In September 2023, Federal Law No. 15 of 2023 entered into force (the “2023 Arbitration Law”) in the United Arab Emirates (“UAE”), introducing certain amendments to key provisions of Federal Law No. 6 of 2018 on arbitration (the “2018 Arbitration Law”).
Federal Law No. 6 of 2018 applies to arbitrations seated onshore in the UAE (different arbitration laws govern arbitrations seated in the free zones, such as the Dubai International Financial Centre and the Abu Dhabi Global Market; see Arbitration in the UAE and Dubai International Arbitration Centre (DIAC) Arbitration).
The 2023 Arbitration Law amends Articles 10, 23, 28 and 33 of the 2018 Arbitration Law and introduces a new Article 10(bis), as discussed below.
Article 10 (Requirements That Must Be Met By an Arbitrator)
The substance of Article 10 of the 2018 Arbitration Law is essentially preserved in Article 10 of the 2023 Amendment Law, which refers to the requirements an arbitrator must meet. These requirements include, among other things, that the arbitrator shall not be a minor, that he/she shall not be convicted for moral turpitude or dishonesty and that he/she shall make a declaration of impartiality and independence.
The 2023 Arbitration Law now adds a new requirement in Article 10(1)(c), explicitly prohibiting any “direct relationship” between an arbitrator and any of the parties in the arbitration that would prejudice the arbitrator’s “impartiality, integrity or independence.”
Even though this addition apparently intends to prevent conflicts of interest, the provision, as phrased, is ambiguous. This is because the 2023 Arbitration Law does not define the term “direct relationship”, thus leaving room for potential disputes regarding its interpretation and application. This ambiguity would ideally be rectified by UAE case law. In the meantime, practitioners may be guided by the 2014 IBA Guidelines on Conflicts of Interest in International Arbitration, which, despite their non-binding nature, provide helpful guidance on evaluating conflicts of interest and are frequently used in international arbitration practice.
Moreover, Article 10(2) of the 2018 Arbitration Law provided that “[a]n arbitrator may not be a member of the Board of Trustees or the administrative branch of the competent Arbitration Institution administering the arbitration case in the State.” This prohibition is not found in other leading arbitration rules, such as the 1996 Arbitration Act applicable in the United Kingdom.
The 2023 Arbitration Law now introduces an entirely new provision, i.e., Article 10(bis), which relaxes the restrictions on appointing arbitrators from the arbitral institution’s supervisory or management bodies, provided that the following eight conditions are met:
- the regulations of the administering arbitral institution should not prohibit this;
- the institution should have a governance system for organizing the work of the arbitrator in a way that ensures impartiality, preventing any conflicts of interest or any preferential advantage, as well as a mechanism regulating the appointment, dismissal and removal of the arbitrator;
- the arbitrator should not be the sole arbitrator or the head of the arbitral tribunal, i.e., he/she can only be a co-arbitrator;
- the parties should acknowledge in writing the arbitrator’s institutional role without objections or reservations about the arbitrator’s appointment;
- the arbitral institution should have a special mechanism for the safe reporting of any violation committed by the arbitrator;
- the arbitrator cannot be a member in more than five cases per year;
- the arbitrator should submit a written undertaking, pledging to avoid conflicts of interest, as well as avoid influencing the arbitration proceedings in any way by virtue of the arbitrator’s institutional role;
- the arbitrator should also adhere to any other conditions or requirements determined by the relevant arbitral institution.
Article 10(2)(bis) of the 2023 Arbitration Law also provides that violation of these conditions shall result in the invalidity of the arbitral award, which is a harsh remedy. It also provides that the parties shall have the right to demand civil compensation from the responsible arbitral institution and the arbitrator, which is an equally strict remedy.
Enhanced due diligence to ensure full compliance with these new requirements is thus required and expected from arbitration practitioners to avoid jeopardizing the validity of UAE-seated arbitral awards and exposing arbitral institutions and arbitrators to potential civil liability, which will negatively impact their reputation.
Speaking of stringent rules, it is also worth bearing in mind that the UAE is known for its formalistic approach to the enforcement of foreign arbitral awards, with a series of recent Dubai Supreme Court decisions (Dubai Supreme Court Case No. 109/2022; Case No. 403/2020; Case No. 1083/2019) confirming that arbitrators must sign not only the operative part of the arbitral award (usually the final page) but also the reasoning part, for it to be enforceable by onshore UAE courts against assets located in the UAE (see also Enforcement of Arbitral Awards in the UAE).
Article 23 (Determination of Applicable Procedures)
A minor amendment introduced by the 2023 Arbitration Law is the slightly revised wording of Article 23, which reaffirms the parties’ right to agree on the procedures to be adopted by the arbitral tribunal in the conduct of the proceedings, including the parties’ right to subject the proceedings to the arbitration rules of any arbitral institution in the UAE or abroad.
Article 28 (Arbitral Proceedings; Place of Arbitration)
The amended Article 28(1) of the 2023 Arbitration Law now explicitly acknowledges that the parties may agree to conduct the arbitration virtually “through modern means of technology”.
This foreseeable addition legitimizes the credibility of virtual proceedings and reflects the increasing use of virtual hearings, which was prompted by the COVID-19 pandemic. Similar provisions acknowledging virtual hearings have also been adopted in the revisions of many institutional arbitration rules (see, e.g., Article 32(2) of the 2023 SCC Arbitration Rules).
Article 28(3) of the 2023 Arbitration Law is also a novel provision, imposing a new obligation on arbitral institutions to provide the technologies necessary for the conduct of the arbitral proceedings. However, the exact scope of the arbitral institutions’ obligation is not defined in the 2023 Arbitration Act. It is, thus, unclear, for example, if arbitral institutions are expected to be able to provide the services (for instance, videoconference and transcription) and equipment (for example, laptops, microphones and cameras) required for the conduct of virtual (or hybrid) hearings, which are typically outsourced to specialist, third-party firms. While the scope of this obligation remains to be elucidated, this new provision does require arbitral institutions to stay abreast of technological advances. It also underscores the administering institutions’ role in preserving the efficiency of arbitral proceedings.
Article 33 (Arbitral Proceedings and Hearings)
The revised Article 33 of the 2023 Arbitration Law affords arbitrators increased flexibility in conducting the arbitration. Article 33(7) of the 2023 Arbitration Law now explicitly stipulates that the arbitral tribunal has the discretionary power to determine the applicable rules of evidence in case the applicable law is silent on the issue, provided that these rules do not conflict with public policy.
While the provision does not specify which state’s public policy the rules of evidence should not conflict with, it is assumed that it refers to the UAE’s public policy. Practitioners in UAE-seated arbitrations should thus be wary of refraining from using evidentiary rules that would conflict with UAE public policy (for instance, avoiding the use of illegally obtained evidence, which is inadmissible in the UAE).
* * *
Albeit non-groundbreaking, the amendments introduced by Federal Law No. 15 of 2023 to the 2018 Arbitration Law in the UAE are welcome. On a positive note, they reflect the UAE’s openness to aligning its domestic regimes to modern international standards and trends, such as the increased use of virtual hearings. On the flip side, however, the wording of the new provisions introduces unnecessary ambiguities, opening the road to potential disputes. In any event, the impact of the changes remains to be seen, in practice, in the coming years.