The DIAC Arbitration Rules 2022: A Step to Cement the DIAC’s Position as a Prominent Arbitral Institution

Recent Development

The Dubai International Arbitration Centre (“ DIAC ”) Arbitration Rules 2022 (“ Rules ”) ^[1] were issued on 25 February 2022 by the Board of Directors of the DIAC. The Rules will enter into force on 21 March 2022 and will apply, in principle, to all new requests for arbitration submitted to the DIAC thereafter. The Rules significantly modernize the DIAC Arbitration Rules 2007 and aim to reinforce the DIAC’s prominent position as a global arbitration institution and establish Dubai as a leading global center for arbitration. This aim is highlighted by Dr. Tariq Humaid Al Tayer, the chair of the DIAC Board of Directors:
“ Our priority in the coming years is to strengthen DIAC’s position as a leading centre for settling disputes locally, regionally, and globally, by enhancing arbitration practices and standards, which will in turn improve the ease of doing business in Dubai. The changes to the rules are a major step forward in terms of reinforcing Dubai’s position as a global centre for arbitration. ”

In addition to the establishment of the Rules, the DIAC Arbitration Court (“ Arbitration Court ”) was also appointed to replace the DIAC’s Executive Committee, which previously supervised the alternative dispute resolution services and cases under the DIAC.

Amendments to the Rules and Significant Provisions

The Rules bring significant amendments aimed at increasing efficiency and include provisions reflecting contemporary practices in international arbitration, such as virtual hearings. As such, the Rules have been brought up to the standard of rules of leading arbitration centers, offering flexible and efficient proceedings. The most significant amendments, which were also highlighted by the DIAC in their press release concerning the Rules, are listed below: ^[2]

Commencing the arbitration

• Pursuant to Articles 4.3 and 5.3, the request for arbitration and answer to the request for arbitration can now be submitted by email or an electronic case management system implemented by DIAC. This innovative approach is significant for the sustainability of arbitration and is an important step for adaptation to the evolution of the arbitration world especially after the COVID-19 pandemic.
• Pursuant to Article 5.7, the longest possible time extension that can be granted to respondent for submitting its answer to the request for arbitration has been reduced from 14 days to 10 days. This amendment promises a faster proceeding.
• Article 6.5 expressly provides that nominating or participating in the appointment of an arbitrator does not preclude a party from objecting to the arbitral tribunal’s jurisdiction.
• Article 7.5 expressly provides that a party may change its representatives or add new ones after informing the other parties, arbitral tribunal and the DIAC, subject to the arbitral tribunal’s approval. The arbitral tribunal will take into consideration, among other things, any potential conflicts of interest and impact on time and cost-effectiveness of the proceedings.

Multiple contracts, consolidation and joinder

• Multiple contracts, consolidation and joinder are entirely new concepts established with the Rules. In accordance with Article 8, parties may initiate a single arbitration for multiple claims arising from or in connection with multiple arbitration agreements, provided that the parties are the same, the arbitration agreements are compatible and the disputes originate from the same legal relationship, or the underlying contracts consist of a principle contract and its ancillary contracts, or the claims arise from the same transaction or series of related transactions. In addition, arbitrations can be consolidated upon one party’s application in that regard and after all parties are invited to comment. Consolidation is not possible if the parties have expressly opted out of it in the arbitration agreement.
• Pursuant to Article 9, a new party may join as claimant or respondent to the arbitration upon an application by a party in that regard, regardless of whether or not such party is a party to the arbitration, and after all relevant parties are invited to comment, provided that all parties, including the joining party, consent to the joinder in writing, or the joining party prima facie appears to be party to the arbitration agreement.

The arbitral tribunal

• Pursuant to Article 10, if the parties are of different nationalities, a sole arbitrator or the chair of the arbitral tribunal will not have the same nationality as any of the parties unless the parties agreed on this in writing or the Arbitration Court decides so. The previous rules had a similar provision. However, the Rules give discretion to the Arbitration Court, unlike the previous rules.
• Article 13 provides an alternative process for appointing arbitrators, which is another significant amendment. Accordingly, if the parties fail to agree on which arbitrator(s) to nominate and have not stipulated any other mechanism of appointment, they can notify the DIAC that they agree to the alternative appointment process. In such a case, the DIAC will provide the parties at least three suitable arbitrator candidates and invite the parties to contribute to this list of candidates. The candidates that are either agreed on or recommended by both parties will then be invited to accept the appointment.

The proceedings

• Article 20.1 provides that where the parties have not agreed to a seat of arbitration but agreed on a location/venue for the arbitration, such location/venue shall be deemed as seat of arbitration. However, if the parties agree on neither the seat of arbitration nor location/venue for arbitration, the seat will be the Dubai International Financial Centre ^[3] , whereas previously, the seat of arbitration would be Dubai.
• Articles 20.2, 23.2, 26 and 27.6 expressly provide that the arbitral tribunal can decide to hold virtual meetings and hearings. This is a significant adaptation to recent developments in arbitration practice, especially after the COVID-19 pandemic.
• Article 22 is another new provision on third-party funding, which is in line with the rules of internationally preferred arbitral institutions. Accordingly, any third-party funding arrangement must promptly be disclosed to all parties and the DIAC prior to the constitution of the arbitral tribunal. The parties cannot enter into such an agreement after the constitution of the arbitral tribunal if it risks giving rise to conflicts of interest with the arbitral tribunal. If they do so, they should disclose this agreement. On one hand, this amendment protects the economic interests of the parties and, on the other hand, provides transparency.

Award and costs of arbitration

• Pursuant to Article 34, the arbitral tribunal may sign the awards electronically. Furthermore, even though the arbitration proceedings are confidential according to Article 38, Article 34.8 provides that the award may be made public if parties give their consents.
• Article 36 on costs of arbitration is another amendment that clarifies the scope of costs. Accordingly, registration fees, DIAC’s administrative fees, fees and expenses of the arbitral tribunal, tribunal or party appointed experts, and legal representatives, as well as any other party’s costs as assessed and determined by the arbitral tribunal are all included in the costs of arbitration.

Expedited proceedings

• Article 32 brings expedited proceedings into arbitration under the DIAC. The expedited rules will apply if the parties agree in writing, or the Arbitration Court decides on its application due to exceptional urgency or the relevant circumstances, or if the total amount of the claims and counterclaims, if any, is below or equal to AED 1 million (exclusive of interest and legal representation costs), provided that the parties did not agree otherwise in writing. ^[4] The sole arbitrator will resolve the dispute. Furthermore, the time limit for rendering a final award in expedited proceedings is three months, as opposed to the six-month time limit in ordinary proceedings, from the date of the transmission of the file to the sole arbitrator, unless extended by the Arbitration Court.

Emergency arbitrator

• Pursuant to Article 2 of Appendix II (Exceptional Procedures), prior to the constitution of the arbitral tribunal and concurrently with or following the filing of the request for arbitration, if there is a need for emergency interim relief, a party may submit an application for emergency interim relief to the DIAC. The emergency arbitrator will issue its order as soon as reasonably possible. This is a significant amendment to the Rules, which enables the parties to receive interim relief in a reasonable time period.

Conciliation

• The Rules also provide parties with an amicable dispute resolution method. Pursuant to Article 3 of Appendix II (Exceptional Procedures), any party wishing to commence a conciliation under the Rules must submit an application for conciliation to the DIAC. If the counter party agrees to participate to conciliation, the procedure will begin. The conciliation process will be concluded within two months from the date that the DIAC transmits the file to the conciliator, unless extended by the parties. If the parties settle, a formal settlement agreement will be executed between them. If the conciliation fails, the conciliation proceedings will be terminated by the conciliator without prejudice to the merits of the dispute.

Conclusion

The Rules bring many new provisions reflecting the recent developments in international arbitration practice and are now more in line with the rules of the most preferred international arbitration institutions, such as those of the International Chamber of Commerce and the London Court of International Arbitration. With these amendments, the DIAC aims to modernize its arbitration practice and further its eminent international arbitration institution, both for global disputes and disputes within the Middle East region.

[1] You may access the Rules, in English, here .

[2] You may access the press release, here .

[3] The Dubai International Financial Centre, which was established in 2002 by Law No. 3 of 2002, is a special economic zone in Dubai that has its own separate legal system.

[4] As of the date of this legal alert, AED 1 million equals to USD 272,294 and EUR 250,040.