Decree 34 of 2021 and Development in Arbitration in Dubai
"Arbitration is justice blended with charity" - Nachman of Breslov.
The Dubai Decree no. 34 of 2021 regarding the Dubai International Arbitration Centre was published on 14 September 2021. The new Decree will reform the framework of Arbitration in the Emirate of Dubai. The new Decree is accompanied by a new statute under which the Dubai International Arbitration Centre (DIAC) will be managed and regulated. The New Decree and the Statute were published in the Dubai Official Gazette. It will come into force from 20 September 2021 in accordance with Article 10 of the New Decree. The Decree is aimed to enhance the efficiency of alternate dispute resolution institutions in Dubai, and it also seeks to promote the Emirate of Dubai as an international arbitration hub.
Significant changes by the new Decree
First, the new Decree seeks to merge all arbitration proceedings in Dubai within a single arbitration center. Under Articles 4 and 5 of the new Decree, the Emirates Maritime Arbitration Centre and the DIFC Arbitration Institution will be abolished. All the assets, employees and lists of arbitrators of the Abolished Centers shall be transferred to the newly formed DIAC Centre.
Second, the new Decree cancels the Emirates Maritime Arbitration Centre and DIFC Arbitration institute. The Emirates Maritime Arbitration Centre is a specialized maritime arbitration institute that was established in 2016. The DIFC Arbitration Institute was formed by the DIFC Dispute Resolution Authority when the Dubai International Financial Centre was formed in 2004. All the Emirates Maritime Arbitration Centre (EMAC) and DAI (DIFC Arbitration Institute) real estate, assets, fund allocations, rights, obligations, including the employees and the Memberships of these Arbitration centers, are to be transferred to the singular arbitration center DIAC until the expiry of their membership period.
Finally, the new DIFC Arbitration Institute (DIAC) governance will consist of three bodies. A Board of Directors, the Court of Arbitration, and the Administrative body. The newly established arbitration court comprised 13 members, including the President of the Court. The President will be appointed by the decision of the Board of directors. The DIAC Court of Arbitration is entrusted with supervising and reviewing the draft arbitral awards or orders before issuing the relevant tribunal. The administrative body will manage and govern all arbitrations under DIAC's rules. Article 8.4 of the Statute authorizes the DIAC Board of Directors to set up rules, procedures, and conditions of Arbitration. The Decree aims to promote Dubai as a reliable international hub for Arbitration. The Statute gives importance to privacy, confidentiality, and impartiality in discharging the duties by the Arbitrators.
Impact of new Decree no. 34 of 2021
The DIAC granted six months to comply with the Decree and replace the existing bodies of EMAC and DAI. The popular arbitration centers, the London Court of International Arbitration and DIFC, formed in 2008, will be abolished. The existing DIFC-LCIA and EMAC clauses will remain valid. The Decree specifically provides that the abolished Centres' rules will be applied for existing proceedings, and the new DIAC rules will replace the rights and obligations of the abolished Arbitration Centres.
The Decree provides that any arbitral tribunal constituted by 20 September 2021 can decide any case under the existing DIFC-LCIA rules. According to the Decree, the reformed DIAC will supervise the cases if the parties disagree.
The DIAC will be based in Dubai with a branch offshore, giving the parties the freedom to choose the location of their Arbitration. The ongoing arbitrations will be able to continue the process of Arbitration without disruption. The courts of both Dubai and the DIFC have the right to enforce arbitral awards. The amendment of the Statute and Decree will encourage the international Arbitration users to view DIAC as a global arbitration center using the DIFC Arbitration Law. This change will attract and keep up the foreign investment in Dubai.
The Decree is silent on the future DIFC-LCIA or EMAC proceedings. This silence creates a gap for parties with contracts mentioning the DIFC-LCIA and EMAC rules. So the Parties wishing to start the proceedings should seek legal advice before filing a request for Arbitration.
Responsibility of the DIAC Centre
Article 40 of the DIAC Rules will be replaced in accordance with the New Decree and the Statute. Article 40 states that no member of the tribunal, executive committee, Centre, and its employees will be liable to any person for any act or omission in connection with the arbitration proceedings. Article 24 of the Statute states that the Chairman, any member of the Board, the Court, the arbitral tribunals, the executive director and employee of the DIAC, when performing their duties at DIAC shall not be held liable for any act or omission on their part that it is the result of an unintentional error. The Center will be solely responsible for this act. This Article sets a developed framework for civil liability of the parties involved in the DIAC arbitration.
The current state of confusion can be avoided only upon the enforcement of the new DIAC Rules. The efforts to promote Arbitration might prompt parties to amend their existing agreements or move away from Dubai to avoid any uncertainty. To ensure clarity and transparency during the transitioning of the new Decree and to reduce the risk, the arbitration users amend their existing agreements in favor of the more established arbitral institutions or with the other parties.
Decree 34 of 2021 was established with the aim of establishing the Emirate as a leading arbitration center. The Government of Dubai has shown its sustained commitment to establishing it. The Parties can benefit from its application and legal framework. There is no doubt that the new Decree and Statute will become an essential milestone for the future of Arbitration in the Emirate of Dubai.
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