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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.
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).
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 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
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.
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.
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