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Alternative dispute resolutions

Arbitration in UAE

Prof. Aymen Masadeh


Head of MSc Construction Law and Dispute Resolution

Alternative dispute resolutions

ADR programs cannot be a substitute for


a formal judicial system, especially under
the common legal system. It cannot
establish legal precedent or make changes
in the law. ADR can complement and
support the judicial system.

What is ADR?

To put it simple, this term refers to all


dispute resolution mechanism that are
alternative to the court system.

Binding and non-binding ADR:

ADR can be binding such as arbitration or nonbinding such as mediation.

Mandatory and voluntary ADR:

Some legal systems impose mandatory ADR


before approaching the court.

Main Characteristics of ADR


Approaches
1.
2.
3.

Less formality
Application of equity
Direct participation and communication
between disputants.

What can ADR do?


The straightforward objective of ADR is
to improve the administration of justice
by settling the disputes efficiently.
However, ADR may also have direct and
indirect impacts on economy and social
issues.

ADR can complement the judicial system.


This can be done by
Being associated with the court. This will
reduce the caseload.
Resolving a case that was originally filed in the
court.

Avoid justice delay. Extreme justice delay


may deny justice.
More satisfaction with dispute resolution.

Reduce the cost (in most cases). In fact


justice delay and cost can be interrelated
especially in commercial cases.
Facilitate economic restructure.
Show more creativity of outcomes.
Avoid negative impact on the on-going
business or personal relationships.

You are advised to use ADR where

Complex or technical disputes can be


handled more effectively by specialized
private ADR systems.
Court system is inefficient: High costs,
long delay, etc.
Keeping good relation is more significant
than the dispute solution.

Equity considerations: Creativity and


flexibility.
High rates of court decisions
enforcement actions.

ADRs seek to resolve individual


disputes on a case-by-case basis
They do not develop the law and the
practice of law.
They do not correct systemic injustice.
They are not suitable in public offenses.
They are inappropriate to resolve
multiparty cases where some parties do
not, or cannot, participate.

ADR Models

Consensual methods of Resolving Disputes:


1. Negotiations: Disputants themselves control the
process and the outcome.
2. Mediation and Conciliation: Disputants hire a
third party who controls the process and they
control the outcome.
3. Arb-Med / Adj -Med: the arbitrator writes the
award and put it in a sealed envelope. Then he
proceeds to mediation. If the issue is settled, the
envelope will not be opened. This process becomes
important when the parties fears that the other
will not continue in the mediation process.

Resolving Disputes through


recommendation
1. Mediator recommendation: Similar to
mediation. The mediator here makes a
recommendation.
2. Early Neutral Evaluation (ENE) or
(Judicial Appraisal):
In some countries, the court imposes ENE before
hearing the case. Disputants present summaries of
their case and receive a nonbinding assessment by a
third party. The third party can be a lawyer, a
practitioner, a judge, etc.

Imposed Solution to Disputes

1.

Arbitration: disputants hire a third party to control the


process and the outcome.

2.

Adjudication: like arbitration, the decision is binding.


However, disputants may object to the decision within a
fixed period of time. Adjudication could be legal or by
agreement. In most cases, the latter is called Dispute
Review Board (DRB) or Dispute Adjudication Board
(DAB). The board comprises three members. Every
disputant appoints one who must be accepted by the other.
The two members select the third one who chairs the
board. The board is appointed at the beginning of the
project.

3.

Med-Arb and Med-Adj: Any issue not


settled by mediation will be decided by
arbitration. The same third party will act
as mediator and arbitrator.

Hybrid Approach

Two-track approach: used in


conjunction with litigation, representatives
of disputants become engaged in an ADR
form. These representatives must not be
involved in litigation. The ADR track
proceeds concurrently with litigation.

Dispute Resolution mechanisms in FIDIC

FIDIC Red Book 1987


SETTLEMENT OF DISPUTES

67.1 Engineer's Decision

67.1.1 If a dispute of any kind whatsoever arises


between the Employer and the Contractor in
connection with, or arising out of, the Contract
including any dispute as to any opinion,
instruction, determination, certificate or valuation
of the Engineer, the matter in dispute shall, in the
first place, be referred in writing to the Engineer,
with a copy to the other party... No later than
the eighty-fourth day after the day on which he
received such reference the Engineer shall give
notice of his decision to the Employer and the
Contractor. Such decision shall state that it is
made pursuant to this Clause.

Engineers decision is binding but not final


67.1 Engineer's Decision

67.1.2 the Employer shall give effect


forthwith to every such decision of the
Engineer unless and until the same shall
be revised, as hereinafter provided, in an
amicable settlement or an arbitral award.

67.1 Engineer's Decision

67.1.3 If either the Employer or the Contractor be


dissatisfied with any decision of the Engineer, or if the
Engineer fails to give notice of his decision, then either the
Employer or the Contractor may, on or before the
seventieth day after the day on which he received notice of
such decision, or on or before the seventieth day after the
day on which the said period of 84 days expired, as the case
may be, give notice to the other party, with a copy for
information to the Engineer, of his intention to commence
arbitration, as hereinafter provided, as to the matter in
dispute. Such notice shall establish the entitlement of the
party giving the same to commence arbitration, as
hereinafter provided, as to such dispute and, subject to SubClause 67.4, no arbitration in respect thereof may be
commenced unless such notice is given.

Engineers decision becomes binding and final when

67.1 Engineer's Decision


67.1.4 If the Engineer has given notice of his decision as
to a matter in dispute to the Employer and the
Contractor and no notice of intention to commence
arbitration as to such dispute has been given by either
the Employer or the Contractor on or before the
seventieth day after the day on which the parties
received notice as to such decision from the Engineer,
the said decision shall become final and binding upon
the Employer and the Contractor.

Question:
In case of lapse of the 84 days (No
decision) and lapse of 70 days followed
(No arbitration notice), how can the
dispute be solved?

In cases of non-compliance with the engineers decision and


no notice of arbitration has been given, can the other party
resort to arbitration?
Yes, direct arbitration.

67.4 Failure to Comply with Engineer's Decision

Where neither the Employer nor the Contractor has given


notice of intention to commence arbitration of a dispute
within the period stated in Sub-Clause 67.1 and the related
decision has become final and binding, either party may, if the
other party fails to comply with such decision, and without
prejudice to any other rights it may have, refer the failure to
arbitration in accordance with Sub-Clause 67.3. The
provisions of Sub-Clauses 67.1 and 67.2 shall not apply to
any such reference.

67.2Amicable Settlement

Are parties obligated to attend amicable settlement in order


to start arbitration?
Where notice of intention to commence arbitration as to a
dispute has been given in accordance with Sub-Clause 67.1,
the parties shall attempt to settle such dispute amicably
before the commencement of arbitration. Provided that,
unless the parties otherwise agree, arbitration may be
commenced on or after the fifty-sixth day after the day on
which notice of intention to commence arbitration of such
dispute was given, even if no attempt at amicable settlement
thereof has been made.
Can negotiation or mediation last for more than the above
mentioned 56 days?

Arbitration in UAE

Independence of Arbitration

Modern international commercial arbitration has


consequently achieved a considerable degree of
independence from national courts. For example,
the arbitration clause in an international commercial
contract is generally recognised as being an independent
agreement, which survives any termination of the contract
in which it is contained (the separability doctrine).
The parties themselves are generally free to determine
how their disputes are to be resolved, subject only to such
safeguards as may be considered necessary as a matter of
public policy;
Arbitrators are free to decide on their own jurisdiction,
subject only to a final decision by the relevant national
court.

The parties are free to choose which system of


law will govern the dispute between them; and
indeed, may even elect general principles, such
as those of equity and good conscience or the
UNIDROIT Principles of International
Commercial Contracts.
Finally, judicial control of errors of law in
international commercial arbitration has been
virtually abandoned, leaving courts the limited
role of policing procedural due process, such as
the obligation of the tribunal to give each party
a fair hearing.

Partnership between courts and


arbitration

Lord Mustill states: In real life the position is not so clear-cut.


Very few commentators would now assert that the
legitimate functions of the Court entirely cease when the
arbitrators receive the file, and conversely very few would
doubt that there is a point at which the Court takes on a
purely subordinate role. But when does this happen? And
what is the position at the further end of the process? Does
the Court retake the baton only if and when invited to
enforce the award, or does it have functions to be exercised
at an earlier stage, if something has gone wrong with the
arbitration, by setting aside the award or intervening in some
other way? Lord Mustill, Comments and Conclusions in
Conservatory Provisional Measures in International Arbitration ,
9th Joint Colloquium (ICC Publication, 1993)

At the beginning of the Arbitration

Three possible areas of court


intervention
1. Enforcing the Arbitration Agreement
2. Establishing the Arbitral Tribunal
3. Challenges to Jurisdiction

1.

Enforcing the Arbitration Agreement


A party may take the case to court despite
the existence of arbitration clause or
submission agreement.
Here, the defendant will have two choices: To
go on with litigation or to object to the court
jurisdiction.
If he decides to select the latter choice, he
must raise his objection before submitting his
statement on substance first hearing.

Article 8.1 of the UNICTRAL model law


states that A court before which an
action is brought in a matter which is the
subject of an arbitration agreement shall,
if a party so requests not later than when
submitting his first statement on the
substance of the dispute, refer the parties
to arbitration unless it finds that the
agreement is null and void, inoperative or
incapable of being performed.

Article 203(5) of the Federal Civil


Procedural Law (CPL) states that If the
parties to a dispute agree to refer the
dispute to arbitration, no suit may be filed
before the courts. Notwithstanding the
foregoing, if one of the parties files a suit,
irrespective of the arbitration provision, and
the other party does not object to such
filing at the first hearing, the suit may be
considered, and in such case, the arbitration
provision shall be deemed cancelled.

2)

Establishing the Arbitral Tribunal: the


court will intervene in arbitrators
appointment issues if
Parties fail to appoint the respondents
arbitrators.
Parties fail to appoint the sole chairperson
arbitrator.
Parties challenge the impartiality of the
arbitrators.

Appointment of arbitrators: Article 204 of the Federal CPL


states that
1- If a dispute arises between the parties prior to the execution
of an agreement between them to refer the same to arbitration,
or if one or more of the nominated arbitrators refuses to act as
such, withdraws, is dismissed, has his appointment revoked, or is
prevented from acting due to an encumbrance, and no
agreement exists between the parties in this respect, the court
which has jurisdiction to consider the dispute shall appoint the
necessary number of arbitrators at the request of one of the
parties filed in the normal procedure for filing a suit. The number
of arbitrators appointed by the court shall be equal, or
complementary, to the number agreed between the parties to
the dispute.
2- The court's decision in respect of the foregoing may not be
contested in any way whatsoever.

Disqualification of arbitrators: Article 207(4) of the Federal CPL


states that An arbitrator may not be disqualified except for
reasons occurring or appearing after his appointment. A
request for disqualification must be based on the same grounds
on which a judge may be dismissed or deemed unfit for passing
judgement. The request for disqualification shall be filed with the
court which has jurisdiction to consider the dispute within five
days from notifying the parties of the appointment of the
arbitrator or from the date on which the reason for
disqualification arose or from the time it became known if
subsequent to the notification of the appointment of the
arbitrator. In all events, the request for disqualification shall not
be granted if the court has already passed a judgement or if the
hearing of pleadings has been concluded.

Can the arbitrator be dismissed?


Article 207(3) of the Federal CPL states that No
arbitrator may be removed except with the
approval of all the parties to the dispute.
However, if it is established that the arbitrator
has willfully neglected to act in accordance with
the terms of reference, despite a written notice
to him in this respect, the court which had
jurisdiction to consider the dispute may, at the
request of one of the parties, dismiss the
arbitrator and order a replacement in the same
manner as he was originally appointed.

Challenges to Jurisdiction
The tribunal will decide on its jurisdiction.
However, the award can be challenged on the ground
that the arbitration agreement did not exist or it was
invalid.
Article 216.1 of the Federal CPL states The parties
to a dispute may, at the time of consideration of the
arbitrators award, request the nullification of the
same in the following events: (a) If the award was
issued without, or was based on invalid terms of
reference or an agreement which has expired by time
prescription, or if the arbitrator has exceeded his
limits under the terms of reference.

During the Arbitral Proceedings


The purpose of arbitration is to provide an
alternative to the court. So, the court role
should be limited when the case is in the
hands of the arbitrators.
However, in certain areas the tribunal may
need some supports during the hearings. For
example, it may need to ask the competent
court to assist in taking evidence, or to make
an order for the preservation of property
which is the subject of the dispute, or to
take some other interim measure of
protection.

Interim Measures
They may be called as interim measures of
protection or interim or conservatory
measures or provisional or conservatory
measures.

What are interim measures?


An interim measure is any temporary measure,
whether in the form of an award or in another
form, made by the Arbitral Tribunal at any time
prior to the issuance of the award by which the
dispute is to be finally decided. (Article 24 (1-b)
of the DIFC Arbitration Act)

The tribunal may issue interim measures.


Do we need the intervention of the
court?
We do need for several reasons:

First, the arbitral tribunal cannot issue interim


measures until the tribunal itself has been
established. It takes time to establish an
arbitral tribunal and during that time, vital
evidence or assets may disappear.

Secondly, the powers of an arbitral tribunal


are generally limited to the parties involved in
the arbitration itself. A third party order, for
example, addressed to a bank holding deposits
of a party would not be enforceable against
the bank and multi-party or multi-contract
disputes may also pose similar problems.

Thirdly, interim measures ordered by an arbitral


tribunal do not, by definition, finally resolve any
point in dispute. An order or award of interim
measures is therefore unlikely to satisfy the
requirement of finality under the New York
Convention, which may render it unenforceable
internationally. As a consequence, where there
may be a need for international enforcement of
the interim measure, parties should consider
applying for such measures before the courts of
the place of execution provided that this is not
incompatible with the agreement to arbitrate.

Article 22 of the Federal CPL sates that The


courts shall have jurisdiction to determine
preliminary issues and interlocutory applications
in the original action within their jurisdiction and
shall also have jurisdiction to determine any
application connected with such action which the
proper course of justice requires that it be heard
with it, and they shall likewise have jurisdiction to
make orders for expedited and preservatory
procedures to be carried out in the State
notwithstanding that they do not have jurisdiction
in the original action.

Some States have sought to label interim


measures ordered by tribunals as awards,
at least as far as their own legislation is
concerned. This is the case of Scotland
which requires that an interim measures
order take the form of an award. Actually,
under DIAC arbitration rules, the interim
measure can be issued as a provisional
award.

Sorts of interim measures


Article 24 (1-b) of the DIFC Arbitration Act states
For the purposes of this Article reference to an interim
measure includes orders that a party:
a) maintain or restore the status quo pending
determination of the dispute;
b) provide a means of preserving assets out of which a
subsequent award may be satisfied or other means for
securing or facilitating the enforcement of such an
award;
c) take action that would prevent, or refrain from taking
action that is likely to cause, current or imminent harm
or prejudice to any party or to the arbitral process
itself; or
d) preserve evidence that may be relevant and material to
the resolution of the dispute.

Kinds of interim measures can be


summarized as follows
1. measures relating to the attendance of
witnesses;
2. measures related to preservation of
evidence;
3. measures related to documentary
disclosure;
4. measures aimed at preserving the status
quo.

Attendance of witnesses:
This is a sort of preservation of evidence.
It may be necessary to resort to the courts,
particularly if the witness whose presence is required
is not in any employed or other relationship to the
parties to the arbitration, and so cannot be persuaded
by them to attend voluntarily.
The arbitral tribunal or a party with the approval of
the arbitral tribunal may request from a competent
court of this State assistance in taking evidence. The
court may execute the request within its competence
and according to its rules on taking evidence.

Some arbitration laws give powers to


arbitrators to carry out court procedures
related to the attendance of witnesses.
(See S44 of the English Arbitration Act
1996)

Preservation of Evidence
If for example, the dispute is over the number
or quality of reinforcing bars used in the
concrete foundations of a road, bridge, or
dam, some record must be preserved,
preferably by independent experts, before
those foundations are covered over. This is
self-evident and, on the whole,
uncontroversial.

Documentary Disclosure
The arbitral tribunal's power to order
disclosure of documents is necessarily limited
to the parties to the arbitration. Yet in certain
circumstances, relevant documents may be in
the hands of a third party.

Preserving the Status Quo


For example, a pharmaceutical company may
produce a particular drug under licence and then
decide to manufacture and market a competing
product under its own name, claiming that there
is nothing in the licence agreement to prevent it
doing so. In such a case, the licensor probably
wishes to argue that until the dispute is resolved
by arbitration, the licensee should be restrained
from manufacturing and marketing the competing
product.
Can this apply under the UAE law?

Which court decides interim


measures under UAE law?

1 - One of the judges of the seat of the court of


first instance shall be deputed to make
provisional rulings without prejudice to the
[substantive] right in expedited matters where it
is feared [that a right will be lost] by the passing
of time.
2 - The trial court shall have jurisdiction to hear
those matters if they are raised before it as
consequential issues.
3 - Outside the city where the court of first
instance has its seat, such jurisdiction shall be
vested in the petty court. (Article 28 of the
Federal CPL)

Can the arbitral tribunal issue


interim measures?
The current UAE arbitration rules do not
provide much on this question.
Under the UAE law, Article 209(2) of
the civil procedure code states that If,
during the course of arbitration, a
preliminary issue, which is outside the
powers of the arbitrator, arises the
arbitrator shall suspend the proceedings
until a final judgement on the same has
been passed.

DIAC arbitration Rules


Article (31) titled Interim and Conservatory
Measures of Protection states
1- Subject to any mandatory rules of the applicable
law, at the request of a party, the Tribunal may issue
any provisional orders or take other interim or
conservatory measures it deems necessary, including
injunctions and measures for the conservation of
goods which form part of the subject matter in
dispute, such as an order for their deposit with a
third person or for the sale of perishable goods.
The Tribunal may make the granting of such measures
subject to appropriate security being furnished by the
requesting party.

How can interim measures be enforced?


This can be done through state courts. In
order for the parties to be able to do so, the
tribunal may issue the interim measures as
interim or provisional award. Article 31.2 of
DIAC rules states that Measures and orders
contemplated under this Article may take the
form of an interim or provisional award.

Does Resorting to the state court for enforcing an


interim measure mean a waiver of the arbitration
agreement?

Article 31.3 of DIAC arbitration rules allows resorting


to state courts for interim measures albeit there is an
arbitration agreement or even where the dispute is
being arbitrated. It states that A request addressed by a
party to a competent judicial authority for interim or
conservatory measures, or for security for the claim or
counter-claim, or for the implementation of any such
measures or orders granted by the Tribunal, shall not be
deemed incompatible with, or a waiver of,
the Arbitration Agreement.

Further, Article 6 of the Draft Federal


Arbitration Law states that The court
referred to in the above article (5) may
order, upon the request of one of arbitration
parties or that of arbitral tribunal, that
temporary or conservative procedures be
taken whether prior to proceeding with
such arbitration procedures or while they
are being taken. In addition, when the above
procedures are taken on the part of the
court, this shall (not) necessarily mean that
arbitration procedures are stopped.

Under Article 25 of the DIFC-LCIA arbitration rules, the


tribunal has the power to issue interim and conservatory
measures unless the parties agree otherwise.
Here, it should be noted that parties still have the right to
apply to any state court for interim or conservatory
measure. Article 25.3 states The power of the Arbitral
Tribunal under Article 25.1 shall not prejudice howsoever
any partys right to apply to any state court or other judicial
authority for interim or conservatory measures before the
formation of the Arbitral Tribunal and, in exceptional
cases, thereafter. Any application and any order for such
measures after the formation of the Arbitral Tribunal shall be
promptly communicated by the applicant to the Arbitral
Tribunal and all other parties

Enforcement of arbitral interim measures, issued


under the LCIA rules, can simply be enforced by the
DIFC courts.
For this purpose, Article 24 of the DIFC Arbitration Act
states that With the written permission of the Arbitral
Tribunal a party in whose favour an interim measure has
been granted may request from the DIFC Court of First
Instance an order enforcing the Arbitral Tribunals order or
any part of it. Any request for permission or enforcement
made under this Article shall be simultaneously copied to all
other parties. Unless the Arbitral Tribunal at any time directs
otherwise, the party making a request to the DIFC Court of
First Instance under this Article shall be entitled to recover
in the Arbitration any legal costs and DIFC Court of First
Instance fees reasonably incurred thereby.

Do parties need to agree on the tribunals


power to issue interim measures?

The answer to this question depends solely


on the applicable arbitration rules and law.
Generally speaking, the tribunal will have
such a power unless the parties agree
otherwise.
For example,
under Article 31 of the DIAC arbitration rules,
such an agreement is not required. The arbitral
tribunal will have such a power by default.

Similarly, Article 24.1 of the DIFC Arbitration


Law states that The following provisions shall
apply unless the parties have expressly agreed
in writing that the Arbitral Tribunal shall not
have power to order interim measures...
Similarly, Article 17.1 of the UNCITRAL
arbitration model law states unless otherwise
agreed by the parties, the arbitral tribunal may,
at the request of a party, grant interim
measures.

Compensations
Will the party be compensated if it appears later that
the interim measure requested by the other party
was unnecessary and harmful?
Yes, the tribunal can include such compensations in its
award.
Article 17G of the UNCITRAL clearly states that
The party requesting an interim measure or applying
for a preliminary order shall be liable for any costs
and damages caused by the measure or the order to
any party if the arbitral tribunal later determines that,
in the circumstances, the measure or the order
should not have been granted. The arbitral tribunal
may award such costs and damages at any point
during the proceedings.

Article 24.1(e) of the DIFC Arbitration


Act states that The party requesting an
interim measure may be liable for any
costs and damages caused by the measure
to any other party if the Arbitral Tribunal
later determines that, in the
circumstances, the measure should not
have been granted. The Arbitral Tribunal
may award such costs and damages at any
point during the proceedings.

In order to make sure that compensation


will be paid, the tribunal may order any
claiming or counterclaiming party to provide
appropriate security in connection with such
measure, including security for the legal or
other costs of any other party by way of
deposit or bank guarantee or in any other
manner (DIFC Arbitration Law)
A similar rule can be found under Article
31.1 of the DIAC arbitration rules.

Article 17 E(2) of the UNCITRAL


Arbitration model law states that The
arbitral tribunal shall require the party
applying for a preliminary order to
provide security in connection with the
order unless the arbitral tribunal
considers it inappropriate or unnecessary
to do so.

At the end of Arbitration

The enforcements and judicial challenges


of arbitral award

Factors to be considered in issuing


an interim measures

Article 17 A. of the UNCITRAL model law states that


(1) The party requesting an interim measure shall
satisfy the arbitral tribunal that:
(a) Harm not adequately reparable by an award of
damages is likely to result if the measure is not
ordered, and such harm substantially outweighs the
harm that is likely to result to the party against whom
the measure is directed if the measure is granted; and
(b) There is a reasonable possibility that the
requesting party will succeed on the merits of the
claim. The determination on this possibility shall not
affect the discretion of the arbitral tribunal in making
any subsequent determination.