New life breathed into DIAC as axe falls on DIFC-LCIA

Key provisions – what you need to know

Article 4 abolishes the Maritime Centre and “the DIFC’s Arbitration Institute” i.e. the DIFC-LCIA.

Article 5 provides for the transfer to DIAC of the “properties, moveable assets, devices, equipment and funds” belonging to the abolished centres, as well their financial allocation from the Government of Dubai, their employees and their lists of arbitrators, conciliators and members. Further, DIAC will take over all the “rights and obligations” of the abolished centres.

Article 6 provides that all arbitration agreements referring disputes to the abolished arbitration centres will be “deemed valid and effective” and DIAC will replace those centres in considering and determining disputes that arise under the agreements, unless otherwise agreed by the parties.

What this means is that unless the parties agree otherwise, ongoing DIFC-LCIA arbitrations (there are about 140 currently active) will be administered and supervised by DIAC. The Tribunals currently appointed will remain in place – just operating under the auspices of DIAC as opposed to the DIFC-LCIA.

Arbitral tribunals formed within the abolished centres will continue to determine all cases pending before them without interruption, using the “applicable rules and procedures” (unless otherwise agreed by the parties). DIAC and its administrative body will, however, supervise the cases. Current DIAC cases will proceed as normal.

Article 10 puts the onus on DIAC to implement the decree within six months of it taking effect. Essentially, by 19 March, 2022.

In light of this, DIAC will most likely open a branch in the DIFC freezone in addition to its existing premises in mainland Dubai, as permitted by Article 2 of the decree.

What does this mean?

This seems to be a move to support DIAC which was a key player in international arbitration in Dubai, particularly during the financial boom of 2004 to 2008. However, in recent years it has attracted mostly UAE parties with the international arbitrations gravitating towards DIFC-LCIA.

The Dubai Government has, for some time now, been pursuing a modernising agenda, updating laws and regulations as evidenced by the demise of the much criticised JJC. Some view this as merely a step in the overall ambition to a modernise and rationalise the current structures and to “bring arbitration in the Emirate” under one roof.

The key question is: what next?

Issues which will need to be considered:

1. Consider what to do in relation to ongoing DIFC-LCIA arbitrations.
2. Will DIAC improve its rules (dated 2008) to bring them into line with other rules like LCIA, ICC and SIAC?
3. One of the difficulties around ongoing arbitrations will be finances. The decree has indicated that all assets and finances of DIFC-LCIA will be transferred to DIAC. Will tribunals be prepared to proceed if there is any uncertainty around fees?
4. When the LCIA presence in India was terminated, the LCIA announced that it would administer new cases under the LCIA India Rules from London. Similar arrangements were made when the same happened in Mauritius. This might provide some guidance as to one potential outcome for future disputes under the DIFC-LCIA Rules.