ARBITRATION

Arbitration

Arbitration

Executive Summary

Arbitration, a form of alternative dispute resolution (ADR), is a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. It is a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides. Other forms of ADR include mediation (a form of settlement negotiation facilitated by a neutral third party) and non-binding resolution by experts. Arbitration is most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions. The use of arbitration is far more controversial in consumer and employment matters, where arbitration is not voluntary but is instead imposed on consumers or employees through fine-print contracts, denying individuals their right to access the courts.

Following the recent establishment of the LCIA-DIFC Centre at the Dubai International Financial Centre (DIFC), Dubai now has two international arbitration centres. This reflects the increasing acceptance of arbitration in the Middle East and the progress made in developing arbitration in Dubai.

The Dubai government recognised at an early stage that, in order to establish Dubai as a regional financial centre, the government needed to improve its legal system. It therefore set up the DIFC as a free zone with its own, common-law-based legal system and established a DIFC Court currently headed by Sir Anthony Evans. Despite this undoubted progress, more needs to be done if Dubai is to become a regional arbitration centre and attract the large and complex Middle East disputes that are regularly referred to London and Paris.

The low point for arbitration in Dubai was possibly the UAE's Court of Cassation's decision in Dubai Aviation Corporation v. Bechtel (2004), where the UAE's highest civil court annulled an arbitral award made two years earlier in Dubai on the grounds that the witnesses in the arbitration had not been sworn.

The UAE court's decision dealt a serious blow to arbitration in Dubai, and to the UAE as a whole. The decision also led to significant pressure on the UAE to accede to the New York Convention, particularly following the UAE infrastructure boom where foreign contractors, undertaking multibillion dollar projects, sought greater certainty in enforcing their entitlements.

After a consultation process, the UAE finally acceded to the New York Convention in August 2006. Accession provided a huge boost to arbitration in the UAE because it meant that arbitral awards could be more readily enforced outside the UAE.

New Dubai International Arbitration Centre (DIAC) rules came into effect in May 2007. The changes in the rules represented a considerable advance on the previous rules and brought the DIAC rules in line with other major arbitration centres around the globe. To take two examples, the DIAC rules now provide that on the application of one of the parties, the tribunal has the power to order interim measures (Article 31), and that the ...