The UAE Federal Arbitration Law one year in: taking stock

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The adoption of the UAE Federal Arbitration Law (UAE FAL) was welcomed with great acclaim in June last year. It entered into force on 16 June 2018 and has since applied to arbitrations seated in the UAE, including those pending at the time of entry into force of the new law. The UAE FAL is, in relevant part, albeit not exclusively, based on the UNCITRAL Model Law, which in itself has lifted the perception of UAE-seated arbitrations that are governed by the new law to a new level. The UAE is now seen as a Model Law jurisdiction that complies with international best standards and practice.

I have commented at length on the provisions of the UAE FAL both in anticipation of and after its adoption over the course of 2018. Attentive readers will recall that I have not shied away from venting my scepticism about what most commentators heralded as a sea change of the UAE arbitration law and the commencement of a new era of UAE-seated arbitrations. A careful look at the provisions of the UAE FAL reveals that in their majority, they codify existing case law precedent introduced under the former UAE Arbitration Chapter, that is Articles 203 to 218 of the UAE Civil Procedures Code (CPC), which, for their part, have been repealed by the UAE FAL. Such provisions include the kompetenz-kompetenz of arbitral tribunals, the separability of arbitration agreements and party autonomy. Importantly, the principle of party autonomy pervades most provisions of the UAE FAL and conditions almost all curial interventions of the UAE courts. As a corollary, in true UNCITRAL Model Law tradition, intervention by the curial courts, other than to support the arbitration process, is kept to an absolute minimum. This is undoubtedly laudable and a move in the right direction.

Despite the general euphoria that accompanied the adoption of the new law, some of its provisions prolonged previous, unwelcome arbitration practice; some created new procedural obstacles that did not exist before. An example of the former is the requirement of a special power of attorney to submit to arbitration, which survives in the capacity requirement in the shape of Article 4 of the UAE FAL. An example of the latter is the requirement that an award expressly list the nationality of each arbitrator, hence adding to the list of content requirements that need to feature in an award to ensure its enforceability. As regards the issue of capacity more specifically, it comes as a surprise (if not a shock) that the UAE courts have reportedly given a rather strict reading to Article 4 of the new law, discarding the more recent case law precedent that had given rise to the apparent authority doctrine under the UAE Arbitration Chapter (see Palm Jebel Ali LLC v Alan Stenet; Middle East for Development LLC v Safar Real Estate Investments LLC; and Al-Firjan LLC v JNR Development Limited). This, no doubt, is a move in the wrong direction and will hopefully remain an isolated instance of judicial error. That said, some more recent case law precedent suggests that under the new law the UAE courts are moving away from qualifying arbitration as an exceptional means of dispute resolution (in digression from the fundamental right to resort to court) (see Case No. 8/2018, ruling of the Dubai Court of Appeal of 16 January 2019), but only time will tell whether such an approach will ultimately erode the requirement for a special authority to bind to arbitration.

On a much more positive note, the UAE courts have followed the enhanced regime for enforcement of arbitral awards introduced by the new law. Since adoption of the new law, there have been consistent reports confirming the swift issuance of orders for enforcement of domestic awards by the competent court of appeal (see Case No. 6/2018, Chief Justice, Dubai Courts, 31st October 2018, unpublished and Case No. 9/2018, Chief Justice, Dubai Courts, 17 September 2018, unpublished). The courts appear to comply with the short timeline of 60 days for issuance of an order for enforcement.

In a similar vein, the UAE courts are reported to have welcomed the enforcement of foreign awards. Some readers might recall that there was some initial controversy on the question as to whether the regime set out in the UAE FAL would also apply to foreign awards. This question has now settled in favour of the application of a new regime adopted by Cabinet Decision No. 57 of 2018 (in relation to the Executive Regulation of the UAE Civil Procedures Law, 9 December 2018), which entered into force on 16 February 2019. It repeals Articles 235 to 238 CPC and introduces a new set of rules for the enforcement of foreign awards.

The wording of the new provisions (see Articles 85 to 88, Cabinet Decision No. 57 of 2018) closely resembles the corresponding (now repealed) provisions of the CPC, which confirms the continued application of the principle of reciprocity and the continued prevalence of international enforcement instruments that bind the UAE (including the New York Convention). Applications for enforcement of foreign awards are now directly heard by the execution judge, who issues an order for enforcement in no more than three days (see Article 85(2), Cabinet Decision No. 57 of 2018). That order is enforceable with immediate effect (see Article 78, Cabinet Decision No. 57 of 2018, which provides that “[i]mmediate enforcement shall be mandatory by operation of the law in any of the following cases: … D. Orders delivered on petitions…”. For the avoidance of doubt, the application for enforcement of a foreign arbitral award takes the form of a petition; see Article 85(2).) In essence, therefore, the cabinet decision introduces a procedural regime for the expedited enforcement of foreign arbitral awards. Again, insider circles confirm that the new regime for the enforcement of foreign awards works well and is implemented by the judges of the court of appeal to the letter.

Without prejudice to the achievements that have been made by the UAE FAL within the context of enforcement, by far the greatest innovation is the introduction of electronic communication across the new law. Witnesses may testify electronically, that is via video-conference. Arbitrators are allowed to deliberate by electronic means of communication, such as telephone or email (there being no need for them to meet in person for deliberations). They are even allowed to issue awards electronically, which in turn must mean that awards will no longer be required to be signed on each individual page (as used to be the case under the former UAE Arbitration Chapter). This latter innovation goes hand in glove with Article 41(6) of the new law, according to which awards are deemed signed and issued at the seat of the arbitration. So, there is no longer a requirement for foreign arbitrators to travel to the UAE for signature of the award to ensure that it qualifies for domestic enforcement. Against this background, following adoption of the new law, UAE-seated arbitrations have become perceptibly more relaxed.

It remains to be seen how the new law will change arbitration practice in the UAE over time. Suffice it to say that, for now, the UAE FAL has changed the face of UAE-seated arbitrations in some important respects. However, only practice will tell how deep-seated these changes really are.