As of 21 March 2022, the Dubai International Arbitration Centre’s (“DIAC”) new Arbitration Rules came into effect and will govern all arbitrations submitted on or after that date. The 2022 Rules are particularly significant as DIAC assumes its position as the sole arbitration centre in Dubai following the abolition of other arbitration centres, most prominently the busy and successful DIFC-LCIA Arbitration Centre, pursuant to Decree No. 31 of 2021 (the “Decree”). The Decree also promulgated a new statue for DIAC and founded a new DIAC Arbitration Court (the “Arbitration Court”) in anticipation of the 2022 Rules.
This is the first time that DIAC has updated its rules since 2007 (and, even then, the rules were not substantively amended). The 2022 Rules are an enormous step forward. They reflect a modern approach to arbitration practice with an emphasis on party autonomy, flexibility, procedural integrity and efficiency. The opportunity has been taken to address some ambiguities and difficulties arising under the 2007 DIAC Rules, such as providing the tribunal with explicit power to award legal and other arbitration costs. Updates in relation to hot topics such as third party funding of parties, virtual hearings and remote practice reflect a modern view of arbitral best practice. New provisions relating to expedited proceedings, the joinder of parties, and the consolidation of claims under different contracts provide for greater procedural flexibility and match similar innovations in the equivalent ICC and LCIA arbitration rules.
DIFC as a default seat
Historically, DIAC was an institution seated alongside the Dubai Chamber of Commerce and was closely associated with domestic dispute resolution. The default seat under the 2007 rules was Dubai. The 2022 Rules reflect the ambition to change the perception of DIAC into an institution with both local and international reach. Article 20.1 provides that “in the absence of an agreement on the seat and location/venue, the initial seat of the arbitration shall be DIFC”. The DIFC is a benign environment for domestic and international arbitration. It has a well-developed, UNCITRAL-based procedural law that is familiar to international practitioners. The DIFC Court exercises a light but supportive jurisdiction over arbitration proceedings, has strong powers to grant interim and injunctive relief and has a record of being strongly pro-enforcement of awards. At the same time, as the DIFC Court has repeatedly held, it is a Dubai court and its judgments are enforceable onshore.
Procedural innovations aimed at time, cost and environmental concerns
The 2022 Rules are subject to a “core objective” to ensure that all arbitrations are conducted “justly, fairly, impartially, efficiently and proportionately” with the tribunal subject to a general duty to ensure proceedings are conducted “expeditiously, diligently and in a cost effective manner”. This will apply to all aspects of the procedure adopted by the tribunal.
The COVID-19 pandemic has served to accelerate certain trends in arbitration practice that had previously been driven by a desire to avoid necessary expense, save time and address legitimate concerns about the environmental impact of proceedings that all too often involves needless cost and waste (particularly in the form of international travel and hard-copy documentation). Many of the updates in the 2022 Rules are concerned with ensuring that arbitration can be carried out virtually and with a focus on saving time, costs and with due regard to environmental concerns.
Where the 2007 DIAC Rules required paper copies of documents to be filed with the Arbitration Centre and the tribunal, the 2022 Rules provide that requests for arbitration, answers, and pleadings can be filed and exchanged electronically (see, for example, Articles 4.3 and 5.3). The tribunal now has greater flexibility to hold hearings by telephone or video conferencing, as well as in person (Article 20.2). Witnesses can appear and give evidence at a hearing virtually (Article 27.6), and Awards can be signed electronically or physically (Article 20.3), thereby avoiding the idiosyncratic practice of arbitrators having to fly into the Emirate physically to sign awards.
These updates address some of the means by which formulaic procedural challenges against the enforcement of awards became commonplace under the 2007 DIAC Rules. This should promote the integrity of the arbitral process in Dubai and improve the chance of predictable and just outcomes regarding enforcement.
New powers of consolidation and joinder
The 2022 Rules also include several new powers for the tribunal and the DIAC Arbitration Court in relation to consolidation and joinder provisions similar to those that have been adopted in the ICC Rules of Arbitration.
Article 8 of the 2022 Rules provides that a single request for arbitration may be used for multiple claims arising out of multiple contracts where the claimant can establish on a prima facie basis that:
- All claims are made under the same arbitration agreement; or
- The arbitrations:
a. involve the same parties; and
b. have compatible arbitration agreements, and one of the following elements can be established:
i. the disputes arise out of the same legal relationship; or
ii. the underlying contracts consist of a principle and ancillary contracts; or
iii. the claims arise out of the same transaction or a series of transactions.
Claims can also be consolidated where the tribunal has already been constituted for one of the claims, so long as a tribunal has not yet been constituted for the other claims, and the requirements set out above can be met, or where all parties agree to the consolidation.
These provisions are a reflection of the reality that parties often transact under the terms of multiple overlapping contracts, particularly in the construction sector which, historically, has made up a significant proportion of DIAC’s caseload. In such circumstances, attempting to demonstrate which contract a particular claim falls under can be difficult, and indeed, artificial, which can undermine the integrity of the proceedings and encourage the respondent party to take jurisdictional points in order to delay or undermine the proceedings. The Consolidation provisions will give the tribunal clear powers to examine the parties’ relationship and make decisions based on an holistic analysis of the parties’ relationship while making it more difficult for a defendant to attack the jurisdiction of a tribunal to hear claims arising from multiple contracts.
Similarly, Article 9 of the 2022 Rules sets out the provisions related to the joinder of parties to an arbitration. Notably, Article 9 allows for the joinder of parties to an arbitration even where that party is not a party to the arbitration agreement, so long as all parties have consented to the joinder.
The consolidation and joinder provisions allow for tribunals to better examine the legal relationships between parties as they existed in practice, potentially allowing for more holistic considerations of those relationships and better outcomes for all involved.
Expedited Proceedings and Interim Measures
The 2022 Rules also include several procedural provisions that bring DIAC in line with other leading institutions, among these are the provisions related to expedited proceedings and interim measures.
The Expedited Proceeding provisions are introduced in Article 32, which states that Expedited Proceedings are the default procedure where DIAC’s administering body, the Arbitration Court, considers it appropriate in the circumstances and when one of the following conditions is met:
- If the total value claimed and counterclaimed is equal to or less than AED 1,000,000 (exclusive or interest and costs), unless the parties agree otherwise.
- If the amount exceeds AED 1,000,000 but the parties agree in writing to the Expedited Procedure; or
- In the case of “exceptional urgency” as determined by DIAC’s administering body, the Arbitration Court.
The Expedited Procedure provisions appear similar to those found in the 2021 ICC Arbitration Rules. These provisions are a useful tool to ensure that relatively small claims can be dealt with quickly and cheaply, and are in keeping with the general drive for efficiency that is evident throughout the 2022 DIAC Rules. They are also useful in circumstances where a party is facing immediate harm or as a means of countering attempts by a defendant to shift assets out of the jurisdiction. In general, their inclusion in the 2022 Rules ensures that arbitrations held under the Rules are more flexible and responsive to the needs of the parties.
However, the AED 1,000,000 claim threshold appears to be rather low, especially when this amount includes the value of counterclaims. This can be contrasted with the ICC Rules, in which arbitrations with a value of up to $3,000,000 can be resolved via the Expedited Proceedings procedure. The ICC’s higher threshold appears to be a more reasonable one in the context of the amounts often in dispute in international arbitration.
A bold and welcome complement to the expedited procedure provisions is the inclusion of an interim measures mechanism in the 2022 Rules. An interim measure is any temporary measure prior to the issuance of a Final Award that seeks to prevent imminent harm by preserving the status quo between the parties. The provisions related to interim measures are contained in Article 1 of Appendix II to the 2022 Rules.
The interim measures provisions appear to have been inspired by the similar provisions found in the UNCITRAL Arbitration Rules. Tribunal have often been unwilling to grant interim measures under the UNCITRAL Rules due to concerns regarding the enforceability of such measures in domestic courts. The 2022 DIAC Rules attempt to address this concern by providing that:
- Interim measures and preliminary orders made in respect of them “shall be binding on the parties” and “the parties [shall] undertake to comply in full with such order immediately” (Article 1.14, Appendix II); and
- A party may approach a domestic court to grant interim measures or enforce an interim measure or preliminary order issued by a Tribunal without being taken to breach or waive the arbitration agreement (Article 1.13, Appendix III).
These additions clarify the binding nature of interim measures and the obligations they impose upon the parties. They should encourage tribunals to grant such orders in the knowledge that domestic courts will more readily enforce them.
Taken together, the expedited procedure and interim measures provisions provide parties to a DIAC arbitration with a set of useful new tools to thoroughly and flexibly enforce their rights in both domestic courts and arbitral tribunals.
Litigation Funders
A major trend in recent years, both in arbitration and litigation, has been the rise of litigation, or third party, funders. These are third parties who will fund a party’s litigation expenses on commercial terms. This has raised ethical concerns and has the potential to create conflicts of interests between funders and litigants.
Article 22 of the 2022 Rules sets out the provisions related to third party funders. In particular they require that:
- Before or after the constitution of the tribunal, a funded party must disclose this fact to the other parties and DIAC, together with the identity of the funder and whether or not the funder has committed to adverse costs liability (i.e., will be able to cover an adverse costs order against the funded party);
- Once the tribunal has been constituted, a party is prohibited from entering into a funding arrangement if that arrangement would give rise to a conflict of interest between the tribunal and the third-party funder. This is clearly an attempt by DIAC to prevent the validity of the tribunal from being undermined by a strategic litigation funding arrangement;
- The tribunal may take into account whether or not the funder will cover adverse costs orders when apportioning costs. Funders should certainly bear this provision in mind before entering into any funding arrangement.
These provisions, taken together, have the effect of ensuring transparency between the parties as to what their funding arrangements are, putting the parties on a more equal footing than if those arrangements remained undisclosed. Further, they help to preserve the tribunal from any conflicts of interest.
While these are welcome developments, they do rely on an element of good faith from the funded party to properly disclose their funding arrangements. How effective and how enforced they are will rely a great deal on the DIAC Arbitration Court’s willingness to enforce and scrutinise them.
Other procedural innovations
Article 12 of the 2022 DIAC Rules provides for the tribunal to be nominated in the conventional way (primarily by the parties or, failing that, by the Arbitration Court) with any nomination subject to the Arbitration Court’s approval. Article 13 provides for an “alternative appointment process” for appointment whereby the Arbitration Court will provide both parties with a list of potential arbitrators with both parties afforded an opportunity to rank the candidates in order of preference prior to the Court making a decision on appointment. This alternative system represents an attempt to introduce into the rules a system that practitioners have long adopted between themselves when attempting to appoint sole arbitrators and chairs.
The Arbitration Court
The 2022 Rules provide for a major role to be played in DIAC proceedings by the Arbitration Court. The existence of the Court was first disclosed in the Decree, which appended the new DIAC statute. The 2022 Rules provide that the Court will have a function akin to but not identical to that of the ICC Court. The statue provides that the Court will be composed of no more than 13 experienced international and domestic arbitration and alternative dispute resolution professionals who will each serve a four year term. Under the 2022 Rules, the Court has a general role of deciding any matter that is not specifically provided for in the rules (Article 40.1).
There are a number of particular roles assigned to the Court. It is charged with making interim decisions on certain issues pending a final determination by the tribunal (such as prima facie jurisdiction and the language of the proceedings). The Court has final say on the appointment of the tribunal (whether upon nomination of the parties or otherwise) and any challenge to arbitrations (where it must issue reasons in relation to challenge). The Arbitration Court also has the power, upon a request from the tribunal and having taken submissions from the parties, to report misconduct by counsel to the relevant supervisory or professional body.
The Court must also review the draft Award “to ensure, insofar as possible, that the formalities required by the rules have been complied with”. The review appears to be narrow in scope and, on the face of it, aimed at having the parties benefit from the experience of the Arbitration Court in avoiding procedural difficulties that undermine the award and hamper enforcement. The review appears more limited in scope that that conducted by the ICC arbitration where the Court is entitled to lay down modifications as to form and “draw [the tribunal’s] attention to points of substance”, and where the award cannot be issued without the Court’s approval as to its form.
Conclusion
The 2022 DIAC Rules include a range of updates aimed at modernising DIAC and enabling the institution to cater effectively to both domestic and international markets. There is a general duty on the tribunal and a toolkit of powers to ensure that proceedings are efficient, cost effective and address environmental concerns. The rules have been tailored to address perceived difficulties with arbitration in Dubai in the past, and the selection of DIFC as a default seat demonstrates a commitment to ensure that arbitration proceedings are robust and awards will be enforced.
