The United Arab Emirates with USD 37,600 per capita GDP is considered one of the most suitable countries for investment. The UAE has an open economy, high per capita income, stable political environment and pro-investment legislations promoting confidence among the business community. To ensure the constituting confidence of investors, UAE has recently passed new standalone arbitration law (the Federal Arbitration Law Number 6 of 2018) which is on the lines of UNCITRAL Model Law on International Commercial Arbitration 1985.
Arbitration is one of the most preferred mechanisms of dispute resolution among the business community because of its transnational nature and the ability to resolve complex disputes while staying away from country-specific politics. The international commercial arbitration helps to resolve disputes, with individual parties from different countries remaining free from local jurisdiction (compared to national courts). Arbitration is meant to serve the business community, and therefore it is required to develop and adopt the best ways to accommodate the growing demand of the business community.
The contractual arrangements in the current commercial world are becoming complex due to multiple subsequent contracts between the same parties or unrelated parties or independent contracts between unconnected parties for the same projects. In such circumstances, it is crucial that when a dispute arises in such complex contracts, there is an arrangement to resolve it effectively even if there are more than two parties involved in that transaction.
This article is divided into four (4) Parts. Part I provides a brief introduction about joinder and consolidation of arbitration proceedings for the resolution of disputes arising from complex commercial arrangements. Part II of this article will focus on UAE, DIFC and ADGM arbitration laws. Part III of the article will examine the arbitration rules of prominent UAE arbitration institutes to see to what extent these institutes permit joinder and consolidation in commercial arbitration in UAE. Finally, the Part IVwill provides specific guidelines for parties to avoid landing in undesirable situations.
Part I: Understanding the Joinder and Consolidation
As stated above, the commercial arrangements around the world are getting complicated day by day and therefore requiring more sophisticated legal mechanisms to resolve such complicated commercial arrangements. Many commercial arrangements, whether in UAE of around the world, need lengthy and complicated contracts where multiple national and international parties are involved in the completion of a single project. Especially, construction contracts are highly complicated due to the involvement of various parties like landowner, contractor ........ etc
- Consultants (Designers, Architects
- Civil Engineers
- Client etc.
Moreover, all these parties might have one or more contract between each other containing its arbitration clause. Big construction contracts are just on example of many complicated commercial arrangements.
Under such complicated commercial contract arrangements, an arbitral award passed under one contract might affect the right or interest of other parties engaged in the same project through a separate contract. This might also lead to the passing of conflicting and confusing arbitral awards increasing the cost and time of the entire dispute resolution mechanism. And this is where the joinder and consolidation of arbitration proceedings become useful.
When a dispute arises under one interrelated contract, the parties might want some other party also to be joined in the arbitration proceeding which is working on the same project in a different capacity under a separate, but interrelated agreement.
Joinder: The term joinder in arbitration means adding the non-signatory (third party) to an arbitration agreement.
Consolidation: In consolidation, two or more arbitrations are combined or consolidated into a single arbitration proceeding.
Part II: UAE Legislative Framework
UAE Federal Law
Article 22 of the new UAE Federal Arbitration Law Number 6 of 2018 covers the joinder of new parties into arbitration. It states that the arbitral tribunal has the discretion to authorize the joinder of a third party in arbitration if the original party of the arbitration or the joining party makes such request. The joining party has to be a party to the arbitration agreement. However, the UAE's new federal arbitration law is silent on consolidation of arbitration proceedings.
DIFC Arbitration Law
The DIFC Arbitration Law Number 1 of 2008 doesn't have any specific provision for consolidation and joinder of parties in arbitration. A limited reference has been provided in Article 17(3)(c) which states that if there are more than two parties to a dispute, then the DIFC Court of First Instance shall provide for the arbitration tribunal unless otherwise agreed by the parties.
ADGM Arbitration Rules
Rule 36 of the ADGM Arbitration Rules provides that the arbitration institute or the court (as the case may be) can permit the joinder if requested by a party if it considers that it is in the interest of justice.
It further provides that, only a party to the same arbitration agreement or has consented to the joinder in writing can be joined. This stipulates that the joinder shall not be permitted without giving all the parties (including the party to be joined) an opportunity to be heard. The Rule 36 further states that a party cannot be joined after the confirmation or appointment of an arbitrator unless all parties (including the joined party) otherwise agree.
Part III: Dissecting UAE's Institutional Arbitration Rules
DIAC Arbitration Rules
The DIAC arbitration rules do not refer to joinder or consolidation of arbitration proceedings. However, Rule 11.1 of the DIAC Arbitration Rules deals with the situation where there are multiple parties. It states that where there are numerous parties and the dispute is referred to a three-member tribunal the Claimants and Respondents shall together one arbitrator each for the constitution of the tribunal. The DIAC Arbitration Rules does not make any further reference to multi-party arbitration.
Abu Dhabi Conciliation and Arbitration Centre
The ADCAC does not have any specific provision for joinder or consolidation of arbitration proceedings.
Sharjah International Commercial Arbitration Centre (SICAC)
Article 7 of the Sharjah International Commercial Arbitration Centre provides for the joinder and intervention in arbitration proceedings.
Consent: for joinder, all parties (including the joined party) has to agree for the joinder.
The joined party as to be a party to the same arbitration agreement or another consistent arbitration agreement. The joinder request has to arise from the same legal relationship from which the dispute arises.The date of commencement of the arbitration proceeding for the joined party shall be the date on which the center receives a request for the joinder of the party.
The request for the joinder has to be made before the constitution of the arbitration tribunal unless;
- There is an acceptable excuse or
- All the parties (including the joined party) agrees.
Article 9 of the SICAC Rules provides that, all the claims arising under the same contract can be settled in the same arbitration even if those claims are arising under different arbitration agreements.
Article 10 of the SICAC Rules explicatively deals with the consolidation of arbitrations. It provides that the Executive Committee can consolidate two or more arbitration into single arbitration under the following circumstances:
- If all the parties consent to consolidation;
- All claims are arising from the same arbitration agreement; or
- If the allegations are arising from different arbitration agreements, however, all the arbitrations arise from the same legal relationship, and the Executive Committee finds that all the arbitration agreements are either compatible or can be reconciled.
Article 10 further states that, if the Executive Committee decides to consolidate the arbitrations then they should be consolidated in the first registered arbitration (will this affect rights of parties like date of commencement of arbitration etc.?) unless otherwise agreed by the parties.
DIFC-LCIA Arbitration Centre:
Article 1.5 and Article 2.5 of the DIFC-LCIA Arbitration Rules 2016 provide that there can be more than one claimant and respondent respectively. Furthermore, Article 22.1 (ix) provides that the arbitration tribunal (with the approval of LCIA Court) can consolidate one or more arbitration into single arbitration if all the parties to arbitration provide their consent in writing.
As per the Article 22.1 (x) of the Rules, the arbitration tribunal (with the approval of LCIA Court) can order the consolidation of arbitrations into single arbitration if;
- Arbitrations have commenced under the same arbitration agreement or
- Commenced under any compatible arbitration agreement between the same disputing parties.
However, the following condition needs to be satisfied before any consolidation can be ordered under Article 22.1 (x) of the Rules;
- No arbitration tribunal has been formed for such arbitrations or
- If the tribunal is already formed, then such tribunal is composed of same arbitrators.
The International Islamic Centre for Reconciliation and Arbitration
No provision for joinder or consolidation of arbitration proceedings.
Part IV: Conclusion and Takeaways
Arbitration is a creature of contract and therefore, to what extent the joinder and consolidation of arbitration are possible, will entirely depend on the language of the arbitration agreement entered between the parties, arbitration rules applicable and the law of that specific jurisdiction. However, below are some guidelines that can come handy for avoiding uncomfortable situations.
- If parties wish to allow for joinder or consolidation, they should provide this in their arbitration agreement and also choose the arbitration institute and rules accordingly. However, it is difficult to contemplate the requirement of joinder and consolidation at the beginning of the commercial arrangement, and sometimes it might be undesirable to permit joinder and consolidation.
- If parties wish for unhindered joinder and consolidation, then they should make sure that the arbitration clause in all contract is same or at let compatible.
- Parties should aim to have an umbrella arbitration agreement for related contracts to avoid any confusion or inconsistency.
- If the party wish to avoid being joined or have its arbitration consolidated to an arbitration proceeding, it should expressly withhold its consent to such joinder or consolidation attempts. Withholding the consent can help the party to avoid joinder or consolidation or to resist the enforcement of an arbitral award if its lack of consent is ignored.
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.