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The Renewal of DIAC: New Rules Launched in 2022

On 2 March 2022, the Dubai International Arbitration Centre ("DIAC") published the DIAC Arbitration Rules 2022 (the "2022 Rules").

The 2022 Rules follow the re-launch of DIAC by Decree No. 34 of Year 2021 (the "Decree"). The Decree abolished existing arbitration centres – including the DIFC-LCIA and EMAC – and created a single consolidated arbitration centre: DIAC.

In line with Dubai's objective to position itself as a leading arbitration hub, the 2022 Rules establish a framework of modern arbitration procedures that introduce efficiency and flexibility to DIAC Arbitration proceedings and strengthen DIAC's position as one of the leading global arbitration institutions.

 

The implementation of the 2022 Rules

The 2022 Rules come into effect on 21 March 2022 and replace the existing 2007 rules (the "2007 Rules"). The 2022 Rules apply to arbitrations which commence on or after 21 March 2022 regardless of the date on which the underlying agreement to arbitrate was entered into, unless the parties have agreed otherwise.

The 2022 Rules are designed to facilitate "the time efficiency of the proceedings, while maintaining a balance between autonomy of the parties and empowering the arbitrators to manage cases efficiently" and advance the overall objective of cementing "Dubai's position as a global alternative resolution hub".

The 2022 Rules introduce a number of mechanisms and concepts that align DIAC arbitral proceedings with other leading international arbitration centres. The key changes to the 2007 Rules are set out below.

 

Notable amendments to the 2022 Rules

DIFC Default Seat

The 2007 Rules provided for onshore Dubai as the default seat of arbitration where the parties had not specified a seat.1

In line with the Decree, the 2022 Rules enshrine the principle that the DIFC shall be the default seat of arbitration in the absence of an agreement on the seat and location/venue.2  The Tribunal however retains the power to finally determine the seat of arbitration, having regard to any observations from the parties and any other relevant circumstances. 

The DIFC as a default seat is an important shift for international parties. It means that the DIFC Arbitration Law (which is based on the UNCITRAL model arbitration law) will apply to the arbitration and the courts with supervisory powers over the arbitration will apply common law principles and function in the English language.

Multiple Contracts and Consolidation

Article 8 of the 2022 Rules sets out a framework dealing with issues of multiple contracts and the consolidation of claims. There is no equivalent framework under the 2007 Rules. Article 8.1 of the 2022 Rules provides that a party may submit a "single Request in respect of multiple claims arising out of or in connection with more than one agreement to arbitrate".3 Either the parties must agree to the consolidation or it must be demonstrated, on a prima face basis, that:

  • all claims in the arbitrations are made under the same agreement to arbitrate; or 
  • the arbitrations involve the same parties, the agreements to arbitrate are compatible, and:
    • the disputes arise out of the same legal relationship(s); or
    • the underlying contracts consist of a principal contract and its ancillary contract(s); or
    • the claims arise out of the same transaction or series of related transactions.4

This concept of a consolidated request aligns with recent a recent evolution of the LCIA Arbitration Rules which allows parties arbitrating under the LCIA Rules to file a single Request for Arbitration for numerous disputes under multiple contracts.5

Joinder

Article 9 of the 2022 Rules sets out a framework for enjoining additional parties to an arbitration. Additional parties may be enjoined to proceedings by way of an application to the Arbitration Court provided that:

  • all parties (inclusive of any party to be joined and whether or not such party is a party to the agreement to arbitrate referred to in the Request) have consented in writing to the joinder; or 
  • it is prima facie satisfied that the party being joined may be a party to the agreement to arbitrate referred to in the Request.6

Joinder may also be ordered following the constitution of the Tribunal.7 In these circumstances, additional requirements must be satisfied. For example, the party being joined must expressly agree to the appointment and the power of the Tribunal and the application of the arbitration rules.8

There was no equivalent framework for the joinder of parties under the 2007 Rules.

Third-party Funding

Article 22 of the 2022 Rules provides that parties who enter into third-party funding arrangements must promptly disclose this fact to all other parties and the centre and must disclose whether or not the funder has committed to an adverse costs liability. 

This is a welcome evolution from the 2007 Rules and one that is also found in recent updates to the rules of other leading arbitral institutions such as the ICC.9

Costs of the Arbitration

Following a Dubai Court of Cassation judgment in 2012,10 in the absence of express agreement by the parties, legal costs were not recoverable in DIAC arbitrations under the 2007 Rules.

Article 36 of the 2022 Rules expressly provides that the costs of the arbitration include, among other things, the fees of legal representatives and expenses incurred by those representatives, and further stipulate that the Tribunal may make decisions on the costs of the arbitration.

As such, the 2022 Rules firmly establish that the Tribunal is empowered to award legal fees. This an important change to the 2007 Rules and removes any uncertainty regarding the recoverability of legal fees.

Expedited Proceedings

The 2022 Rules introduce expedited procedure rules, which apply where:

  • the parties agree in writing; 
  • the total of sums claimed in the arbitration is AED 1,000,000 (exclusive of interest and legal costs), unless the parties agree otherwise in writing; and
  • in cases of exceptional urgency as determined by the Arbitration Court upon an application by a party.11

If the Arbitration Court is satisfied that the criteria for expedited proceedings has been met, and provided the advance on costs for the arbitration has been paid, DIAC will appoint a sole arbitrator within 5 days of the Arbitration Court's decision.12  The sole arbitrator is to issue the final award within three months of the transfer of the file.13

The 2007 Rules did not contain any provisions providing for expedited procedures. Such rules have, however, been adopted by other international arbitration centres, such as the ICC, for some time.14  The inclusion of these rules highlight the region's efforts to maintain international best practice in arbitration.

Exceptional Procedures

Appendix II of the 2022 Rules sets out detailed frameworks for other "exceptional procedures" including the appointment of an emergency arbitrator and conciliation proceedings. 

For the first time, the 2022 Rules contain a provision for an emergency arbitrator.15  These provisions allow a party to seek interim or conservatory measures from an emergency arbitrator before the Tribunal has been appointed and without having recourse to national courts.  

The 2022 Rules also provide a route for parties to seek to amicably settle a dispute through conciliation. The conciliator(s) have the discretion to determine the procedure of the conciliation, provided each party is given a reasonable opportunity to present their respective positions and the conciliator(s) have due regard to the relevant circumstances.16  The conciliation process is to be concluded within two months from the date of transmission of the file to the conciliator(s).17

Both of these procedures were absent from the 2007 Rules and demonstrates DIAC's further progress in aligning itself with other prominent arbitration centers such as the ICC and LCIA. 

The Arbitration Court

The Arbitration Court, as established by the Decree, is empowered to perform a number of functions under the 2022 Rules. In addition to appointing arbitrators, the Arbitration Court's purview also includes determining certain applications made prior to the formation of an arbitral tribunal such as:

  • preliminary objections concerning the existence validity, scope or applicability of the agreement to arbitrate;18
  • applications for consolidation;19 and
  • applications for joinder.20

The Arbitration Court is comprised of 9 members, with Dr. Ahmed Bin Hazeem Al Suwaidi and Mr. Ahmed Mohammed Al Rasheed currently serving as President and Vice-President respectively.  

 

Conclusion

The 2022 Rules modernise the DIAC arbitral procedure and reflect DIAC's attempt to adopt international best practice. The 2022 Rules also provide much needed clarification on certain issues, such as the recoverability of legal fees, which previously caused uncertainty and concern amongst the various stakeholders of arbitration.

This revitalised framework is a significant step in Dubai's campaign to establish itself as a leading hub for international arbitration center and will no doubt be welcomed by the arbitration community.

 

1 2007 Rules, Article 20.1.
2 2022 Rules, Article 20.1.
3 2022 Rules, Article 8.1.
4 2022 Rules, Article 8.2.
5 LCIA Rules 2020, Article 1.2.
6 2022 Rules, Article 9.1.
7 2022 Rules, Article 9.4.
8 2022 Rules, Article 9.4(a).
9 ICC Rules 2021, Article 11.7.
10 Dubai Court of Cassation Case No. 282/2012.
11 2022 Rules, Article 32.1.
12 2022 Rules, Article 32.2.
13 2022 Rules, Article 32.5.
14 For example, the ICC introduced rules for expedited proceedings in 2017. 
15 2022 Rules, Article 2 of Appendix II.
16  2022 Rules, Article 3.10 of Appendix II.
17 2022 Rules, Article 3.11 of Appendix II.
18 2022 Rules, Article 6.2.
19 2022 Rules, Article 8.2.
20 2022 Rules, Article 9.1
.

 

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