MAJOR CHANGES IN THE DUBAI ARBITRATION SCENE – THE END OF THE DIFC-LCIA AND CONSOLIDATION AT THE DIAC

DIFC-LCIA has been wound up by legislative decree and its assets moved to the Dubai International Arbitration Centre (DIAC)

Indian traders and investors have long been active in the Gulf region. Dubai in particular sees Indian businesses thrive alongside those from the West and East. New dispute resolution centres have been a feature of growth of the legal environment in many Gulf states, and in particular Dubai where the DIFC-LCIA arbitration center (a joint venture between the Dubai International Financial Center ("DIFC") and the London Court of International Arbitration ("LCIA")) has long been a popular choice for international arbitration. That choice is no longer available as the DIFC-LCIA has been wound up by legislative decree and its assets moved to the Dubai International Arbitration Centre ("DIAC").

 Businesses and lawyers contracting in the region, and whose existing contracts contain DIFC-LCIA arbitration clauses will need to take note of the changed arbitration landscape in Dubai and the choices now available.

Background

The DIFC-LCIA was first established as an arbitration center in 2008 and was relaunched in 2015. New DIFC-LCIA Rules were launched in 2016 and its caseload continued to grow.

However, on 14 September 2021, Decree No. (34) Concerning the Dubai International Arbitration Centre was issued in Dubai announcing the dissolution of the DIFC-LCIA. The Decree stated that the DIFC-LCIA and a second arbitration center, the Emirates Maritime Arbitration Centre ("EMAC") were to be merged into the DIAC. The relevant parties, including the DIAC and the DIFC-LCIA were granted 6 months from entry into force of the Decree to give effect to its terms, which period expired on 20 March 2022 with no transitional arrangements having been announced.

Reform at the DIAC

Meanwhile, changes were being made at the DIAC.

New modernized DIAC Rules were published and took effect from March 2022. These rules included revised provisions for expedited proceedings, consolidation and joinder, the use of virtual hearings and electronic filings, and also the recovery of legal and expert fees which had been a grey area under previous DIAC Rules. The new DIAC Rules also provided a default seat for the arbitration in the DIFC where the parties had not otherwise chosen a seat or venue for the proceedings, and subject to a decision by the tribunal to determine a different seat. More analysis of the new DIAC Rules can be found in our blog post here: https://www.twobirds.com/en/insights/2022/uae/diac-new-rules-for-a-new-world

DIAC also announced reform of its management structures replacing its Executive Committee with a new Arbitration Court to effect the supervision and case management of the arbitration and ADR caseload of the expanded center. The new Court members comprise: Dr. Ahmed Bin Hazeem Al Suwaidi (President), Ahmed Mohamed Al Rasheed, Jehad Abdulrazzaq Kazim, Graham Lovett, H.E. Justice Shamlan Al Sawalehi, Mohammad Rashid Al Suwaidi, Dr. Mansoor Al Osaimi, Dr. Yousef Al Suwaidi and Gemma Nemer.

Dissolution and Handover

After much anticipation, the DIAC and DIFC-LCIA issued a joint statement on 28 March 2022 setting out the regime agreed between them to give effect to the Decree and address the handling of arbitration cases already filed, or to be filed, with the DIFC-LCIA given the announcements of its merger with DIAC.

According to the joint press release, and stated to be consistent with the Decree, the LCIA was to administer "all existing DIFC-LCIA cases (i.e. those commenced and registered by the DIFC-LCIA under a designated case number on or before 20 March 2022)" which would henceforth be administered from the LCIA in London.

Meanwhile, all DIFC-LCIA cases commenced on or after 21 March 2022 (or commenced before 21 March 2022 but not registered by the DIFC-LCIA under a designated case number) are agreed to be "registered by DIAC and administered directly by its administrative body in accordance with the respective rules of procedure of DIAC, including the tables of fees and costs in force from time to time, through DIAC's own case management systems, unless otherwise agreed by the parties".

This means parties whose agreements provide for DIFC-LCIA arbitration and who do not agree to use a new arbitral institution in light of the dissolution of the DIFC-LCIA can expect to have their cases referred to and administered by the DIAC under DIAC Rules.

A revised set of choices

Many parties have understandably revisited their template agreements providing for DIFC-LCIA arbitration in light of the new arbitral landscape in Dubai. Where those parties do not wish to use the DIAC, they may choose other options with the DIFC as a seat (including international arbitral institutions such as the International Chamber of Commerce ("ICC"), LCIA, or Singapore International Arbitration Centre ("SIAC"), amongst others. Or they may consider other arbitral institutions and seats in the Gulf region such as the Abu Dhabi Commercial Conciliation and Arbitration Centre ("ADCCAC").

More problematic will be those cases filed with the DIFC-LCIA but not assigned a case number where parties will find themselves now before a DIAC arbitration, or those contracts where one party refuses either to amend the arbitration agreement or accept the effect of the Decree to convert an agreed DIFC-LCIA arbitration into a DIAC arbitration.

In any event, users and stakeholders in international arbitration in the Gulf region are advised to take careful note of the changed arbitration landscape in Dubai and the new choices available.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.