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Posted In: Alert

Posted By: Singularity Legal

Tags: Singulairty legal, DIAC Rules, DIFC

 325

DIAC to conduct arbitrations under the erstwhile EMAC Arbitration Rules and DIFC-LCIA Rules.

The New DIAC Rules 2022

The Decree No. 34 of 2021 concerning the Dubai International Arbitration Centre (“Decree”), enacted in September 2021, made significant changes to arbitration landscape in Dubai by consolidating all arbitration proceedings to the Dubai International Arbitration Centre (“DIAC”) and abolishing prominent arbitral institutes like Emirates Maritime Arbitration Centre and DIFC-LCIA, transferring all rights and obligations of these abolished centres to DIAC. This move had taken the entire international arbitration community by surprise; awaiting further clarity on how the decree was going to be implemented.

On 2 March 2022, DIAC published its new Rules, which come into force today, i.e., 21 March 2022. With these new Rules, DIAC has been significantly modernised, incorporating several provisions and mechanisms that are commonly seen in institutions such as ICC, LCIA and SIAC. These include mechanisms on joinder, consolidation, prima facie jurisdictional decisions, significant leeway for virtual hearings, expedited procedures, etc. We discuss some of the more notable innovations in the DIAC Rules below.

Higher importance to efficiency of arbitral proceedings

The Rules lay significantly higher emphasis on efficiency as a first principle for the tribunal to apply in the conduct of proceedings. In fact, Article 17 labels efficiency as a “core objective” of the Rules, along with fairness and impartiality. Article 17.2 also labours on how the tribunal may achieve efficiency:

17.2. … The Tribunal shall also ensure that the arbitration is conducted expeditiously, diligently and in a cost-efficient manner. This may include making determinations of issues on a preliminary basis, determinations on documentary evidence alone, limiting disclosure or written submissions of the parties, limiting the extent of expert evidence and/or encouraging experts to agree on certain issues.

In line with this and keeping with the trend with institutions like LCIA and ICC, Article 7 of the Rules incorporates the novel mechanism allowing tribunals to refuse a change in a party’s representation at a belated stage of the arbitration, if such change creates a potential conflict of interest with the tribunal. This mechanism brings efficiency on equal footing with a party’s right to representation.

Lastly in this regard, the Rules provide a boldly short time-limit of 6 months for the tribunal to issue its final award. This time-limit can only be extended by written agreement between the parties, or by a decision of the DIAC Arbitration Court.

Cumulatively, the Rules appear to be quite promising in terms of offering efficient arbitrations to parties.

Conflict between parties’ arbitration agreement and the DIAC Rules

A surprising provision is that where the parties’ arbitration agreement is inconsistent with DIAC Rules, DIAC Rules shall take precedence. On the one hand, this prevents situations in which parties may end up creating anomalous hybrid derivations of institutional rules by poorly drafted arbitration agreements. However, this provision may also give rise to complicated questions before courts on the exercise of party autonomy, with potentially conflicting views.

Emergency arbitration

DIAC has now caught up with the leading global arbitral institutions in providing for emergency arbitration, albeit with some interesting features. To begin with, the DIAC Rules allow tribunals and emergency arbitrators to grant ex parte interim relief if notifying the counterparty may jeopardise the efficacy of the application.1 Typically, tribunals and emergency arbitrators offer equal opportunity of being heard to both parties before granting interim reliefs. This creates a small risk of rendering certain interim reliefs moot, such as freezing orders or Mareva injunctions, because the counterparty gets the opportunity to dissipate assets in the time it takes for the emergency arbitrator to be constituted and order relief. DIAC’s innovation brings emergency arbitrators at par with courts in being able to order reliefs ex parte, thus creating a truer alternative to courts for interim reliefs. However, one challenge may be that courts may refuse to enforce orders or awards passed by emergency arbitrators without giving the counterparty an equal opportunity to be heard.

It is also worth noting that DIAC Rules describe the emergency arbitrator’s decision as an ‘order’, not an award. This may make the emergency arbitrator’s interim relief unenforceable in foreign jurisdictions, as a majority of legislations only enforce foreign awards, not the tribunal’s orders.

Addressing third-party funding

In keeping with the increasing adoption of third-party funding, the text of the Rules explicitly addresses it going beyond institutions such as SIAC who have only sought to address third-party funding through practice directions. The Rules mandate prompt disclosure of any third-party funding arrangement entered into by a party at any time, including details of the identity of the funder and its commitment to adverse costs liability. The tribunal is also authorised to take such arrangements into account while apportioning costs.

At the same time, in a bold move, the Rules directly prohibit a party from entering into any third-party funding arrangement if there is a conflict of interest between the funder and any member of the tribunal.

Alternative arbitrator appointment mechanism

The Rules introduce an alternative process for appointing arbitrators, for situations when parties do not have a mechanism in their agreements or cannot agree on arbitrator. In such cases, on notification, DIAC will suggest at least three candidates, inviting the parties to list all the candidates by order of preference, and taking note of the parties’ mutual preference, will invite candidates to accept appointment.

The way forward

Some questions remain unanswered. It has been reported that all but one DIFC-LCIA staff has resigned, and DIAC has so far only announced the appointment of its new Registrar.2 Moreover, one member of the DIAC Court is also a sitting judge of the DIFC Court of Appeal, which may result in his need to recuse himself from DIAC-originating applications before DIFC Courts.3 Additionally, the new fee schedule, in line with the new Rules, is yet to be released, making it difficult for parties to estimate their costs.

At the same time, while the Decree transposed arbitrations currently governed by the rules of the abolished Emirates Maritime Arbitration Centre and DIFC-LCIA to DIAC, DIAC Rules themselves are silent on this. However, DIAC has reportedly now confirmed that, in compliance with the Decree, with effect from 21 March 2022, it will administer arbitration proceedings for disputes arising out of agreements referring to the rules of the centres abolished by the Decree.4

The Rules are an extremely positive development, not only modernising DIAC as an institution, but more importantly, marking the end of the uncertainty brought about by the Decree in the last six months. 

 

1This provision appears to be inspired by Article 17B of the UNCITRAL Model Law, as amended in 2006.

2https://globalarbitrationreview.com/diac-unveils-rules-amid-continued-uncertainty

3https://globalarbitrationreview.com/diac-unveils-rules-amid-continued-uncertainty

4https://gulfnews.com/business/diac-to-now-register-arbitration-cases-referring-to-rules-abolished-by-decree-1.86594622