Major Changes to Arbitration in Dubai

Dubai’s government recently made significant changes to its arbitral framework as part of its effort to strengthen the position of the Emirate as a dominant center for international dispute resolution in the region. Decree No. 34 of 2021 (the “Decree”), issued by Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum on September 14, 2021 and effective as of September 20, 2021, has fundamentally altered the existing arbitration framework in Dubai, and has the potential to have significant impacts for parties whose arbitration agreements name the now-abolished institutions.

The changes were unexpected, and have impacted parties and institutions beyond the Gulf region. For example, the London Court of International Arbitration (“LCIA”) previously was responsible for administering anywhere between 100 and 200 international arbitrations per year under the now abolished DIFC-LCIA Arbitration Centre. The LCIA noted that the recent Decree “and its swift enactment came as a surprise,” and that the “LCIA was not consulted nor given notice.” Going forward, for at least a period of time, affected parties may have to coordinate with both institutions during the pendency of ongoing arbitrations.

Overview of Important Changes:

• The Decree makes the Dubai International Arbitration Centre (“DIAC”) the sole arbitral institution in Dubai, abolishing both the DIFC-LCIA Arbitration Centre and the Emirates Maritime Arbitration Centre (“EMAC”).
• The change appears to have been made in the interest of efficiency, consolidating all arbitrators, resources, and parties in a single centralized location, with proceedings governed by a uniform set of rules and procedures.
• The Decree provides for a six-month transition period. It requires that the abolished centers transfer ownership of all properties, moveables, assets, devices, equipment and funds, employees, financial allocations, and their lists of all arbitrators, conciliators and experts to the DIAC.

Impact on Existing and Future Agreements and Underway Proceedings:

• Arbitration agreements executed prior to September 20, 2021 that name the newly abolished institutions are still considered valid and enforceable unless the parties agree otherwise, but the DIAC will ultimately replace whichever institution was named as the administrative body.
• Any agreements executed on or after September 20, 2021 that name one of the abolished institutions will likely be deemed invalid and unenforceable.
• On-going proceedings with a formed tribunal are continuing under their original applicable rules and procedures, though the “DIAC and its administrative body shall, however, undertake the supervision of such cases” pursuant to Art. 6(b) of the Decree. In its October 7, 2021 statement, the LCIA clarified that underway DIFC-LCIA proceedings are continuing with the LCIA as the administering body. Reading both statements together, there may perhaps be two supervising authorities, though it is currently unclear how this is expected to function practically.
• Proceedings which are referred for resolution after September 20, 2021 will be administered by the DIAC in accordance with the DIAC Rules, unless the parties agree otherwise.

In sum, parties should review their pre-September 20, 2021 arbitration agreements and determine whether any them invoke the DIFC-LCIA or EMAC rules. If so, parties may consider seeking modification of the agreement to name another institution, or otherwise accept that any future dispute will instead be administered by the DIAC pursuant to its rules.