Arbitration

Arbitration is a method to settle disputes out of judiciary courts. The dispute will be decided by one or more people (arbitrators) which can be selected by the parties together. The procedure is regulated by law but the parties have more freedom to present their case. In general, the final decision on the dispute is binding for both parties.

Arbitration is common to settle disputes arising from international transactions which can have advantages for transnational businesses (see question 3). Since the UAE are a global market place, arbitration clauses are often automatically used in many standard contracts. Due to the international environment, there are many arbitration courts in the UAE, such as the Abu Dhabi Conciliation and Arbitration Centre (ADCCAC) and the Dubai International Arbitration Centre (DIAC).

Advantages:

• arbitrators with case specific knowledge can be appointed
• Unless the parties agree otherwise, the proceedings are confidential in absence of the public
• arbitration court language can be jointly chosen by the parties and does not require Arabic
• an appeal against arbitration awards is only possible in certain, very few cases

Some disadvantages

• Considering the tribunal and administrative fees, there are higher costs than in a “normal” court procedure
• The duration of arbitration is often longer than “normal” court procedures since the arbitral award must also be ratified by the local courts to be enforceable

To assess if arbitration is the favorable option for your case, you should seek professional advice. Please do not hesitate to contact our specialized lawyers at Daburon & Partners.

All commercial disputes can be settled by an arbitration court, except disputes concerning employment, registered commercial agencies, public policy, criminal matters or family matters.

In order for an arbitration court to have jurisdiction, an arbitration agreement or clause is required. The arbitration agreement can be included as a clause in the contract (arbitration clause) or in a separate agreement (arbitration agreement). This agreement or clause is an independent contract next to the main contract. There are certain conditions for the arbitration agreement or clause to be effective (see question 7).

The arbitration agreement can be signed before or after a potential dispute arises, even if proceedings are already pending before a "normal" court.

The arbitration agreement or clause must be in writing. There can also be a written reference to an international treaty or other document containing an arbitration clause. Apart from that, the parties have a lot of freedom in drafting the agreement or clause as long as the clause is unambiguous. That’s why the arbitration agreements or clauses should always be reviewed before signing - preferably by a specialized lawyer. We at Daburon & Partners are happy to assist you in reviewing or drafting your arbitration agreements or clauses.

The arbitration tribunal itself decides whether the arbitration clause is valid, meaning it is the court's responsibility to decide whether or not it has jurisdiction in the dispute. This is called competence-competence.

There are four different categories: • the law determining the validity of the arbitration agreement: except for the freezones, in the UAE this is determined by the UAE Arbitration Law • the procedural arbitration law = seat of arbitration: is also subject to the UAE Arbitration Law • the substantive law applied to the dispute • the law applicable to the recognition and enforcement of the arbitral award. The UAE Arbitration Law gives the parties a good deal of leeway to structure the proceedings and therefore the individual procedural steps themselves. 10. What happens if the parties have not made a clear choice of law? If the parties have not made a clear choice of law for the arbitration, the following principles may apply: • lex contractus: main contract law leads to the procedural law • lex fori: seat of arbitration leads to procedural law • la règle materielle: common will of the parties leads to the procedural law

In general, either the "normal" courts or an arbitration court will have jurisdiction over the dispute. Arbitration courts have jurisdiction when there is a contractual arbitration agreement or one of the parties initiates proceedings before an arbitral tribunal. Should one of the parties commence court proceedings notwithstanding the agreement, the court declines jurisdiction if the defendant raises a plea of lack of jurisdiction. In this case it is very important to react as a defendant. We are happy to help you with this!

In addition to the distinction between the federal and local levels and the division of the courts according to instances, a differentiation must also be made according to the court circuits. This means that at each court level, the case is further categorized and assigned to a court circuit based on the size of the case and the expertise of the judges. The amount in dispute, the nature of the case and the number of judges determines whether it is a minor circuit or a major circuit.

The decision as to which court district is relevant also has an impact on the amount in dispute above which the judgment can be appealed: An appeal to the Court of Appeal is in general only possible if the amount in dispute exceeds AED 20,000. This makes some first-instance judgments unappealable on the merits and thus protects the judiciary from being overburdened.

Generally, arbitration proceedings are more expensive than "normal" court proceedings, but the parties are free to regulate the allocation of costs in the arbitration agreement. If the opposing party refuses to pay its costs when the arbitration proceedings are initiated, which is extremely likely, the claimant must also pay this share in advance.

The arbitration depends on various circumstances such as the complexity of the dispute or the relationship between the two parties. Furthermore, the arbitral award must be ratified by a court. The ratification and enforcement of the award shall by law be completed within 60 days of the application. This is why arbitration proceedings generally take longer than proceedings before a normal court.

The UAE are a signatory to the New York Convention and the Riyadh Convention. Therefore, arbitral awards made in the UAE are recognized by countries that are also signatories to these conventions. Since 165 countries have signed the New York Convention it is likely that the award will be enforceable in your country.

In order to enforce a foreign arbitral award in the UAE, an application must be made to the enforcement judge. The judge will check whether certain requirements have been met, such as the parties to the foreign proceedings being summoned or that the award is not contrary to the morality and public order of the UAE.

Additionally, a notarial and consular certification of the arbitral award and their translations are required.

The law does not provide for a specific number of arbitrators. The only requirement is that there must be an uneven number of arbitrators to avoid a stalemate decision. Half of the arbitrators are appointed by one party and half by the other party. The presiding judge of the arbitral tribunal is then appointed by the appointed judges. In some institutions the judges are also appointed by the institution itself. The potential arbitrators have to ensure independence and impartiality.

The parties may also make certain arrangements about the appointment of arbitrators in advance, such as gender or nationality.

The choice of arbitrators can be decisive for the outcome of the proceedings. Our experienced team at Daburon & Partners can help you choose the tactically smartest arbitrators.

Daburon & Partners’ lawyers have extensive experience in arbitration proceedings throughout the Middle East. Although the UAE is a civil law state many arbitration courts are composed with judges from common law states. Due to the collision of those two legal systems in arbitration proceedings our internationally trained lawyers enjoy the advantage of understanding both sides. This enables us to find the best possible tactics for achieving your best possible result.