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

Introduction

By Decree 34 of 2021, Dubai has abolished the DIFC-LCIA Arbitration Centre, along with the Emirates Maritime Arbitration Centre, and transferred their property, staff and cases to the Dubai International Arbitration Centre – DIAC. The 10-article decree took effect on the 20 September 2021 after appearing in the Dubai Government’s Official Gazette on 14 September. It seems to have taken everyone by surprise – including the LCIA and DIAC.

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.

Following the issuance of Decree 34 the DIFC-LCIA and the LCIA announced that:

1. all DIFC-LCIA arbitrations already on foot will be administered directly by the LCIA under the rules of the DIFC-LCIA Arbitration Centre;
2. parties should not incorporate reference to the DIFC-LCIA Rules or the Centre in their arbitration agreements; and
3. all DIFC-LCIA arbitrations that are commenced after the enactment of Decree 34 will be administered by DIFC under the DIAC arbitration rules (unless of course parties agree otherwise).

What does this mean?

There 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 Joint Judicial Committee (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?

The Dubai Government has, for some time now, been pursuing a modernising agenda, updating laws and regulations

Issues still to be considered

Issues which will need to be considered include the following:

1. Parties will need to consider whether they are comfortable to proceed with ongoing DIFC-LCIA arbitrations given the current uncertainties. Any changes to the status quo will require the consent of the respective parties.
2. The future uptake of the DIAC will depend on whether DIAC takes steps to improve its rules (dated 2008) to bring them into line with other rules like those of the LCIA, ICC and SIAC. Notably a new DIAC Board of Directors have been appointed.
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?