UNITED ARAB EMIRATES: An Introduction to Dispute Resolution

With the normalisation of relations with Israel and Qatar, and the resumption of dialogue with Iran, the Middle East appears to be an oasis of relative political and economic stability within a rather turbulent global context. The normalisation with Israel in particular saw immediate benefits to the United Arab Emirates (UAE), with a significant influx of foreign investment. The UAE has remained neutral in the Ukraine-Russia conflict, and the past 12 months have seen a considerable number of Russian businesses and individuals migrating to the UAE. This, among other factors, has resulted in a greater focus on due diligence and anti-money laundering (AML) compliance by legal professionals. There is noticeably increased commercial activity, and a corresponding rise in related disputes is expected.

While much of the attention on the region is focused on Saudi Arabia, the UAE’s market has matured rapidly. The introduction of more stringent compliance regimes and the introduction of corporate tax in the UAE for the first time is likely to keep legal and financial professionals busy.

The dispute resolution space in the UAE continues to evolve rapidly. In arbitration, the effects of Decree No 34 of 2021, which abolished the DIFC-LCIA and EMAC, are still being felt. The Dubai International Arbitration Centre (DIAC) introduced a new set of rules (the “2022 Rules”) to replace the dated DIAC Rules of 2007. The 2022 Rules apply to arbitrations commenced after 21 March 2022, and introduce a raft of new provisions, including provisions on consolidation, joinders, third-party funding, expedited proceedings and emergency arbitrators.

Two particularly notable provisions in the 2022 Rules relate to the seat of arbitration and the power of tribunals to award inter partes legal costs. The 2022 Rules identify the Dubai International Financial Centre (DIFC) as the “initial” seat of arbitration where parties have not specified the seat of arbitration. A tribunal has the power to determine the final seat of arbitration, taking into consideration the circumstances and the parties’ submissions. Given the presence of financial free zones with their own courts in the Emirates of Dubai and Abu Dhabi (the DIFC and the Abu Dhabi Global Markets, respectively), the choice of seat continues to be an important consideration in arbitrations in the UAE. A recent judgment from the Abu Dhabi Cassation Court, which declined jurisdiction over enforcement of an arbitration award issued under the ICC Rules on the grounds that the Abu Dhabi Global Market (ADGM) courts have jurisdiction (as the ICC has a branch in the ADGM), brings this issue into sharp relief. The provisions in the 2022 Rules authorising a tribunal to award legal costs is especially significant in light of UAE court judgments which held that a tribunal does not have jurisdiction to award legal costs in the absence of an express agreement of the parties.

The DIFC courts continue to be a popular forum for dispute resolution. In recognition of the growth of the digital economy – both globally and in the Middle East – the DIFC courts have established a Digital Economy Court Division to hear disputes related to current and emerging technologies. The Emirate of Dubai in particular is positioning itself as a hub for technical innovation, and this has been fueled, among other factors, by the relaxation of the rules regarding residency and working out of the Emirate of Dubai. Recent judgments of the DIFC courts have seen an expansion of their jurisdiction. In a recent judgment, the DIFC courts granted a freezing injunction in support of ongoing proceedings in the onshore Dubai courts, despite none of the DIFC’s orthodox jurisdictional gateways being applicable, and none of the assets sought to be frozen falling under the DIFC.

The rules of civil litigation in the onshore courts have also been the subject of sweeping changes. Most notable among these are the provisions to establish English-language courts, and permit limited rights of audience to foreign lawyers who meet specified criteria. Litigation in onshore courts was hitherto conducted exclusively in Arabic (save for the Emirate of Abu Dhabi, which has a dual English- and Arabic-language court), and rights of audience in onshore courts were reserved for Emirati nationals. The rules of evidence have also been changed to introduce a greater emphasis on witness evidence (including cross-examination of witnesses) and rules regarding document production, both of which were previously lacking and often cited as weaknesses in the onshore courts. Although the onshore UAE remains a civil law jurisdiction, there is a noticeable movement towards recognising “judicial principles” which have a binding effect on lower courts. The onshore courts have streamlined procedures for the recognition and enforcement of domestic arbitration awards, foreign arbitration awards and judgments.