Increase in legal cases spurs effort to arbitrate

Sultan al Mansouri, the Minister of Economy addresses the conference in Abu Dhabi.

The UAE Government is putting the final touches on legislation to encourage arbitration in commercial disputes instead of lawsuits and ease the strain on court system after a recent rush of cases. The planned arbitration law, which will replace an outdated patchwork of local and federal rules, is to be based on international best practice and Sharia law.

The legislation is intended to provide a legal benchmark for arbitration centres in the Emirates as the number of commercial disputes rises after the global financial crisis. "Arbitration is one of the key instruments to resolve disputes amicably and thus enhance investor confidence in the economy's fundamentals to support businesses," Sultan al Mansouri, the Minister of Economy, said yesterday at the Draft Federal Law of Arbitration Conference in Abu Dhabi.

The law should be passed before the end of the year after consultations with stakeholders including the Dubai International Arbitration Centre (DIAC), the Abu Dhabi Commercial Conciliation and Arbitration Centre and the International Islamic Centre for Reconciliation and Arbitration (IICRA), Mr al Mansouri said. Arbitrators now face the challenge of ensuring their decisions are robust enough to meet international standards while complying with UAE rules dating back as far as the 1970s.

It is also intended to close loopholes in the current legislation that can lead to complications in disputes and slow the resolution process. The law will also reduce the time parties have to register arbitration claims and limit the grounds for appeal against the decisions of arbitrators. The legislation is one of 14 laws planned by the Government to modernise the commercial legal system and help attract foreign investment.

The global financial downturn had exposed the shortcomings of the country's financial system, Ahmed al Tayer, the governor of the Dubai International Financial Centre (DIFC), said yesterday. "The UAE is introducing a wide-ranging programme to address regulatory and legal shortcomings in our financial system," Mr al Tayer said in a speech at the MENASA Forum in Dubai. "It is critical that we urgently address the deeper risks and challenges that the [global] economic crisis has revealed."

Government officials consider the arbitration law a cornerstone of the reform plan. DIAC hopes the new legislation will help to consolidate Dubai's emergence as a regional centre for dispute resolution and ease a backlog of arbitration cases. A surge in payment claims from the building industry has increased the number of disputes handled by the DIAC, which is part of the Dubai Chamber of Commerce and Industry. The fall in the number of projects since the financial downturn prompted contractors to pursue payments from developers.

About 150 cases have been registered by the centre from across the Gulf this year after the caseload tripled to 292 cases last year from the previous one. About two thirds of the latest cases related to the construction and property sectors, said Dr Hussam al Talhuni, the director of the DIAC. "What we need is a legal framework that does not offer any loopholes in the national law to challenge procedures or decisions that are not relevant to arbitration," Dr al Talhuni said on the sidelines of the conference.

"This will open the door for more trust in administering justice through arbitration rather than resorting to courts, and that will save time." Each of the arbitration centres in Dubai, Abu Dhabi and the other emirates has its own rules for the resolution process. The DIFC Courts handle corporate litigation cases involving firms within the free zone. The Dubai-based IICRA handles commercial disputes in the Islamic finance industry from across the GCC as well as Malaysia.

It is expecting an increase of between 8 and 10 per cent in the number of cases this year compared with last year. IICRA arbitrators base their rulings on international, local and Sharia law. The new UAE law will mean they will only have to follow local and Sharia legislation. "We have to use this law to encourage people to use arbitration to resolve disputes rather than courts, as is the custom of many people in the UAE," said Abdessattar Khouildi, the secretary general of the IICRA.

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