The Comprehensive Guide on Arbitration Law in UAE
UAE Arbitration Law
The spontaneous economic growth of the UAE has established it as a leading financial center. As such, the country has drawn the attention of international investors and contractors. Naturally, this has resulted in the creation of different business institutions.
And with the increase in commercial companies, the UAE has witnessed a rise in commercial disputes. These disputes have further multiplied due to the global economic downturns. These downturns have made companies unable to generate funds when needed to fulfill their agreements with individuals or other companies.
With the rise in disputes, the need for a dispute resolution system that is timely and cost-effective arose. Hence the resort of many to arbitration.
It has, therefore, become standard practice for commercial enterprises in the UAE to insert arbitration clauses or agreements into their contracts.
Let’s examine what arbitration is all about before diving into commercial arbitration law in the UAE and the benefits.
What is Arbitration?
Arbitration is one of the major systems of dispute resolution. Other modes of dispute resolution include negotiation, mediation, collaborative law, and litigation.
Among these different means of conflict resolution, arbitration stands out. This is because of its dynamic features.
One of the primary features of arbitration is that business organizations or individuals can resolve their disagreements without going to court.
The process involves two parties choosing an impartial third party, legally called an arbitrator, to stand in-between whenever conflicts arise. The two parties agree in advance that the verdict of the arbitrator is final and binding. This verdict is legally termed as an award.
After the two conflicting parties have agreed on the details of the arbitration process, the hearing proceeds. At this hearing, both sides present their evidence and testimonies to corroborate their claims.
Afterward, the arbitrator considers the claims of both sides to make an award. This award is often final, and the courts hardly reexamine the award.
Arbitration can either be voluntary or mandatory.
Conventionally, arbitration has always been voluntary. But over time, some countries have made it mandatory when it comes to resolving some legal issues.
Overview of UAE Arbitration Law
The UAE arbitration law has different features, which include:
#1. The legislative framework
The UAE arbitration law can generally operate in different areas of the UAE apart from the financial free zones. These financial free zones are also known as free trade zones.
They are economic regions where foreign investors set up their business enterprises and carry out trades. Each of the free zones has its special arbitration legislation aimed at encouraging and attracting foreign investors.
There are two free trade zones in the UAE:
- Global MarketPlace Abu Dhabi
- Dubai International Financial Centre
Apart from these zones, the general arbitration law is applicable in any other region in the UAE.
According to the UAE Federal Law, parties can challenge an arbitration award within 15 years if it is a civil claim and within 10 years if it is a commercial claim. At the expiration of the stipulated period, any legal action related to the arbitration award is time-barred and will not be attended to by the court.
Additionally, the law provides that the final award must be issued within 6 months, starting from the date of the first hearing.
The arbitrator can extend the hearing by an additional 6 months or more depending on the conflicting parties.
#3. Validity of arbitration agreement
For any arbitration agreement to be valid, it must meet some requirements, which include:
- The arbitration must be in a written format. This could involve a written or electronic exchange of messages.
- The person who is signing the contract of agreement on behalf of an institution must have the authority to take such action.
- If a natural person signs the agreement, that individual must be someone capable of carrying out their legal responsibilities.
- A company can use the arbitration contract of another as long as they referenced the arbitration clause incorporated.
Furthermore, the statements in the arbitration contract must be in clear terms. Both parties must also properly understand all that is in the arbitration contract.
Legally, there is no limit to the number of arbitrators that can be on a case. However, if there is a need for more than one arbitrator, then the number of arbitrators must be an odd number.
When selecting an arbitrator, there are specific legal guidelines:
- An arbitrator must, by all means, be a neutral party who is not a minor under the law.
- The arbitrator must not be under a ban as a result of bankruptcy, felony, or any other illegal activities.
- The arbitrator must not be working for any of the two parties signing the arbitration contract of agreement.
#5. Nomination of an arbitrator
The two parties are in charge of nominating the arbitrators. But where the two parties cannot reach an agreement, an arbitration institution can step in to appoint qualified arbitrators.
Afterward, the arbitrators appoint a chairperson among themselves. If they are unable to appoint a chairperson, the arbitral institution will make the appointment.
#6. Independence and impartiality of an arbitrator
Upon nominating an arbitrator, the arbitrator must provide a legal written statement that erases every doubt about their impartiality. If there is a case whereby the arbitrator cannot continue to be impartial in the arbitration case, they must notify the parties. And this might require that the arbitrator gives up their position.
#7. Removal of an arbitrator
Certain things can lead to the removal and replacement of arbitrators, including:
- The death or inability of an arbitrator to carry out their duties.
- A refusal to perform their functions.
- Acting in a manner that leads to unjustifiable delays in the proceedings.
- Carrying out actions that are in breach of the arbitration agreement.
Benefits of Choosing Commercial Arbitration
#1. Freedom to choose the right person to resolve the dispute
Both parties are free to choose an arbitrator they believe to be fit for the job. This allows both parties to pick an arbitrator that has a good grasp of the issue at hand.
They also have the opportunity to select someone with adequate experience in resolving disputes among business enterprises.
Commercial arbitration is flexible in that it gives the parties the ability to dictate how the process goes, including the time and place. This allows both parties to work out an agreement plan that they are comfortable with.
#3. Timely and cost-effective
As a result of the flexibility of commercial arbitration, the parties can make the process fast.
This helps in saving the excess amount spent during litigation.
#4. Final decision
The final decision made in the arbitration is binding. This makes it challenging for any party to tender an appeal when dissatisfied with the outcome. This is different from court cases which create openings for unending appeals.
#5. Neutral procedure
In the case of international business disputes, the two parties can decide on where the hearing will take place. They can also choose the language for the arbitration process.
Hire a skilled UAE arbitration lawyer
Amal Khamis Advocate and legal consultants is a well-established UAE law firm recognized across the globe. We are a leading arbitration law firm in UAE. Our team of advocates can assist you in drafting commercial arbitration agreement and guide you through arbitration proceeding in UAE.
We have over 50 years of experience in dealing with different legal issues, especially in the area of commercial arbitration. We are a customer-centered law firm that works closely with our clients to meet their specific needs. So your interests would be well protected with us as your representative.
Arbitration has become a more popular way to settle disputes, especially in commercial disputes where a lot of money may be at stake. However, most people know little about the law, and what they do know is often incorrect. We have all it takes to handle and resolve commercial disputes, whether the party is a small or large business enterprise. Reach out to us today and let us do an excellent job of resolving that dispute amicably.