An overview of the 2022 DIAC rules: a new start in Dubai

Introduction

In our December 2021 issue, we wrote about Dubai Decree 34 of 2021 (the Decree), which abolished the DIFC-LCIA Arbitration Centre and transferred the DIFC-LCIA’s cases to the Dubai International Arbitration Centre (DIAC) (see our article, New life breathed into DIAC as axe falls on DIFC-LCIA: What you need to know about the changes). At the time, the Decree was an unexpected development in Dubai’s arbitration landscape, which had the effect of consolidating the DIFC-LCIA and the Emirates Maritime Arbitration Centre into DIAC, and giving DIAC a six month period to March 2022 to step up into the role.

In our previous article we commented that the success of the Decree would depend on what steps were taken to update DIAC’s arbitration rules, the last edition of which came into force in 2007. In this article, we provide an overview of DIAC’s new Arbitration Rules (New Rules), in effect as of March 21, 2022, which we believe bring DIAC into line with global best practice and afford parties and practitioners several useful procedural mechanisms to ensure that proceedings are conducted effectively, efficiently, and fairly.

Background to the DIAC

DIAC was established by the Dubai Chamber of Commerce and Industry in 1994 as the Centre of Commercial Conciliation and Arbitration. It is the oldest arbitration centre in Dubai and is now Dubai’s sole arbitration centre.

DIAC’s New Rules, aim to modernise DIAC and bring procedural best practice to the institution. Among other developments ushered in by the New Rules, DIAC now has an administering body (similar to those of the ICC and LCIA), called the “DIAC Arbitration Court”, which ensures the proper regulation of proceedings and awards.

Seat of DIAC Arbitrations

The New Rules provide that unless the parties agree otherwise, the default seat of an arbitration under the New Rules will be the Dubai International Financial Centre (DIFC), save where the Tribunal determines that circumstances warrant otherwise. Previously, the default seat for DIAC arbitrations was onshore Dubai. Accordingly, unless the parties specify a different seat in their arbitration agreement, the common law DIFC Courts will have supervisory jurisdiction over the arbitration proceedings, as well as the ratification and/or annulment of awards. As the DIFC Courts are typically arbitration friendly, we consider this to be a positive development.

Procedural Innovations

The New Rules introduce a range of procedural innovations aimed at redressing time, cost and environmental concerns. Where the 2007 DIAC Rules required paper copies of documents to be filed with the Arbitration Centre and the tribunal, the 2022 DIAC Rules provide that Requests for Arbitration, Answers, and pleadings can be filed and exchanged electronically (see, for example, Articles 4.3 and 5.3 of the New Rules).

Further, there is now greater flexibility for tribunals, parties, and witnesses. For example:

• the tribunal now has greater flexibility to hold hearings by telephone or video conferencing, as well as in person (Article 20.2 of the New Rules);
• witnesses can appear and give evidence at a hearing virtually (Article 27.6 of the New Rules); and
• awards can be signed electronically or physically (Article 20.3 of the New Rules), thereby avoiding the idiosyncratic practice of arbitrators having to fly into Dubai to physically sign DIAC awards.

The New Rules address some other difficulties which arose under the 2007 DIAC Rules, including providing the tribunal with an express power to award legal and other arbitration costs.

The New Rules now permit the use of third-party funding in arbitration provided that the funded party discloses that fact, the identity of the funder, and whether the funder has committed to an adverse costs liability.

The New Rules adopt several of the procedural mechanisms found in the rules of other leading institutions, bringing DIAC into line with the likes of SIAC, the LCIA, and the ICC. This modernisation can be observed in the following new features of the DIAC New Rules.

Article 8 and 9: Consolidation and Joinder

The New Rules provide for the consolidation of claims which, subject to certain criteria in Article 8, allow a party to combine multiple claims into one arbitration. This provision brings the New Rules broadly in line with Article 9 of the ICC Rules.

Additionally, similar to Article 7 of the ICC Rules, the New Rules allow third-parties to be joined before the constitution of the tribunal with the agreement of the parties or with permission of the DIAC Arbitration Court where: (i) a tribunal has been constituted in one arbitration and no arbitrators have been appointed in the other(s); or (ii) the same tribunal has been appointed across multiple arbitrations. A third-party may also be joined after the constitution of the tribunal if all parties agree to the joinder or the tribunal determines that the third-party is a party to the relevant arbitration agreement.

Articles 8 and 9 of the New Rules ensure that the tribunal can efficiently deal with all claims between parties, and ensure that the proper parties to the dispute have joined the arbitration.

Article 32: Expedited Proceedings

Like other leading arbitral institutions, the New Rules now provide a mechanism for hearing the dispute on an expedited basis. A party can make such a request where:

• the amount in dispute is less than AED1m (exclusive of interest and costs);
• the parties agree in writing to the expedited procedure;
• the case is one of “exceptional urgency”; or
• if the DIAC Arbitration Court considers it appropriate.

Such expedited proceedings would be decided by a sole arbitrator on the basis of a documents only process, with the final award being issued within three months.

The AED1m claim threshold appears to be rather low, especially as this amount includes the value of counterclaims. In contrast, the ICC Rules and the SIAC Rules provide for expedited proceedings for arbitrations with a value of up to US$3m and S$6m respectively. These higher thresholds appear more reasonable given the amounts often in dispute in international arbitration, for example, the ICC 2022 Preliminary Report states that the median dispute figures for cases filed between January and October 2021 was US$5.7m. We anticipate that the threshold will be reviewed in due course.

Article 2, Appendix II: Emergency Arbitration

It is also notable that a party can now apply for the appointment of an emergency arbitrator and seek urgent interim relief. This change broadly aligns with Article 29 of the ICC Rules, serving to ensure that parties can obtain interim relief at the start of the proceedings before a tribunal has been formally constituted.

Conclusion

The reforms brought about by the Decree and the New Rules mark a sea-change for arbitration in Dubai. The New Rules, and the selection of the DIFC as a default seat, demonstrates a renewed commitment by the Emirate to ensure that arbitration proceedings are robust and that awards will be enforced. This modernisation should create the right environment for the future success of DIAC and secure Dubai’s reputation as a leading hub for arbitration.

A complete copy of the New Rules can be found here.

With thanks to Elizabeth Yong and Ashleigh Giles.