The nation’s Legislative authority promulgated Federal Law No. 6 of 2018 (“Arbitration Law”), satisfying the urgency of creating a separate and distinct UAE Arbitration Law, thereby effectively revoking Article No. 203 to Article No. 218 of the Federal Law No. 11 of 1992 concerning Civil Transactions Law. The Arbitration Law retains few elements from the Articles of Civil Transactions and incorporates certain principles of UNICITRAL Model Law.
In a novel move, UAE Legislation has recognised the International Commercial Arbitration (Article 3). This Article states Arbitration Law may have international character even if it is conducted within U.A.E. If the principal place of business of parties are located in two different countries and if one of the parties’ principal place of business is more concerned with the Arbitration Agreement, that shall be the deciding factor to ascertain whether the Arbitration is International or Domestic.
The Arbitration Law retains the need for specific power to execute an Arbitration Agreement (Article 4 (1)) from the Civil Transactions Law. This retention of the aforementioned clause raises a peculiar issue, as parties need to ensure that the individuals signing the Arbitration Agreement have power to do so under the Memorandum of Association or a specific power of attorney. In the absence of the aforesaid, there is a risk the Arbitration Agreement will be treated as invalid. Hence, the parties are advised to review documents and inspect the identity of the individuals signing the Agreement, before entering into an Arbitration Agreement.
In keeping pace with the International Arbitration rules and practice, the Arbitration Law treats an Arbitration Agreement as independent and separate from the main contract
(Article 6 (1)). If the main contract is deemed as invalid or is revoked or terminated, this does not affect the Arbitration Agreement’s validity unless it is in itself invalid and void.
The Arbitration Law bestows powers on the Arbitral tribunal to decide on any plea raising jurisdictional dispute (Article 19 (1)). It is the discretion of the Arbitral tribunal to treat this as a preliminary issue and pass an interim award, or decide in its final award. This brings in itself a significant change and the ideology that Court intends to have least interference with the Arbitration proceeding. However, this raises a procedural dilemma, if in a particular case the Arbitral tribunal decides to adjudicate the jurisdictional objection in its final award, in this situation the parties would be made to argue on the merits and jurisdictional objection, and if the final award states that tribunal had no jurisdiction then the parties’ efforts litigating on merits turns out futile and a waste of the tribunal’s precious time and resources.
Furthermore, the Arbitration Law takes a pro-arbitration approach with Article 25 setting set time limit to object if there is any inconsistency between the Arbitration procedure and Arbitration Agreement. The law provides for the said objection to be raised within seven days or any agreed period from the date of knowledge of inconsistency. Such a strict and short timeline displays the Legislature’s intention for parties to be pro-active in their approach and for the Arbitration to proceed with quickly.
Parties entering into Arbitration often aim to keep them private and confidential. However, the same is not adequately covered under the Arbitration Law. Article 33 (1) states Arbitration sessions shall be held privately unless otherwise agreed between the parties. The Arbitration Law does not address the confidentiality of the documents, witness statements and oral/written submissions made during the Arbitration proceedings. This, thus, raises an issue that any documents exchanged during the proceedings can be circulated to be used
elsewhere. Therefore, it is in parties’ interest to draft appropriate confidentiality clauses in their Arbitration Agreement, or agree to keep pleadings confidential while formulating arbitration procedures.
Article 33 (5) of the Arbitration Law gives further autonomy to a party to appoint a legal representative or expert to represent them before an Arbitration proceeding. There is no legislative compulsion to have a lawyer represent you as the law allows anyone to be appointed as a representative, provided the said representative has proof of power to do so. The Arbitration Law adopts a commercial and cost-effective approach by giving the Arbitral Tribunal authority to hear witness testimony through modern means of communication (video conferencing facilities) and do not require the witness’ physical attendance (Article 35). However, the law does not establish the manner in which witness testimony be taken on record i.e. examination in chief and cross examination. Hence, it is at the tribunal and parties’ discretion to decide whether the witness ought to be cross examined or the testimony be taken on record as it is.
Article 41 (6) simplifies the cumbersome process of signing the Arbitral Award. Earlier, few Arbitration Centres stressed the need for Arbitrators to sign the Arbitral Award in the venue itself or have the foreign arbitrators return to U.A.E for the Award’s ceremonial signing. The abovementioned Article explicitly states an award will be deemed to be issued at the arbitration’s venue, even if the Arbitral tribunal signs it outside the venue. This, thus, makes publishing the Arbitral Award swift without the inconvenience of having it signed at the venue.
With the aim to make Arbitration a quick and effective dispute resolution mechanism, Article 42 of the Arbitration Law provides the Tribunal ought to render the final award within the time limit agreed between parties. If there is no agreed time limit, then the award
shall be rendered within six months from the date of the Arbitration proceeding’s first session. Such Tribunal may decide to extend the above period by another six months unless the parties agree on a longer period. However, if Arbitral Award is not published even after the aforementioned extension, then further extension can only be made by making an application to Court. The court may order an extension or terminate the Arbitration proceeding and this decision will be final. It is pertinent to note that failure to render award within the above time frame is ground to challenge an award (Article 53 (1) (g)).
Arbitration Law provides for limited grounds under which an Award can be set aside by Court. Party seeking to set aside the arbitral award ought to prove that:
• No Arbitration Agreement exist or Arbitration Agreement is void or has expired under the Applicable Law (Article 53 (1)(a))
• Party signing the Arbitration Agreement lacked legal capacity to execute the Agreement (Article 53 (1) (c))
• If the Arbitral Tribunal excluded the application of the law agreed upon by the parties to govern the dispute (Article 53 (1) (e))
• If the Arbitral procedures are void which affected the award or the award was issued after the time limit prescribed by law or parties (Article 53 (1) (g))
If the Arbitral award deals with issues that are not within the scope of Arbitration Agreement, or exceeds its jurisdiction under the Agreement, then the parts not within the scope of agreement shall be treated as void (Article 53 (1) (h)). The Law recognizes the principle of severability, wherein it separates the award’s void part and retains the valid part. The Arbitration Law provides the Court power to suomoto – to annul the award if the court finds the subject matter of dispute relates to a subject which is not arbitral (eg. Criminal, labour or real estate issue) or it is against the U.A.E.’s public order and morals.
Prior to the Arbitration Law’s formulation, there was no time limit to file an action before court to set aside arbitral award. However, the Arbitration Law sets forth a 30-day time limit to commence an action to set aside an arbitral award (Article 54 (2)). Furthermore, such an action does not result in stay of arbitral award. Hence, the party is free to enforce the arbitral award even if an action to set aside award is filed. The Court is at the liberty to stay the enforcement if one party requests for such stay.
Overall, the Arbitration Law is a welcoming piece of legislation, which covers all the aspects of Arbitration in line with international practice. There are few key components that would need clarity, and it would be interesting to see how the courts enforce such provisions. U.A.E. legislators have worked towards providing a wholesome legislation and this certainly clears the grey areas that were present under the Civil Transactions Law. In the near future, we shall see if the enforcement and interpretation of Arbitration Law invites more attention from International Parties and favour U.A.E. as the venue for Arbitration proceedings.
Al Nassar Advocates & Legal Consultants