United Arab Emirates: Back To Basics: Arbitration Under Insurance/Reinsurance Contracts In The UAE

Last Updated: 2 February 2017
Article by Peter Ellingham and Rishi Sengupta

We continue our series with a high-level overview of arbitrating under an insurance/reinsurance contract governed by UAE law.  Specialist legal advice should be sought for detailed guidance and/or specific circumstances.

What is arbitration?

Arbitration is a creature of parties' agreement to resolve disputes confidentially and as an alternative to litigation before courts.

Arbitration may be set up on an "ad hoc" basis or through a recognised arbitration institution.  In the latter case, the institution performs a supervisory function and may exert a degree of control over procedure, at least pending the appointment of a tribunal.  Several arbitration institutions have been created, which adopt modern rules based on international arbitration practices.  Specific to Dubai, two that are commonly used are (a) the Dubai International Arbitration Centre (usually referred to as "DIAC"), which is based onshore, and (b) its equivalent within the DIFC, the DIFC-LCIA Arbitration Centre, which adopts the London Court of International Arbitration's rules and procedures and imports its administrative expertise.

UAE law allows arbitration under Chapter 3 of the UAE Civil Procedure Code (Federal Law 11/1992).  Notable provisions of the arbitration law are:

  1. There must be a written arbitration agreement;
  1. Parties are free to agree the number of arbitrators provided it is an odd number;
  1. Arbitrators can be of any nationality, though it is preferred if the nationality is not the same as that of either party;
  1. Parties are to be treated with equality and given a full opportunity to present their cases.  Any communication with the Tribunal is to be copied to the other party;
  1. Parties can agree to minimum qualifications of an arbitrator; and
  1. Parties are free to agree on the procedure to be followed, save for certain specific requirements (for example, an arbitrator must accept the appointment in writing1, and once appointed should within 30 days of his acceptance notify parties of the first meeting/session where time for parties to serve pleadings is decided2).

Arbitration clauses in insurance contracts

As discussed above, arbitration agreements must be written.  Insurance contracts are often standard forms and based on wordings used in "western" jurisdictions. Such standard form contracts often carry arbitration clauses. Outside insurance, such standard form clauses may well suffice, but as far as insurance contracts are concerned:

(i)The UAE Civil Code (Federal Law 5/1985) requires that any agreement to arbitrate contained in an insurance policy must be separate from the general policy wording.  Failure to abide strictly by this requirement renders the clause void; and

(ii)It is vital under UAE arbitration law that the person agreeing to arbitration agreement has the requisite authority on behalf of the contracting party. For a company, that person is usually the General Manager. We have seen various instances in the recent past where an issue over authority renders the entire arbitration (or the eventual award) void.  However, insurance contracts are often signed by one party only – the insurer, in which circumstances the existence of a valid written arbitration agreement is questionable.

Arbitration clauses in reinsurance contracts

There is nothing specific to reinsurance in UAE law and UAE insurance law does not state that it applies to reinsurance arrangements.  However, it is generally accepted that UAE insurance law encompasses reinsurance contracts.  It is therefore reasonable to accept that, for an arbitration agreement between an insurer and reinsurer to be valid, it too must be independent of the reinsurance contract.

Arbitrating insurance/reinsurance disputes

Insurers and reinsurers will inherently seek certainty, or at least the predictable.  As there is a perception that the result of litigating in the UAE Courts can be unpredictable, insurers/reinsurers will often prefer to arbitrate.  However, insurers/reinsurers often fall back on arbitration clauses contained in standard wordings, without realising that these may be void, for the reasons discussed above.  Further, given the nature of insurance contracts – which are generally renewed annually, there may be practical impediments to executing a separate arbitration agreement on each renewal.  In theory therefore, insurers/reinsurers may face situations in which they have no option but to litigate before UAE Courts.

That said, there is nothing preventing insurers/reinsurers agreeing with their respective insureds, after the event, that any dispute should be arbitrated.  That agreement need not necessarily be recorded in one deed, but can be evidenced in correspondence, provided that authorised representatives of both parties have respectively signed it, or it can be proved that the communication was sent from their respective systems3.

Indeed, it is perfectly possible for parties to ratify, in subsequent correspondence, an arbitration clause contained in a standard wording that would otherwise have been void per the UAE Civil Code.  Kennedys was recently involved in a case where, in January 2016, the Dubai Court of Cassation4 upheld a Dubai Court of Appeals'5 decision to allow the arbitration between an insurer and its insured in accordance with the arbitration clause contained within a property all risks insurance policy.  In that case, when the dispute arose, parties through respective legal consultants (authorised by their respective PoAs) agreed to arbitrate pursuant to the clause contained in the policy.  The issue before the Dubai Courts related to the appointment of the tribunal, which the Courts of Appeal and Cassation affirmed should follow the procedure set out in the arbitration clause in the policy.

Other advantages of arbitrating insurance/reinsurance disputes

Arbitrating insurance disputes is not only beneficial to insurers, but may also have benefits for the insured.  These include the following:

  • Parties have the freedom to determine the relevant language for resolving the dispute, whereas court proceedings are conducted in Arabic.  Litigating in Arabic can lead to significant translation costs and the risk of ambiguities being introduced during translation.
  • Insurance specialists can be selected and appointed as arbitrators, enabling the tribunal to draw on its expertise in relation to discrete insurance issues.  In contrast, judges in the Dubai Courts are not insurance specialists and generally rely on court-appointed experts to determine issues of insurance law.
  • Court-appointed experts might not have experience of the particular area of insurance that has given rise to a dispute, whereas in arbitration each arbitrating party may call its own specialised experts.
  • Arbitration is generally (although not always) quicker than litigation – indeed, the law requires an award to be made within six months of the tribunal being formed unless otherwise agreed by parties.
  • Appeals are customary in UAE Courts, whereas the grounds for challenging an arbitration award are limited to procedural or public policy issues.
  • Subject to parties' agreement, arbitrators may have a discretion to award costs, whereas UAE Courts only make nominal costs awards.


Arbitration is a useful tool for resolving disputes between an insurer and insured and/or between an insurer and reinsurer, such that incorporating an arbitration clause in an insurance arrangement has advantages.  However, as in any jurisdiction, care must be taken to ensure such clauses are legally compliant.


1 Article 207 (1) of UAE Civil Procedure Code (Federal law 11/1992)

2 Article 208 (1) of UAE Civil Procedure Code (Federal law 11/1992)

3 See for example Dubai Court of Cassation decision in case number 220/2004

4 Case No 354/2015; Civil Objection. Date of Decision 28 January 2016.

5 Civil Appeal No 258/2015; date of decision 16 September 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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