In summary of the facts, Injazat Capital Limited and Injazat Technology Fund ITF (Claimants) brought a claim before the Court of First Instance against Denton Wilde Sapte DWS (Defendant) for alleged negligence and failing to advice the Claimant in regard to the existence or exercise of an option to sell shares it acquired under a Share Subscription Agreement.

DWS submitted a claim to stay those proceedings since DWS’s terms of business, attached to an engagement letter sent to ITF, provided for a jurisdiction clause that reads, i.e.: “If any claim, dispute or difference of any kind whatsoever (…) arises out of or in connection with those agreements (…), you and we each agree to submit to the exclusive jurisdiction of the Dubai Courts. However, we may at our sole option, refer the claim, dispute or difference to LCIA arbitration in London (…)”.

The Claimant asserted that the terms of business and the arbitration option were not received, and in any event they were not accepted, although DWS’s position was that the terms were forwarded by fax and e-mail to the Claimant who did not respond to it.

The grounds based on which the Court refused to grant a stay

DWS pointed to the application of article 13 of the DIFC Arbitration Law (Law No. 1 of 2008) obliging the Court to grant a stay in the presence of a valid agreement to arbitrate. The Court accurately rejected its application on the basis that the said Law only applies where the seat of arbitration is the DIFC as provided in its article 7.

Following that, the Court has made several misconceptions in its justification to refuse granting a stay.

Turning to the New York Convention NYC to which the UAE is a member since 2006, the Court could have granted a stay in accordance with article II(3) of the NYC, instead it rejected its application on the basis that there is no ambiguity with regard to the scope of application of article 13 of Law No.1 despite that there is a presumption that legislation is drafted in a manner consistent with treaty obligations (Salomon v. Commissioners of Customs and Excise [1967] 2 QB 116). Article II(3) of the NYC sets out the maximum threshold that a member State can adopt and provides for the obligation of the Court to refer the parties to arbitration unless the arbitration agreement is null and void, inoperative or incapable of being performed. The Court, in clear violation of that article, relied on the more onerous provisions of the scope of article 13 of Law No.1 conditioning the grant of a stay only to those arbitrations where the seat is in the DIFC.

In strengthening its position, the court referred to article 5 of the Dubai Law No. 12 of 2004 relating to the jurisdiction of the DIFC Court (as amended by Law No.16 of 2001), and which allows the parties to submit to the jurisdiction of any other Court. Although the term “any other Court” is wide enough to encompass a reference to an arbitration tribunal or Court, the Court of First Instance decided that there is no room for construing Law No.12 as if it covers parallel proceedings before a Court and an arbitral tribunal.

Back to the jurisdiction clause of DWS’s terms of business, the latter referred to the jurisdiction of the Dubai Courts. DWS contended that the Dubai Courts meant the national Courts of Dubai other than the DIFC. Strangely, the Court of First Instance decided that the onus is on DWS to establish that it constituted an agreement to contract out of the DIFC Courts, and further construed that the background circumstances in which the contract was entered into – the provision of legal advice within the DIFC – leads to the conclusion that the reference is to the DIFC Courts.

It is common sense however for all practitioners in the UAE that a reference to the Courts of Dubai is, rather than being construed, a clear reference to the non-DIFC Courts (Hardt v Damac – CFI 036/2009). Additionally, the aforementioned Law No.12/2004 amended by Law No.16/2001provides in article 2 a clear definition of the Dubai Courts as those of the “Emirate of Dubai”.

The decision of the Court of First Instance raises several concerns as to how similar applications for a stay will be dealt with in the future, and poses questions as to the enforceability of the New York Convention by DIFC Courts.

It is noteworthy that the DIFC Courts system provides for a mechanism of appeal before the Court of Appeal, and a decision by the same on that matter should be worth waiting for.

With almost $5 billion in annual trade between Palestine and Israel, it is imperative to establish a neutral forum for resolving business disputes. JAC is established under the auspices of the International Chamber of Commerce. Zahi Khouri and Yara Asad of ICC Palestine and Oren Schachor and Baruch Mazor of ICC Israel were on hand to announce the partnership. JAC’s goal is to establish, in John Beechey’s words, “a truly neutral and independent forum.”

Catherine Rogers at Penn State has been actively involved in JAC’s creation, and she expressed to me her desire for arbitration to impact real people on the ground in conflict zones. As she put it,

“Israel is by far Palestine’s largest trading partner and, according to some estimates, Palestine is Israel’s second largest trading partner after the United States…. [W]hile politicians on both sides seem locked in an intractable battle against peace, peaceful exchanges occur every day between ordinary Palestinians and Israelis. Of course, some disputes arise out of these commercial transactions. In those disputes, Israelis have full access to the machinery of civil justice under Israeli law. Meanwhile, it can be exceedingly difficult for Palestinians to participate in the judicial proceedings in Israel, and Palestinian court judgments are generally unenforceable…. The JAC could provide a better alternative for Israeli-Palestinian exchanges.”

A video introducing JAC is available here. Kudos to all those involved in creating this new joint venture, which the ICC evocatively describes as the “merchants of peace” in the Middle East.

Questions regarding arbitration in Dubai usually focus on enforcement in general, and, particularly, the interrelation between the civil law “onshore” regime and the common law “offshore” jurisdiction of the Dubai International Financial Centre (DIFC). Certain key developments in relation to these regimes from the last few years are set out below.

I. BACKGROUND: THE ARBITRAL REGIME OF THE DIFC

The DIFC is an example of ‘a jurisdiction within a jurisdiction’, a construct adopted in several Middle Eastern countries and adapted to provide certainty and familiarity to international business in an attempt to attract investment.

The DIFC is a financial free zone, located in the Emirate of Dubai (known as “offshore” and “onshore” Dubai respectively). In spite of its location in the centre of a civil law jurisdiction, the DIFC is an autonomous common law jurisdiction, empowered, pursuant to UAE law, to enact its own legal and regulatory framework for all civil and commercial matters. The language of the supervisory court, the DIFC Court,¹ is English.

The DIFC Arbitration Law is modelled on the UNCITRAL Model Law, as amended in 2006, and entered into force in 2008. Pursuant to this law, there is no requirement for parties to have any connection with the DIFC in order to provide for an arbitration to be seated in the jurisdiction.² In contrast, arbitrations seated in “onshore” Dubai are governed by Articles 203-218 of the UAE Code of Civil Procedure 1992, largely based on the former Egyptian Civil Procedure Law.³

In February 2008, the DIFC inaugurated the DIFC-LCIA Arbitration Centre (the Centre), which is the product (as the name suggests) of a joint venture between the London Court of Arbitration (LCIA) and the DIFC. The DIFC-LCIA Arbitration Rules (the Rules) are closely modelled on the LCIA Arbitration Rules. The Centre functions with the assistance of the LCIA Secretariat and has full access to its expertise and general systems.

II. THE ENFORCEMENT REGIME: AN UPDATE

A. Enforcement in “Onshore” Dubai

1. Awards rendered in Dubai

Pursuant to Article 215 of the UAE Code of Civil Procedure, a “domestic” arbitration award must be recognised by the local court, with the effect of converting it to a court judgment. As there is no system of precedent nor comprehensive court reporting system in the UAE, there is no consistent barometer of the Dubai Courts’ attitude to domestic awards. However, key cases are often reported at conferences or are the subject of publications by counsel. Concerns regarding the Dubai Courts’ attitude to enforcement of awards have a long history, harking back to the widely reported case of Bechtel v. the Department of Civil Aviation of the Government of Dubai in 1994, in which the Dubai Court of Cassation refused to enforce a US$ 25 million award in favour of the Claimant on the grounds that the arbitrator had failed to require the witnesses to swear an oath in the manner prescribed by the UAE Civil Procedure Code. Since 1994, arbitration practitioners in the region have developed a list of “dos and “don’ts”, in an effort to minimise the risk of annulment.⁴ Practitioners are periodically reminded of the need to follow this list. In 2009, for example, the Court of Cassation was faced with an appeal of a Court of Appeal decision to set aside an award on the basis that the arbitrator had not signed each page of the award. The Court of Cassation’s judgment confirmed that an award could be set aside if the signature of the arbitrator (or majority of the tribunal) did not appear on the pages of the award containing the final relief granted and the tribunal’s reasons for granting that relief. In this particular case, the arbitrator had signed the page setting out its decision and part of the reasoning for its decision. The Court of Cassation deemed this sufficient to uphold the validity of the award and proceeded to reverse the decision of the Court of Appeal.⁵

Recently, local practitioners have expressed confidence that the Dubai Courts’ attitude towards arbitration awards has changed since Bechtel.⁶ It is worth noting that, awards rendered under the rules of the Dubai International Arbitration Centre (DIAC) are almost always seated in Dubai, and when compared with DIAC’s large caseload, the discussion of enforcement “scare” stories is limited.

However, a new arbitration law, based upon the UNCITRAL Model Law, would obviously provide greater certainty as to the boundaries of the Dubai Courts’ authority to set aside awards.

2. Awards Rendered in the DIFC

Further to Article 43 of the DIFC Arbitration Law, a party may apply for an order of the DIFC Courts recognising an arbitration award rendered in the DIFC.

Article 7 of Dubai Law No 12 of 2004 (Article 7), states that any judgment “ratified” by the DIFC Courts will be enforceable in “onshore” Dubai (and thereafter, in the other Emirates, pursuant to Federal Law No (11) of 1973 Regulating Judicial Relations between Member Emirates in the Federation) without any further review by the Dubai Courts, provided the judgment is final, has been translated into Arabic and is “appropriate for enforcement”.⁷ Recognition pursuant to Article 43 of the DIFC Arbitration Law qualifies as “ratification” for the purposes of Article 7.⁸ To date there has been no judicial guidance as to the meaning of “appropriate for enforcement”. The 2009 Protocol on Enforcement between the DIFC Courts and the Dubai Courts signed in April 2009 (the Protocol), reiterates the contents of Article 7, particularly that the Dubai Execution Court is to enforce a DIFC judgment without re-reviewing the case, and sets out the procedure by which enforcement pursuant to Article 7 is to take place.

Two key developments occurred in 2011 in relation to Article 7 and the Protocol. The first arbitration award rendered in a DIFC-seated arbitration and recognised by the DIFC Courts pursuant to Article 43, was enforced “onshore” pursuant to Article 7 and the Protocol. At the time in question, approximately 40 DIFC court judgments or orders had already been enforced pursuant to the Protocol. This sets an important precedent, and allows for tentative advice to be provided as to the practice, rather than simply the theory, of “onshore” enforcement of an “offshore” award. The award in question, Property Concepts FZE and Lootah Network Real Estate & Commercial Brokerage, was ratified by the DIFC Court of First Instance on 19 October 2010 and ordered the Defendant to pay damages of approximately US$ 7.2 million plus interests and costs.⁹

Secondly, on 31 October 2011, Dubai Law No 16 of 2011 (Law No 16), passed primarily to expand the jurisdiction of the DIFC Courts, also amended Article 7. The test for enforcement remains the same, but the procedure for enforcement as set out in the Protocol is now enshrined in law. It is worth noting that the phrase “final and appropriate for enforcement” (as per the English translation of Article 7 and the Protocol) is worded as “final and executable” in the English translation of Law No 16. However, the phrase in Arabic is the same in all three instruments, and the test therefore appears unchanged.

3. Foreign Arbitration Awards: Enforcement under the New York Convention

Following the UAE’s accession to the New York Convention (the Convention) in 2006, any arbitration awards rendered in the UAE will be enforceable in the 146 states party to the Convention subject to the limitations specified in its Article V. Conversely, the UAE has an obligation to enforce foreign arbitration awards in accordance with the terms of the Convention. Even though the focus of this discussion is Dubai, it is worth noting that the first foreign arbitration awards enforced in the UAE under the Convention were enforced by the Fujairah (one of the seven Emirates that make up the UAE) Courts in late 2010. Two London Maritime Arbitration Association awards, rendered in 2007, were enforced “in absentia” on the basis of “documents-only”. The defendant did not contest the enforcement.

Decisions of the Dubai Courts are not systematically reported. However, the existence of two enforcement actions under the Convention before the Dubai Courts are generally known amongst the local arbitration community. In the first, the Dubai Court of First Instance refused to enforce a Stockholm Chamber of Commence award with no reasons. The decision is being appealed. The second enforcement action, in respect of an award in a dispute between a subsidiary of Macsteel International, incorporated in the Jebel Ali Free Zone, and a Dubai-incorporated company, rendered under the Rules and seated in London, was upheld by the same court. As a contested action, the decision has been hailed as a key “step forward”. It is generally understood that the disputing party relied upon technical arguments that drew upon the pre-Convention enforcement regime. It is notable that not only did these arguments not prevail in the Dubai Court of First Instance, but that the Fujairah court, in its judgment, made no reference to the pre-Convention regime.

B. Enforcement in “Offshore” Dubai

As there are limited or no relevant precedents, the legal regime set out below is discussed on more of a theoretical basis, simply to complete the picture.

1. DIFC Arbitration Awards

As set out above, a DIFC award is recognised pursuant to Article 43 of the DIFC Arbitration Law (as occurred in Property Concepts FZE and Lootah Network Real Estate & Commercial Brokerage). The DIFC Courts will then proceed to enforce the award.

Subject to the parties’ agreement and any request for interpretation or correction of an award, an application for an award to be set aside (and therefore any attempt to resist recognition on this basis) must be made within three months of the applicant receiving the award.¹⁰ The grounds on which an application to set aside can be made are adopted from the UNCITRAL Model Law, as amended in 2006, and are largely limited to safeguarding the procedural integrity of the process, for example, relating to violation of due process rights. In addition, the DIFC Courts may set aside an award on their own volition if they deem that the dispute is not arbitrable under DIFC Law or the outcome of the award is contrary to the public policy of the UAE.¹¹

2. “Onshore” Dubai Arbitration Awards

Arbitration awards rendered in “onshore” Dubai would, theoretically, be enforced in accordance with Law No 16, following ratification by the Dubai Courts (Law No 16 operates equally in respect of Dubai court judgements being enforced in the DIFC as for DIFC judgments being enforced in Dubai, subject to slightly different formalities). No relevant precedent has yet been reported.

3. Foreign Arbitration Awards

The DIFC, as a financial free zone, has an obligation to comply with the international obligations of the UAE.¹² As part of the UAE, awards rendered in the DIFC also benefit from rights granted to the UAE under international law.

It has been suggested that a more certain way of enforcing foreign arbitration awards in “onshore” Dubai, rather than to seek direct enforcement under the Convention before the Dubai Courts, is to combine two of the enforcement routes described: (i) firstly, obtaining recognition of a foreign award under the Convention before the DIFC Courts where the judges are more familiar with the UAE’s international obligations under the Convention and where the grounds for refusing enforcement are drafted in line with those under the Convention (they mimic the grounds for setting aside domestic arbitration awards set out above); and (ii) secondly, enforcing the DIFC-ratified award in “onshore” Dubai pursuant to Law No 16. The developments described above would appear to support this view.

III. CHOOSING THE DIFC AS AN ARBITRAL SEAT

In light of recent developments and its geographical location, the DIFC is likely to be viewed as an attractive seat of arbitration, whether as a neutral seat for two non-UAE parties or for disputes involving one or more UAE parties. In fact, lawyers often enquire about the possibility of seating any arbitration with a Middle East connection in the DIFC. However, given the DIFC’s position as a second jurisdiction within the Emirate of Dubai, and further to a judgment rendered by the (as he then was) Deputy Chief Justice of the DIFC Courts, Michael Hwang, in July 2009, parties wishing to choose the DIFC as the juridical seat of their arbitration should be reminded of the need to express their intention in specific terms.

The case in question, Amarjeet Singh Dhir v. Waterfront Property Investment Limited and Linarus FZE,¹³ was the first case heard by the DIFC Courts in connection with the DIFC Arbitration Law and the Centre. In spite of the Claimant’s arguments to the contrary, Michael Hwang considered that, in the circumstances and given the parties’ knowledge of the different jurisdictions, the arbitration was seated in “onshore” Dubai, pursuant to an arbitration clause which specified: (i) the applicable law as the “laws of the Emirate of Dubai”; (ii) any dispute (following a period for amicable settlement) to be resolved through arbitration conducted in accordance with “the DIFC-LCIA rules of arbitration applicable to the Dubai International Financial Centre”; and (iii) the place of arbitration as “Dubai”. In essence, the choice of the Rules will not protect a party that has not expressly stated the DIFC as the arbitral seat. Michael Hwang summarised the position as follows:

The moral of this case is that, if parties want the DIFC Arbitration Law to apply and the DIFC Court to have jurisdiction over an arbitration, they should expressly select the DIFC as the seat in their arbitration agreement.¹⁴

IV. THE DUBAI WORLD TRIBUNAL

No discussion of arbitration in the UAE would be complete without mention of one recent decision of the Special Tribunal to decide Disputes related to the settlement of the financial position of Dubai World and its subsidiaries (the Dubai World Tribunal or DWT). Although the DWT and its rulings in respect of arbitration clauses require their own blog entry to be developed fully, we set out the ruling in a recent case that exemplifies its policy in respect of arbitration agreements. The DWT is composed of three DIFC judges,¹⁵ and, therefore may also be informative as to the line such judges will take in the DIFC Courts.

By way of introduction, the DWT was established pursuant to Dubai Decree No 57 of 2009, as amended by Dubai Decree No 11 of 2010 (the Decrees), to hear disputes brought by or against Dubai World and its subsidiaries in the aftermath of Dubai World’s restructuring first announced in late 2009. The DWT formed part of a legislative insolvency package aimed at offering Dubai World’s many creditors a degree of certainty and a neutral forum to pursue their claims. The Decrees had the effect of mandatorily excluding the jurisdiction of the Dubai Courts (including the DIFC Courts) in respect of these claims. The DWT’s jurisdiction and decisions draw upon the laws of various jurisdictions: it is seated in the DIFC; many of the claims brought before the DWT arise out of contracts governed by UAE law;¹⁶ and the court procedure was determined, prior to October 2011, by the Rules of the DIFC Courts (modeled largely on the English Civil Procedure Code) and since October 2011, in accordance with the Rules of the DWT (a variation on the Rules of the DIFC Courts). Its decisions are final and not subject to appeal.

In its judgment dated 11 July 2011, in the case of Hedley International Emirates Contracting LLC v. Nakheel PJSC,¹⁷ the DWT upheld its “policy” position towards arbitration clauses, to “respect and enforce arbitration agreements made between the Corporation and its creditors” and to expect parties to continue with pending arbitration proceedings in accordance with the terms of the relevant contract.¹⁸ The DWT dismissed jurisdiction in the case on the basis that the claim in question was subject to an arbitration clause. In its decision, the DWT noted that it was bound by Article II(1) of the Convention, which prescribed that it must recognise binding arbitration agreements. More telling was the warning, in the final paragraph of its decision, that applicants in future claims presented to the DWT, but dismissed for lack of jurisdiction because they are governed by a binding arbitration agreement, would find themselves faced with an adverse costs award on an indemnity basis.

Reza Mohtashami & Merryl Lawry-White¹⁹

“What chances you have if it all goes wrong and what companies are moving and looking to do business there.

Jerome goes on to discuss the following in more detail:

* There are a number of reasons as to why Dubai based companies should be thinking about Dispute Resolution

o The kingdom is engaged in unprecedented amounts of spending and presents a lot of opportunities for companies to benefit. They need to understand what their legal position would be if they end up in a dispute.

o There appears to have been a complete lack of consideration as to how a dispute would be handled, what their rights and entitlements would be and what sort of protections they could have been built in at the contract negotiation stage.

* Are there specific concerns when taking your business into Saudi Arabia that don’t exist elsewhere?

* How transparent is the Dispute Resolution in Saudi Arabia?

* With concerns over the ability to advance claims against the government and that a lot of the business awards are coming from the government, is it a question of understanding the legal system and being able to put it to use better?

* Why you cant go into arbitration with the government?

* The type of things should companies be putting into their contracts before agreeing to deals etc

* Is it a problem when English court cases/contracts are translated into Arabic in the Kingdom of Saudi Arabia?

* What are the most common types of Dispute Resolution in the Kingdom? What are the difficulties of sorting them out and enforcing those judgments?

* Are international contracts applicable in Saudi Arabia or are there specific Terms and Conditions which do not travel very well in Saudi Arabia?

* Judges do not have to come from a legal background, does that cause issues in being able to predict outcomes in court cases?”

To listen to the podcast in full, please visit http://www.clydeco.com/news/articles/radio-interview-dispute-resolution-in-saudi-arabia.cfm.

Until today there is no independent arbitration law in Qatar. Articles 190-210 of Law No 13 of 1990 The Civil and Commercial Code of Procedure (the “CCP”) regulates arbitrations. The CCP is mainly based on the old Egyptian laws and does not meet the needs of swift investment and construction developments that Qatar is heavily undertaking. In addition to the CCP and the QFC, an Emiri Decision number (5/8) of 2006 established the Qatar International Center for Arbitration (the “QICA”) within the Qatar Chamber of Commerce and Industry as an optional forum for commercial arbitration in Qatar. The QICA Rules were issued as a set of arbitration rules to be used by parties who choose the QICA as the forum for their arbitration.

With this background in mind and in order to get to know more about Qatar arbitration rules and developments, I met with Dr. Zain Al Abdin Sharar, an Associate Professor of Commercial Law at Qatar University. Our discussion mainly covered the CCP out of date rules and the problems associated with the current provisions. The problems were also discussed and highlighted in his recent article to be published by the end of the year (Does Qatar Need Reforming its Arbitration Law and Adopting the UNCITRAL Model Law for Arbitration? A Comparative Analysis). I thought I’d summarize some of the notes discussed, only in relation to the CCP and not with regard to the Australian International Arbitration Law (IAA), which is part of the comparative study, for the benefit of our readers.

Arbitration clause and arbitration agreement: Article 190 of the CCP Law strictly provides for the arbitration agreement to be in writing. Dr. Zain recommends that the scope of “in writing” to be broader in a way to encompass the situation in which a formal agreement has not yet been printed and signed by the parties. In interpreting the “writing” requirement, he also recommends the Qatari legislator or national courts to take into account the aspects of the law prescribed in article 7 (2) of the UNCITRAL Model Law, which are consistent with the best practice reflected in the New York Convention and the Model Law when interpreting the writing requirement.

Arbitrability: There is no reference to arbitrability under Qatari law. Article 190 of the CCP mentions only the “matters that can be settled amicably”. Matters that cannot be settled amicably are those matters related to personal status matters (including the validity or termination of marriage, filiations, incapacity, guardianship and inheritance) and those related to public policy (such as criminal liability, betting and gambling, drugs, prostitution and other ‘immoral’ activities). In that respect, Dr. Zain recommends that the new arbitration law in Qatar lays down directly the requirements for arbitrability by clearly identifying the types of disputes that cannot be arbitrated with clear guidelines for matters that can be subject to arbitration. Furthermore, the article suggests clearer definition for “legal capacity” in relation to arbitration.

The Kompetenz-Kompetenz principle and autonomy of the arbitration agreement: These two important principles are completely missing from the CCP provisions regulating arbitration. Interestingly enough, the article noted that “some jurists argued that the arbitration clause follows the fate of the main agreement with respect to its existence and validity and it seems that there are not any judicial decisions to state otherwise”.

Finality of the arbitral award: The CCP permits three types of recourse against an arbitral award: the appeal, the petition for reconsideration, and the request for the award to be set aside. Articles 202-209 set out vague and ambiguous conditions and time restraints with respect to appeals. Dr. Zain stated that there are no pre-established grounds for appeal and that an award can be appealed on question of fact and law. Having said that, article 205 states that an award may not be appealed “if the award is made by arbitrators acting as amiable compositeurs, or in an appellate capacity, and if the parties to arbitration have expressly waived their right to appeal”. However, with regard to setting aside an award, the grounds provided for in article 207 of the CCP are very much similar to those mentioned in Article V of the 1958 New York Convention.

In general, all the CCP articles in relation to arbitration need to be updated. The Qatari legislator is currently working on creating a new arbitration act; however, it is not clear yet when this act will be available.

Recently, a significant amount of unrest has occurred in Egypt in which traditionally the leading arbitral institute for the Middle East resides. The Cairo Regional Centre for International Arbitration (the Cairo Centre) has enjoyed being the leading international arbitration in the Middle East region for several years; however, the regional unrest may dissuade international businesses from going to Egypt for its international arbitrations. In its wake, though, another institution has planted its own roots and is working hard, and successfully so, to challenge the Cairo Centre as the leading international arbitration centre.

The Dubai International Arbitration Centre (DIAC) is conveniently located in one of the more modern business capitals of the Middle East. Already a region with a highly concentrated ex-pat community and several foreign businesses with joint venture locations, it is a location which can easily accommodate arbitrations amongst international parties. It has access to modern facilities and an international airport.

In 1965, the Dubai Chamber of Commerce and Industry was created as a non-profit entity representing the interests of those businesses located in Dubai. Stemming from this, in 1994, came the DIAC. In the past few years, the DIAC has worked rigorously to increase the breadth of backgrounds represented on its Panel of Arbitrators and overall global awareness of its services. This past March, the DIAC hosted its fifth Arbitration Dialogue in Soeul, Korea – tying on its event to the 14th Annual IBA International Arbitration Day. This forum provided an opportunity for leading practitioners and arbitrators worldwide to discuss trends in international arbitration and the growing role of the DIAC in the Middle East region. This Arbitration Dialogue followed two previous internationally held dialogues, one in London and the other in Paris. It has yet another planned for later this year, again in conjunction with an Annual IBA International Arbitration Day; this one to be held on October 30 – November 4 in its own backyard, Dubai.

During the Arbitration Dialogue in Soeul, Korea, the Dubai Centre reported receiving 431 arbitration cases in the year 2010; this represents a 47% increase from 2009. That is a remarkable jump and may indicate its growing importance in the region.

The DIAC may be one to watch for in the coming years.

Most international law scholars of the Arab-Israeli conflict seem to know little about international trade, and focus almost exclusively on the laws of war in their discussion of Middle East relations. Therefore when I was choosing my topic for discussion, I decided to analyze the current status of the Arab League boycott against Israel. The secondary boycott, of course, involves the blacklisting of any corporation that does business in Israel.

As a result of the secondary boycott, Arab consumers suffered because they did not have access to the most efficient source of goods and services. Israeli investment also suffered because foreign corporations often chose to sell their products to dozens of countries with hundreds of millions of consumers rather invest in one small country with a few million consumers. Third-country corporations were caught in the middle and forced to make hard choices that they should never have been forced to make.

The good news is that in the past fifteen years the secondary boycott against Israel has died a quiet death. According to official reports from the United States, of the twenty-two members of the Arab League, only three countries–Iraq, Libya, and Syria–continue to enforce a secondary boycott. Even then, it appears that only Syria is serious about it. USTR has recently stated that the secondary boycott “has extremely limited practical effect overall on U.S. trade and investment ties with most Arab League countries.” As a practical matter, we are experiencing the death rattle of the secondary boycott against Israel.

One can only speculate about the cause of death, but I would hazard that it has much to do with the legalization of international economic relations. Since the end of the Cold War, thousands of bilateral investment treaties have been signed. Hundreds of those involve Arab countries, with Egypt having signed seventy-nine, Morocco seventy-three, Oman seventy-one, Lebanon forty-nine, Jordan thirty-five, etc. These BITs are unusually significant in that they depoliticize disputes by guaranteeing foreign investors the right to pursue treaty-based investment arbitration. If an investor is blacklisted as a result of the secondary boycott against Israel, then it likely has a viable claim for a BIT violation, such as compensation for conduct tantamount to an expropriation or denial of fair and equitable treatment.

Equally momentous is the binding nature of the WTO rules, which prohibit discriminatory import bans. The Arab League boycott violates WTO rules against MFN treatment and quantitative restrictions. Not surprisingly, none of the twelve Arab League countries that are WTO members enforce a secondary boycott, and only three of them–Kuwait, Saudi Arabia, and the UAE–continue to enforce a primary boycott.

Even the primary boycott is subject to a strong legal challenge before the WTO, but Israel thus far has decided to forego this avenue, concluding that “the boycott right now is on the defensive as a result of working behind the scenes…. We do not wish to politicize the WTO.” One may take this at face value, or conclude that Israel fears that such a challenge would require the WTO to finally interpret the national security exception, an ambiguous provision that deserves careful interpretation in a less politically-volatile context.

WTO accession talks will continue to create pressure to eliminate the secondary boycott. In its accession talks, for example, Saudi Arabia confirmed that “the application of secondary and tertiary boycotts had been terminated in practice and in law.” Recent WTO decisions involving China’s accession commitments now make clear that those promises are subject to legal enforcement. The three secondary boycott holdouts–Iraq, Libya, and Syria–are all seeking WTO membership, and given the nature of accession talks, one can be sure that termination of the secondary boycott will be a precondition of their membership.

That’s great news for the Arab street. The importance of promoting foreign investment is particularly acute in the Middle East. The Arab world is facing a ticking time-bomb, with approximately 70 percent of its population under twenty-five years old. It desperately needs to find ways for its growing population to contribute to its economy. For most Arab countries, the commitment to strengthen their economies and develop trade relationships has taken precedence over the desire to enforce a secondary boycott against Israel. Almost nine out of ten Arab countries have concluded that the costs of continued enforcement of the secondary boycott outweigh the benefits.

That’s also great news for Israel. It is now enjoying a tremendous influx of foreign investment. The boycott’s greatest risk was always that it would impede direct foreign investment into Israel. That fear no longer animates the discussion. In the same year that Israel was at war with Lebanon, it enjoyed record direct foreign investment of over $13 billion.

In Abu Dhabi, some years ago, a decision was made by the government here to prepare, under license from FIDIC, two bespoked forms of the contract – build only, and design and build. Those forms were issued in 2007 accompanied by the requirement that they be used as the form of contract by all government departments in the Emirate of Abu Dhabi.

The centrepiece of the ADR process in that new form of contract is the use of a Dispute Adjudication Board (DAB).

It is not the purpose of this note to review the quite lengthy and detailed DAB and related dispute resolution procedures set out in the contract.

What is perhaps more relevant for the theme of this 4-part commentary, focusing on ADR in the Abu Dhabi major projects market, is the fact that, via this mandated form of FIDIC, the dispute resolution process proceeds first to the DAB(cl20.4) ie the use of a DAB is now the default rather than, in earlier versions, an option.

The Abu Dhabi government’s version of the FIDIC contract does maintain cl20.5 which expressly encourages amicable settlement at any time.

Finally, if those two processes do not resolve the matter, the dispute is referred to “final and binding” arbitration. The default body and rules are those of the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC).

In theory, of course, it is possible for some of these provisions to be amended by a government authority for a specific project. But what is more relevant for this note, is that after a detailed review and consultation process, the decision was made to mandate a DAB.

I see the introduction of a DAB as a very valuable and important step to facilitate major project disputes in Abu Dhabi.

In theory, a project-specific DAB, properly appointed and constantly in touch with a project’s progress and the development of a dispute, seems like not just a good solution, but an almost “ must have” for the demands created by projects in Abu Dhabi in 2010 and onwards.

But as good as they appear to be in theory, DABs seem to have a chequered history and more of a “B” rating, than an A+ in construction disputes.

Perhaps their fate is not helped by the entry alongside “dispute board” in Wikipedia which says “This article is an orphan, as few or no other articles link to it”.

But that is being a little unfair. In many jurisdictions DABs compete with an array of offerrings from commercial ADR institutions, advancing soltionsthat are quite varied and not limited to just arbitration (see for example AAA’s and the ICC’s extensive menus of ADR solutions).

So what are, or should be, the drivers in the Abu Dhabi market for making this DAB process work?

First, speed to an initial decision. Around the world, and particularly with in-house counsel, the constant and resounding criticism of arbitration is that it takes too long, and is too appealable (ie even longer). In almost all surveys of arbitration users, time and delay ranks far more significantly than cost. The case for arbitration, for major project and construction disputes, is not helped these days as being almost always a very expensive process. But speed of decision consitently comes first in surveys of in-house counsel and the users of the ADR systems, as the key factor in choosing an ADR solution or in measuring its success or valueto them.

Consistently with the views of Tom Stipanowich (Arbitration: the New Litigation(Univ. Illinois Law Review 2010) a speedy process must, by its very nature, require the setting of tight boundaries on evidence and submissions and expert reports. And the surveys tend to indicate that a controlled, and ostensibly fair but speedy system, is what most large orgainaistions are looking for thesedays.

Witness the outstanding success of the adjudication system in England. In England, and in Australia where it has been almost uniformly adopted in all states, it has had the effect of greatly reducing the number of disputes that go to arbitration. Adjudication has, however, had some adverse side effets. It has produced a large number of court cases at the stage the court is asked to adopt the adjudicator’s report. In the first 4 years of its introduction in Australia, there were over 150 cases ranging from issues of statutory interpreation through to whether the adjudicator had exceeded his jusrisdiction. The outcome being that a relatively short statute needs to be read an interperted in the light of quite a number of important judicial pronouncements. Another side-effect is that lawyers running these matters regularly have to prepare in 14 or 28 days claims and evidence that otherwise would take many months in an arbtiration or even in court.

So will the use of a DAB in Abu Dhabi produce a better result than say arbitration? Or is there a better alternative in this region and at this time in the cycle of major projects?

On any view the introduction of a mandated DAB is a very good first step. The essence of an effective DAB is a decision making process, in real time, by people who can see and view the project and fully understand the issues.

It is the complete converse of a project-specific DAB, that years after construction is completed 3 learned arbitrators have a sitting lasting mouths, to hear and consider expert debate on what did happen and more theoretically, what should have happened or been done, as they look at “as-built” programmes and the true audited accounts of the builder (did he really suffer a loss?).

If you therefore set the sceneas being Abu Dhabi in 2010 and onwards, looking to attract and secure investment; seeking to give transparency to the dispute resolution process and both physically and commercially just purely manage the massive volume of work (and hence disputes) there can be no argument against doing everything that is sensibly possible to make the DAB system work.

One real concern I have is that this initiative is not backed by my professional collegues, or their clients, in Abu Dhabi. If that were to happen, I do not believe that the “system” absent a DAB process, will cope at all.

Finally, let us not forget mediation. In the final part of this series I would like to advance the case for both ad-hoc and institutional mediation to be used as a first choice even before DAB’s in the major project market in Abu Dhabi.

It is not by chance that ADCCAC’s title includes the term “ concilitation” and that the centre promotes a disputes clause that requires the parties first to attempt concilitation, before embarking on an arbitration. In the next part I will review in some detail ADCCAC’s approach to conciliation and how it might be a valuable process for this market, at this time.

Via Article 203 (5) of the Civil Procedure Law (1992), if the parties have agreed to refer a dispute to arbitration, an action on that dispute cannot be brought before the courts.

So let us assume for present purposes that the project in question, or the relevant commercial transaction, does have an arbitration agreement in it, which is recognized by the courts and enforced.

In many ways arbitrating major disputes in the UAE can be a far more complex process than in, say, the USA or UK or Europe.

First, what needs to be understood is that the list of criticism and “adverse” features in modern comercial arbitration, enumerated by Thomas Stipanowich recently in his paper “Arbitration: The New Litigation” (Univ. Illinois Law Review 2010) are all present and accounted for in the UAE. But in the UAE their mix and relative weightings differ.

300 plus years of common law litigation process in both the USA and UK has produced such a detailed set of procedures for litigation, that their almost complete adoption into many major arbitrations, has done arbitration a great dis-service.

In these Western countries, the Medieval processing of the merchants ( the “sniff & smell” arbitrations) have now been replaced by processes quoted by Thomas as being similar to civil litigation – judicialized; formal; costly and time consuming.

We all know what the elements are, in the arbitration process, that lend themselves to this criticism. They include discovery (especially nowadays “e” discovery); accessing 3rd party documents; prehearing procedures; factual and expert reports (for both claimant and respondent); a “hearing” process of some form, including possibly oral testimony and cross- examination.

Next, and quite critically, once an award is delivered while there needs to be a clear pathway to enforcement, in some jurisdictions the relevant arbitation law will permit appeals – allowing time to run on and further costs to be incurred. It is unfair to generalise too much as there are, of course, many examples of successful arbitations. But let us accept for present purposes that in the Gulf most arbitrations over significant sums of money or complex technical issues do involve these traditionally “litigious” style of steps and processes.

Now consider a scenario under which the concept of “judicialized” did not, in effect, exist.

“Judicialized” can of course mean many things, but to western lawyers it is, perhaps, the briefest way of starting with “due process” ; moving though “natural justice and fairness” ; touching upon the independence of experts and the arbitrator(s); having the abitlity to verify facts, and ending with a comprehensive, detailed, judgment, with reasons.

Accordingly, a fair deal of the debate on arbitration reform, especially in the USA and UK has been framed on the baisis of a comparative analysis with the processes in the respective court systems. But what if, in the country of your arbitration, there were not so similar court processes? What would then be the “meates and bounds” of the arbitration debate? I would suggest far less clear and far more open to argument on the fundamentals.

The UAE is a civil law system, but one that has developed in very recent years, comparatively to the USA; UK and Europe. The Federation was only formed in 1972 and the UAE Civil Code first promulgated in 1985. A Commercial Code followed in 1993, a year after the Civil Procedures law.

The court system in the UAE copes with technical or complex construction matters by essentially referring the issues out to court appointed “experts” . In construction matters, those experts are generally engineers fluent in Arabic. The expert will submit his report to the court and the court will decide whether to adopt it or, if the findings are contested, then the court might be persuaded to refer the matter to another expert. This whole process can take 30-60 days and be entirely based on the materials submitted by both parties. Rarely, if at all, is there a hearing with oral testimony in civil cases. Accordingly, there has not been and indeed there cannot really ever be a “judicialisation” of arbitration in the UAE – if by that term we mean the processes of civil litigation in western common law and civil law systems. Accordinly, in the UAE, the responsibilities that then devolve to the relevant arbitration body and arbitrator(s) are, in my view, far more significant than in Western countries.

Put another way, for disputes arising from major projects , or complex commercial transactions , the pressure on the arbitration process to get it right and to deliver an outcome that is just, fair and within an acceptable time frame, is probably no greater anywhere than in the UAE at present – given the sheer size of the UAE’s build and investment programme.

And that is not at all to say that the arbitration institutions in the region have not risen to the challenge. They have, and continue to do so. But the sheer size and volume (and complexity) of many of the disputes in the region have never really had to be addressed by such a small artibration community.

Finally , what the GFC has thrown up in the Gulf, in the context of dispute resolution, is the role and legitimate interests of the finance/banking sector and investors. Unfortunately, the “system” in the UAE has had difficulty coping with the combination of insolvent developers; defaulting purchasers and defacto “mortgagees in possession”.

Add to that the fact that most of the building contracts and real estate sale and purchase agreements included arbitration clauses, and for some developmetns there are literally 100s of disgruntled purchasers who have to initiate individual arbitrations to try to either get their deposits and partial payments back, or to seek some form of remedy.

The challenge therefore, particulary in Abu Dhabi, for the legal profession and for the government seeking to secqure international investment, is to design and implement dispute resolution processes that recognize the relaties and limitations of the underlying court system(s) and respond to the demands for investor certainty and enforceable outcomes.

But to almost every international organization in the industrial, defence and major projects sectors it is, in fact, one of the burning issues confronting their participation in a market planning to spend or invest $USD450billion in 2010.

In the current financial climate, the Middle East is the most real, immediate and accessible market for project and investment businesses, otherwise stymied in the economies of the USA and Europe.

The overall framework for this 4-part series will be first to briefly outline the current legal system that supports the region. To then to focus on the dispute resolution systems that are currently being used and to review their degree of success.

Some consideration will then need to be given to the recently (2007) introduced, bespoked, version of FIDIC ’99 for government work in Abu Dhabi and how that contract manages disputes. In that context, the role of a Dispute Administration Board is now mandated.

Finally, there needs to be made some observations on the relevant institutional body for commercial arbitration in Abu Dhabi – the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), and its procedures and objectives. That arbitration body is now also mandated in the Abu Dhabi government’s FIDIC versions.

It is difficult to convey to people who have never spent some time in the region, the strikingly inverse relationship here between size and wealth, and indeed population numbers.

The United Arab Emirates (UAE) is a federation of seven Emirates, nestled between Saudi Arabia and Oman and the waters of the Persian Gulf.

The geographical size of the UAE approximates to the State of Maine in the USA. Total population is between 5-6 million people. The state of Abu Dhabi (both a city and an Emirate) occupies ¾ of the UAE’s area and has a population of close to ( or pehaps now just exceeding) 2 million people. It is also the Federal capital of the UAE.

For 2010, the GDP of Abu Dhabi is expected to pass $USD450 billion of which near 70% will be spent in the construction (55%) and oil and gas (15%) sectors.

To put these figures into context, for Australia, with a population of 24 million and a workforce of 11.5million, the GDP for 2009 was estimated to be between $USD 900 billion and $USD950 billion. Abu Dhabi is planning to exceed that number by 2013-2014, and then double it again by 2020.

In an investment report by Isthmus Partners released 31st March 2010, Abu Dhabi is quoted as having 95% of the UAE’s oil reserve, and 92% of the proven gas reserves. The report says that, based on current utilization, Abu Dhabi’s oil reserves, will last for 150 years.

Abu Dhabi certainly has its share of distressed real estate developments and postponed major projects. But nowhere near the scale being experience in Dubai.

The focus of dispute resolution in the UAE has been, for much of 2009 and early 2010, entirely dominated by events in Dubai and the government entities, Dubai World and its development subsidiary Nakheel. And these were not issues limited, geographically, to the Gulf. The bond-financing instruments used in Dubai were once seen as grade “A” investments and were (and are today) held by the likes of RBS and HSBC, together with a plethora of institutions and individual worldwide.

But now, as the appetite returns for reinvestment in the Gulf, and the schedule for major projects in Abu Dhabi is reactivated, it is legitimate to ask – can the existing dispute resolution systems – especially Abu Dhabi – possibly cope? If there are doubts – what can be done? Or perhaps better – are there lessons to be learned from the Dubai experience and if so, what are they?

Against the statistics and figures quoted above, now add to them the fact that, presently, the Abu Dhabi court systems has pending before it approximately 320,000 cases. Many of those caes relate to employment and labour issues and a significant proportion relate to small comercial dipustes. But on any view, the court system of Abu Dhabi has little real capacity to manage major complex construction disputes.

And may I conclude this first part of the series by also noting that the UAE does not have an arbitration law. It does have, in the UAE’s Civil Procedure Law (1992), Articles 203 to 218 which specifically address arbitration, aspects of it’s the process and the enforcing of domestic awards. But, with respect, those provisions were not designed in anticipation of the current dimensions of doing business in the UAE in 2010.

I should note, for completeness, that it has been mentioned that the UAE soon will receive a new arbitration law, but a number of commentators feel that in the current circumstances, the finalization of a new arbitration law is just not seen as having sufficient priority.

In the next parts of this series – focusing on dipute resolution in Abu Dhabi – I will review in more detail the principle forms of contracts and arbitration agreements that are used in the Emirate and look more closely at some of the recent initiatives that the government has introduced to help manage issue resolution in the light of one of the world’s biggest building programmes.