DIAC-DRA Memorandum of Understanding

Dr. Gordon Blanke (DWF) explains the recent MoU established between the Dubai International Arbitration Centre (DIAC) and the DIFC Dispute Resolution Authority (DRA)
The latest noteworthy development in arbitration in the UAE is the recent adoption by Dubai International Arbitration Centre (DIAC) and the Dubai International Financial Centre (DIFC) Dispute Resolution Authority (DRA), which comprises both the DIFC Academy of Law and the DIFC Courts, of a Memorandum of Understanding (MoU) to promote their mutual co-operation, including in particular the recognition and enforcement of DIAC awards by the DIFC Courts. Dr. Gordon Blanke from DWF clarifies.

What is the objective of the MoU?

The MoU envisages different forms of co-operation between the DIAC and the DRA at a number of levels, including in particular the development and dispensation of joint training programmes to the legal profession in the Middle East, the joint marketing of their services, the organization of joint conferences and seminars on matters of common interest to both institutions, joint research and academic writing. Given DIAC's main focus on arbitration as an alternative form of dispute resolution, the MoU equally focuses on arbitration. As its title suggests, the main objective of the MoU is to enhance the recognition and enforcement of DIAC awards by the DIFC Courts.

How likely is the MoU to achieve this objective?

At first glance, it is not clear from the wording of the MoU what shape the enhancement of the recognition and enforcement of DIAC awards by the DIFC Courts is intended to take. Given that the choice of a jurisdiction for enforcement of an arbitral award usually depends on the location of the award debtor’s assets, it is questionable whether there is any sense at all in aiming for enhancing the co-operation in enforcement by the DIFC Courts unless a significant proportion of award debtors were to have assets in the DIFC, which – in our experience – is simply not the case.

The suggestion that this may all be down to the drafting of the arbitration clause is misdirected: A simple amendment of the existing DIAC Rules of Arbitration to make provision for the expedited recognition and enforcement of DIAC awards by the DIFC Courts would go beyond the powers accorded to the DIAC in administering arbitration services or indeed to the contracting parties in their submission to arbitration in the first place.

“The MoU is predicted to have positive effects on the relations between onshore and offshore Dubai in matters of arbitration.”

Would the recent “jurisdiction expansion” by DIFC Courts help?

The DIFC Courts have established a discernible track record as a host or conduit jurisdiction, entertaining actions for the recognition and enforcement of both domestic and foreign arbitral awards in mainland Dubai for onward execution elsewhere onshore, even absent any geographic nexus to the DIFC. Such awards have more specifically included awards rendered under the DIAC Arbitration Rules in arbitrations seated in onshore Dubai. It’s true that the DIFC Courts’ recently acquired status as a host jurisdiction has been criticized by some as a form of creeping jurisdiction, acquired through the increasingly expansive scope of DIFC judge-made law.

The expansion of the DIFC Courts’ jurisdiction has, in turn, given rise to considerations of conflicts of jurisdiction between the onshore Dubai and offshore DIFC Courts. So far, any such conflicts had been understood to have been resolved in favour of the court first seized, in terms promotive of and facilitated by the free movement of judgments, orders and ratified awards between the Dubai and the DIFC Courts by virtue of the regime of mutual recognition established by the Judicial Authority Law. In order to meet any residual jurisdictional concerns, the Ruler of Dubai has recently established the Dubai-DIFC Judicial Committee, which is entrusted with the determination of conflicts of jurisdiction between the Dubai and DIFC Courts. Importantly, it has been reported that one such jurisdictional conflict is presently pending for consideration by the Committee.

It remains questionable how co-operation between the DIAC and the DIFC Courts could possibly contribute to the recognition and enforcement of DIAC awards, other than to confirm and hence strengthen the DIFC Court's acquired status as a host jurisdiction for domestic DIAC awards. The DIAC itself does not have the power to direct the recognition and/or enforcement of its awards by any courts. Nor can the choice of DIAC arbitration affect the discretion of an enforcing court to recognize and/or enforce a resultant award or indeed predetermine the ultimate court of enforcement of a resultant award: The only court that may be predetermined by choice of arbitration is the curial court in charge of supportive measures of the arbitration or actions for nullification: This, however, will typically be the court at the seat of arbitration. For the avoidance of doubt, choice of mainland Dubai as the seat of the arbitration will import the curial competence of the onshore Dubai Courts, choice of the DIFC that of the offshore DIFC Courts. There is also little more sense to be gained from the intended expedition of the DIFC recognition and enforcement process: As far as we are aware, on previous occasions, the DIFC Courts have readily ratified and enforced DIAC awards, no particular (time-consuming) obstacles having been identified as slowing down, not to mention impeding the enforcement process.

This discussion brings to mind the recent decision of the DIAC to open a branch in the DIFC on the pretext that awards rendered in a DIFC DIAC forum would be more easily enforceable before the DIFC Courts (although interestingly, there is no mention in the MoU of the opening of the DIAC in the DIFC): As I mentioned earlier, neither the seat of the arbitration nor the seat of the arbitration institution will affect the enforceability of a resultant award. If anything, given the arbitration-friendliness of the DIFC Courts and the arbitration maturity of the DIFC judiciary, the designation of the DIFC as the seat of arbitration may assist in protecting a resultant award from frivolous challenges. With this objective in mind, DIAC may wish to amend its model arbitration clause for use in the DIFC by making the DIFC a mandatory seat of the arbitration. Bearing in mind the wording of the MoU on the subject, a like-worded DIAC DIFC Model Arbitration Clause may well be a viable proposition.

Do you believe that the MoU is a good initiative?

Taken in the round, the MoU is predicted to have positive effects on the relations between onshore and offshore Dubai in matters of arbitration. It is to be hoped that the various forms of co-operation undertaken by the DIAC and the DRA will promote the complementarity of a civil and common law arbitration offering in the UAE, for choice by the contracting parties. It is unlikely though that it will have any impact on the enforceability of DIAC awards before the DIFC Courts, a subject-matter that, in any event, has already been decided in the affirmative.

The MoU between DIFC and DIFC DRA is available online on the official website of the DIFC Courts. 

 

Author: Dr. Gordon Blanke, Partner, DWF

Bio: Dr. Gordon Blanke is Partner and heads the International Commercial and Investment Arbitration practice of DWF (Middle East) LLP in the Dubai International Financial Centre. He has experience in all types of international commercial and investment arbitration in both the common and civil law legal systems, having acted as advising counsel and arbitrator under most leading institutional arbitration rules and ad hoc in arbitrations seated in the US, Europe and the Middle East in relation to a variety of industry sectors, including banking and finance, construction/real estate, commodities, shipping, and oil and gas. He has published over 100 books and articles on international arbitration.