International commercial arbitration at the DIFC in UAE

Dubai, one of the emirates in the United Arab Emirates (UAE), has set itself up as an global trade and finance center. This is indicative of the establishment of reliable mechanisms for the resolution of disputes in cross-border commerce. The Dubai Global Economic Centre (DIFC) and its associated DIFC-LCIA Arbitration Centre (now transitioned to the DIFC Court of Arbitration) have become the mainstay for such dispute-resolution activities. As saleable Dispute solution becomes the preferred mode for settlement of disputes, it is important for businesses in and outside the Middle East to understand how dispute-resolution traditionally works at the DIFC.

Background: What is the DIFC?

This is a free zone that was established in 2004 to attract international economic institutions, law firms, and multinational businesses into its fold. It has its own unique legal framework based on English common law under which it sits free and independent to the UAE civil law system. As a result, it becomes extremely attractive to international investors or foreign businesses.

DIFC Courts by itself, and the Dubai Economic Services Body (DFSA) are the bodies that keep adjusting it. It is significantly relevant to the article that the dispute-resolution model of the DIFC, historically based on the DIFC-LCIA Arbitration Centre, mirrors the structure of the London Court in Global Dispute – Resolution.

Why Resort to Arbitration?

• Above all else, global aspects of commercial dispute resolution and the most attractive pertain to alternative means of resolving disputes, and not ordinary court processes. These merits are essentially the case when they are cross-border disputes.
• Jurisdiction is thus removed from the local courts, without public bias or unfamiliarity.
• Hearings and awards are private.
• Expert Arbitrators: Arbitrators can be chosen by parties themselves due to particular expertise.
• Enforceability: Arbitral awards are enforced under New York Convention, to which UAE is a signatory.
• All those aforementioned are true to the DIFC as well, but it gets attached to that truly progressive legal environment and globally recognized dispute-resolution infrastructure.

DIFC Legal Framework for Arbitration

1. Law governing dispute-resolution in DIFC

The DIFC law on dispute-resolution is DIFC Law No. 1 of 2008, and this is with reference to the UNCITRAL Model Law on Global Commercial Arbitration. It has therefore got a certain amount of familiarity and credibility among multinational practitioners, as key features include:

• Party autonomy in relation to choosing arbitrators and procedures
• Minimal judicial intervention
• Recognition and implementation of both domestic and non-citizen arbitral awards
• Unlike the federal dispute-resolution law of the UAE, the DIFC dispute-resolution law fits more closely into global standards and practices, making it attractive to foreign parties.

2. DIFC Courts and Judicial Support

This is an arbitrary institution, and in that regard does not make itself wholly a court process; but sometimes it has to come in courts, for instance, to enforce interim measures, appoint arbitrators, or set aside awards. The DIFC Courts have been said to be very friendly to arbitration, allowing speedy implementation with little encumbrance.

One specific characteristic is the free-standing Implementation jurisdiction of the courts of the DIFC, which enables a party to call upon the implementation of a foreign arbitral award in the DIFC, even where that award is notextraneous to the controversy. This will be sufficient for its recognizability, and it will then be “exported” through the cooperation mechanism to the onshore country courts.

With this, DIFC has become a conduit jurisdiction- a conduit for providing legal pipelines for implementation of international awards that are not within reach of the domestic UAE or probably the entire GCC.

The Role of Arbitration Centres

DIFC-LCIA Arbitration Centre (2008–2021)

Originally, the DIFC housed the DIFC-LCIA Arbitration Centre, a joint venture between the DIFC and the London-Court of Global Arbitration. It offered dispute-resolution under LCIA-rules, tailored to suit the regional context. This centre quickly became a preferred forum for global disputes involving Middle Eastern parties.

Growth to DIAC (2021 Onwards)

In 2021, a major change occurred. Dubai issued Decree No. 34 of 2021, dissolving the DIFC-LCIA and consolidating all dispute-resolution establishments into a single entity: the Dubai Global Arbitration Centre (DIAC). Under the decree:

• The DIAC is now supervising dispute-resolutions that have been seated in the DIFC.
• The DIFC maintains itself as a valid seat of dispute-resolution with the benefit of the common law system.
• Currently, dispute-resolutions previously governed by the DIFC-LCIA rules are being moved to DIAC with procedures in place to ensure continuity and deference to party agreements.
• Although initially thought to be a stumbling block, this merger has had little effect on the already-established implementation credibility of dispute-resolutions seated in the DIFC. The new rules of the DIAC (2022 Rules) have been amended with global best methods in mind and are still attracting cross-border disputes.

Choosing the DIFC as the Seat of Arbitration

When details elect the DIFC as the seat of dispute-resolution, they are choosing:

• A neutral jurisdiction outside the UAE’s federal court system
• A common law environment
• Supportive and competent courts
• An efficient and enforceable framework
• The ‘seat’ is distinct from the ‘venue’. The seat determines the lawful regime (DIFC dispute-resolution law and DIFC Courts), while the venue is any place that is physically fortunate. The flexibility is what makes the DIFC attractive.

The Practicalities of Execution of Arbitrary Verdicts:

Ensuring implementation of recognition is in fact one of the best maneras del camino for going to a DIFC Premises; this is how they work:

Implementation Inside the DIFC

If the award is given at DIFC, the award may directly enforce within the DIFC Courts with a few choices against challenging it. There are only limited grounds for challenging awards related to procedural matters of serious nature (for example, lack of jurisdiction, due process violation).

Implementation within Onshore Dubai and the UAE

Under Judicial Body Law (Law No. 12 of 2004), the parties can take DIFC Court judgment and seek recognition in onshore courts at Dubai. This so-called DIFC-Dubai gateway presents a lawful bridge for common law and civil law system within the UAE.

Implementation beyond the borders of UAE

The UAE is a signatory of the New York Convention (1958) on Recognition and Implementation of Non-Citizen Arbitral Awards. Such conventions make all DIFC awards recognized and enforceable in more than 170 countries thus making them strong platforms for cross border commercial dispute-resolution.

Types of Disputes Treated:

The DIFC dispute-resolution framework is used across industries:

• Banking and finance
• Construction and real estate
• Mergers and acquisitions
• Oil and gas
• Shipping and logistics
• Technology and telecom
• Its flexibility, confidentiality, and neutrality appeal to both regional conglomerates and multinational corporations.

Challenges and Considerations

Although the DIFC has all the blessings for dispute-resolution, the parties should be aware of the following issues:

1. Legal Duality

Doubts and confusions in respect of the DIFC lawful framework may arise with respect to the UAE federal lawful system. Clear stipulation within contracts will need to be agreed to avoid conflicts in the jurisdiction.

2. Institutional Changes

There was uncertainty that arose as a result of the change from DIFC-LCIA to DIAC. During this transitional period that seeks to resume operations, details will need to be cognizant about the existing institutional substructures and conventions.

3. Costs

To put it plainly, it is costly to arbitrate at the DIFC. Therefore, parties should consider the cost-effectiveness in choosing between institutional dispute-resolution, ad hoc dispute-resolution, or another forum.

4. Implementation Risks

While, for the most part, all has gone pretty much according to plan through the DIFC-Dubai gateway, implementation is never automatic. Awards may be reviewed still by courts for matters pertinent to public policy or procedural fairness.

Best Methods for Parties

• Be precise regarding the drafting of the dispute-resolution clauses: Clearly stipulate the seat (DIFC), the institution (DIAC) and the applicable rules.
• Select experienced arbitrators: In DIFC dispute-resolution, people with expertise in commercial law, finance and industry-specific matters are required.
• Understand the procedural timeline: DIAC-rules allow for speedy management of the case but timelines may differ.
• Prepare for implementation: Consider where the award may be enforced and structure the dispute-resolution clause around that thinking.

Conclusion

The DIFC has rightly earned its status as the leading jurisdiction for global commercial dispute-resolution in the Middle East. With common law, independent courts and global dispute-resolution rules in place, it offers a strong alternative to more traditional forums.

For businesses involved in cross-border transactions in the region, the DIFC offers a modern, efficient and enforceable means of resolving disputes. With the global rise of dispute-resolution, the role of the DIFC will continue to grow—most notably with the recent consolidation of institutions under DIAC and simplifying of rules and techniques.