Arbitration in Dubai has grown considerably in recent times and is a process increasingly used by businesses in Dubai to resolve their disputes. Despite this growth in arbitration, however, the enforcement of arbitration awards in the UAE has a troubled history, primarily due to unclear domestic arbitration law. The UAE reached perhaps its lowest point in this respect in 2004, when the UAE Court annulled a domestic arbitration award on the ground that some of the witnesses in the arbitration had not been sworn in the manner required by UAE law for Court hearings.
Recently, steps have been taken to reform the process of the enforcement of arbitration awards in the UAE. In 2006, the UAE ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 ("New York Convention") and a new UAE federal arbitration law is currently being drafted. It is hoped the latter will replace and modernise some of the existing provisions in the domestic arbitration law.
The UAE does not currently have an arbitration law based on the UNCITRAL model law. Domestic arbitration law in the UAE is based upon only 25 or so Articles in UAE Federal Law No. 11 of 1992 ("UAE Civil Procedure Code"), including 10 Articles dealing with execution of foreign awards (in comparison, the UK Arbitration Act 1996 has over 100 sections and several schedules). Not all of these provisions are fully consistent with established international practices and the UAE's obligations under the New York Convention. Furthermore, the relevant decree implementing the New York Convention in the UAE did not expressly displace the enforcement provisions in the Civil Procedure Code. Therefore, parties seeking to enforce an award – whether under the New York Convention or otherwise – must satisfy the relevant requirements of the UAE Civil Procedure Code. In summary, these state that a party seeking to enforce an arbitration award must show that:
- the courts of the UAE did not have jurisdiction in the dispute that gave rise to the award;
- the award was issued by an arbitrator or tribunal which was competent to hear the dispute in the country in which the award was made;
- the parties were duly summoned and represented in the arbitral proceedings;
- the award is final in accordance with the laws of country in which the award was passed;
- the award does not conflict with or contradict any judgment or order previously made by the UAE court; and
- the award is not contrary to public policy in the UAE.
In practice, this means that the process of enforcing awards can often be lengthy and unpredictable. It is not uncommon for the UAE courts to require that the foreign award satisfies the rules and procedures of the UAE and may refuse to enforce if there is a violation of local laws. One potential difficulty arises in convincing the UAE Court that it did not have jurisdiction to hear the dispute in the first place (irrespective of the arbitration agreement between the parties). The UAE Court typically has a fairly broad jurisdiction over disputes including, for example, claims connected to monies or assets within the UAE and claims arising out of contracts executed or to be performed in the UAE, as well as claims over foreigners resident in the UAE. As a result, it has proven difficult to convince the UAE Court that it did not have jurisdiction.
All of this creates uncertainty in relation to how the UAE Court will deal with enforcement applications and can mean that what should have been a relatively short-form execution procedure under the New York Convention may turn into a much longer process more analogous with a full-blown court case. These complications can defeat the very purpose of arbitration as a faster and more efficient dispute resolution process.
Another recent development in the UAE has been the establishment of the LCIA-Dubai International Financial Centre (DIFC) Arbitration Centre, together with the release of the DIFC Law No. 1 of 2008 ("DIFC Arbitral Law") which came into force on 01 September 2008 and is based on the UNCITRAL Model Arbitration Law. The DIFC is a financial free zone which is exempted from UAE federal commercial and civil laws. It is not at all, as some commentators portray, the beginning and end of Dubai jurisdiction. Nevertheless, the recently established arbitration centre brings together LCIA's expertise in administering arbitrations and provides Dubai with a well-known arbitral institution and a modern arbitration law. Any award issued by the DIFC is a New York Convention Award.
Article 42 of the DIFC Arbitral Law provides for recognition and enforcement of arbitral awards and Article 44 sets out limited grounds on which recognition or enforcement of an award can be refused by the DIFC Court, including where:
- either party was under some incapacity or that the arbitration agreement was invalid;
- the party against whom the award is being invoked was unable to present its case;
- the arbitrator exceeded its jurisdiction;
- the composition of the tribunal or the arbitral proceedings was not in accordance with the agreement of the parties;
- composition of the tribunal or the arbitral procedure was not in accordance with the agreement of the parties or the law of the State or jurisdiction where the arbitration took place; or
- the award has not yet become binding on the parties or has been set aside or suspended by a Court of the State or jurisdiction in which the award was made.
The DIFC Arbitral Law is certainly a helpful step forward. However, it only applies within the DIFC and does not affect the existing arbitral provisions set out in the UAE Civil Procedure Code. Reform of UAE Federal arbitration laws is much needed and it is hoped that any new federal arbitration law that is introduced in the UAE will take heed of the more modern provisions of the DIFC Arbitral Law and, crucially, will facilitate the proper operation of the New York Convention.
Conclusion
Although the UAE, and especially the Emirates of Dubai and Abu Dhabi, have clearly invested in, and profiled, the development of arbitration as a dispute resolution process, a revised UAE federal arbitration law is much needed. Indeed, a new arbitration law is key to the advancement of arbitration in the UAE. Particularly in the context of the enforcement of foreign arbitration awards, it is to be hoped that any new law will eradicate the current inconsistencies between the provisions of the UAE Civil Procedure Code and the UAE's obligations under the New York Convention.
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