September 2019

On costs in Arbitration under the UAE Federal Arbitration Law [1]

Dr. Gordon Blanke, Founding Partner, Blanke Arbitration LLC, Dubai/London/Paris

This article discusses the recoverability of party costs and in particular legal fees in arbitrations under the UAE Federal Arbitration law. In doing so, the article endeavours to contrast the positions under the former UAE Arbitration Chapter and under the UAE Federal Arbitration Law, which was adopted in June 2018 and repealed the provisions of the UAE Arbitration Chapter. The article will show that the UAE Federal Arbitration Law codifies existing case law precedent in relevant part and  places a question mark over the recoverability of legal costs bar the parties’ express agreement.


Claims for costs are a key ingredient of any arbitration proceeding, in particular in circumstances where alternative recourse to the local courts does not allow the prevailing party to recover its costs on a full indemnity basis. This is, for instance, the case in the United Arab Emirates (UAE), whose courts - although awarding full court fees to the prevailing party – only provide for nominal recovery of party costs and in particular counsel fees [2]. This can create some discouragement for parties with small value claims given that legal fees can be significant even in smaller cases. In such circumstances, parties will hope to find a greater degree of flexibility in arbitration.

The Position under the UAE Arbitration Chapter

Historically, UAE arbitration law has faced difficulties with the award of costs. The former UAE Arbitration Chapter [5] was silent on the power to award costs other than to state that a tribunal was to determine its own fees and the costs of the arbitration [6]. This could certainly not be interpreted to mean that an arbitrator sitting under the UAE Arbitration Chapter had the power to award party costs. All that Article 218 of the UAE Arbitration Chapter envisaged was to permit an arbitrator to assess his own costs and expenses and enter an award for all or part of these against the succumbing party.

In addition, in an oft-cited ruling [7], the Dubai Court of Cassation clarified the arbitrator’s power to award costs within the meaning of Article 2.1 of the Appendix on Costs to the Dubai  International Arbitration Centre (DIAC) Rules (the “DIAC Rules”), according to which“the costs of the arbitration [to be awarded  by a tribunal]  shall include the Centre’s administrative Fees for the claim and any counterclaim and the fees and expenses of the Tribunal fixed by the Centre in accordance with the Table of Fees and Costs in force at the time of the commencement of the arbitration, and […] any expenses incurred by the Tribunal, as well as the fees and expenses of any experts appointed by the Tribunal.” The Court gave a restrictive interpretation of the term “arbitration costs” under Article 2.1 of the Appendix on Costs to the DIAC Rules, excluding party costs from its natural scope. More specifically, the Court held as follows:

[…] the arbitration costs decided by the arbitration tribunal are in particular those related to the administrative fees of the claim and counterclaim and the fees and expenses of the tribunal as well  as the fees and expenses of tribunal-appointed experts in accordance with the DIAC Costs  Schedule.  Such costs do not include the legal expenses paid by the parties to their attorneys representing them in the arbitration procedure or whoever prepares the claim or advises the parties before initiating the arbitration procedure.…The DIAC Rules do not grant arbitrators the power to award Counsel fees.

The Court’s ruling met with trenchant criticism at the time, highlighting in particular that the term “include” did not intend to limit the scope of  “arbitration costs” under Article 2.1 and was only to introduce a non-exhaustive list of types of recoverable costs [8]:

With all due respect, in my view, the Dubai Court of Cassation misinterprets the express cost definition  provided in the DIAC Rules. In doing so, it overlooks the semantic importance of “include” in the phrase “[t]he costs of arbitration shall include …”. In the English language, the verb  “include” is given a non-exclusive meaning and is commonly used to introduce a non- exhaustive list of examples. To emphasise this use of “include”, it is occasionally followed by the shorthand term “e.g.”9, which stands for “example is given”. This is no different here in that

(i) the DIAC administrative fees and expenses and (ii) the tribunal’s fees and expenses over the  course  of  an  arbitration  are  no  more  than  two  (non-exhaustive)  instances of the type of arbitration costs that a tribunal  is empowered to award and that may hence be recovered under the DIAC Rules. That this choice of words must have been intentional is also supported by the fact that the original drafting language of the DIAC Rules is English (vide DIAC Rules, at p. 1). Further support can be drawn from the Arabic translation of the English version of the DIAC Rules, which appears to preserve the non-exclusive meaning of “include” (i.e. “امب يف كلذ”)  and  thus  confirms  the  intended  open-ended  nature of “arbitration  costs” within the meaning of the DIAC Rules  (“[The  2007  DIAC  Rules  were] originally drafted in the English language and after its approval by the DIAC Board of Trustees it was translated into Arabic, special care being given to the accuracy of its translation.” (my underlining; vide DIAC Rules, at p. 1). Finally, the inclusion of Counsel fees into the definitional scope of “arbitration costs” is also intuitive from the point of view of the actual type and level of costs incurred by arbitrating parties over the course of an arbitration: most parties do rely on legal Counsel for representation in the proceedings and especially successful  respondents should not be discouraged from doing so by having to bear their own costs.

Court  practice  to  award nominal Counsel fees only (usually a token of a maximum of AED 3,000) even though authorized to award costs on a full indemnity basis under Article 133(2) of the UAE Civil Procedures Code (“The party against whom judgment is passed shall be ordered to pay the costs of the action. Costs shall include lawyers’ fees.”) cannot be decisive: (i) There is no doctrine of stare decisis under UAE law, so the case law of the UAE courts does not form binding precedent; and (ii) pursuant to Article 212 of the Arbitration Chapter of the UAE Civil Procedures Code, an arbitration tribunal is not bound by rules of process and procedure of the UAE courts in any event.

For the avoidance of doubt, in our proposition, the Dubai Court of Cassation erred in finding that the definition of “arbitration costs” within the meaning of the DIAC Rules was confined to fees and expenses incurred by DIAC and the tribunal. This, of course, is not meant to imply that any and all costs should be recoverable in arbitration references under the DIAC Rules. For instance, it may be controversial to what extent costs of the executive management of a party incurred in assisting  in  the  preparation of the party’s case may be recoverable. This being said, to the extent that a particular type of cost is found to be recoverable, in my view and in keeping with best international practice, only reasonable amounts incurred under that cost heading are recoverable. To what extent amounts incurred are reasonable will largely be a question of (i) the particular facts and overall value of the arbitration, (ii) the (legal and technical) complexity of the proceedings and (iii) the procedural course of the arbitration (ii) the (legal and technical) complexity of the proceedings and (iii) the procedural course of the arbitration proceedings. Generally speaking, most tribunals accept that legal fees between 2.5% to 5% of the value of the overall claims in dispute are reasonable [10]

The Position under the UAE FAL

Unfortunately,  the UAE legislator failed to rectify this deficient  position under the UAE Federal Arbitration Law (the “FAL”). In actual fact, the FAL is equally restrictive in wording as Article 2.1 of the Appendix on Costs to the DIAC Rules (and Article 218 of the former UAE Arbitration Chapter for that matter). Article 46(1) FAL, which deals with the arbitrator’s powers to award costs, provides in relevant part as follows:

Unless otherwise provided by the agreement of the Parties, the Arbitral Tribunal shall assess the costs of arbitration which shall include: the fees and expenses incurred by any member of the Arbitral Tribunal […] and the costs of experts appointed by the Tribunal.

Disregarding for a moment the restrictive reading given to the term “include” by the Dubai Court of Cassation in Case No. 282/2012 [11], this wording would suggest that any costs incurred in arbitration - whether arbitration or party costs - are recoverable by order of the tribunal. The list of costs following the term “include” is only illustrative of examples of recoverable costs and as such non-exhaustive. As a result, it could be argued, other costs that are not expressly listed, such as the administrative costs of an arbitration institution and party costs, fall within the ambit of costs awardable under Article 46(1) FAL. The non-exhaustive character of this list would arguably stand  confirmed by the omission of institutional costs from its scope: it cannot have been the intention of the UAE legislator to exclude the recovery of such costs (which typically fall within the cost powers of arbitration tribunals) from the list by design. This argument would by extension apply to the recoverability of party costs if it were not for Article 33(5) FAL, which  allows the parties free choice  of legal counsel, but expressly at their own cost:“The Parties  may, at their own expense, avail of experts and attorneys, whether lawyers or otherwise, to represent them before the Arbitral Tribunal.”

In a sense,  it would appear that the UAE legislature has codified UAE case law precedent on the subject of costs through Article 46(1) FAL. This is no doubt extremely disappointing and perceived by some as a lost opportunity to bring the position on costs under UAE arbitration law in line with other worldwide leading arbitration laws that make express provision for the award of party costs.


In the light of the foregoing, the bottom line appears to be that to make sure that an arbitral tribunal has the power to award party costs, including counsel fees, the disputing parties must expressly confer such power on the tribunal either in the terms of the original arbitration agreement or by means of terms of reference. To the extent that the parties might not be able to agree, it would appear good law that the parties can form an agreement to the effect by each party requesting the recovery of its respective party costs in its written statement of relief [12]. This would be no different from the formation of an agreement to arbitrate by written exchange of authorised signatories [13], the matter of costs being an essential component of an arbitration agreement.

Author: Dr. Gordon Blanke is Founding Partner of Blanke Arbitration LLC, Dubai/London/Paris.



[1] This  article  is  based  on  G.  Blanke,  “The  Curse  of  Costs  under  the  UAE  Federal  Arbitration  Law”,  Thomson  Reuters Practical Law Blog, forthcoming September 2019. The author can be contacted at[2] Issued by Council of Ministers Decision No. 126 dated 4/9/1435H.

[2]This is despite the generous wording of Article 133(2) of the UAE Civil Procedures Code, which allows the recoverability of counsel fees by the prevailing party in litigation. For further detail, see also below.

[3] Article 61(1), English Arbitration Act 1996 provides verbatim as follows: “The tribunal may make an award allocating the costs of the arbitration as between the parties, subject to any agreement of the parties.”

[4] Article 28.3, DIFC-LCIA Rules provides verbatim as follows: “The Arbitral Tribunal shall also have the power to decide by an award that all or part of the legal or other expenses incurred by a party (the “Legal Costs”) be paid by another party. The Arbitral Tribunal shall decide the amount of such Legal Costs on such reasonable basis as it thinks appropriate. The Arbitral Tribunal shall not be required to apply the rates or procedures for assessing such costs practised by any state court or other legal authority.”

[5] I.e. Articles 203 through to 218 of the UAE Civil Procedures Code.

[6] See Article 218, UAE Arbitration Chapter, which provides verbatim in relevant part as follows: “The arbitrators shall assess their fees and the costs of the arbitration and may make an award in respect of the whole or part thereof against the losing party.”

[7] See Case No. 282/2012, ruling of the Dubai Court of Cassation of 3rd  February 2013.

[8] See in particular G. Blanke, “Dubai Court of Cassation finds against recoverability of Counsel fees in DIAC arbitration”, Kluwer Arbitration Blog, 23rd  June 2013, available online at of-cassation-finds-against-recoverability-of-counsel-fees-in-diac-arbitration-2/.

[9] I.e. “exempli gratia”, Latin for “for example”. (our footnote, not in the original)

[10] Ibid.

[11] Cited supra.

[12] Provided that submission of these was effected by duly authorised representatives: See Article 7(2)(d) FAL, which codifies case law precedent to the desired effect.

[13] See Case No. 174/2005, ruling of the Dubai Court of Cassation of 19 December 2005.