The year in review

1) Developments affecting international arbitration Decree No. 34 of 2021 concerning the Dubai International Arbitration Centre

Undoubtedly, the most important development for UAE arbitration in 2021 was the surprise introduction and swift enactment of the DIAC Decree.

Following enactment of the DIAC Decree, on 20 September 2021, both the DAI and EMAC were abolished and their assets, rights and obligations transferred to DIAC. The DIFC-LCIA Arbitration Centre, being a joint venture between DAI and the LCIA, and one of the most prominent arbitration centres in the UAE for more than a decade, was therefore in effect unable to continue to operate in the UAE beyond the six-month transitional period.

The DIAC Decree dictated that DIAC will (1) have its headquarters in mainland Dubai and a branch in the DIFC; (2) consist of a new board of directors, court of arbitration and an administrative body which will together undertake the overall supervision and management of the new DIAC; and (3) that DIAC would issue new arbitration rules to replace the 2007 DIAC Rules, in line with its stated objectives to strengthen Dubai as a global centre for dispute resolution and apply international best practice. DIAC proceeded to issue its new arbitration rules on 21 March 2022.

The DIAC Decree provided a period of six months for DIAC to coordinate with all concerned entities to make adjustments in consistency with the decree (Article 9). Following enactment of the DIAC Decree, there were certain press releases issued as agreements were slowly reached between DIAC and the LCIA Arbitration Centre during a period of great uncertainty.

At the end of the six-month transitional period provided for under the DIAC Decree, DIAC's announcement on 21 March 2022 confirmed that DIAC now registers arbitration cases referring to the rules of arbitration centres abolished by the Decree. Such referrals are accepted from 21 March 2022 and shall be administered under the new DIAC arbitration rules (unless the parties agree otherwise) which also came into effect on 21 March 2022.

On 28 March 2022, DIAC and the LCIA also issued announcements clarifying the position in respect of ongoing, existing DIFC-LCIA arbitrations. These announcements by DIAC and the LCIA provided welcome clarity to those arbitrators, parties and practitioners engaged in existing DIFC-LCIA arbitrations, stating clearly that the LCIA will administer all existing DIFC-LCIA cases to completion. Existing DIFC-LCIA arbitrations include only those that were successfully registered with the DIFC-LCIA and provided with a registered case number on or before 20 March 2022.

In addition, and corresponding with DIAC's announcement on 21 March 2022, all arbitrations, mediations and other alternative dispute resolution proceedings referring to the respective rules of the DIFC-LCIA (including ad hoc proceedings where the DIFC-LCIA is requested to act as appointing authority or administrator), commenced on or after 21 March 2022 shall be registered and administered by DIAC in accordance with the new DIAC Rules 2022, unless the parties agree otherwise.

DIAC Rules 2022

On 21 March 2022 DIAC issued, pursuant to the DIAC Decree, its new arbitration rules, replacing its old 2007 rules. The new DIAC Rules 2022 marked a significant step forward for arbitration in the UAE, given that they represented a long-awaited and substantial improvement and modernisation of DIAC's previous rules, and reflected recent international best practice.

The key highlights of the new DIAC Rules 2022 include:

Seat – the default seat for proceedings is the DIFC, in absence of agreement by the parties, and unless the Tribunal determines otherwise. This represents a marked change from the prior DIAC rules which provided for a default seat of on-shore Dubai. This change by itself demonstrated DIAC's desire to be an internationally accessible arbitration institution.

Recovery of legal costs – for the first time, the DIAC Rules 2022 now provide for the recovery of a party's legal costs. Previously, the DIAC rules had not empowered a tribunal to make an award of a party's legal costs. Notably, tribunals are now even empowered to make interim orders for the preservation of a party's legal costs.

Consolidation and joinder of proceedings – the DIAC Rules 2022 now allow for consolidation of proceedings, and joinder of third parties to proceedings after the appointment of the Tribunal.

Interim measures and emergency arbitrator – the DIAC Rules 2022 provide for 'exceptional procedures' which include interim measures and the appointment of an emergency arbitrator. Tribunals are empowered to issue preliminary orders (defined as a temporary measure) at any time prior to issuance of its final award, and on the application of a party, to:

maintain or restore the status quo pending determination of the dispute;

prevent harm or prejudice to the arbitration;

prevent the dissipation of assets;

preserve evidence; and

provide security for the costs of the arbitration

In advance of the appointment of a tribunal, a party can make a request to DIAC to appoint an emergency arbitrator to determine an application for emergency interim relief.

Expedited proceedings – the DIAC Rules 2022 provide for expedited proceedings where the sum in dispute is less than 1 million dirhams; where the parties agree to expedited proceedings; or where the case is one of exceptional urgency, as determined by the DIAC Arbitration Court. Under expedited proceedings, parties can expect a tribunal consisting of a sole arbitrator to be appointed within five days.

Third-party funding – the DIAC Rules 2022 provide that a funded party must disclose the fact that it is being funded both to the opposing parties and to DIAC. Parties are also prevented from entering into a funding agreement where it could give rise to a conflict between the tribunal and the funder.

DIAC Arbitration Court – the DIAC Decree provided for the establishment of a new DIAC Arbitration Court. The Arbitration Court is intended to provide supervision of cases managed by DIAC. The DIAC Rules 2022 empower the Arbitration Court to appoint arbitrators and determine questions on the existence of a valid arbitration agreement (subject to the tribunal's power to make a final determination on jurisdiction), and consolidation and joinder of proceedings.

Virtual hearings – the new DIAC Rules provide for pleadings to be submitted electronically, and for hearings to be conducted virtually. In 2021 there has been a significant rise in arbitration hearings being conducted virtually. While there are new challenges (particularly to cross examination of factual and expert witnesses) associated with conducting hearings virtually, in large part the move to virtual hearings has been broadly welcomed by parties and legal representatives in saving time and cost.

A number of these changes will be recognisable to those familiar with rules updated in 2021 by both the ICC and the LCIA.