Dubai International Arbitration Centre Launches New Arbitration Rules for 2022

Background
Historically, DIAC had been the key arbitration centre in the UAE. A second prominent institution, the DIFC-LCIA Arbitration Centre, emerged initially in 2008 but more significantly in 2015 as a result of agreements between the LCIA and the DIFC Arbitration Institute. The DIFC-LCIA Arbitration Centre gained popularity very quickly partly due to its affiliation with the LCIA and the adoption of very similar rules. Its perception was further cemented by year-on-year increases in caseloads and experience of complex and high-value cases.

The international arbitration community was therefore taken by surprise last September when Decree No. 34 consolidated Dubai-based arbitration institutions, including the Emirates Maritime Arbitration Centre (EMAC) and the DIFC Arbitration Institute, into what is expected to be the sole pre-eminent arbitral institution in the region. By annulling and superseding extant Rules relating to arbitration in the region, the practical effect of the Decree was the abolishment of these institutions, including the DIFC-LCIA Arbitration Centre. Consequently, all cases that were being heard or would have been heard by EMAC or the DIFC-LCIA fell under the purview of DIAC.

At present, DIAC and LCIA have announced that they have agreed to terms that are consistent with the Decree and the LCIA will administer cases commenced and registered on or before 20 March 2022 from London, with a mechanism for the orderly management of funds paid by parties also agreed on.

The stated aim of the Decree is to enhance the efficiency of Dubai’s alternative dispute resolution institutions and to promote the Emirate of Dubai as a global arbitration hub.

Following the Decree, it became necessary for new DIAC rules to be approved by the DIAC Board of Directors. In the interim, the 2007 DIAC Rules and rules of the abolished arbitration centres were to remain in effect. The new 2022 Rules were subsequently approved by the Board on 25 February 2022 and came into force on 21 March 2022.

Key Changes in 2022 Rules
A key change in the 2022 Rules is the provision for DIFC as the default seat of arbitration which applies in the absence of party agreement in place of arbitration.  This is a significant departure from the 2007 rules which provided for Dubai as the default seat. The advantages of a DIFC seat include an “offshore” common-law jurisdiction having a UNCITRAL Model Law based arbitration law and a relatively straightforward award ratification process.

The 2022 Rules also account for the increased focus in recent years on due process, efficiency, and cost-effectiveness of arbitration proceedings. For instance, the 2022 Rules include provisions dealing with multiple contracts and consolidation, joinder of parties, alternative processes for appointing arbitrators, and exceptional proceedings such as emergency arbitration and conciliation. Additionally, the rules now include the much-awaited expedited proceedings for claims not exceeding AED 1 million (approx. USD 272,000). This fast-track option could be a game-changer in a market that generally lacks efficient means of adjudicating low claim value cases. Other additions allow for hearings to be heard virtually and encourage communication via email.  The other key improvement is clarity on arbitration costs. Under the 2022 Rules, legal fees form part of the arbitration costs and can be claimed by the parties.

The DIAC also announced the appointment of its Arbitration Court which replaces the Executive Committee of the DIAC and undertakes the duties of general supervision of the ADR services offered, as well as supervision of the management of all cases administered by the DIAC. The nine members of the Court will serve as the appointing authority as well as the decision-maker for certain preliminary applications before a tribunal is constituted. Again, this differs from the 2007 Rules where the Executive Committee, now defunct, performed this role.

Conclusion
The changes to the Rules reflect international best practices as well as modern realities that were not envisaged by their 2007 iteration. The DIAC’s ambition to become the foremost international arbitration centre is evident from the improvements to the Rules, and how these are applied in practice will be truly definitive of the Centre’s efficiency and effectiveness in the administration of disputes.

Should you require more information or have any other queries relating to this legal alert, please do not hesitate to contact Luisa Cetina or Khurram Khan.