International arbitration developments in the Middle East
Global | Publikation | June 2017
In the last year, a number of important developments in international arbitration took place in the Middle East region. New arbitral institutions were established in the Kingdom of Saudi Arabia and the United Arab Emirates. Local arbitration institutions revised and updated their rules of arbitration. New arbitration laws were issued in Qatar and the United Arab Emirates. We review these key international arbitration developments which, in the main, are positive and aimed at making the countries in the region more attractive for users of international arbitration.
New arbitral institutions
Kingdom of Saudi Arabia
The first international arbitration institution in the Kingdom of Saudi Arabia, the Saudi Centre for Commercial Arbitration (SCCA), was officially inaugurated in October 2016. The launch came two years after the Kingdom’s Council of Ministers resolved in 2014 to launch a centre to administer civil and commercial disputes, with an ambitious vision of becoming the preferred ADR choice in the region by 2030.
The SCCA Rules, effective from May 2016, are based on the UNCITRAL Arbitration Rules and have been developed in partnership with the AAA-ICDR. At the same time, the SCCA Rules were drafted to be consistent with the Saudi Arbitration Law issued in 2012. The SCCA Rules are generally in line with most major arbitration rules and include provisions regarding the appointment of an emergency arbitrator and joinder of third parties. Fees follow an ad valorem principle. In line with the new 2012 Arbitration Law, the SCCA has underlined that parties can appoint whomever they choose as arbitrators. The SCCA Rules are expressly stated to apply without prejudice to the rules of Sharia. However, as a matter of public policy, enforcement in Saudi Arabia is in any event only possible if an award does not violate Sharia principles.
While the opening of the SCCA is certainly welcome, the eyes of the international arbitration community will remain on enforcement of domestic and foreign arbitration awards in Saudi Arabia. While, in the recent years, this process has become easier, it is hoped that the opening of the SCCA (coupled with the government’s plan to open three branches of the SCCA in Saudi Arabia by 2020) signal a desire to become a modern arbitration-friendly jurisdiction.
It remains to be seen if the SCCA will make any inroads on the position occupied by other existing regional arbitration centres (such as DIAC and DIFC/LCIA) and the local courts. It also remains to be seen whether the Saudi government will include SCCA dispute resolution provisions in its contracts with third parties (as opposed to its previous default position of Saudi courts).
United Arab Emirates
The Emirates Maritime Arbitration Centre (EMAC), a specialised maritime arbitration centre, commenced operations in September 2016. EMAC is intended to address the dispute resolution needs of the growing maritime sector in the region.
EMAC’s rules are based on the 2010 UNCITRAL Arbitration Rules and provide for the DIFC as the default seat of arbitration, which means that the DIFC court will be the supervisory court. The advantage of this arrangement is that awards recognized and enforced by the DIFC Court are automatically enforced by the UAE courts. Final EMAC DIFC awards will be enforceable in other convention countries under the New York Convention.
New institutional rules
New DIFC-LCIA Rules
New DIFC-LCIA Arbitration Rules came into force on October 1, 2016, replacing the 2008 rules. The new rules mirror the amendments to the LCIA Arbitration Rules 2014 and the changes introduced are aimed at making DIFC-LCIA arbitrations more efficient and cost effective. The changes are also in line with the trends adopted by other arbitration institutions such as the SIAC and the HKIAC.
In summary, the key changes are
- Emergency Arbitrator (Article 9B) – the new rules allow parties, “in the case of emergency”, to request a temporary sole arbitrator to conduct emergency proceedings pending the constitution of the tribunal. The LCIA Court must appoint an Emergency Arbitrator within three days of receipt of the application.
The Emergency Arbitrator must decide the claim for emergency relief as soon as possible, but no later than 14 days from his/her appointment. The Emergency Arbitrator’s award or order may be confirmed, varied, discharged or revoked by order or award made by the tribunal once constituted. The Emergency Arbitrator provisions do not prejudice a party’s right to apply to the courts for interim measures before the tribunal has been constituted (Article 9.12).
The Emergency Arbitrator provisions will not apply to arbitration agreements made before October 1, 2016 unless the parties have expressly agreed to it.
It remains to be seen how the local courts will treat the awards or orders made by an Emergency Arbitrator.
- Consolidation of multi-party disputes (Articles 1.5, 2.5, 15 and 22) – the new rules expressly recognize that there may be more than one claimant or respondent. The tribunal may consolidate two or more arbitrations (subject to certain conditions) and, prior to the formation of the tribunal, the LCIA Court may do so (Article 22). Moreover, the tribunal is expressly empowered to provide additional directions regarding witness statements, submissions and evidence, “particularly where there are multiple claimants, multiple respondents or any cross-claim between two or more respondents or between two or more claimants” (Article 15.6).
- Measures to increase efficiency – the new rules include provisions aimed at reducing delay and costs of the DIFC-LCIA arbitrations, such as:
- Reduced time periods – certain default time periods have been reduced: for example, a respondent’s time to submit a response to a request for arbitration has been shortened to 28 days (from 30 days) (Article 2.1). That said, the LCIA Court’s time to appoint the Tribunal has increased from 30 days to 35 days (Article 5.6).
- Tribunal’s availability (Articles 5.4 and 10) – each arbitrator candidate is now required to sign a written declaration stating, inter alia, that he/she is “ready, willing and able to devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the arbitration”. The aim of this provision is to ensure at the outset that the members of the tribunal formally commit to devoting sufficient time to the arbitration and make themselves available for hearings etc. To supplement this provision, the LCIA Court can revoke an arbitrator’s appointment if he/she is “unfit to act” (Article 10.1), which includes failure to “conduct or participate in the arbitration with reasonable efficiency, diligence and industry” (Article 10.2).
- On-line filing (Article 1.3 and 2.3) – claimants and respondents are now able to file their requests for arbitration and responses on-line on the DIFC-LCIA’s website.
- Conduct of counsel (Article 18) – the new rules set out provisions aimed at regulating the conduct of the parties’ legal representatives (e.g. proof of authority, changes or additions to counsel). In particular, the parties are now obliged to ensure that, “as a condition of such representation”, their counsel have agreed to comply with the “General Guidelines for the Parties’ Legal Representatives”, and the Tribunal may sanction counsel for violation of the guidelines.
New arbitration laws
New Qatari arbitration law
On February 16, 2017, a new Qatari arbitration law was introduced; Law No 2 of 2017 to issue the Arbitration Act in Civil and Commercial Matters. It will enter into force once published in the Official Gazette. The law is largely based on the UNCITRAL Model Law (though with some variations, in particular in relation to timelines) and will apply to arbitrations, present or future, seated in Qatar or to international commercial arbitrations (as defined) seated elsewhere if the parties have agreed to submit to the Qatari arbitration law. It will apply to both public and private sector parties, irrespective of the nature of legal relationship on which the dispute is based or treaties Qatar has with other countries. The scope for government-related arbitrations, however, may be limited given that government entities can only agree to arbitrate with the Prime Minister’s consent. Notably, the new law allows parties to elect that the Qatar International Court (Qatari Financial Centre Civil and Commercial Court) will act as supervising court of the arbitration.
Arbitrator liability in the United Arab Emirates
A recent change to the UAE Penal Code (Article 257) has created a criminal offence punishable by imprisonment where arbitrators fail to act impartially (Federal Law No. 7 of 2016). This new law is controversial. The Code does not define the test for lack of integrity or partiality. In the absence of further guidance or amendment, Article 257 may reflect negatively on Dubai as a seat of arbitration, and could affect the advances made by Dubai in the recent years to establish itself as an arbitration-friendly jurisdiction. This has generated considerable discussion within the UAE legal community and there has been some suggestion that Article 257 may be amended in due course.