DIFC body set to be the final word in arbitration

The Dubai International Financial Centre (DIFC) has teamed up with the London Court of International Arbitration (LCIA) to set up the DIFC LCIA Arbitration Centre. The move was heralded as another step towards making the DIFC a comprehensive financial jurisdiction.

Deputy Ruler of Dubai Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum said: “This is a landmark step for Dubai, reaffirming its status as one of the world’s leading business hubs and creating an efficient working environment for local international companies to prosper.”

Alec Emmerson, a Dubai-based partner with international law firm Clyde & Co, sits on the DIFC court users committee, and is part of the legislative subcommittee that reviewed the new DIFC Arbitration law. Emmerson explained to Emirates Business the rationale for creating the new law and centre.

Dubai already has the Dubai International Arbitration Centre (DIAC), and Abu Dhabi has one too. Why is the DIFC setting up another one?

The purpose of the new arbitration centre is to deal principally with international disputes. Previously, quite a lot of people would have gone to Singapore, which is particularly popular with Indian companies. In Asia, Hong Kong has been quite successful with its arbitration centre.

Before the UAE ratified the New York Convention in 2006, nobody would have dreamed of picking DIAC (or the Abu Dhabi arbitration centre) if they were not from the region. With the New York convention, an award made in Dubai could be enforced in most other countries in the world, and the opposite holds true. But the rest of the world has a perception that awards from the DIAC and other arbitration centres in the Middle East are difficult to enforce.

Is there any basis to this perception?

Historically, and this may change, there have been lots of war stories about the difficulties of enforcing awards in the UAE courts and the highly technical points that the judges will accept as a valid reason not to enforce an award. Once you have the arbitration award it should be final; there is no point in arbitrating if people are unwilling to pay.

One well-known case where an award was thrown out was because the documents were not signed on every page – they were signed at the end and initialled on every page. There is another one, where the court decided that although the companies agreed what oaths the witnesses should swear to tell the truth, one of the parties appealed to the court not to ratify the award based on the parties have not sworn in with exactly the same oaths as they would in court, and the courts decided that the award was invalid. Now these sorts of highly technical issues demonstrated and caused the world at large to believe that the local courts were not supportive for arbitration, and this is similar across the Middle East.

What role should courts play in the enforcement of arbitration awards?

The parties agree in the contract that the award will be final and binding, and in jurisdictions in Singapore, Hong Kong, London, and the United States, the courts uphold that concept and agreement, and are very reluctant to interfere with the award. There has to be clear evidence of the arbitrator being bribed, or a very serious problem for an award to be thrown out. Historically the region’s courts have interfered on these technical issues and not supported the award.

How will this change with the arbitration law and centre?

There are not many places in the world where there are specialised commercial courts, so you can run into problems when judges are not familiar with the issues. This is not unique to the region. This is where the DIFC new arbitration centre is important. Anyone can choose the DIFC LCIA as the seat for arbitration, and the enforcements are quite simple.

The whole of the DIFC is quite revolutionary – where else in the world has the government said we are going to have an area of our country where the civil laws that we have enacted for our country will not apply and they created this special legal regime, and continued to enact state-of-the-art financial legislation. Most importantly, the government recognised that it probably would only work if it has its own court. So the DIFC Court was set up, and they appointed Sir Anthony Evans, who was previously a court of appeals judge in charge of the commercial courts in England as the chief justice; they appointed Michael Hwang, who is a well-known arbitrator in Singapore as the deputy chief justice. We have six commercial judges at the DIFC, we have court rules that are based on the English commercial court practice, and the new arbitration law, which has gone out for consultation, will be enacted once comments are received and after some amendments.

What are the improvements to the original DIFC arbitration law?

The original arbitration law that was passed at the founding of the DIFC was exclusive; the jurisdiction was limited to disputes between companies with a DIFC connection. The new law is inclusive – anybody can choose whether to bring their disputes there whether they are in the DIFC or not.

So what happens after the DIFC LCIA Arbitration Centre decides on an award?

When a party gets an award, they take it to the DIFC court to ask for an order for enforcement, and the DIFC Court will apply very similar principles to English arbitration law, so there is a high degree of confidence that the judges will support arbitration unless there is a very serious irregularity. Once the judgment is received from the DIFC, you still have to go out in the world and do something with it.

 

So then you can go overseas with it under the New York Convention.

(The New York Convention is known as the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which sets out conditions for the recognition and enforcement of foreign arbitration awards in the territories of its member states.)

Under the convention, you don’t have to convert it into a DIFC Court judgment, you just take the award to wherever you are going to enforce it and say it is a final award. But if you wanted to enforce it in the UAE and in the GCC countries you would first get the DIFC Court to turn the award into a judgment, and then you would take that judgment to the Dubai Court, and the Dubai Court’s execution judge, without interference, would recognise the DIFC Court and issue a Dubai Court final judgment. I have been told that the local execution judges even have the stamp ready.

 

There has been a lot of liaison between the DIFC and local courts about working together, and statutorily, the Dubai court will recognise the DIFC Court judgment. There has also been judicial training in the local courts, so it is clear that the enforcement process will not be an opportunity to litigate for another three years. Once a party gets a Dubai judgment, under the UAE constitution, it is applicable in any other emirate, and under the Riyad Convention, it can go to other GCC countries and enforce the award.

One problem that has been recurrent over the years is that Saudi Arabia has rarely enforced a foreign award, although it has been a signatory to the New York Convention for over a decade. So although in theory you can take your UAE award to Saudi Arabia, in practise it is very difficult.

Do you believe that the new DIFC LCIA Arbitration Centre will become an active venue for dispute resolution?

Because the enforcement will be straightforward, I think it will be very popular for international parties because of the location, and I think it will be popular regionally. The LCIA, a venerable institution that is over 100 years old, has never before entered into an overseas venture. In the world of arbitration, the LCIA is one of the big names, and setting up here, we will be able to conduct what are in effect LCIA arbitration in the at the DIFC.

 

Alec Emmerson

Alec Emmerson, a partner with international law firm Clyde & Co, started with the firm’s shipping and insurance legal sector in 1977.

 

He managed the Hong Kong office for Clyde & Co from 1984 during an era of major shipping insolvencies, the Carrian fraud and insolvency (on which Emmerson worked for nine years) as well as a host of major marine casualties and the infamous “phantom ship” frauds.

Before returning to London in 1996, Emmerson also handled numerous arbitrations (including sitting occasionally as an arbitrator), investment disputes, disasters, commercial contract and employment litigations, and was active in most areas of insurance dispute resolution.

He moved to the Dubai office in 1999, where he continues to practise in the same area of commercial dispute resolution.