A decree was issued by the Dubai Government on 14 September 2021, coming into effect on 20 September 2021, which abolished the Dubai International Financial Centre ("DIFC") Arbitration Institute, the administering body of the DIFC-LCIA Arbitration Centre.
The LCIA has confirmed in a public statement that the decree came as a shock to it, and there was no warning or discussion with the LCIA in advance of the move.
As a result, there have been some concerns about the the stability and reliability of the UAE, Dubai and the DIFC as a seat of arbitration.
The DIFC-LCIA Arbitration Centre
The DIFC-LCIA Arbitration Centre was established in 2008 between the London Court of International Arbitration ("LCIA") and the DIFC as a joint venture to administer efficient and flexible arbitration for parties throughout the Gulf and Middle East and North Africa regions. The rules adopted by the DIFC-LCIA were an adaptation of the LCIA rules. DIFC-LCIA arbitrations and awards were supervised by DIFC courts, applying the statutory and common law of the Dubai International Financial Centre and operating in English.
The provisions of the decree stipulate that all arbitration clauses referring to the DIFC-LCIA Arbitration Centre will still be valid, but the DIFC-LCIA will be replaced by the Dubai International Arbitration Centre ("DIAC") as administrative body, which is suggested to be the single unified arbitration centre in Dubai, going forward.
Dubai International Arbitration Centre
DIAC was established in 1994 and its arbitrations are conducted pursuant to the DIAC Arbitration Rules 2007 ("the DIAC Rules"). DIAC arbitrations are generally seated in onshore Dubai, meaning that its arbitrations and awards are subject to supervision of the onshore Dubai courts, rather than the international courts of the DIFC. DIAC arbitrations are generally operated in Arabic and apply UAE civil law.
However, as a result of the decree, all arbitrations in Dubai will be under the DIAC, but with the option of either an onshore Dubai or a DIFC seat.
Practical Considerations
This abrupt reform has caused some concern and uncertainty. A number of lawyers are believed to have advised clients to stop providing for any Dubai-based arbitration within their agreements. Certainly, the decree appears to mean that no contracts should henceforth provide for DIFC-LCIA Arbitration, and parties should consider whether they want to provide for DIAC arbitration or arbitration through another institution and with a different seat.
Whilst DIAC's existence appears not to be under threat, parties should note that it is not an identical institution to DIFC-LCIA and consideration should be given to DIAC's rules and procedures before providing for DIAC arbitration in any contracts. As DIAC have been given six months to implement changes to their structure and rules to allow for this transition, it should also be noted that some change is likely to follow at DIAC in the near future. Caution should be exercised before providing for DIAC Arbitration Rules with a DIFC seat in agreements, until such changes have been implemented.
For a more recent update on the status of DIFC cases following the expiry of the six month transition period, see our article here.
For more details regarding Dubai arbitration clauses and guidance on how to include these within your agreement, please contact Duncan Bagshaw or Arish Bharucha.
This article has been co-written by Duncan Bagshaw (Partner) and Sanchita Agrawal (Solicitor)
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