even where the dispute is

being arbitrated. It states that “A request addressed by a

party to a competent judicial authority for interim orconservatory measures, or for security for the claim or

counter-claim, or for the implementation of any such

measures or orders granted by the Tribunal, shall not be

deemed incompatible with, or a waiver of,

the Arbitration Agreement.”



Further, Article 6 of the Draft FederalArbitration Law states that “The courtreferred to in the above article (5) mayorder, upon the request of one of arbitrationparties or that of arbitral tribunal, thattemporary or conservative procedures betaken whether prior to proceeding withsuch arbitration procedures or while theyare being taken. In addition, when the above

procedures are taken on the part of thecourt, this shall (not) necessarily mean thatarbitration procedures are stopped.”



Under Article 25 of the DIFC-LCIA arbitration rules, thetribunal has the power to issue interim and conservatorymeasures unless the parties agree otherwise.

Here, it should be noted that parties still have the right toapply to any state court for interim or conservatorymeasure. Article 25.3 states “The power of the Arbitral

Tribunal under Article 25.1 shall not prejudice howsoeverany party’s right to apply to any state court or other judicialauthority for interim or conservatory measures before theformation of the Arbitral Tribunal and, in exceptionalcases, thereafter. Any application and any order for suchmeasures after the formation of the Arbitral Tribunal shall be

promptly communicated by the applicant to the ArbitralTribunal and all other parties…”



Enforcement of arbitral interim measures, issuedunder the LCIA rules, can simply be enforced by theDIFC courts.

For this purpose, Article 24 of the DIFC Arbitration Actstates that “With the written permission of the ArbitralTribunal a party in whose favour an interim measure has

been granted may request from the DIFC Court of FirstInstance an order enforcing the Arbitral Tribunal’s order orany part of it. Any request for permission or enforcementmade under this Article shall be simultaneously copied to allother parties. Unless the Arbitral Tribunal at any time directsotherwise, the party making a request to the DIFC Court of

First Instance under this Article shall be entitled to recoverin the Arbitration any legal costs and DIFC Court of FirstInstance fees reasonably incurred thereby.”

D d h b l’



Do parties need to agree on the tribunal’s

power to issue interim measures?

The answer to this question depends solelyon the applicable arbitration rules and law.

Generally speaking, the tribunal will have

such a power unless the parties agreeotherwise.

For example,

◦ under Article 31 of the DIAC arbitration rules,

such an agreement is not required. The arbitral

tribunal will have such a power by default.



◦ Similarly, Article 24.1 of the DIFC ArbitrationLaw states that “The following provisions shall

apply unless the parties have expressly agreed

in writing that the Arbitral Tribunal shall not

have power to order interim measures...”

◦ Similarly, Article 17.1 of the UNCITRAL

arbitration model law states “unless otherwise

agreed by the parties, the arbitral tribunal may,at the request of a party, grant interim

measures.”



Compensations

Will the party be compensated if it appears later thatthe interim measure requested by the other partywas unnecessary and harmful?

Yes, the tribunal can include such compensations in itsaward.

Article 17G of the UNCITRAL clearly states that“The party requesting an interim measure or applyingfor a preliminary order shall be liable for any costsand damages caused by the measure or the order toany party if the arbitral tribunal later determines that,

in the circumstances, the measure or the ordershould not have been granted. The arbitral tribunalmay award such costs and damages at any pointduring the proceedings.”



Article 24.1(e) of the DIFC ArbitrationAct states that “The party requesting aninterim measure may be liable for anycosts and damages caused by the measureto any other party if the Arbitral Tribunallater determines that, in thecircumstances, the measure should not

have been granted. The Arbitral Tribunalmay award such costs and damages at anypoint during the proceedings.”



In order to make sure that compensationwill be paid, “the tribunal may order any

claiming or counterclaiming party to provide

appropriate security in connection with such

measure, including security for the legal or

other costs of any other party by way of

deposit or bank guarantee or in any other

manner…” (DIFC Arbitration Law) A similar rule can be found under Article

31.1 of the DIAC arbitration rules.



Article 17 E(2) of the UNCITRALArbitration model law states that “The

arbitral tribunal shall require the party

applying for a preliminary order toprovide security in connection with the

order unless the arbitral tribunal

considers it inappropriate or unnecessary

to do so.”



At the end of Arbitration

The enforcements and judicial challengesof arbitral award

Factors to be considered in issuing



Factors to be considered in issuing

an interim measures

Article 17 A. of the UNCITRAL model law states that (1) The party requesting an interim measure… shall

satisfy the arbitral tribunal that:

(a) Harm not adequately reparable by an award ofdamages is likely to result if the measure is not

ordered, and such harm substantially outweighs theharm that is likely to result to the party against whomthe measure is directed if the measure is granted; and

(b) There is a reasonable possibility that therequesting party will succeed on the merits of the

claim. The determination on this possibility shall notaffect the discretion of the arbitral tribunal in makingany subsequent determination.

Arbitration in UAE

Documents

Transcript of Arbitration in UAE