What law is applicable in arbitration?

Posted by Awatif Mohammad Shoqi Advocates & Legal Consultancy on March 27th, 2022

The number of arbitration cases registered in the United Arab Emirates has steadily increased in recent years. This is especially so for Dubai in terms of commercial litigation, with arbitration being included as a standard clause for dispute resolution, whether relating to real estate matters, construction, or commercial contracts. The year 2021 has seen critical changes in the arbitration sector. A new decree anointing the ‘Dubai International Arbitration Centre’ (DIAC) as a sole arbitral chamber in the emirate, which now essentially abolishes the Dubai International Financial Centre-London Court of International Arbitration (DIFC-LCIA). The said decree is in effect from September 2021 and establishes the Dubai International Arbitration Centre to act as the sole dispute-resolution seat in the emirate of Dubai.

Choice of law

It is important to note that the UAE Arbitration Law also applies to international, commercial arbitrations conducted outside the UAE if the parties to the dispute agree to the same. International arbitration has had its crucial impact felt especially during the Covid pandemic,  the international arbitration process demonstrated its resilience and flexibility in resolving disputes by delivering through technological means, including holding sessions remotely. 

In an arbitral agreement, the parties can incorporate their choice of law and generally, preference is given to the law of a particular jurisdiction wherein they intent the dispute to be resolved. However, this can be changed to include the applicability of foreign law. Most international arbitration institutions do accept foreign choice of law and also have on their panel experienced and qualified arbitrators who can understand and apply the provisions of foreign law to a given dispute.

However, this does not mean that parties should choose any given foreign law; but instead, this should be strategically decided, first and foremost understanding the benefits of such selection in depth. Further, care should be given to make the dispute resolution clause effective and clear in its applicability in order to avoid potential preliminary issues that can often escalate to expensive litigation.

It is also critical to understand that despite the choice of foreign law, there are instances in which only the UAE laws apply, which include among others:

  • Disputes related to real-estate situated in UAE;
  • Concerning employment law;
  • Concerning the UAE Commercial agency;
  • Concerning any event in UAE

The arbitration process provides many positives over traditional litigation. However, that said, the parties should ensure that the arbitration clause or agreement is drafted with clear and beneficial provisions. The arbitration clause is a powerful mechanism through which the parties to a dispute can pre-mediate the possible resolution mechanism, including detailing very minute process details. For example, the parties can choose the choice of language, the number of arbitrators, the finality and binding nature of the arbitration, the sharing of arbitral expenses, place of arbitration etc., to name a few. Parties can, in short, agree, determine the conduct of proceedings and hence streamline the entire process to suit the requirement of the case at hand. Arbitration has continued to gain popularity in the UAE as a choice for dispute resolution due to its confidential and convenient nature. 

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Awatif Mohammad Shoqi Advocates & Legal Consultancy

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Awatif Mohammad Shoqi Advocates & Legal Consultancy
Joined: February 3rd, 2021
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