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Arbitration Law in the UAE

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Staff Writer, TLR

Published on July 14, 2023, 17:41:00


Arbitration, UAE, legislation, federal, international, jurisdiction

The dispute between the Sheikh Shakhbut Bin Sultan Bin Za'id (Sheikh of Abu Dhabi) and Petroleum Development Ltd. concerning a 75-year oil concession agreement was the first case of arbitration dispute in UAE, that was referred to the international arbitration. This case paved the way for arbitration in the UAE.

 UAE is globally renowned for its oil-exporting businesses, along with its numerous economy which includes tourism, international finance, shipping and logistics, construction, retail, and manufacturing. 

The need to have strong legislation on arbitration for the smooth inflow of more commercial activities from all across the world with an assurance of sorting out the disputes that might arise during the course of business activities in various sectors in a quicker and effective manner was felt by the UAE government. 

Accordingly, on 3 May 2018, Federal Number 6 of 2018 concerning Arbitration (the “Arbitration Law”), the first stand-alone legislation, which came into effect on 14 June 2018, replaced Articles 203 to 218 of Federal Law No. 11/1992 (the “Civil Code”).
This Arbitration Law was enacted with an intention to match the existing modern global arbitral practice as the Arbitration Law is framed in line with the United Nations Commission on International Trade Law (UNCITRAL), a mandate formed to promote progressive harmonization and unification of international trade law through conventions, model laws, and other instruments to address key issues. 

Arbitration Law in the UAE-

UAE- Federal Jurisdiction

Commercial disputes which relate to the registration of real estate, insurance policies and commercial agencies are generally not arbitrable. The arbitrability of each dispute will, however, be considered on its own merits.
UAE – Common Law Jurisdictions
Although Article 41(2)(b)(i) and 44 (1)(b)(iv) of the DIFC Arbitration Law and Articles 53(2)(b)(i) and 57(1)(b)(i) of the ADGM Regulations provide for the possibility of a subject-matter not being capable of settlement by arbitration, there is no prescriptive list within either of these laws as to what matters may not be arbitrable.

The legislation which applies to an arbitration is dependent on whether the arbitral process (i.e. the lex arbitri) is subject to the Federal Civil Law system of the United Arab Emirates (UAE), or by the laws of two distinct jurisdictions I.e. the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM), generally understood as “Common Law Jurisdictions”), both of which have their own arbitration laws/regulations. 

Federal Law No. 6/2018 on arbitration:  The United Arab Emirates (UAE) published its new arbitration law in the Official Gazette No. 630 on 15 May 2018 as Federal Law No. 6 of 2018  (the UAE Arbitration Law) and replaced Articles 203 to 218 of Federal Law No. 11/1992 (the UAE CPC).

Articles 203 to 218 of the UAE CPC were those provisions which were relevant to arbitration. This UAE Arbitration Law applies to all arbitral proceedings carried out in the UAE, unless the parties agree to apply a different arbitration law.

Should the parties agree to apply a different arbitration law, that arbitration law must comply with the requirements of public order and morality in the UAE.
The UAE Arbitration Law provides a detailed legislative framework for arbitrations within the UAE and it is largely based on the UNCITRAL Model Law 1985, it is much more closely aligned to international standards. This has generally strengthened the UAE’s position as a jurisdiction for international arbitration.

The UAE Arbitration Law, contains 61 articles divided into six chapters which replaced the 16 articles contained in the Law of Civil Procedures (UAE CPC) that had previously governed the procedural aspects of arbitration in the UAE.

General Principles – 

- The Arbitration Law applies to arbitrations seated in the UAE unless the parties elect to apply a different law and such law does not conflict with the public policy and public morals of the UAE.
- The Law will also apply to international, commercial arbitrations conducted outside the UAE if the parties have so agreed.
- The parties shall be treated equally and given adequate opportunity to present their cases.
- Arbitral awards shall be treated as confidential and may not be published without the written consent of the parties. Further, the proceedings themselves shall be held in private, unless otherwise agreed by the parties.
- Where a dispute is subject to an arbitration agreement is filed before the court, the court where the proceedings were filed shall stay them but such request should be made prior to the submission of any defence.

Limitation to Arbitration Proceedings-

- Arbitrations are subject to the same legal limitations as lawsuits. Civil claims have a 15-year limitation period (Article 473, Federal Law No. 5 of 1985 (Civil Code)) while business claims have a ten-year limitation period (Article 95, Federal Law No. 18/4993 (Commercial Code). The length of the limitation period, however, is determined by the subject matter.
- The parties must agree on a time frame for issuing the final award. If no such agreement is reached, the final decision must be rendered within six months after the arbitration's initial hearing (which is generally the preliminary hearing). Unless the parties agree to a longer extension, the tribunal can prolong this term by up to six months. However neither the DIFC-LCIA Arbitration Rules (for a DIFC seated arbitration), the DIFC Arbitration Law, nor the ADGM Regulations provide for a time limit for the issue of the final arbitral award.

Organizations in the UAE to handle disputes-

The UNCITRAL Model Arbitration Law is the foundation of UAE arbitration law and the main On-Shore arbitral institutions, in order of case volume, are the:

• Dubai International Arbitration Centre (DIAC), which applies the DIAC Rules (2007) (the DIAC Rules); and
• Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), which applies the Procedural Regulations of Arbitration (the ADCCAC Rules).
• The Dubai International Financial Centre / London Court of International Arbitration Centre (DIFC-LCIA Arbitration Centre) which applies the DIFC-LCIA Arbitration Rules 2016 (the DIFC-LCIA Arbitration Rules).

There are currently two financial free zones established in the UAE that have separate arbitration legislation. The financial free zone in Dubai is the Dubai International Financial Centre (DIFC) and the financial free zone in Abu Dhabi is the Abu Dhabi Global Market (ADGM).

Arbitration rules are usually determined by the choice of an arbitral institution. The regulations of the DIFC are closely modeled after the rules of the London Court of International Arbitration (LCIA). The DIFC-LCIA Arbitration Centre is separate from the DIFC courts, but it acknowledges that the DIFC courts have supervisory authority over matters brought to DIFC-LCIA Arbitration.

Similarly, local UAE courts supervise issues brought to arbitration institutions outside the DIFC, such as the Dubai International Arbitration Centre, which conducts a considerable number of arbitrations in the UAE.

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