2022 DIAC Arbitration Rules

May 2022 Mehveş Erdem
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Introduction

Dubai International Arbitration Center (“DIAC”) amended its Arbitration Rules on 25 February 2022 (“2022 Arbitration Rules”). The 2022 Arbitration Rules were published on 2 March 2022 and came into effect on 21 March 2022. The Rules will be applied to arbitrations that are filed after 21 March 2022; unless parties agree otherwise date of the arbitration agreement will not be considered. With these amendments, DIAC has taken an approach which is similar to other arbitral institutions and has followed the trend of introducing rules that are more in line with the present needs of users.

Main Changes

The 2022 Arbitration Rules made significant changes to the 2007 Arbitration Rules. These changes are mainly related to electronic filing, virtual proceedings, the seat of arbitration, jurisdiction of the tribunal, appointment of arbitrators, joinder, consolidation, replacing legal representatives, expedited proceedings, emergency interim relief, third party funding and costs.

Virtual Proceedings and Electronic Filing

DIAC has introduced two new important features: (i) virtual proceedings and (ii) electronic filing. With the 2022 Arbitration Rules, parties can now choose to conduct proceedings either virtually or physically.[1] Given the current atmosphere of the arbitral institutions it was inevitable that these options would be granted to users. The second opportunity provided to users is the option to file documents electronically. Article 3.1 of the 2022 Arbitration Rules states that all notifications and communications will be made in writing through email or in accordance with the electronic case management system which DIAC will implement.[2] This system is not yet in use. However, with the 2022 Arbitration Rules, DIAC has signaled that a case management system is on the way.

Seat of Arbitration

As was the case with the 2007 Arbitration Rules, under the new rules parties are free to decide the seat. However, an important change is made for cases in which parties do not make such a designation. The 2022 Arbitration Rules provide that the default seat is the Dubai International Finance Center (“DIFC”)[3], previously it was stated to be Dubai[4]. Considering that DIFC is a common law jurisdiction there is no doubt that international users will feel more familiar and willing to use DIAC.

Arbitral Tribunal

There are two main changes that are related to arbitral tribunals: (i) the power of arbitral tribunals to decide their jurisdiction and (ii) the appointment of arbitrators.

Article 6 of the 2022 Arbitration Rules provides that the arbitral tribunal has the power to decide on its own jurisdiction with respect to objections regarding the existence, validity, scope or applicability of the arbitration agreement.[5] If the arbitral tribunal decides that the arbitration proceedings should proceed, the final decision related to the jurisdiction will be rendered by the arbitral tribunal. Additionally, the 2022 Arbitration Rules confirm that the arbitration agreement is separate from the main contract.[6]

The second rule that is related to arbitrators is the alternative process of appointing a sole arbitrator and the chairman (in cases in which parties failed to appoint within the time limit). In the alternative process, DIAC shares a list of three potential sole arbitrators.[7] The parties each can add three more to the list. Within seven days, parties must rank the candidates.[8] If a party fails to communicate its rankings all candidates will be deemed equally preferred.[9] DIAC will then invite candidates in the order of the preferences that the parties have expressed. In case parties cannot mutually agree, or if any candidates are unable to accept, the Arbitration Court decides whether to directly appoint an arbitrator or to repeat the process.[10]

Joinder

The 2022 Arbitration Rules allow for joinder of new parties.[11] This is a new provision, as the 2007 Arbitration Rules did not regulate joinder. For joinder to be realized, either all parties should consent, or DIAC or the arbitral tribunal should establish that the joining party is a party to the arbitration agreement. DIAC can decide on joinder requests before the arbitral tribunal is constituted; once constituted, the arbitral tribunal has the power to decide on joiners.

Consolidation

As with joinder, consolidation is a newly added rule.[12] The 2007 Arbitration Rules were silent on this issue. With the new rule, two or more arbitrations can be consolidated if the parties agree or (i) the arbitration agreement is the same for all of the claims, or (ii) the proceedings to be consolidated involve the same parties and (iii) the arbitration agreements are compatible. In parallel to the situation with joinder before the arbitral tribunal is established, DIAC has the power to consolidate before the establishment of a tribunal, but power shifts to the tribunal once it has been established.

Legal Representatives

The newly added rule on legal representatives is a distinct rule. This rule requires the approval of arbitral tribunals when a party wants to change its legal representative. In such a case, the tribunal considers conflict of interest issues and the impact on time and cost-effectiveness of the proceedings in deciding whether to approve the replacement.[13] While this provision aims to prevent conflict of interest issues, it may put a party in a difficult position if the tribunal does not approve the replacement, as the party will be forced to continue with an underperforming legal representative. Indeed, this provision may obstruct a lawyer’s right to withdraw from representation even if there are legitimate reasons. The consequences of this new provision and how it will be applied in practice will be seen in time since it does not have an equivalent in other institutions.[14]

Expedited Proceedings

The 2022 Arbitration Rules on expedited proceedings are relatively different compared to other arbitral institutions. The monetary threshold is AED 1,000,000 which is approximately USD 272,000. Expedited proceedings can apply to arbitration agreements that are entered into after 21 March 2022. In order to apply expedited proceedings, there are three conditions: (i) a monetary threshold of AED 1,000,000, (ii) agreement of the parties, or (iii) if DIAC decides the case is exceptionally urgent.[15] The arbitral tribunal has the power to determine the specifics of the proceedings. The 2022 Arbitration Rules do not provide rules of procedure other than specifying the three-month time limit.

Emergency Arbitrator

Under Article 2 of Appendix II (Exceptional Procedures), a party can file an application for emergency interim relief either with its request for arbitration or at a later date. The application can be decided ex parte if notifying the other party would jeopardize the application or if the procedural rules of the seat of arbitration allow for an application without notice.[16] In their applications, parties should explain why they require an emergency arbitrator, the relief that they seek, and why they are entitled to such relief. DIAC appoints an emergency arbitrator in one day if the Arbitration Court decides that these proceedings can apply on a prima facie basis.[17] Following the appointment of the emergency arbitrator, the arbitrator should provide a timetable within two business days from the time they receive the file from the Center. Afterwards, the emergency arbitrator will issue its order “as soon as reasonably practicable”.[18]

Third-Party Funding

The 2022 Arbitration Rules require parties to disclose to other parties and to DIAC if they are engaged with a third-party funder.[19] The disclosing party should also provide information about whether the third party will be liable for adverse costs. This is also a newly added provision since 2007 Arbitration Rules were silent on the third-party funding.

Costs

Under the 2007 Arbitration Rules, legal costs were not recoverable if parties had not previously reached an agreement.[20] The 2022 Arbitration Rules clarify the scope of the costs of arbitration.[21] Registration fees, DIAC’s administrative fees, fees and expenses of the arbitral tribunal, tribunal or party appointed experts, and legal representatives, as well as any other party’s costs are included. In addition, the arbitral tribunal may make decisions on the costs of the arbitration.[22] The Arbitral tribunal also has the power to award the legal fees.

Conclusion

The 2022 Arbitration Rules aims to strengthen DIAC’s global position.[23] To accomplish that end, “the new rules reflect the latest developments in the field of international arbitration, as well as the evolving needs of the business community, and are aimed at improving the efficiency of the arbitration procedures and ensuring that the users would benefit from a wide range of additions.”[24] The 2022 Arbitration Rules, with their new provisions related to the disclosure of third party funding, costs and charging structures, virtual proceedings and electronic submissions, have come closer to the approach of the other most frequently used institutions in this field, such as the International Chamber of Commerce. There is no doubt that establishing DIFC as the default seat is a step towards attracting more international cases.

Source
  • DIAC 2022 Arbitration Rules Article 20.2, 23.2, 26 and 27.6.
  • DIAC 2022 Arbitration Rules Article 3.1.
  • DIAC 2022 Arbitration Rules Article 20.1.
  • DIAC 2007 Arbitration Rules Article 20.1.
  • DIAC 2022 Arbitration Rules Article 6.1.
  • DIAC 2022 Arbitration Rules Article 6.1.
  • DIAC 2022 Arbitration Rules Article 13.2.
  • DIAC 2022 Arbitration Rules Article 13.3.
  • DIAC 2022 Arbitration Rules Article 13.4.
  • DIAC 2022 Arbitration Rules Article 13.5.
  • DIAC 2022 Arbitration Rules Article 9.
  • DIAC 2022 Arbitration Rules Article 8.
  • DIAC 2022 Arbitration Rules Article 7.5.
  • Bradfield, Michelle / Chaudhri, Javade / Harb, Jean-Pierre / Heitzmann, Pierre / Martin, Heathet / Shadmand, Sheila: DIAC 2022 Arbitration Rules: Will They Propel DIAC Into a Top-Five Institution? 21.04.2022, JDSUPRA, https://www.jdsupra.com/legalnews/diac-2022-arbitration-rules-will-they-1674037/ (Access date: 15.06.2022).
  • DIAC 2022 Arbitration Rules Article 32.1(a).
  • DIAC 2022 Arbitration Rules Article 2.2.
  • DIAC 2022 Arbitration Rules Article 2.5.
  • DIAC 2022 Arbitration Rules Article 16.4.
  • DIAC 2022 Arbitration Rules Article 22.1.
  • Dubai Court of Cassation, Case No. 282/2012, 03.02.2013.
  • DIAC 2022 Arbitration Rules Article 36.
  • DIAC 2022 Arbitration Rules Article 36.2.
  • As highlighted by Dr. Tariq Humaid Al Tayer, the chair of the DIAC Board of Directors: “Our priority in the coming years is to strengthen DIAC’s position as a leading centre for settling disputes locally, regionally, and globally, by enhancing arbitration practices and standards, which will in turn improve the ease of doing business in Dubai. The changes to the rules are a major step forward in terms of reinforcing Dubai’s position as a global centre for arbitration.”, http://www.diac.ae/idias/resource/Rules2022PR.pdf (Access date: 25.06.2022).
  • DIAC’s announcement, 02.03.2022, http://www.diac.ae/idias/resource/Rules2022PR.pdf (Access date: 15.06.2022).

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