What are the Advantages and Disadvantages of Arbitration Agreements in UAE?

Posted by Awatif Mohammad Shoqi Advocates & Legal Consultancy on October 26th, 2022

Arbitration is an alternate method of dispute resolution, and is recognized throughout the world. Many a times, disputes arise under a contract, whether related to the validity of the contract, breach of the terms or interpretation of the contract, and these disputes need to be resolved.

Parties can resolve their disputes through courts or arbitration. There are dedicated arbitration law firms which deal with arbitration cases day-in and day-out and are experts at their field. Additionally, many full-service law firms have arbitration lawyers in Dubai or an arbitration team / department which handles the arbitration matters for the firm.

What is an Arbitration Agreement?

Arbitration lawyers in UAE will explain that for a dispute to be referred to arbitration, it is paramount that there be an arbitration agreement. The arbitration agreement should be in writing and can form part of the main agreement as a clause in the main agreement or a separate agreement which is being clearly referred to in the main agreement.

In an arbitration, a third party – an arbitrator, or a group of third parties – an arbitral tribunal, will be appointed, either by the parties or the competent authorities, who will hear both parties, review the evidence and pass an arbitral award.

What are the advantages and Disadvantages of an Arbitration Agreement?

There are many advantages and disadvantages to an arbitration agreement. Some of them are explained below by arbitration lawyers in the UAE.

Advantages

Alternative to Courts: Arbitration is an alternative to resolving disputes through courts. Arbitration proceedings are usually conducted through an arbitration institute which set out the procedures for conducting arbitration.

Language of the Arbitration: It is well known that the language of the courts is Arabic, which could result in some hindrance for non-Arab speakers. For arbitration, the parties can decide in writing to have the arbitration proceedings in English or any other mutually agreed language, which would be beneficial for the parties to resolve disputes.

Quick Proceedings: Depending upon the type of dispute and the arbitration institute, the arbitration proceedings can be resolved quickly.

Confidentiality: Arbitration proceedings are private and usually the award issued will be confidential.

Finality of the arbitral award: Except on certain specified grounds (as set out in the law or the arbitration institute’s rules), the arbitral award is usually considered as final.

Disadvantages of an Arbitration Agreement

Non-arbitrable Issues: There are some issues which are not arbitrable. These include, for instance, matters which are against public policy or morals of the UAE. For resolution of such issues, assistance of courts would have to be taken.

Costs: Depending upon the issue, the arbitration institute involved, the arbitrators handling the matter and other factors, the arbitration proceedings might be more costly than the court proceedings. However, the arbitrator usually has the power to award costs in his arbitral award, including the costs of arbitration, legal fees and other expenses.

There is no doubt that arbitration is a crucial method to resolve disputes.
Confused on whether your contract should refer to arbitration for dispute resolution? Get in touch with an arbitration law firm or arbitration lawyers in Dubai today to obtain legal advice!

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