Hot on the heels of the Decree, the Dubai International Arbitration Centre ("DIAC") has announced updated DIAC Arbitration Rules which come into force today, 21 March 2022 ("2022 Rules"). In addition, DIAC has announced the appointment of an Arbitration Court, in line with the Decree. The Arbitration Court replaces the Executive Committee of DIAC and will supervise all cases administered by DIAC.
The 2022 Rules will apply to all new requests for arbitration submitted to DIAC after 21 March 2022 unless the parties agree otherwise. We examine the 2022 Rules below.
The rules being replaced date back to 2007 ("2007 Rules"). DIAC published amended draft rules in 2017 ("2017 Draft Rules"), which aimed to revise and improve the 2007 Rules, to meet the needs of practitioners and users. However, the 2017 Draft Rules failed to receive approval, and the 2007 Rules have now been in force for the past 15 years.
The 2022 Rules, therefore, represent a much-needed update contain a number of important changes. The notable amendments are:
- absent alternative agreement between the parties, the seat of the arbitration will be the Dubai International Finance Centre ("DIFC"), unless the Arbitral Tribunal determines otherwise (having regard to the opinion of the parties and circumstances);
- consolidation/joinder provisions proposed in the 2017 Draft Rules have been incorporated and expanded to allow for consolidation/joinder after the appointment of the Arbitral Tribunal;
- expedited proceedings will take place where: i) the sum in dispute is AED 1m or less (excluding interest and legal costs) (c. US$ 270,000); ii) the parties agree; and/or iii) the case is of 'exceptional urgency'. However, expedited proceedings will only apply to arbitration agreements entered into after 21 March 2022, unless the parties agree otherwise;
- there is an alternative appointment process for arbitrators;
- provision is made for virtual hearings and a move away from paper-based filings;
- Appendix II of the 2022 Rules includes a non-exhaustive list of interim measures and contains a procedure for the appointment of an emergency arbitrator;
- it is express that costs of the arbitration include fees and expenses of legal counsel and experts. Under the 2007 Rules, because this point was not express and legal counsel fees were therefore not recoverable, parties, if they were alert to the issue, typically addressed it in the Terms of Reference; and
- third-party funding is permitted, with a disclosure obligation placed on the funded party, and the Arbitral Tribunal has the power to take third-party adverse costs liability into account.
Seat of DIAC arbitration
The 2007 Rules stated that where the parties failed to specify the seat of the arbitration in their contract, or did not agree on the seat, the default seat of arbitration was 'Dubai'. This meant on-shore Dubai rather than the DIFC (an international free-zone within the Emirate of Dubai having its own arbitration law). This meant that proceedings would take place under the UAE Federal Arbitration Law and were supervised by the Dubai Courts rather than the DIFC arbitration law and DIFC Courts.
The 2017 Draft Rules amended the default seat of arbitration to be the DIFC. The 2022 Rules have retained the 2017 Draft Rules' amendment and provide that:
- where the parties do not agree a seat, but do agree a location/venue for the arbitration, unless the parties agree otherwise the location/venue shall be deemed the seat of the arbitration;
- in the absence of an agreement on seat or location/venue the initial seat shall be the DIFC; and
- the Arbitral Tribunal shall have the power to finally determine the seat of the arbitration having regard to observations from the parties and relevant circumstances.
New consolidation provisions in the 2022 Rules are akin to the current ICC Rules. The 2022 Rules allow consolidation/joinder where parties are involved in "the same transaction or series of transactions" whilst the ICC Rules refer to "the same legal relationship". LCIA Rules are broader as they allow consolidation/joinder of arbitrations between different disputing parties if deemed appropriate.
New consolidation provisions in the 2022 Rules allow:
- Claimants to submit a single Request for Arbitration in respect of multiple claims arising out of or in connection with more than one arbitration agreement;
- the Arbitration Court to consolidate multiple arbitration proceedings prior to the constitution of the Arbitral Tribunal where the parties agree or certain conditions exist; and
- the Arbitral Tribunal to consolidate two or more arbitrations into a single arbitration prior to the constitution of an Arbitral Tribunal in another arbitration.
New joinder provisions in the 2022 Rules allow:
- the Arbitration Court to join one or more additional parties as Claimant(s) or Respondent(s) provided that all parties consent in writing or that prima facie the party being joined is subject to the arbitration agreement; and
- the Arbitral Tribunal, after considering all the factors (including possible conflicts of interest and procedural efficiency), to join one or more parties as Claimant(s) or Respondent(s) provided that: (i) all parties consent in writing and the party being joined has expressly agreed to the appointment and powers of the Arbitral Tribunal and application of the 2022 Rules; or (ii) the Arbitral Tribunal is satisfied that the party being joined is subject to the arbitration agreement.
Expedited and Emergency Proceedings
Article 32 of the 2022 Rules addresses expedited proceedings. Expedited proceedings can be sought where: i) the value of the proceedings is equal to or less than AED 1m (excluding interest and legal costs) (c. US$ 270,000); ii) the parties agree in writing; or iii) there is 'exceptional urgency'.
Where the Arbitration Court decides that an arbitration shall be expedited, it will seek to appoint a sole arbitrator within five days of its decision. The Final Award must be rendered within three months of the date of the transmission of the file to the sole arbitrator.
Expedited proceedings will only apply to arbitration agreements entered into after 21 March 2022.
Alternative Appointment Process
Article 13 of the 2022 Rules provides that where the parties: i) seek to appoint a sole arbitrator but fail to nominate one within the prescribed time limit, or, the co-arbitrators fail to appoint a chair; ii) fail to stipulate a mechanism for appointment; or iii) notify the Centre that they submit to the Article 13 appointment process, DIAC will provide a list of at least three suitable candidates to the parties or co-arbitrators (in the event that the chair cannot be appointed). Each party or co-arbitrator has seven days to rank the candidates in order of preference. DIAC will then invite the candidates to act in order of expressed preferences until one accepts the invitation.
Virtual Hearings and Electronic Filings
Article 26.1 gives the Arbitral Tribunal the right to decide whether hearings shall be held "in person, by telephone or through any other appropriate means of virtual communication including video conferencing".
Article 34.6 allows the Arbitral Tribunal to sign awards electronically.
Interim Relief and Emergency Arbitrator Appointment
Appendix II, Article 1 provides that an Arbitral Tribunal may order interim measures on terms it "considers appropriate in the circumstances". It also contains a non-exhaustive list of such interim measures. These broadly follow those set out in the UAE Federal Arbitration Law.
Appendix II, Article 2 sets out the procedure for appointment of an emergency arbitrator. DIAC shall seek to appoint an emergency arbitrator within one day of an application. Challenges to such an appointment must be made within two business days of notification and a decision on the challenge shall be made within two business days. The emergency arbitrator shall aim to establish a timetable to decide the application for emergency interim relief within two business days of transmission of the file to them.
Article 36 of the 2022 Rules makes clear that the costs of arbitration include fees and expenses of the parties' legal representatives.
This is an important clarification on the 2007 Rules which previously allowed awards or parts of awards to be set aside due to legal counsel's fees and expenses being deemed unrecoverable.
The 2022 Rules also follow the ICC's lead as regards third-party funding. The 2022 Rules place an express obligation and burden of disclosure on parties that receive third-party funding.
Article 22.1 of the 2022 Rules states that funded parties must disclose the existence of third-party funding arrangement to all other parties and DIAC, with details of the funder, and whether or not the funder has committed to adverse costs liability.
Article 22.2 of the 2022 Rules provides that parties cannot enter into third-party funding arrangements after the Arbitral Tribunal is formed in instances where this may cause a conflict of interest between the funder and a member of the Arbitral Tribunal.
Article 22.3 of the 2022 Rules provides that the Arbitral Tribunal may take into account the existence of any third-party adverse costs liability when apportioning costs between the two parties.
Various other small amendments from the 2007 Rules and the 2017 Draft Rules can be found throughout the 2022 Rules. Practitioners and users should be alert to this and consult the 2022 Rules in detail before taking any steps in a DIAC arbitration.
We also recommend that everyone consult the official 2022 Rules published by DIAC rather than other websites or commentary. There are many websites and articles that refer to the 'new DIAC rules' that were published in response to the 2017 Draft Rules. As discussed above, the 2017 Draft Rules and the 2022 Rules are different.
Overall, the 2022 Rules represent a significant overhaul of and improvement on the 2007 Rules. This is in keeping with the revamped and revitalised position of DIAC. The 2022 Rules should go some way to establishing DIAC as a leading institution for arbitral proceedings and continue to give the legal market confidence that the UAE and DIFC is a suitable seat and venue for high-value dispute resolution.
The 2022 Rules can be found here: http://www.diac.ae/idias/.
Authors: James Fox, Slava Kiryushin, Donal Scott and Joshua Colman-Pecha.To contact Donal, please use the following details:
Work Phone Number: +971 4 524 5624
Mobile Phone Number: +971 55 488 0766