The draft of the Federal Arbitration Law (the "Draft Law") has recently been released for consultation and, absent robust objections from the legal community and with the exception of minor amendments, is likely to become law within the next 12 months. The Draft Law, once enacted, will repeal the current provisions of the Civil Procedure Code governing arbitration and will govern arbitrations conducted pursuant to UAE procedural law as well as the rules of the arbitral centre under which the arbitration is being conducted (for example the Abu Dhabi Commercial Conciliated and Arbitration Centre or Dubai International Arbitration Centre). The Draft Law is based largely on the Egyptian model (Law 27 of 1994 Promulgating the Law Concerning Arbitration in Civil and Commercial Matters). This article will examine some of the key provisions of the Draft Law and consider the potential impact it will have on arbitration in the UAE (on the presumption the law is likely to be enacted in its current form).

The role of the court

The role of the court in arbitrations has been clarified under the Draft Law. The relevant local court is the court that is substantially competent to hear the dispute, that is, the civil courts of the particular emirate where the dispute arises. However, where the dispute is one of international trade, which is defined by Article 4 to include where the head office of the parties is located in different countries, or the agreement is international for a number of other reasons set out in the Draft Law, the Abu Dhabi Federal Court of Appeal (unless the parties agree a foreign Court) will be the competent court: Article 5. Article 15 of the Draft Law restates the present position that is; a party must plead the arbitration agreement at the first opportunity or potentially lose the right to arbitration.

Precautionary procedures

The competent court will have the power to order temporary or conservative procedures, for example precautionary attachments, prior to or during the arbitration.

Appointment

Where the parties have agreed a sole arbitrator to determine the dispute but are unable to agree on the identity of the arbitrator, the court will select an arbitrator. Where the appointment procedures are violated by either party or the party appointed arbitrators are unable to agree on a procedural matter or the appointment of another arbitrator the court will make the selection on application of either party.

Powers during arbitration

During the arbitration proceeding, the Tribunal may apply to the Court to:

(a)

pass judgement on a witness failing to attend or refusing to swear or answer questions;

(b)

assign a third party with a job of providing any document in its possession to settle the dispute; and

(c)

orders rogatory.

The Arbitral Tribunal or either party may ask for assistance of the competent court to obtain evidence, although it remains to be considered how this will sit if parties have already agreed alternative forms of discovery, for example the IBA Rules.

Nationality of arbitrators

The Draft Law introduces a new requirement not previously present under UAE law in relation to the appointment of arbitrators. In the absence of agreement between the parties and in the event any arbitration centre fails to nominate an arbitrator(s) Article 18 of the Draft Law will apply empowering the competent court to make the selection.

In the case of an international arbitration (as described above) the arbitrators may not be of the same nationality as either of the dispute parties. It is unclear in the Draft Law whether this is only in the event the court nominates the arbitrator or whether it is applicable to all arbitrations. This may cause some concern to foreign entities entering the region as they may not be able to select an arbitrator from their jurisdiction unless the arbitration clause provides otherwise.

The authority of the signatories to an arbitration agreement

The Draft Law restates the current position that a signatory to an agreement containing an agreement to arbitrate must be specifically authorised to enter into such agreement. This is often a source of dispute between the parties providing a basis to challenge the validity of the arbitration agreement. It is significant that the authors of the Draft Law have chosen to maintain this requirement as it is one of the major issues affecting the binding nature of arbitration agreements and can affect the speed and efficiency of justice through jurisdictional challenges where a party may often seek to challenge on the basis of their own authority (or lack thereof) to enter into an arbitration agreement after the event.

Challenges to arbitration awards

There are limited grounds on which the court can overturn an arbitration ruling and these include:

  • where a party to arbitration does not have authority to arbitrate;
  • if there is an error on the formation of the Tribunal or if the award exceeds the limit of the arbitrators authority; or
  • if the award is contrary to public policy/order in the UAE.

Enforcement

Article 53 of the Draft Law provides that the award may be set aside (by an application to the competent court) on a number of grounds.

An application to set aside an award must be made within sixty (60) days from the date on which the party making the application had received notice thereof. Article 54 provides that a previous agreement to waive the right to challenge or set aside the award will not preclude such an application before the competent court.

For international arbitration (as defined above) the competent court is the Abu Dhabi Federal Court of Appeal.

The ratification and enforcement of the award is through the competent court (the Court President). In order to enforce an award, the request must be accompanied by the following:

  • the original award (or a signed copy);
  • a copy of the arbitration agreement;
  • a certified translation if the award is not in Arabic; and
  • a copy of the docket confirming deposit of the award with the court.

Time periods for arbitration

The Draft Law requires the award to be passed within six months of the date of the first session, however, subject to the governing rules the tribunal may extend the period by six months without recourse to the court (which is a new and welcome addition) or with the agreement of the parties indefinitely.

Arbitration agreement

The Draft Law removes the requirement for the problematic arbitration deed which is a requirement of the current provisions in the UAE Civil Procedure Code. All that is now required in this context is the arbitration agreement, that is, the initial agreement containing the arbitration clause.

Conduct of the proceeding

The Draft Law brings the procedural steps in terms of pleadings in line which international practice, that is, the parties or the tribunal sets the time for the statement of claim and the statement of defence with supporting documents to be filed and served. This simplifies the procedure for commencement of arbitration where it is often required to file the Statement of Claim and all documents relied upon by the claimant at the time of the application or request for arbitration.

Summary

To answer the question in the title of this article the Draft Law rather than being a revolution represents an evolution of the existing provisions contained within the UAE Civil Procedure Code. Some may argue that the UAE has lost an opportunity to significantly advance arbitration in the region and position itself as an internationally recognised arbitral centre by not making more fundamental changes and adopting the internationally recognised UNCITRAL Model Law. What the Draft Law represents is a hybrid piece of legislation incorporating some aspects of the UNCITRAL Model Law while maintaining other provisions embodied in the existing law which runs counter to the goal of harmonisation of the legal framework governing international arbitration.

International business will no doubt be concerned by the continued necessity for a party to be specifically authorised to enter into arbitration (rather than the overriding presumption in favour of arbitration present in many other jurisdictions) and the potential heavy involvement of the court. It remains to be seen whether these concerns will be addressed prior to the Draft Law being enacted. Notwithstanding this a bespoke and detailed law on arbitration in the UAE is a welcome addition to national law.

The key question remains how the Courts of the UAE will apply the new provisions once enacted. The answer to this question is likely to decide the UAE's ability to be considered a pro-arbitration jurisdiction by international standards, fundamental if the UAE is to become the preferred regional centre for arbitral disputes within the Middle East.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.