New DIAC Decree aims to streamline arbitration in Dubai: Your questions answered

Decree No. 34 of 2021 concerning the Dubai International Arbitration Centre recently came into force, making a number of changes to the arbitration landscape in Dubai. We seek to answer a number of important questions moving forward:

Q: What does the Decree actually do?

A: The overarching purpose of the Decree is to streamline the existing arbitration regime in Dubai, firstly by bringing all institutional arbitration under the purview of the DIFC Courts (by making the DIFC the default seat of arbitration in Dubai) and secondly by amalgamating arbitration under the one institution – the Dubai International Arbitration Centre (DIAC). This is in contrast to the previous setup where DIAC, DIFC-LCIA and EMAC each administered cases separately, and where DIAC cases were supervised by the onshore Dubai courts and cases under EMAC or DIFC-LCIA rules were supervised by the DIFC courts unless the parties had expressly agreed otherwise.

Q: What will happen to EMAC and the DIFC-LCIA moving forward?

A: There has not been any formal confirmation of how the Decree will be implemented, but it appears that EMAC will be wound up whilst the DIFC-LCIA will continue in some form at least for now. Discussions are ongoing between the LCIA and the Government of Dubai as to how the DIFC-LCIA will operate moving forward

Q: What happens to cases that are already being administered by the DIFC-LCIA or EMAC?

A: Article 6 of the Decree specifies that arbitral tribunals already formed will continue to handle the cases pending before them pursuant to the procedural rules already applicable to them. However, Article 6 also says that DIAC will undertake supervision of those cases. Having said that, this is not our practical experience and to date both EMAC and the DIFC-LCIA are continuing to supervise existing cases under their respective rules. It also appears that arrangements may be reached for the DIFC-LCIA to continue to operate moving forward as a division of DIAC, in which case it will maintain supervision of cases under its rules. This is something to monitor moving forward.

Q: What happens if I have an existing case proceeding under DIAC’s rules? Will the seat of arbitration now change to DIFC?

A: The Decree cannot retroactively change the seat of arbitration in proceedings that have already commenced. Therefore, if you have a case under DIAC’s rules in which the seat is Dubai, the seat will remain Dubai. New cases commenced under DIAC’s rules after the Decree has come into force should be seated in the DIFC unless the parties have agreed otherwise. Note that in some instances parties will have agreed to use the DIAC rules in force at the date of the contract which may precede the Decree coming into force. In such cases the seat may still be onshore Dubai notwithstanding the provisions of the Decree. Should such circumstances apply to your contract we would suggest discussing this with your lawyer. There should not be any other changes to cases already proceeding under DIAC’s supervision. Whilst DIAC are intending to release new arbitration rules in the next 6 months, these will not apply to existing cases.

Q: What happens if there is a dispute between two parties on jurisdiction?

A: Under the arbitration laws of both the UAE and DIFC, arbitral tribunals retain the power to determine jurisdiction. Therefore, in any case any jurisdictional objections should be determined by the arbitral tribunal in the first instance.

Q: What court will supervise my arbitration? Which court will determine an appeal or set aside application?

A: The supervisory court will be determined by the seat of arbitration, and the same applies in respect of the court that will hear any appeal or set aside application. For existing cases, this will be the same as before the Decree came into effect. The only change is in respect of DIAC cases commenced after the Decree comes into effect where no seat has been specified in the arbitration clause. Whereas the default supervisory court was previously the onshore Dubai court, now the supervisory court will be the DIFC court.

Q: What if parties who have chosen to refer disputes to DIAC want to preserve onshore Dubai as the seat of arbitration?

A: Most aspects of arbitration are subject to the will of the parties. Therefore, if the parties are in agreement that they actually want the seat to be onshore Dubai, then they are free to agree this. The seat of arbitration will only change to the DIFC where the parties are unable or unwilling to agree on a seat of arbitration otherwise. This agreement can be reached at the time the contract is drafted or when a dispute arises.

Q: What will happen to DIAC? Are they capable of assuming supervision of all these cases?

A: DIAC is a well-known and internationally renowned arbitral centre that handled in excess of 200 cases in 2019 and at its peak more than 400 cases. It has a large administrative team, a modern set of procedural rules and an extensive panel of both regional and international arbitrators. To build on this, the Decree and its accompanying Statute also put in place a raft of changes to the structure and operation of DIAC. A new Board of Directors, Court of Arbitration and Administrative Body will be set up, together with new procedural rules. It remains to be seen how this will all be implemented but the foundations are in place for a successful and effective international arbitration centre.

Q: What does the closing of EMAC mean for the maritime industry in Dubai?

A: EMAC was the only dedicated maritime arbitral centre in the Middle East, and whilst it is unfortunate to see it close its doors, this does not mean that the services offered by EMAC cannot continue in other forums. EMA in its time showed that there are a wealth of talented people in the maritime industry in Dubai and the UAE willing to share their knowledge and experience. Educational seminars, networking events, and the bringing together of maritime professionals will continue into the future. As to the resolution of disputes, parties will need to take guidance from their legal advisers to ensure their dispute is heard by persons with the appropriate expertise, pursuant to procedural rules suited to the circumstances of the dispute. One of EMAC’s strengths was its panel of maritime experts, and those experts remain available to hear disputes moving forward.