Breaking: UAE Ushers in Changes to the Arbitration Law

Al Tamimi & Company have become aware that the UAE has recently enacted a new law that amends certain provisions of the Federal Arbitration Law No. (6) of 2018 (the “Arbitration Law“).  The new law, Federal Law No. (15) of 2023 (the “Amendment Law“), introduces some significant changes to the arbitration regime in the UAE, aiming to enhance its efficiency, flexibility, and attractiveness for domestic and international parties.

One of the most notable amendments is the expansion of the scope of arbitration law in relation to virtual and online arbitration proceedings.  Article 28 of the Amendment Law allows parties to agree on the conduct and location of the arbitration, either physically or virtually through modern technological means or in technical environments.  If the parties do not agree, the arbitration tribunal has the power to decide on the mode and place of arbitration, considering the circumstances of the case and the suitability of the place for the parties. Arbitration institutions are responsible for providing the necessary technology to conduct the arbitration proceedings through modern technological means or within technical environments, in accordance with the technical standards and regulations in force within the country.  This amendment reflects the growing trend of using online platforms and tools for dispute resolution, which accelerated during the COVID-19 pandemic and its impact on travel and mobility which has undoubtedly left an indelible mark on dispute resolution process.  It also enhances the accessibility and convenience of arbitration for parties who may not be able to attend physical hearings or who prefer to save time and costs by using virtual and remote hearings. However, it also raises some challenges and risks, including the need to ensure the security, confidentiality, and reliability of the remote arbitration process, as well as the enforceability of awards issued through a virtual arbitration process.  Therefore, parties and arbitrators should exercise due care and caution when opting for a virtual or remote arbitration process and ensure that they comply with the applicable laws and rules in the relevant jurisdictions.

Another significant amendment is the relaxation of the restriction on appointing arbitrators from the arbitration institution’s supervisory or controlling bodies.  Article 10 of the Amendment Law provides an exception to the general rule that prohibits the appointment of an arbitrator who is a member of the Board of Trustees, the Executive management, or the Administrative apparatus of the arbitration institution concerned with organizing the arbitration.  The exception allows the parties to appoint such an arbitrator if certain conditions are met, such as the consent of the parties, the disclosure of the arbitrator’s membership, the non-involvement of the arbitrator in the arbitration institution’s decision-making, and the limitation of the number of arbitration cases that the arbitrator may handle in one year. The Amendment Law also requires the arbitration institution to have a special governance system and a secure reporting mechanism to ensure the separation of duties and impartiality of the arbitrator and to prevent any conflict of interest or preferential advantage.  By this amendment, the UAE aims to increase the pool of qualified and experienced arbitrators available for selection by parties and to respect parties’ autonomy and choice in the selection of arbitrators.  It also acknowledges the reality that some arbitration institutions in the UAE have a limited number of staff and members who may also act as arbitrators in some cases.  However, the amendment also poses some potential risks and challenges, such as the potential to undermine the independence and neutrality of the arbitrator, creating a perception of bias or favouritism, and exposing the arbitration award to challenges and annulment on the grounds of invalidity or violation of public order.  Therefore, parties and arbitrators should carefully weigh the benefits and potential downsides of appointing an arbitrator from the arbitration institution’s supervisory or controlling bodies and ensure that they comply with the conditions and requirements stipulated by the Amendment Law and the arbitration institution’s rules.

A third notable amendment is the clarification and enhancement of the arbitration tribunal’s discretion and authority to determine the procedures and rules of evidence to be followed in the arbitration. Article 23 of the Amendment Law reaffirms the parties’ right to agree on the procedures that the arbitration tribunal should follow in the conduct of the arbitration, including subjecting these procedures to the rules implemented in any arbitration organization or institution within the country or abroad.  However, if the parties do not agree on the procedures, the arbitration tribunal has the power to determine the appropriate procedures, taking into account the law and the fundamental principles of justice and international conventions to which the country is a party.  Article 33 of the Amendment Law also grants the arbitration tribunal the discretion to decide whether to hold oral hearings to present evidence or oral arguments, or whether to proceed with a process that is “documents only” with the parties submitting documents and other material evidence as is the case in many civil law legal systems.  The arbitration tribunal also has the flexibility to decide to hold such hearings at an appropriate stage of the proceedings at the request of one of the parties.  Moreover, the arbitration tribunal has the discretion to determine the rules of evidence that must be followed in the event that the applicable law lacks the necessary evidence laws to adjudicate the dispute, provided that these rules do not conflict with public order. The arbitration tribunal may also determine the admissibility and weight of the evidence presented by any party regarding a fact or expert opinion and determine the time, method and format in which such evidence is exchanged between the parties and how it is presented.  This change reflects the recognition of the arbitration tribunal’s role and responsibility in ensuring the efficiency, fairness, and quality of the arbitration process and outcome.  It also empowers the arbitration tribunal to adopt the most suitable and appropriate process, procedures, and rules of evidence for each case, taking into account the parties’ expectations, the nature and complexity of the dispute, and the applicable legal framework.  However, this amendment also has the effect of imposing certain obligations and challenges which the arbitration tribunal must navigate, such as ensuring the respect of the parties’ rights and interests, compliance with the due process and public order requirements, and the avoidance of any unnecessary delays or costs.  Therefore, the arbitration tribunal should exercise its discretion and authority in a reasonable and balanced manner and in consultation and cooperation with the parties and the arbitration institution.

The Amendment Law introduces important and positive changes to the arbitration regime in the UAE, designed to make it more modern, flexible, and attractive for domestic and international parties. Essam Al Tamimi, Chairman of Al Tamimi & Company, comments on the forthcoming changes: “The UAE’s new arbitration law not only aligns with international standards, but also bolsters the global arbitration community by offering a modernized approach with greater procedural flexibility. While it caters to both domestic and international stakeholders, its adaptability further strengthens the international arbitration arena, solidifying the UAE’s role in the broader dispute resolution framework.”

Dr. Hassan Arab, Regional Head of Dispute Resolution at Al Tamimi & Company adds: “The forthcoming amendments to the UAE’s Arbitration Law represent a pivotal shift, not just for the nation but for the broader international arbitration community within the UAE. Emphasizing stricter guidelines on arbitrator impartiality, clearer provisions for digital arbitration, and more, the UAE demonstrates its dedication to upholding the highest transparency and modernization standards. This commitment enhances the standing of the UAE within the global arbitration landscape, reinforcing its position as a trusted and preferred destination for international dispute resolution.”

How can we help?

At Al Tamimi & Company, we understand the importance of staying updated with the latest legal developments and their implications for businesses and individuals. With the recent amendments to the UAE’s Federal Arbitration Law, we are committed to helping you navigate and benefit from these changes.