Don't jump in to new arbitration system yet

Philip Punwar

Philip Punwar, barrister and chartered arbitrator for Al Tamimi & Company, says the DIFC/LCIA rules will be welcome in the construction industry but, to date, are neither widely available nor enforced.

During the past few weeks it has been a rare day in which I have not been asked by colleagues or clients to suggest, draft, review or advise with respect to, an arbitration clause providing for arbitration at the DIFC/LCIA Arbitration Centre or in the DIFC under the Rules of Arbitration of the DIFC/LCIA Arbitration Centre.

I am certainly not complaining - after all, it has taken more than a short while to convince even my closest professional acquaintances that arbitration clauses are traps for the unwary and only to be used under qualified supervision.

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Phone a friend

Put simply, I tell them, if you can't distinguish between an arbitral seat and an arbitral centre, or struggle to see the difference between the law of the contract and the law of the arbitration, please take care - phone a friend.

Of course you could cut and paste a clause from a previous contract and get lucky but then again, you might instead find that you have unwittingly helped spread the most viral of arbitration clauses - the pathological clause.

But back to the DIFC/LCIA Arbitration Centre. Formally launched in February as a joint venture between the Dubai International Financial Centre (DIFC) and the highly regarded London Court of International Arbitration (LCIA), the Centre promises to provide modern international arbitration facilities in the heart of the DIFC and a scheme of administered arbitration that reflects and draws upon the systems and know-how of its London joint-venture partner.

Without a doubt, the DIFC/LCIA Arbitration Centre has the potential to appeal to both foreign and local parties alike.

Furthermore, if, as expected, the DIFC/LCIA Arbitration Centre Arbitration Rules closely follow the LCIA Arbitration Rules, certain users, including those in the construction field, may welcome a number of its more aggressive provisions.

Third party provisions

For example, the joinder provision at Article 22.1(h) gives the tribunal power to add one or more third parties to the proceedings upon the request of an existing party - so long as the third party consents.

Or possibly even Article 25.1(a), which gives the tribunal power to order a party to provide security for the total amount in dispute, by way of deposit or bank guarantee or in any other manner.

The DIFC/LCIA Arbitration Centre is undoubtedly a welcome addition to the region's dispute resolution landscape, however there are currently strong reasons for exercising caution before attempting to provide for arbitration under its rules.

Not enforced

Quite simply, in contrast to the centre itself, which is situated next to the DIFC Courts, the DIFC/LCIA ArbitrationCentre Arbitration Rules are neither widely available nor yet in force.

I, for one, would hesitate before agreeing to arbitrate in accordance with the provisions of a set of rules that do not yet formally exist.

But there is a further complicating factor - The DIFC Arbitration Law 2004.

While it is true that when its Arbitration Rules are introduced the DIFC/LCIA Arbitration Centre is unlikely to limit its services to the administration of arbitration proceedings with their legal seat in the DIFC, many of those choosing DIFC/LCIA arbitration will expect to be able to choose the DIFC as the legal seat of their arbitration.

Alternatively, they are likely to assume that in the absence of an express agreement on the matter, the DIFC/LCIA Arbitration Centre Arbitration Rules will designate the DIFC as the legal seat. Unfortunately, until the DIFC Arbitration Law 2008 is introduced, a DIFC seat is not available to everyone.

Very broadly speaking, under the existing DIFC Arbitration Law, a DIFC seat may only be chosen where the contract, or at least one of the parties to it, is connected with the DIFC.

Wait for the rules

It may not be long before arbitration clauses providing for arbitration under the Rules of Arbitration of the DIFC / LCIA Arbitration Centre are common.

My guess would be, however, that the rules will most likely appear shortly after, rather than before, the DIFC Arbitration Law 2008.

Until then, please take care - maybe even phone a friend.