A New Era for Dubai Arbitrations Dubai Decree No34 of 2021

What you need to know 

• The Decree abolishes the Emirates Maritime Arbitration Centre and DIFC Arbitration Institute (most commonly known as DIFC-LCIA). The Decree seeks to establish a single unified arbitration forum in Dubai, namely under DIAC. 
• The Decree provides that all arbitration agreements referring to DIFC-LCIA Rules remain valid, but that DIAC shall replace the DIFC-LCIA in administrating the disputes arising out of such agreements. 
• Some issues relating to the implementation of the Decree remain to be clarified. Consultations are taking place between DIAC, the Government of Dubai, and the LCIA to ensure a smooth transition.  

What you need to do

• We recommend that parties to (i) ongoing arbitration proceedings under the DIFC-LCIA Rules and (ii) existing DIAC or DIFC-LCIA arbitration agreements, seek legal advice on the necessity to take action, which may include the renegotiation of existing arbitration agreements and/or the rethinking of ongoing proceedings so as to avoid future complications, such as with respect to the validity and enforceability of arbitration agreements and arbitral awards.

A new era for Dubai arbitrations: Dubai Decree No. 34 of 2021

Last month saw a transformational shift in Dubai's arbitration landscape as Dubai Decree No. 34 dated 14 September 2021 concerning the Dubai International Arbitration Centre ("DIAC") came into force on 20 September 2021 (the "Decree").

The Decree:

• enacts DIAC's new statute; 
• abolishes the Emirates Maritime Arbitration Centre and the Dubai International Financial Centre ("DIFC")'s Arbitration Institute ("DAI"), more commonly known as the DIFC-LCIA (collectively referred to as the "Abolished Arbitration Centres");
• transfers to DIAC all assets, funds, rights and obligations of the Abolished Arbitration Centres;
• transfers to DIAC all employees of the Abolished Arbitration Centres who are selected by decision of the DIAC Board Chairman;
• transfers to DIAC arbitrators' lists held by the Abolished Arbitration Centres; and
• requires DIAC to maintain its headquarters in Dubai and to open a branch in the DIFC.

In addition, Article 4(b) of the new DIAC statute provides that, in the absence of party agreement, the DIFC shall be the default arbitration seat for all DIAC arbitrations.

The stated intention of the Decree and DIAC's new statute is to strengthen the position of Dubai as a reliable global centre for the settlement of disputes and to enhance DIAC's position as one of the best choices for an arbitration centre. 

What does this mean to existing DIFC-LCIA arbitration agreements and arbitration proceedings?

The Decree reassures that: 

• all arbitration agreements referring to the Abolished Arbitration Centres shall remain valid and effective but confirms that DIAC shall replace such Centres in "considering and determining" [sic – probably meant "administrating"] the disputes arising out of such agreements, unless otherwise agreed by the Parties;
• existing arbitral tribunals appointed pursuant to the rules of the Abolished Arbitration Centres will continue to consider and determine the arbitration cases pending before them in accordance with such rules, unless otherwise agreed by the Parties;
• DIAC's arbitration rules and those of the Abolished Arbitration Centres shall remain in force to the extent they do not contradict the Decree; and
• DIAC shall coordinate with the concerned parties in order to make the necessary adjustments in accordance with the Decree within a period of 6 months.

Some matters remain to be clarified

Based on the various stakeholder's press releases, we understand that the stakeholders, including the DIFC and the LCIA, are currently in consultation with DIAC and the Dubai Government with respect to the implementation of the Decree and the transitional period.  The matters under consultations include issues such as determining:

1. who will administer existing DIFC-LCIA arbitrations and in accordance with which rules and pursuant to which arrangement;
2. the status of the DIFC-LCIA casework team;
3. the status of the funds held by the DAI on behalf of the parties in existing DIFC-LCIA cases; and
4. the way in which the authorities intend to equip DIAC to perform its new functions.

Are there potential complications?

Regardless of the ongoing consultations, the Decree raises questions as to:

1. whether a decree may alter the Parties' consent to an arbitration centre and its rules, given the consensual nature of arbitration;
2. the validity and enforceability of arbitral awards issued in accordance with the DIFC-LCIA rules, in proceedings which are going to administered by DIAC, or in accordance with the DIAC rules, especially if the agreed seat of arbitration is outside Dubai (i.e. outside the Decree's scope of applicability); and
3. the ability of DIAC to administer DIFC-LCIA cases in accordance with the DIFC-LCIA rules, without the consent of the LCIA, whose rules are proprietary.

We also understand that the intention is to completely revamp DIAC and its arbitration rules.  However, information about the content and timing of such revamp are yet to be announced.

In the meantime, arbitration practitioners, stakeholders and users will keep an eye on the developments over the next few months regarding the future of the DIFC-LCIA and how DIAC adapts to its new position and as the focal point of arbitrations in Dubai.

How does the Decree affect clients? 

We recommend that parties to (i) ongoing arbitration proceedings under the DIFC-LCIA Rules and (ii) existing DIAC or DIFC-LCIA arbitration agreements, seek legal advice on the necessity to take action, which may include the renegotiation of existing arbitration agreements and/or the rethinking of ongoing proceedings so as to avoid future complications, such as with respect to the validity and enforceability of arbitration agreements and arbitral awards.

 Authors: Cameron Cuffe, Partner; Dyfan Owen, Partner; Tammam Kaissi; Stephen Rigby, Associate; Jenny Zhang, Associate; Nour Makarem, Trainee Solicitor