Welcoming these new rules
Laura Atherton, solicitor advocate, Kennedys considers the advantages of the latest changes in the rules for arbitration.
On 7 May 2007 the new Dubai International Arbitration Centre (DIAC) Arbitration Rules came into effect, replacing the previously used Rules of Commercial Conciliation and Arbitration of 1994. Although both sets of rules are still available from the DIAC's website, all new applications for arbitration submitted to the DIAC are now governed by the new rules.
Many construction contracts in Dubai make reference to the old rules and their application to disputes arising out of the contract. Contractors are, therefore, sometimes surprised to find, when they come to arbitrate a dispute, that these are no longer the rules automatically applied. Does the change matter and what do contractors need to know about the material differences between the two sets of rules? Below are a few examples that show how the new rules have improved the old.
Appointment of Arbitrators
Under the old rules the parties to a dispute could choose to have a sole arbitrator or to have three or more arbitrators to hear the claim. Only if the parties failed to agree on or appoint arbitrators as required would the Committee of Dubai Chamber of Commerce & Industry, and only if requested by a party, step in and appoint arbitrators from its list.
Under the new rules one arbitrator is appointed to hear the dispute unless the parties have expressly agreed on some other odd number or the DIAC determines that a tribunal of three members is appropriate. All appointments of arbitrators are made by the DIAC and although the parties are able to nominate arbitrators, the DIAC may reject these nominees if it considers them unsuitable. The DIAC may appoint arbitrators without the parties' specific request to do so where there has been a failure to nominate in accordance with the rules.
These changes improve both the speed and efficiency of the appointment process and enhance the authority of the body appointing the tribunal. The DIAC is not required to wait for a party to request that it step in and make an appointment where the other party is failing to comply with the rules and it is not obliged to appoint an arbitrator unless in agreement about their suitability to hear the claim.
Under the old rules, the language of the arbitration was Arabic unless the parties or the tribunal agreed otherwise. The award was issued in Arabic in the first instance with a translation attached if the proceedings had been in a language other than Arabic.
Under the new rules the initial language of the arbitration is the language of the arbitration agreement itself. Thereafter, the tribunal may determine the language of the arbitration, having regard to the observations of the parties and all the relevant circumstances.
This change removes the default setting, which leant towards conducting the arbitration in Arabic. It therefore creates a situation where the tribunal must be more proactive in deciding on the appropriate language and also gives the parties the ability to make representations about what language they think is most suitable.
The Procedural and Substantive Law of the Arbitration
Both sets of rules draw the distinction between the substantive law applicable to the dispute - the law used to determine the issues relevant to the dispute itself - and the procedural law - the rules applied to decide the format, procedure and rules of evidence in the arbitration. The nationality of the procedural law will also, in most cases, determine what is called the ÃƒÂ¢Ã¢â€šÂ¬Ã‹Å“seat' of the arbitration.
(a) Procedural Law: The old rules stated that the procedural rules governing the arbitration were, in the first instance, the old rules themselves and, in the absence of a pertinent provision in the rules the rules agreed to by the parties. If the parties could not agree on a relevant rule the tribunal would specify the necessary rule to be followed, which could not contradict the mandatory provisions of the laws of Dubai.
In the new rules the parties may agree upon the procedural law but that agreement must be in writing, failing which the procedural law of Dubai will be applied unless the DIAC determines, having heard the parties arguments on the issue, that another procedural law is more appropriate.
(b) Substantive Law: If the substantive law applicable to the dispute was not expressly or implicitly agreed on by the parties, then under the old rules the tribunal would apply the laws and the prevailing customs of the UAE if the parties were based here or the subject of the dispute was here. If neither of those two bases applied the tribunal would apply the law most closely connected with the subject of the dispute.
The substantive law, under the new rules, is that chosen by the parties. If the tribunal considers that the parties have failed to agree such a choice the tribunal shall apply the substantive law that it considers most appropriate.
These changes, to both the procedural and substantive law, are indicative of the general shift in the new rules towards giving the administrative body more supervisory power to make decisions affecting the process of the arbitration.
It is worth noting that the new rules also give far more detail on the practical issues arising, such as the conduct of any hearings and the use of witness evidence.
The new rules, it is generally agreed, are an improvement on those previously in force. They bring the rules for arbitration in Dubai up to speed with the general international standard.
Contractors need not be concerned about the change to use of these rules for governing their arbitrations in future; in fact the new rules are to be welcomed.