A prominent trading hub, a pioneer in regulatory and legal reforms, and a gem amongst the GCC States. In tandem with Bahrain’s 50th national day celebrations, we are excited to introduce the latest edition of Law Update, where we explore the significant development that the Kingdom of Bahrain has achieved as a nation on the regional and international stage.
In this standout Bahrain Focus, our lawyers provide insights and expert commentary on pertinent legal updates within the country. From an interview with an industry leader discussing the Bahrain real estate market to an insightful overview around alternative working arrangements and its economic effect. In addition, you will find several general articles along with real-life judgments that provide context for the legal landscape across the entire region.Take a read of the edition
On 14 September 2021, Dubai Decree no. 34 of 2021 concerning the Dubai International Arbitration Centre (the “New Decree”) was issued. The New Decree, which reforms the framework of arbitration in the Emirate of Dubai, was accompanied by a new statute (the “Statute”), under which the Dubai International Arbitration Centre (the “DIAC” or “DIAC Centre” or “Centre”) will be managed and regulated. On 20 September 2021, the New Decree, together with the Statute, were published in the Dubai Official Gazette, and accordingly have come into force starting from 20 September 2021 (the “Effective Date”) in accordance with Article 10 of the New Decree.
The New Decree and the Statute introduce major and fundamental amendments to the arbitration framework in the Emirate of Dubai. In this brief, we set out key takeaways along with our initial comments.
Centralized Arbitration Approach: Under Articles 4 and 5 of the Decree, both the the Emirates Maritime Arbitration Centre and the DIFC Arbitration Institution (“DAI”) are to be abolished (“Abolished Centers”). As of the Effective Date, all assets, employees, financial allocations and lists of arbitrators, mediators and experts of the Abolished Centers shall be transferred to DIAC Centre which will replace, under certain conditions, the Abolished Centers in all their rights and obligations.
New Management Structure of DIAC and the Introduction of the Court of Arbitration: Pursuant to Article 5 of the Statute, DIAC’s governance shall be composed of three main bodies (1) Board of Directors; (2) the Court of Arbitration; and (3) the Administrative Body. The DIAC Court of Arbitration shall be composed of 13 members, including the President of the Court, who shall be appointed by a decision from the Board of Directors and should be of a renowned arbitration experience at both the domestic and international levels. Among other mandates, the DIAC Court of Arbitration is entrusted to, in procedural terms, supervise and review the draft arbitral awards/orders before being issued by the relevant tribunal in order to ensure their validity and enforceability. In our view, this is a major step forward to verify the quality of DIAC awards and minimize the challenges that could be raised against their enforceability.
Supervisory Jurisdiction of the Dubai Courts and DIFC Courts: Article 4(a) of the Statute sets out the mechanism by which the place or seat of arbitration is to be determined and therefore, the supervisory court with jurisdiction. There has been, in practice, jurisdictional tension as to which of the local onshore Dubai Court or DIFC Court is the competent supervisory court with jurisdiction to hear claims for enforcement and/or annulment of DIAC awards and more generally in respect of any arbitration award seated in the Emirate of Dubai. The Dubai Courts have expressed reluctance in a number of leading authorities to exercise supervisory jurisdiction over DIFC-LCIA awards despite such arbitration being seated in Dubai on the basis that the DIFC Courts should entertain supervisory jurisdiction over all DIFC-LCIA awards irrespective of the selected seat. The DIFC Courts, by contrast will generally hear claims for enforcement of arbitral awards issued in Dubai-seated arbitration. With the introduction of Article 4 of the statute, the question of supervisory jurisdiction between the two Courts should now be resolved.
Pursuant to Article 4, where the arbitration is seated in the Emirate (i.e. Dubai), the Dubai Courts shall be the supervisory competent court to try “any case, claim or challenge related to any award or procedures of the DIAC arbitration” and the Federal Arbitral Law no. 6 of 2018 will apply. However, in cases where the arbitration is seated in the DIFC, the DIFC Courts shall be the supervisory competent court to try any case, claim or challenge related to any award or procedures of the DIAC arbitration” and the DIFC Arbitral Law no. 1 of 2008 will apply. In our view, the sentence “any case, claim or challenge related to any award or procedures of the DIAC arbitration” is wide enough to include any claim for enforcement, annulment or otherwise of DIAC arbitration awards. As such, the Dubai Courts shall now be bound by the seat criteria to accept jurisdiction as a supervisory court if the DIAC arbitration, which replaced the DIFC-LCIA, is seated in Dubai. The DIFC Courts are also required to deny jurisdiction as a supervisory court if the DIAC arbitration is seated in Dubai (i.e. outside the DIFC). More specifically, the selection of “Dubai” as a seat of arbitration should not, in our view, be construed as a reference to the DIFC.
Default selection of the Seat: Pursuant to Article 4.B of the Statute, the DIFC shall be designated as the default seat of DIAC arbitration proceedings in cases where the parties do not agree to the seat or place of the arbitration. In such cases, the DIFC Arbitration Law shall also apply. We believe that such an amendment aims to promote both Dubai as a global seat of arbitration supported by the DIFC Courts’ growing expertise in arbitration through English language proceedings.
Arbitration Funding Mechanisms: Article 8.4 of the Statute has authorized the DIAC Board of Directors to establish the rules, procedures and conditions of arbitration funders. This is another progressive step to regulate this crucial area for the framework of arbitration in the Emirate of Dubai. This, as we believe, is another sign for the philosophy behind this Decree which essentially aims to promote the Emirate of Dubai as a reliable international hub for arbitration. Indeed, Article 2 of the Statute has explicitly set this as one of the main objectives of the DIAC Centre.
Flexible Method to Propose and Approve the DIAC Rules and Their Amendments: Under the Statute, the DIAC Centre, through its own structural bodies, will be able to issue and amend the DIAC Arbitration Rules without a need for a Decree from H. H. the Ruler of Dubai as the case used to be. According to Article 8.2 and 11.5 thereof, the DIAC Court of Arbitration is authorized to propose the rules of arbitration and conciliation and the DIAC Board of Directors, by its turn, is entitled approve such proposed rules provided that they are meeting the best international practices and to take into account the complexity and disputes and cultural and legal diversity of the relevant parties. This no doubt is another great development in the arbitration industry in the Emirate which will assure a flexible and effective method to issue and approve the necessary amendments and/or additions to the applicable DIAC arbitration rules in a way that corresponds to the need once arises.
Liability of Arbitrator(s) and the DIAC Centre. Pursuant to Article 40 of the DIAC Rules, which are expected to be replaced in the coming week(s) to be in compliance with the New Decree and Statute, no member of the tribunal or of the executive committee, nor the Centre and its employees, nor any expert to the tribunal shall be liable to any person for any act or omission in connection with the arbitration. Article 24 of the Statute has however provided for a different approach and developed a new framework aimed at regulating the liability of all parties involved in the DIAC Arbitration proceedings. Article 24 of the Statute provided that “the Chairman, any member of the Board, the Court, the sub-committees, the arbitral tribunals, the executive director or any employee of the administrative body of DIAC, when performing their duties at DIAC, shall not be held liable, in terms of civil liability, for any act or omission on their part which is a result of an inadvertent mistake, and the Centre shall be solely responsible for such act or omission”. In our view, this new Article sets a new and developed framework for civil liability of the parties involved in the DIAC arbitration process. Arbitrator(s) and other involved parties will not be held liable but only for their inadvertent mistakes. Meaning that arbitrator(s) would be held liable for any intentional mistake whatsoever.
Most importantly is the liability of the DIAC Centre under the new regime. According to the aforementioned Article, the Centre would be solely liable for the arbitrators’ acts and omissions even if they were a result of inadvertent mistakes. This is, in our initial view, a major development in the framework of liability related to arbitration proceedings conducted in accordance with DIAC Rules. Whilst the exemption of arbitrators’ liability for inadvertent mistakes should provide comfort to the parties and the arbitrators, the establishment of the Centre’s liability for such inadvertent mistakes also sends an accountability message to the disputing parties engaged in proceedings under the DIAC Rules.
Other Articles of the New Decree and Statute have also dealt with important issues, including other mandates of the Board of Directors and the new Court of Arbitration, confidentiality and conflict of interests and independence and impartiality.
In conclusion, the New Decree and Statute is a significant milestone for the future of arbitration in the Emirate of Dubai.