Advancing Arbitration in Abu Dhabi: The Significance of the New Arbitration Rules 2024

The recent announcement by the Abu Dhabi Chamber of Commerce and Industry (ADCCI) regarding the launch of arbitrateAD, officially known as the Abu Dhabi International Arbitration Centre (ADIAC), marks a significant milestone in Abu Dhabi’s arbitration landscape. ADIAC replaces its predecessor, the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), which had been the primary arbitration centre in Abu Dhabi for nearly three decades. The newly implemented Arbitration Rules for ADIAC, termed the Arbitration Rules 2024 (the “ADIAC Rules”), became effective on February 1, 2024, supplanting the 2013 ADCCAC Arbitration Rules (the “ADCCAC Rules”). As of February 1, 2024, the ADIAC will administer all new cases, while pending cases filed before this date are still subject to the ADCCAC Rules. The ADIAC Rules will apply when parties agree to refer their disputes to ADIAC or the Abu Dhabi Chamber of Commerce.

One notable feature of the ADIAC is the establishment of a stand-alone Court of Arbitration (the “Court”), operating independently of the ADCCI. This Court plays a supervisory role over arbitrations administered under the ADIAC Rules, and is responsible for arbitrator appointments, resolving challenges to arbitrators, deciding on joinder and consolidation requests, and scrutinizing arbitral awards. This article explores some key features of the ADIAC Rules and what they mean for arbitration proceedings in the region.

JOINDER

Article 11 of the ADIAC Rules introduce significant changes regarding the inclusion of third parties in arbitrations. Parties or third parties can now request the Court to join one or more additional parties to the arbitration process. The Court has the discretion to admit an additional party if all parties agree or if it is satisfied that the additional party falls under the ADIAC’s jurisdiction.

Key aspects of Article 11 include:

1. Request for Joinder: Any party or third party can request the court to join additional parties to the arbitration process. The request must be filed with the ADIAC’s Case Management Office, with copies to other parties, and within a specified timeframe.
2. Court’s Discretion: The Court may admit an additional party if all parties agree or if it finds that the additional party is prima facie subject to the ADIAC’s jurisdiction.
3. Opportunity to be Heard: The Court must afford parties a reasonable opportunity to be heard before deciding on a request for joinder.
4. Effect on Tribunal: A decision to grant joinder does not affect the tribunal’s authority to decide questions regarding its jurisdiction.
5. Timing of Joinder: After the tribunal is constituted, additional parties may be joined only by agreement or in accordance with specific procedures outlined in the rules.
6. Commencement Date: The date of receiving the request for joinder marks the commencement date for the additional party.
7. Adjustment of Costs: After joinder is granted, the Case Management Office adjusts the advance on costs accordingly.

Comparing the ADIAC Rules to the ADCCAC Rules, the most significant difference is that the new rules expressly allow for the inclusion of third parties in arbitrations, whereas the old rules had a narrower scope (Article 25) and did not provide an explicit provision for the inclusion of third parties. The ADIAC Rules provide detailed procedures and criteria for joining additional parties, offering more clarity and flexibility in multi-party arbitration scenarios.

CONSOLIDATION

Article 12 of the ADIAC Rules deals with the aspect of consolidation, and it provides a structured framework for consolidation, considering factors such as agreement among parties, similarity of claims, and efficiency of proceedings. If consolidation is granted, any related arbitrations are merged into the first commenced arbitration, with appropriate adjustments made in respect of the arbitration costs.

Key aspects of Article 12 include:

1. Grounds for Consolidation: Parties can request consolidation if all parties agree, if claims are made under the same arbitration agreement, or if claims arise from the same transaction or series of transactions covered by compatible arbitration agreements.
2. Procedure for Request: The request for consolidation must be filed with the ADIAC’s Case Management Office, with copies to other parties.
3. Court’s Decision: The Court, after hearing from the parties and the tribunal(s), may grant or reject the request for consolidation based on various factors such as the stage of pending arbitrations and the efficiency of proceedings.
4. Effect of Decision: If consolidation is granted, the arbitrations are merged into the first commenced arbitration, unless the court decides otherwise or the parties agree otherwise.
5. Appointment of Arbitrators: If consolidation is granted, the court may revoke prior appointments of arbitrators, and new appointments are made in accordance with the rules.
6. Waiver of Rights: Parties who have not nominated an arbitrator or participated in the constitution of the tribunal after consolidation are deemed to have waived such rights.

When comparing the ADIAC Rules to the ADCCAC Rules, the most notable difference is that the ADIAC Rules provide a clear and comprehensive framework for the consolidation of arbitrations, whereas the old ADCCAC Rules do not have such an express provision. While the ADCCAC Rules do allow parties to amend their claims during the arbitration proceedings, the ADIAC Rules offer a more structured approach to consolidation, considering various factors and providing specific procedures for how the process of consolidation is to take place.

SEAT OF ARBITRATION

Article 22 of the ADIAC Rules specifies the default seat of arbitration. In the absence of agreement between the parties, Article 22 confirms that the Abu Dhabi Global Market (ADGM) will serve as the seat of arbitration. Additionally, it clarifies that reference to the “place of arbitration” (a term used in the context of ICC arbitrations) will be considered the seat of arbitration, and any arbitral award rendered will be deemed to have been issued at the seat, regardless of where the arbitration proceedings (or the evidentiary hearing) actually take place.

Key aspects of Article 22 include:

1. Default Seat: If the parties have not agreed on a seat of arbitration, the ADGM will serve as the default seat. This ensures clarity and certainty in cases where the parties have not made specific arrangements regarding the seat.
2. Decision by the Court: In cases where the parties have not agreed on the seat or place of arbitration, and the default seat is contested, the Court may decide on an alternative seat after considering all relevant circumstances and after giving the parties an opportunity to be heard.
3. Location of Proceedings: While the seat of arbitration is established, the tribunal has the discretion to hold hearings, meetings, and deliberations in a place other than the seat (as is often the case in practice). However, regardless of where these activities occur, the arbitral award is still considered to have been made at the seat of arbitration.

Perhaps the most significant difference between the ADIAC Rules and the ADCCAC Rules is the clarity and specificity provided (in the ADIAC Rules) regarding the default seat of arbitration. The old ADCCAC Rules specify that the place of arbitration would be in the Emirate of Abu Dhabi if not otherwise agreed between the parties, with provisions for flexibility in conducting sessions and deliberations. However, the new ADIAC Rules set the ADGM as the default seat, with provisions for the tribunal to conduct proceedings elsewhere while maintaining the seat’s legal significance. This important change offers increased certainty and consistency in arbitration proceedings when considering that the ADGM, by its strict application of English law, is an extremely pro-arbitration jurisdiction.

EXPEDITED PROCEEDINGS

Article 36 of the ADIAC Rules introduces provisions for expedited proceedings in cases where the amount claimed (and counterclaimed, if applicable) does not exceed AED 9,000,000. These expedited procedures aim to streamline the arbitration process, providing for a more efficient resolution of disputes within a much shorter timeframe.

Key aspects of Article 36 include:

1. Scope of Application: Expedited proceedings apply when the amount in dispute does not exceed AED 9,000,000, encompassing all claims and counterclaims.
2. Simplified Procedures: The expedited arbitration process involves simplified procedures where the Request for Arbitration and the Answer to the to the Request serve as the Statement of Claim and Defence, respectively. Additionally, if a counterclaim is made, the claimant’s Reply to the Counterclaim serves as its Defence to the Counterclaim.
3. Sole Arbitrator: Expedited arbitrations are referred to a sole arbitrator appointed in accordance with the rules, streamlining the decision-making process.
4. Exclusion of Certain Rules: Certain rules, including those related to joinder, consolidation, and appointment of arbitrators, do not apply in expedited proceedings to ensure a faster resolution.
5. Time Limit for Award: The final award must be made within four months from the date the case file is submitted to the tribunal. However, the ADIAC’s Case Management Office may grant an extension of up to two months upon a reasoned request by the tribunal.
6. Reasons for Award: The tribunal must provide the reasons for the final award in summary form.

One of the most significant differences introduced by Article 36 is the establishment of clear and detailed procedures for expedited proceedings. This is something that is not catered for in the ADCCAC Rules, i.e. for straightforward low value claims, parties would still need to follow the entire arbitration process and there was no way in which the proceedings could be fast-tracked. Additionally, the ADIAC Rules provide a more streamlined process, including simplified procedures, a shorter time limit for issuing the final award, and provisions for extensions when necessary. These changes aim to enhance efficiency and expedite the resolution of simple and low-value disputes.

EARLY DISMISSAL

Article 45 of the ADIAC Rules deals with the tribunal’s authority to summarily dismiss claims, defenses, counterclaims, and replies that are deemed manifestly without legal merit, manifestly inadmissible, or outside the tribunal’s jurisdiction. This provision allows for the efficient resolution of disputes by eliminating frivolous or baseless claims at an early stage of the arbitration process.

Key aspects of Article 45 include:

1. Tribunal’s Authority: The tribunal has the discretion to order early dismissal, either on its own volition or upon application by a party, after providing all parties with a reasonable opportunity to be heard.
2. Grounds for Dismissal: Claims, defenses, counterclaims, or replies may be dismissed if they are manifestly without legal merit or manifestly inadmissible or outside of the tribunal’s jurisdiction.
3. Application Process: Parties seeking early dismissal must submit an application stating the facts and legal basis for the request. The application must be filed with the ADIAC’s Case Management Office and the tribunal, and notice must be provided to the other party(ies).
4. Timely Decision: The tribunal is required to make a decision on the application for early dismissal within 30 days of filing unless an extension (of up to 15 days) is deemed necessary. The tribunal’s reasons for the decision must also be stated.

Article 45 is a new aspect that follows similar provisions incorporated in the LCIA and SIAC Rules. Under the ADCCAC Rules, such discretion was not explicitly given to the tribunal. This change reflects a proactive approach to case management, allowing for the efficient resolution of disputes by identifying and addressing meritless claims early in the arbitration process.

THIRD PARTY FUNDING

Article 48 of the ADIAC Rules introduces provisions regarding the disclosure of third-party funding in arbitration proceedings. The Article aims to promote transparency and fairness by requiring that parties inform the ADIAC’s Case Management Office, all other parties, and the tribunal (if already constituted) of any non-party who has entered into an agreement to fund any claims or defenses that form part of a particular arbitration proceeding.

Key aspects of Article 48 include:

1. Disclosure Requirement: Parties are required to disclose the existence and identity of any non-party who has entered into an agreement to fund any claims or defenses in the arbitration proceedings.
2. Timing of Disclosure: Parties must make this disclosure as soon as reasonably possible. Additionally, claimants who have entered into such agreements prior to initiating proceedings must include this information in the request for arbitration.

In comparison with the old ADCCAC Rules, the most significant difference is the introduction of a specific provision requiring parties to disclose third-party funding arrangements. The ADCCAC Rules did not have an express provision addressing the disclosure of third-party funding and accordingly, the change reflects a growing trend towards transparency in arbitration proceedings. It also ensures that all parties are aware of any potential conflicts of interest or influences in the arbitration process.

THE IMPACT OF ADIAC’S NEW ARBITRATION RULES

The introduction of the new ADIAC Rules represents a significant step forward for arbitration in the UAE. The Rules bring Abu Dhabi’s arbitration practices in line with international standards, allowing them to compete with established international rules such as those of the LCIA, SIAC, and the ICC. This alignment with global standards ensures that Abu Dhabi remains a trustworthy and attractive destination for parties seeking efficient and effective dispute resolution mechanisms. By providing a comprehensive framework for arbitration proceedings, the ADIAC Rules offer clarity and predictability, which are essential for fostering confidence among parties involved in international transactions. Moreover, addressing key aspects such as joinder, consolidation, the default seat, expedited proceedings, early dismissal, and third-party funding, the Rules demonstrate Abu Dhabi’s commitment to staying abreast of contemporary developments in arbitration.

This introduction of the ADIAC Rules is likely to encourage parties to make use of the ADIAC, as it provides a reliable and sophisticated platform for resolving disputes in a fair and impartial manner. As a result, Abu Dhabi is poised to solidify its position as a leading hub for alternative dispute resolution (ADR) in the Middle East, attracting businesses and investors seeking reliable mechanisms for resolving commercial disputes. Overall, the ADIAC Rules underscore Abu Dhabi’s dedication to fostering a conducive environment for arbitration and enhancing its reputation as a preferred destination for international dispute resolution.

Disclaimer
This publication does not provide any legal advice and it is for information purposes only. You should not rely upon the material or information in this publication as a basis for making any business, legal or other decisions. Any reliance you place on such material is therefore strictly at your own risk.

Author: Nathan Baikie & Yousef Seihavi