Summary:
Federal Law No. (15) of 2023 (the “Amendment Law”) provides some notable modifications to the arbitration framework in the UAE, aiming to improve its effectiveness, adaptability and attractiveness for domestic and international parties. The Arbitration Amendment Law amends and replaces Articles 10, 23, 28, and 33 and enacts a new Article 10 bis.
This paper describes, compares and examines the Arbitration Amendment Law with the Federal Law No. 6 of 2018 on Arbitration. It also studies the possible effects of the amended articles on the UAE arbitration system, arbitration procedure and domestic and international parties.
Analysis:
I. Amendments on Article 10.
Article 10 (2) of the UAE Arbitration Law[1] prohibits the appointment of an arbitrator who is a “member of the Board of Trustees or the administrative branch of a competent Arbitration Institution administering the arbitration case in the State.”. Nonetheless, the Amendment Law extends the prohibition to include members of Executive Management[2]. It appears that the reason behind this extension is to prohibit arbitrators who have a controlling membership or a membership in a supervising institution from being appointed. No such prohibition is specified neither under English nor French law. Also, IBA Guidelines[3] have dealt only with the prohibition of arbitrators who have membership of the same barristers’ chambers as a party’s Counsel, according to IBA General Standard 7(b).[4] Thus, prohibiting members of executive management from being appointed as arbitrators in the UAE arbitration legal system, leads the UAE Arbitration law to be unique and distinctive.
Additionally, the Amendment Law provides an express prohibition of any direct relationship[5] between an arbitrator and any of the Parties, since it would call into question the arbitrator’s impartiality, integrity or independence. According to Art.10 (c) of the Amendment law, “in addition to the requirement agreed upon the Parties, the Arbitrator must not have a direct relationship with any of the Parties to the arbitration case that would prejudice his impartiality, integrity or independence”.[6]
The concept of “impartiality and independence” is a fundamental principle of international arbitration, so every appointed arbitrator shall be independent and impartial during the arbitral proceedings, including the time of accepting appointment as arbitrator.[7] Also, this concept is not new to the UAE Arbitration Law and system; on the contrary, it has been given effect to in many Articles. Firstly, under Art.10(4) of the UAE Arbitration law “Any person who is notified of his possible appointment as an arbitrator, shall declare, in writing, all circumstances that are likely to give rise to doubts as to his impartiality or independence”. This Article was amended under the Amendment law to be Art.10(3), holding the same meaning. Secondly, the concept of “impartiality and independence were addressed under Article 11(4) of the UAE Arbitration Law, which states that “the Relevant Authority shall … secure the appointment of an independent and impartial arbitrator”, upon the agreed qualifications required by the Parties.[8] Hence, an arbitrator’s appointment may be challenged if the existed circumstances give rise to the arbitrator’s impartiality and independence, based on Art.14(1) of the UAE Arbitration Law.[9]
In addition, the concept of independence and impartiality was confirmed in the case of UAE Federal Supreme Court No.379 in 2013, which states that:
A person should not be an arbitrator and opponent at the same time. Also, if the parties agreed to appoint a specific arbitrator, he/she must not be compliant for a party of the arbitration parties, or to be his lawyer, agent, one of his subordinates or his employees, or he/she previously mediated or expressed his opinion in a competing dispute. Additionally, it is not permissible for an arbitrator initiate arbitration while his opinion is known, which could affect his impartiality and independence.
As well as, the concept of “impartiality and independence” was addressed in other States which applies the Islamic law in their legal system. For instance, according to the Egyptian Court of Cassation No.13892 of 81 JY:
“The arbitrator must be independent from the two parties to the arbitration and must be neutral between them. Lack of independence or neutrality, might affect the validity of the arbitral award”.
Nonetheless, the Amendment law was enacted to emphasise the importance of “impartiality and independence” by prohibiting any direct relationship with any of the Parties to the arbitration. Also, the law stated “impartiality, integrity or independence” to govern all the possible outcomes of the direct relationship due to the difference between “impartiality and independence”. The concept of “impartiality” is considered to be linked to the actual or apparent bias of an arbitrator, which is primarily the arbitrator’s state of mind.[10] By contrast, “independence” relates to the relationship between an arbitrator and one of the Parties.[11] Despite that, it may be argued that a direct relationship could be connected to the concept of independence only; the Amendment has governed all the possible doubts that could be raised because of the direct relationship.
However, Art.10(1)(c) of the Amendment law has prohibited only “direct” relationships, which raises a question regarding the definition of “direct” and how it would be interpreted. Also, it raises the question of whether an “indirect” relationship is equally prohibited. An indirect relationship could include the relationship between the arbitrator’s firm and one of the Parties. Additionally, an indirect relationship could include the involvement of a third party who has a direct relationship with the arbitrator and one of the parties. For example, a direct relationship between a close family member of the arbitrator and one of the Parties. The concept of “direct and indirect relationship” has been considered in the IBA Guidelines[12]. According to the IBA Guidelines standards, “a party shall inform an arbitrator, the Arbitral Tribunal, the other parties and the arbitration institution or other appointing authority (if any) of any relationship, direct or indirect”.[13] According to IBA Waivable Red List, indirect relationship could be considered “if the arbitrator is a lawyer in the same law firm as the counsel to one of the parties”[14] or “a close family member of the arbitrator has a significant financial or personal interest in one of the parties or an affiliate of one of the parties”[15]. However, the Amendment law did not address such examples on the possible direct and indirect relationships. Also, the Amendment law has left us with an essential question, which is whether the Arbitration Amendment Law only prohibits “direct relationships” or it include also “indirect relationships”
Despite that IBA Guidelines provides examples on direct and indirect relationships, there could be always unstated and unexpected relationships, keeping it to the court to decide. Hence, determining the type and impact of an existed relationship tends to be subjective and depends on each case individually. Therefore, despite the Amendment’s lack in addressing indirect relationship and not addressing possible examples on direct and indirect relationships, the courts will determine the type and impact of the existed relationship subjectively, filling the law gaps.
Moreover, the IBA Guidelines provides that an arbitrator may still be appointed even if he has a direct or indirect relationship with a Party to the arbitration under the Waivable Red List if the parties agree,[16] emphasizing the importance of party autonomy and transparency. However, the Amendment Law is silent in considering party autonomy and the parties’ acceptance and agreement on appointing an arbitrator who has a direct relationship.
Nevertheless, Art.10 (c) of the Arbitration Amendment Law emphasises the concept of “impartiality and independence”. Also, it considers the impact of any relationship between an arbitrator and a Party on the effectiveness and fairness of the arbitration process and the award. Additionally, in enacting this Article, legislators affirm their continuous endeavour to achieve an organised and fair arbitration environment and law that protects the parties’ rights in the best possible way to achieve the highest degree of justice.
II. Amendments on Article 23.
The Amendment law reaffirms the implementation of party autonomy, by reaffirming the parties’ right to agree on the procedures that should be followed by the Arbitral Tribunal including their right to subject these procedures to the rules applied in any Arbitration Institution or organization in the State or abroad.[17] However, in the absence of the parties’ agreement on procedure, the Arbitral Tribunal has the power to determine the appropriate procedure that should be followed, taking into consideration the present law, which must always be in compliance with the basic principles of litigation and international conventions which the State is a party.[18]
III. Amendments on Article 28.
Article 28 of the UAE Arbitration Law is dealing with the place (or seat) of arbitration, which was amended to cover both the place of arbitration and the Arbitral proceeding. Art.28 of the UAE Arbitration law stated that “the Parties may agree on the place of arbitration. Failing such agreement, the place of arbitration shall be determined by the Arbitral Tribunal having regard to the circumstances of the case and convenience of the Parties”. Nonetheless, the Amendment provides the Parties the opportunity and freedom to determine their arbitration proceedings on actual or virtual location through modern means of technology or in technical circles. According to the Amendment law Art.28(1):
“The Parties may agree to conduct Arbitration and determine its actual, or virtual location, through modern means of technology or in technical circles. In the absence of any agreement, the Arbitral Tribunal shall determine the place of arbitration having regards to the circumstances of the case and the convenience of the place for the Parties”.
Enacting the option of “virtual hearing” is in line with the principal of party autonomy on determining the arbitral proceedings.[19] Also, virtual hearing does not require an additional time for traveling to the location or the seat of arbitration.[20]
In addition, Art.28 of the UAE Arbitration law affords more power to the Arbitral Tribunal to determine the place of the arbitration hearing, unless the parties agree otherwise. Art. 28(2) stated that:
“Unless otherwise agreed by the parties, the Arbitral Tribunal may
(a). “Hold the arbitration hearings at any place as it deems appropriate to perform any of the arbitration proceedings, where the Parties shall be summoned in a sufficient time before the hearing.
(b). “Hold the arbitration hearings with Parties or deliberation by all means of communications and modern electronic technologies. The Arbitral Tribunal shall deliver or sent the minutes of the hearing to the Parties”
However, these provisions are no longer in existence under the UAE Arbitration Law, according to the Amendment Law. Also, the Amendment Law obligates the Arbitral Tribunal to provide the Parties with hearing transcripts under Art.28(2), stating that:
“The Arbitral Tribunal make available or transmit the hearing transcript to the Parties”.
Additionally, the arbitral institution is obligated to provide the necessary and needed technology for the conduct of arbitral proceedings under Art.28(3), which expressly states the following:
“The Arbitration Center shall provide the technologies necessary for the conduct of arbitral proceedings through the means of technology or in technical circles, according to the required technical standards and regulations applicable in the state.”
As a result, by examining the difference between Art.28 in the Arbitration Law and the Arbitration Amendment Law, it appears that the Amendment Law provides some limitations and restrictions on the Arbitral Tribunal’s power to determine the place of Arbitration. Art.28(1) of the Amendment Law retains the Arbitral Tribunal’s power to determine the place of Arbitration absent the parties’ agreement based on the circumstances of the case and the convenience of the place for the parties. However, it deleted any other powers. Hence, in the absence of the Parties’ agreement, the Arbitral Tribunal is obligated to determine the place of Arbitration, taking into consideration the convenience of the place for the Parties, emphasizing the appropriateness of the appropriateness of arbitration place to the parties.
IV. Amendments on Article 33.
Articles 33(1) – (6) are identical to Articles (1-2 and 4-7) of the Arbitration Law, however, it made a significant change to Art.33(8) and split it into two parts. Article33(8) of the UAE Arbitration Law states the following:
“The Arbitral Tribunal shall have a discretionary power to determine the applicable rules of evidence, and the extent of admissibility, relation or evaluation of the evidence submitted by any party on an incident or expertise; moreover, it may determine the time, method and form in which said evidence is exchanged between the Parties, and the method of its provision to the Tribunal.”
The first part (“The Arbitral Tribunal shall have a discretionary power to determine the applicable rules of evidence”) moves to Art.33(7) according to the Amendment Law. Also, the Arbitration Amendment Law provides two conditions that the Arbitral Tribunal should meet to have discretionary power in determining the applicable rules of evidence. Firstly, this discretionary power is only triggered if there is no agreement between the parties on the question of evidence. Secondly, the Arbitral Tribunal only has this power if the applicable law, which is the parties’ choice of the lex contractus (the law applicable to the substance of the dispute), lacks rules of evidence to determine the dispute. Adding that the applied discretionary power should not conflict with the public order. It shall be noted that this refers to the UAE/federal public policy and the public policy within the jurisdiction of each Emirate. Hence, if an arbitral award is brought before the UAE courts for enforcement, it could be challenged if the Arbitral Tribunal applied rules of evidence that were contrary to UAE public policy. For instance, illegality obtained evidence may be admissible in some jurisdictions, while it could be inadmissible under UAE public policy, since each jurisdiction has its own rules in admitting illegality obtained evidence.
The Arbitration Amendment Law adds a new Article, which is Art.10 bis, to the UAE Arbitration Law. Article 10 bis of the Amendment Law provides conditions for appointing an arbitrator from among the members of the supervisory or controlling bodies of the competent arbitration institution. Hence, it provides conditions in appointing arbitrators notwithstanding Art.10(1)(b) of the Amendment law.
V. The enactment of Article 10 (1) bis.
Article 10(1) bis states: “Notwithstanding the provisions of paragraph (1/b) of Article (10) of the present Decree-Law, the Parties may appoint an Arbitrator from among the board of directors, the board of trustees, or those in similar positions in the supervisory or controlling bodies of the competent Arbitration Institution administrating case in the state, if the following conditions are met:
- The regulations of the rules of the Arbitration Institute administering the arbitration dispute do not prohibit members of its supervisory or other boards from serving as an arbitrator (Article 10 bis (a)).
- The Arbitration Institute administering the arbitration dispute has a special governance body for organizing the work of the aforementioned Arbitrator (Article 10 bis (b)).
Article 10 bis expressly states:
“The Arbitration Institute administering the arbitration dispute has a special governance system for organizing the work of the aforementioned Arbitrator in a way that achieves separation of duties and impartiality, and in a way that prevents the occurrence of a conflict of interest or the emergence of any case of preferential advantage for that member compared to his other counterparts, and in a way that regulates the mechanism of appointment, dismissal and removal of the Arbitrator if any of the specified cases in this regard are met.”
- “The Arbitrator in questions is neither sole Arbitrator nor head of the Arbitral Tribunal”, according to Article 10 bis (c).
- The parties in question acknowledge in writing the Arbitrator’s membership or any supervisory or controlling body with the institution, confirming their consent and that they have no obligation to appoint the Arbitrator. Based on Article 10 bis (d): “The Parties to the arbitration case declare in writing their knowledge of the Arbitrator’s membership in the board of directors, the board of trustees, or any such supervisory or controlling body of the Arbitration Institution administering the arbitration case in the State, and that there is no objection or reservation on their part of that appointment.”
- The institution has a special mechanism for safe reporting of any violations committed by Arbitrators (Article 10 bis (e)).
- The Arbitrator in question is not appointed as a member on more that 5 tribunals each year (Article 10 bis (f)).
- The Arbitrator in question should submit a written undertaking that
- He will not use his position in a way that may create a conflict of interest or to gain unfair advantage or interest compared to the other counterpart Arbitrators.
- He will not participate, deliberate, view, vote, attend meetings or in any way influence the conduct of the arbitration case procedures in the supervisory or other board of the Arbitral Institution during the period of his appointment as an Arbitrator
- The Arbitrator in question shall comply as well with any further conditions or requirements determined by the competent Arbitration Institution (Article 10 bis (h)).
As a result, breaching or violating these conditions has two significant results, based on Article 10 bis (2). Firstly, any violation shall render the concerned arbitral award null and void. Secondly, the Parties have the right to demand any civil compensation from the competent Arbitration Institution and the violating Arbitrator based on the forced legislation in the State.
To sum up, the Arbitration Amendment law aims to achieve unparalleled transparency, modernity, efficiency, and flexibility to arbitration proceedings seated in the UAE; especially with regards to arbitrators’ qualifications, discretion on the applicable proceedings, remote hearings and the use of technology, hearings and evidence respectively.
References
[1] Federal Law No. 6 of 2018 on UAE Arbitration.
[2] Article 10(1)(b), Federal Law No. 15 of 2023, Amending Certain Provisions of Federal Law No.6 of 2018 on Arbitration.
[3] IBA Guidelines on Conflicts of Interest in International Arbitration on 2014.
[4] Ibid.
[5] Article 10(1)(c), Federal Law No. 15 of 2023, Amending Certain Provisions of Federal Law No.6 of 2018 on Arbitration.
[6] Ibid.
[7] Nigel Blackaby, Constantine Partasides, Alan Redfern and Martin Hunter, Redfern and Hunter on international arbitration (7th edn, Oxford University Press 2022), para.4.69.
[8] n (1).
[9] n (1).
[10] n (7).
[11] n (7).
[12] n (3).
[13] General Standard 7(a), IBA Guidelines on Conflicts of Interest in International Arbitration on 2014.
[14] Point 2.3.3 on Waivable Red List, IBA Guidelines on Conflicts of Interest in International Arbitration on 2014.
[15] Point 2.3.9 on Waivable Red List, IBA Guidelines on Conflicts of Interest in International Arbitration on 2014.
[16] Point 4(c) on Waiver by the Party, IBA Guidelines on Conflicts of Interest in International Arbitration on 2014.
[17] Article 23(1), Federal Law No. 15 of 2023, Amending Certain Provisions of Federal Law No.6 of 2018 on Arbitration.
[18] Article 23(2), Federal Law No. 15 of 2023, Amending Certain Provisions of Federal Law No.6 of 2018 on Arbitration.
[19] Kariuki Muigua “Virtual Arbitration Amidst Covid-19: Efficacy and Checklist for Best Practices” [2020] Litigation and Dispute Resolution Bulletin.
[20] Bára Bečvářová “Virtual Arbitration Hearings in Times of COVID-19 (And Beyond)” [2021] < https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwjZzL3TvvyBAxXHgf0HHcrEATcQFnoECAsQAQ&url=https%3A%2F%2Fmunispace.muni.cz%2Flibrary%2Fcatalog%2Fdownload%2F2137%2F6037%2F3409-1%3Finline%3D%26fakulta%3DPRF&usg=AOvVaw2uHRBVd9SqcHwVe_7JIk2J&opi=89978449> accessed 16 October 2023.
Originally published on Lexis Nexis Middle East
https://www.lexismiddleeast.com/eJournal/2023-10-17_55/
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: Dr.Mahmood Hussain & Razan Ziklam (Intern)
