Essay: International Commercial Arbitration Dubai International Arbitration Centre DIAC Rules

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¶ … company have to arbitrate instead of going to court?

As the contract directly states, the contract between our company and the Swiss registered company stipulates that any dispute or difference arising out of or in connection with shall be decided by arbitration in Dubai under the Rules of the Dubai International Arbitration Centre (DIAC). In addition, the Rules of the DIAC specifically states in Article 203 "The parties to a contract may generally stipulate in the basic contract or by a supplementary agreement that any dispute arising between them in respect of the performance of a particular contract shall be referred to one or more arbitrators and may also agree to refer certain disputes to arbitration under special conditions ('UAE Civil Procedure Code' 2005). From the statement of the question, this author assumes that the parties are referring to a dispute with regard to the basic contract and not a supplementary agreement. It might be prudent to seek out a supplementary agreement to include a civil or criminal court case, if our company sees this as advantageous.

What is the next step? Article 203 further stipulates that an agreement for arbitration has to be submitted in writing. This is important for Swiss businessmen to realize because oral contracts are permitted and thrive under Swiss contract law (1992, p. 107). UAE law, of which Dubai is a part, allows oral contracts. For instance, a pledge for movable property may be made orally or in writing ('Security law in the UAE,' 2010). We may want to have a suitable later agreement to allow oral contracts in the buildup phase to the future supplemental written contract and agreement if this appears to be advantageous. For instance, DIAC rules allow arbitration via court procedure in Article 213 of the UAE Civil Procedure Code ('UAE Civil Procedure Code' 2005).

2. How does arbitration differ from going to court?

This author is about to make what may seem to be a strange connection, but the arbitration approach appears to share a lot with a fundamentalist reckoning of religious law. Like fundamentalist readings of the Bible or Koran, such authorities are setting up a "paper pope." What the author means here is that contract law, like much that happens in law, is a developing field with an oral tradition. Case law contributes hugely to our understanding and application of written law and the contracts that they are based upon. It is so easy (and instinctive) for the amateur or the new initiate to contract law to think that everything can be resolved if we "just get it in writing" and then everything can be arbitrated like "gentlemen" (after all, Dubai is not exactly equal in terms of equality of the sexes). What happens if there is a dispute that requires the coercive power of a court to resolve?

As this author pointed out above, arbitration in the UAE Civil Procedure Code, section 213, arbitration via court case is permitted ('UAE Civil Procedure Code' 2005. One real downside to arbitration is the enforcement procedure especially with regard to monetary awards. As Article 215 of the UAE Civil Procedure Code stipulates 'the arbitrators' award may not be enforced unless the same has been approved by the court with which the award was filed… (ibid)'

Even now, ten months into the Dubai debt crisis, faith in the shaky Dubai economy is still affecting investors. To quote Fuchs & Rachna, 'Investors scared off by Dubai's debt crisis are taking a new look at government-related entity debt in the United Arab Emirates, but broad reforms are needed as well as competitive pricing to develop the secondary market.' (18 August 2010, 'Analysis-UAE state-linked bonds brush up investor appeal.'). To be fair, while Dubai is not the only state in the world where investors are running for the hills so to speak, there is certainly room to be cautious, especially during a deep recession. However, there is little doubt that the iou's issued by the Sultan of Dubai have not done much for a lot of companies doing business in the United Arab Emirates (UAE).

3. Should your company suggest mediation to resolve the dispute and why?

Depending upon the issue, we may be better off trying to negotiate a supplementary agreement that would allow a court settlement. Human nature being what it is, it is almost inevitable that certain things will not be able to be settled via arbitration.

Bottom line, we need to consult the best legal minds as well as the accounting department. There is a legal system to observe. However, there appears to be some lack of certainty as to the status of the court system in the UAE with regard to court ordered arbitration in the UAE.

Interestingly, while the UAE Civil Procedure code as below may allow court arbitration in writing, the practice may be very different. Karen Remo-Listana is an experienced Middle Eastern journalist. She is the editor of Pipeline Magazine who in an article states that 'There are two arbitration bodies in Dubai - Dubai International Arbitration Centre (DIAC) and the DIFC LCIA Arbitration Centre. DIFC Courts do not handle arbitration cases (08 February 2010. 'No decision on arbitration cases,').' A fair question to ask the writers of the UAE Civil Procedure Code is exactly which courts they are referring to with regard to court ordered arbitration. The official court system does not seem to know anything about the subject. Perhaps it may be necessary to negotiate supplemental agreements to allow foreign court jurisdiction in such cases.

4. What impact does including a set of rules have on the arbitration process?

In the opinion of this author, it keeps the arbitration on track. Discussions, negotiations, etc. are kept businesslike because they have to remain concerned with the issues that have empowered them in the first place. However, they also may ironically be unwittingly limiting their rights ('Clause and Effect, Oct. 2006). The arbitration clause by adopting commonly used or recommended language in an arbitration clause, clients may have agreed unknowingly to give up their right to have the courts decide the scope of their arbitration agreement and the extent of the arbitrator's jurisdiction. Doing so can significantly affect a client's rights because the decisions of arbitrators are well insulated from review, and courts have no ability to rectify any arbitral errors in law or contract interpretation. The ability to make informed decisions about the language of the arbitration clause and carefully considering the rules of the selected arbitration provider can help clients avoid unwelcome surprises should future disputes develop.

5. Once the tribunal has been appointed what will be the main procedural steps and approximate time frame prior to the issuing of the final award?

The case of the property conglomerate Dubai World looks like it is setting the pattern for debt deals with the use of a tribunal. According to an article in the National, Dubai World believes it may have to make use of a special tribunal set up by the Government to bring some creditors on board to its settlement offer, according to advisers close to the company." The tribunal was set up last November (Frank & Hamischfeger, 2010 ). While now official time frame has been set up, very likely the time frame for an award should be imminent once the last of the present investors is brought on board for the settlement (Parasie & Pasha, 2010) Article 203 of the UAE code stipulates a "maximum period of thirty days from the acceptance of his appointment, the arbitrator shall, without the need to comply with the rules provided under this Law in respect of serving of notices, notify the parties to the dispute of the date of the first hearing scheduled for consideration of the dispute and the venue thereof. The arbitrator shall fix a date for the parties to the dispute to submit their documents, memoranda and pleadings ('UAE Civil Procedure Code' 2005)."

6. Where will the various meetings and hearings be held and who decides?

The meetings will be set up by decree. Unfortunately, it looks like "rebel lenders" will be forced into line on a plan to delay repayment of the debt. "Basically they said 'this is the deal and the alternative is we'll invoke the decree and then you'll have to wait a long time for your money back'," said a Gulf-based creditor bank." Again this is the best information that is being handed out by the government appointed tribunal leaders (Banks, 2010).

7. What can your company do if it loses the arbitration?

We may be able to take the arbitration to a court case ('UAE Civil Procedure Code' 2005). However, it appears that Decree 57 is deciding things. The Sultan's decree is saying that the "decisions and orders of the Tribunal shall be final, irrevocable, and not subject to any appeal or review (Decree 57, December, 2009)." This appears to be the final word on the matter, seeing that Dubai is a Sultanate and… [END OF PREVIEW]

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International Commercial Arbitration Dubai International Arbitration Centre DIAC Rules.  (2010, August 18).  Retrieved May 25, 2019, from https://www.essaytown.com/subjects/paper/international-commercial-arbitration/616482

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