Arbitration Update: DIAC agrees for the LCIA takes over existing DIFC cases


As the transition period following Dubai's surprise abolition of the DIFC Arbitration Institute comes to an end, a new announcement has provided important clarity regarding disputes under agreements providing for Dubai arbitration.  The announcement has important implications for businesses which have any such clauses in their contracts.

In September last year, we wrote about the Dubai Government's Decree No. 34 of 2021 abolishing the Dubai International Financial Centre ("DIFC") Arbitration Institute. The DIFC Arbitration Institute ("DAI") was the administering body of the DIFC-LCIA Arbitration Centre, which was established in 2008 as a joint venture between the DIFC and LCIA, and used an adapted version of the LCIA rules.

Under the Decree, which came into effect on 20 September 2021, all references to the DIFC-LCIA Arbitration Centre within arbitration agreements were to be automatically replaced with the Dubai International Arbitration Centre ("DIAC") as administrative body, unless the parties agreed otherwise. The LCIA confirmed in a public statement last September that the decree came as a shock to it, and there was no warning or discussion with the LCIA in advance of the move.  It was immediately clear that although the Decree provided for a 6-month transition period, the relatively sudden abolition of the DAI would create uncertainty and practical difficulties for parties with ongoing cases being administered by the DIFC-LCIA casework team, in particular with respect to funds held by the DAI on behalf of the parties.

The DIAC and the LCIA had been in ongoing discussions regarding a potential resolution to these issues in anticipation of the six-month transition period expiring on 20 March 2022. It has now been announced that DIAC and LCIA have agreed that the LCIA will administer all DIFC-LCIA arbitrations commenced on or before 20 March 2022, where they have previously been registered by the DIFC-LCIA and assigned a DIFC-LCIA case number. These DIFC-LCIA arbitrations will be administered under the DIFC-LCIA Arbitration Rules.

For existing agreements that provide for DIFC-LCIA arbitration, but where no case has yet been referred for arbitration, all future disputes should be registered directly with DIAC and will be administered under the DIAC Arbitration Rules (as recently revised in March 2022).  Parties to such agreements, who had plainly intended to resolve their disputes under the DIFC-LCIA Rules, should consider seeking legal advice on whether the DIAC Arbitration Rules suit their needs; if the DIAC is not their preferred forum, it would be worthwhile exploring with their counterparties the possibility of amending their arbitration clauses to instead refer to another set of international institutional rules.

For more details regarding Dubai arbitration clauses and guidance on how to include these within your agreement, please contact Duncan Bagshaw, Arish Bharucha or Shelley Drenth.

This article has been co-written by Duncan Bagshaw (Partner) and Shelley Drenth (Senior Associate)

featured image