Originally published in The International Comparatice Legal Guide to: International Arbitration 2011
1 Arbitration Agreements
1.1 What, if any, are the legal requirements of an arbitration agreement under the laws of the UAE?
Under UAE law, an arbitration agreement is subject to the following formal and other requirements:
- An arbitration agreement must be evidenced in writing (Article 203(2) of Federal Law No. 11 of 1992, the UAE Civil Procedure Code ("CPC")).
- The signatory of the arbitration agreement is required to have a special authority to sign (Article 58, CPC); by way of caution, if the agreement is signed by a party representative, it is highly recommended that such representative possess a notarised power of attorney specifically authorising him to sign the arbitration agreement.
- Arbitration clauses in relation to insurance policies are required to be ' contained in a special agreement separate from the general printed conditions in the policy of insurance ' (Article 1028(1), UAE Civil Code).
1.2 What other elements ought to be incorporated in an arbitration agreement?
Apart from the specifications mentioned above in relation to arbitration agreements, the arbitral procedure and the constitution of the arbitral tribunal elsewhere in this Chapter, there are no further considerations to be taken into account in drafting arbitration clauses providing for arbitration in the UAE.
1.3 What has been the approach of the national courts to the enforcement of arbitration agreements?
The UAE judiciary is becoming increasingly familiar with the law and practice of arbitration and, in light of recent trends towards alternative dispute resolution locally and internationally, more and more arbitration-friendly. It is to be noted that the national judiciary will only give precedence to arbitration clauses over proceedings before the courts if alerted to the existence of the arbitration clause at the first court hearing (see question 3.3 below).
2 Governing Legislation
2.1 What legislation governs the enforcement of arbitration proceedings in the UAE? Were there any significant changes made to that arbitration legislation in the past year?
The primary domestic source of law relating to both domestic and foreign arbitral proceedings is Articles 203 to 218, CPC. The recognition and enforcement of domestic awards more specifically is governed by Articles 215, CPC, whereas the recognition and enforcement of foreign awards is regulated by Articles 235 to 237, CPC and the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards and other multilateral or bilateral conventions.
Apart from the CPC, there is also the DIFC Law No. 1 of 2008, which governs arbitration proceedings in the Dubai International Financial Centre ("DIFC") from the arbitration agreement to the recognition and enforcement of DIFC arbitration awards.
There were no significant changes made to arbitration legislation in the past year.
2.2 Does the same arbitration law govern both domestic and international arbitration proceedings? If not, how do they differ?
As indicated above (see question 2.1), both domestic and foreign arbitral proceedings are governed by the provisions of Articles 203 to 218, CPC. However and more importantly, the new expected arbitration law will introduce a formal distinction between domestic and international arbitration, which does not currently exist under UAE law.
2.3 Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?
The current arbitration provisions of the CPC are not based on the UNICITRAL Model Law. By contrast, the DIFC Arbitration Law is modelled on the UNCITRAL Model Law. To note that the new draft arbitration law currently under discussion takes guidance from the Egyptian arbitration law and hence takes, to some extent, account of the UNCITRAL Model Law. The differences between the two are legion and too numerous to enumerate here. It is also unlikely that the new UAE arbitration law will fully follow the spirit and content of the UNICITRAL Model Law; following the latest information from confidential sources, the new arbitration law which is to be adopted may not be entirely in line with the UNICITRAL Model Law.
2.4 To what extent are there mandatory rules governing international arbitration proceedings sited in the UAE?
The following UAE domestic arbitration law provisions on procedure may not be derogated from by the parties in an arbitration sited in the UAE:
- the uneven number of arbitrators (Article 206(2), CPC);
- the arbitrators' independence and impartiality (Article 207(4), CPC);
- the right of both parties to a fair hearing (Article 212(1), CPC);
- the obligation of any fact or expert witnesses to present their respective evidence on oath on the pain of perjury (Article 211, CPC); and
- any other public policy considerations.
3.1 Are there any subject matters that may not be referred to arbitration under the governing law of the UAE? What is the general approach used in determining whether or not a dispute is "arbitrable"?
The majority of disputes are arbitrable in the UAE, subject to few exceptions. This is supported by the wide wording of Article 203(4), CPC which provides in pertinent part that " [a]rbitration of irreconciliable question is inadmissible ". Importantly, this Article does not further specify which " questions " are " irreconciliable ", i.e. inarbitrable.
The following disputes are non-arbitrable under UAE law:
- Commercial agency and distributorship disputes, which are expressly subject to the exclusive jurisdiction of the UAE courts (Article 6, Federal Law No. 18 of 1981 (as amended), the Commercial Agency Law).
- Labour disputes, which are subject to the exclusive jurisdiction of the UAE courts following an initial mediation referral to the competent department of the UAE Ministry of Labour and Social Affairs (Federal Law No. 8 of 1980 (as amended), the Labour Law); collective labour disputes are referred to the Supreme Arbitration Board appointed by the said Ministry.
Importantly, disputes arising under ESCA have to be adjudicated by arbitration in a first instance.
3.2 Is an arbitrator permitted to rule on the question of his or her own jurisdiction?
Under UAE law and relevant institutional Rules (Article 6, Dubai International Arbitration Centre Rules ("DIAC Rules")), an arbitration tribunal is competent to decide upon its own jurisdiction and therefore has kompetenz-kompetenz . Under the DIAC Rules, jurisdictional objections should be raised by the defendant at the latest with the Statement of Defence. Under the CPC, parties retain the right to challenge an award on the basis of it having been rendered in breach of the arbitrator 's proper mandate (and jurisdiction) during the ratification process of the award (Article 216, CPC). The arbitrator is further obliged to defer to the courts if, during the course of the arbitration proceedings, a matter is referred to him/her that falls outside the scope of his/her mandate (Article 209(2), CPC).
3.3 What is the approach of the national courts in the UAE towards a party who commences court proceedings in apparent breach of an arbitration agreement?
UAE courts have become increasingly arbitration-friendly and will give precedence to an arbitration agreement provided that in the first hearing before the competent court the defendant raises the existence of the arbitration agreement and insists on the referral of the proceedings to an arbitral tribunal (Article 203(5), CPC), failing which parties are considered having waived their right to recourse to arbitration.
3.4 Under what circumstances can a court address the issue of the jurisdiction and competence of the national arbitral tribunal? What is the standard of review in respect of a tribunal's decision as to its own jurisdiction?
See question 3.2 above.
3.5 Under what, if any, circumstances does the national law of the UAE allow an arbitral tribunal to assume jurisdiction over individuals or entities which are not themselves party to an agreement to arbitrate?
Generally speaking, third parties cannot be bound by an arbitration agreement under UAE law. Obvious exceptions are where obligations under an arbitration agreement are formally assigned to a third party or where, by way of succession, a third party adopts the contractual obligations, including the obligation to arbitrate, of another party. To note that under UAE law there is no group of companies doctrine or the like per se , nor any other formal doctrine of piercing the corporate veil. However, this does not prevent a tribunal from finding that a corporate affiliate is bound by an arbitration agreement entered into by e.g. the parent company on a case-by-case basis, depending on the particular circumstances of each case. However, UAE court practice has shown that the UAE judiciary may take a very strict approach to the personal jurisdiction of arbitration tribunals over non-signatories.
3.6 What laws or rules prescribe limitation periods for the commencement of arbitrations in the UAE and what is the typical length of such periods? Do the national courts of the UAE consider such rules procedural or substantive, i.e., what choice of law rules govern the application of limitation periods?
The prescription period generally applicable to civil transaction claims under UAE Law is around 15 years. In special cases, this may be reduced to five or just two years. Actions for commercial transactions prescribe after 10 years from the date of which the commercial obligations that form the object of the action arose, unless otherwise specified by the law. In the absence of any court precedent on the subject-matter, it is arguable that the rules on prescription qualify both as procedural and substantive, depending on the individual case at hand.
3.7 What is the effect in the UAE of pending insolvency proceedings affecting one or more of the parties to ongoing arbitration proceedings?
Federal Law No. 18 of 1993, issuing the Commercial Transactions Law, empowers the insolvency judge after hearing the creditors' representative and the insolvent party to uphold the arbitration agreement in a bankruptcy dispute. Albeit not yet tested, this power
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