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Dubai Government Decree No. 34/2021 and the Grand DIAC: A Call for a new DIAC-LCIA …[1] 

Dr. Gordon Blanke, Founding Principal, Blanke Arbitration FZCO, Dubai/London/Paris

Dubai Government Decree No. 34 of 2021 concerning the Dubai International Arbitration Centre (DIAC) (“Decree No. 34/2021”), which entered into force with immediate effect upon its publication[2], has caused a great furore both amongst the local and the international arbitration community.

The main objective of Decree No. 34/2021 is to create a Grand DIAC by consolidating the institutional arbitration offering in the Emirate of Dubai under the auspices of a unified, new DIAC, without, however, losing opportunities of judicial forum shopping between onshore Dubai and the offshore Dubai International Financial Centre (DIFC)[3]. To that end, the “new”, Grand DIAC, to be established by a Statute of the DIAC enclosed in annex to the Decree (the “DIAC Statute”)[4], whilst maintaining its headquarters in onshore Dubai, “shall also have a branch in the [DIFC].”[5] Read together with Art. 4 of the Decree, which “abolishes” the Emirates Maritime Arbitration Centre (EMAC) and the DIFC Arbitration Institute (the “DAI”)[6] and the transition provisions outlined below, this has created concerns or even prompted the premature conclusion that the DIFC-London Court of International Arbitration (LCIA) Arbitration Centre (the “DIFC-LCIA”) has also been dissolved. Nothing, however, could be further from the truth. A proper contextual reading of Decree No. 34/2021 will assist in unraveling its true immediate legal effects and its inevitable practical limitations, which ultimately leave – at least for now – the DIFC-LCIA and its Arbitration Rules unaffected.

That said, even if Decree No. 34/2021 were to have intended to fold the DIFC-LCIA into the new (offshore arm of) DIAC, this would best be achieved by establishing a new DIAC-LCIA with a view to providing for desirable operational continuity and institutional stability.

The new DIAC

Turning to the new DIAC first, it is not a secret that in pursuit of its wider aspirations to make Dubai a leading global – and not only regional – arbitration hub, the Government of Dubai has, for a while, been contemplating the idea of revamping the DIAC and affording it the structure and status that it deserves to compete with its international archrivals, the International Chamber of Commerce (ICC) International Court of Arbitration headquartered in Paris and the London-based LCIA. Both the ICC and the LCIA have significantly enhanced their influence over arbitration in the MENA region, each by creating its own fully operative regional presence by establishing the DIFC-LCIA and the Abu Dhabi Global Market (ADGM)-ICC respectively.

In what must be understood as an attempt to compete more effectively with the two most successful arbitral institutions in arbitration history, the new DIAC takes after both the ICC and the LCIA by creating and operating through a “Court of Arbitration”[7], better labeled the “DIAC Court” (taking account of its conceptual pedigree) – side by side a Board of Directors and Administrative Body. The DIAC Court will be composed of 13 members in total, including a President and a Vice-President, each member having local and international arbitration experience and appointed for a non-renewable term of four years[8]. The DIAC Court will exercise general supervisory powers over DIAC arbitrations, including more specifically (i) the administration of arbitration proceedings under the DIAC and other procedural rules chosen by the parties, such as the UNCITRAL Rules of Arbitration (intimating the availability of DIAC to administer ad hoc arbitration proceedings), (ii) proposing revisions of the DIAC Rules of Arbitration as well as a code of ethics in the conduct of DIAC arbitrations, and (iii) overseeing the appointment and challenge procedure of arbitral tribunals under the DIAC Rules[9]. Importantly, the “soft scrutiny” of arbitral awards, a practice that the DIAC introduced around 5 years ago, will form part of a codified regime (like it does under the ICC Rules) and possibly even extend to arbitral decisions[10]. Equally, under the new regime, like its ICC and LCIA counterparts, the DIAC Court will have a hand in supervising emergency arbitration proceedings prior to the constitution of the arbitral tribunal[11].

In a further attempt to benefit from the existing offshore arbitration offering in the form of the DIFC Arbitration Law, the DIAC Statute provides for the DIFC as a default seat of the arbitration, which in turn will empower the DIFC courts as the curial courts of a DIAC arbitration[12]. In addition, the DIAC Statute clarifies that party choice of (onshore) Dubai as the seat of the arbitration will trigger the curial application of the FAL with the support of the onshore Dubai courts in their capacity as the curial courts[13] whereas choice of the DIFC will engage the DIFC Arbitration Law and the curial competence of the DIFC Courts[14]. That said, there is some lack of clarity around the true scope of the curial courts’ powers in any of these circumstances, extending – in accordance with the wording of the DIAC Statute - to “any case claims and appeals relating to any award or any measure ordered during the arbitral proceedings by the arbitral tribunals.”[15] As is well known and established under both the FAL and the DIFC Arbitration Law, the curial courts’ power is limited to supportive, ancillary functions over the course of the arbitration and does not extend to the enforcement of arbitral awards (let alone arbitral decisions). Despite the wide wording of Art. 4 of the DIAC Statute, actions for enforcement are therefore unlikely to fall within the scope of Art. 4 and the question of the proper enforcement forum will continue to depend on the location of an award debtor’s assets.

With the adoption of Decree No. 34/2021, the new DIAC is also expected to adopt a revised set of DIAC Rules of Arbitration, reflecting the new role of DIAC and the operational changes outlined above. Until adoption of a revised set of DIAC Rules, the existing DIAC Rules remain in full force[16]. So will the rules of the abolished arbitration centres[17].

Transition provisions

In order to facilitate the consolidation of Dubai’s institutional arbitration offering under the DIAC umbrella, Decree No. 34/2021 provides for the transfer to the DIAC of any ownership titles, the staff of the abolished arbitration centres and the financial budgets granted to the abolished arbitration centres by the date of the Decree by the Government of Dubai with immediate effect from 20 September 2021, i.e. the date of entry into force of the Decree[18]. Rosters of arbitrators and membership registers of the abolished centres will, albeit transferred to DIAC, continue to operate on the same terms and conditions until expiry of the relevant registration or membership term[19].

Further, the DIAC “shall substitute the abolished arbitration centres in the exercise of all of their rights and the performance of all of their obligations.”[20] DIAC will hence be required to administer all arbitrations of the abolished centres under their respective rules until adoption of a revised set of DIAC Rules. This is supported by Art. 6 of Decree No. 34/2021, which confirms the continuing validity of (i) arbitration agreements pre-dating entry into force of the Decree that provide for arbitration under the arbitration rules of the abolished arbitration centres and of (ii) pending references under such rules, subject to them being transferred to administration by the DIAC unless otherwise agreed by the Parties[21]. Importantly therefore, the parties retain party autonomy over the further institutional course of their arbitration.

Under Decree No. 34/2021, DIAC is accorded a total of six months starting from 20 September 2021 to complete the transition to the new DIAC.

The DIFC-LCIA

Turning to the DIFC-LCIA, fears of its dissolution as a result of the adoption of Decree No. 34/2021 are unwarranted. Upon closer scrutiny, it becomes apparent that the Decree does not make mention of the DIFC-LCIA, nor of the DIFC-LCIA Rules of Arbitration. This is not surprising given that the DIFC-LCIA does not have any corporate existence and is ultimately no more than a name label that adorns the office space from which the DIFC-LCIA staff, in its turn employed by the DAI, administers arbitrations under the DIFC-LCIA Rules. Short of a transfer of that staff and the DIFC-LCIA’s case management system to the DIAC to ensure the continued administration of arbitrations under the DIFC-LCIA Rules under the DIAC umbrella, the DIAC will not be able to administer DIFC-LCIA references in practice.

In any event, no such transfer has presently taken place. To the contrary, in an official statement of 20 September 2021, the Former Trustees of the DAI have confirmed – in terms echoed by the Registrar of the DIFC-LCIA in recent case-management correspondence - that consultation was taking place between the LCIA and the Government of Dubai “to seek to ensure the good management of existing and future cases where parties have agreed to arbitration […] under the DIFC-LCIA Rules” and that the DIFC-LCIA case team was continuing to deal with the day-to-day management of references under the DIFC-LCIA Rules.

It must also be cautioned that any transfer of the DIFC-LCIA case management system and the DIFC-LCIA Rules for administration by the DIAC would likely require the LCIA’s consent. By way of reminder, the DIFC-LCIA is a joint venture between the LCIA and the DIFC[22] and as such relies for the administration of its own cases upon the LCIA Rules template and the LCIA case management system, which are franchised to the DIA by the LCIA for the purpose of administering references under the DIFC-LCIA Rules. Finally, the LCIA would unlikely sit idly by were existing or future DIFC-LCIA references be transferred for administration to DIAC in the absence of an express agreement between all relevant stakeholders: To the contrary, the LCIA would be likely to retain control over any references administered under the DIFC-LCIA Rules in reliance on Art. 32.4 of the DIFC-LCIA Rules (both in their 2016 and 2021 versions), according to which “[t]he LCIA Court may decide to administer any arbitration directly, in whole or in part, if it deems this appropriate under the circumstances.” It might even be envisaged that were push come to shove, the LCIA operate a DIFC-specialist division, offering administrative services for DIFC-seated arbitrations under the LCIA Rules from within their London headquarters.

With that in mind, a dissolution of the DIFC-LCIA or dispensation with the DIFC-LCIA Rules are unlikely to have been intended (and are, in any event, far from being achieved) by Decree No. 34/2021. In any event, to do either of the two would, if anything, cause a flight of arbitration references from the Emirate of Dubai and play in the hands of

  • the London-based LCIA, with pending references migrating to direct administration by the LCIA Court by virtue of Art. 32.4 of the DIFC-LCIA Rules, and parties that wish to arbitrate in the DIFC referring to DIFC-seated arbitration under the LCIA Rules; and
  • the ADGM-ICC, which operates out of the ADGM in direct competition with the DIFC-LCIA, thus offering a viable institutional alternative for DIFC-seated arbitrations or incentivizing parties to opt for ADGM-ICC arbitration in combination with an ADGM seat, offering advantages similar to those arising from a DIFC seat.

That said, if Decree No. 34/2021 were to pursue objectives that go beyond its proper black-letter scope, the creation of a new DIAC-LCIA in the terms suggested below would assist in bringing the DIFC-LCIA into a wider, DIAC institutional fold and assist in galvanizing inter-institutional forces and synergies to drive Dubai’s rise into a truly global arbitration hub.

The new DIAC-LCIA

In order to avoid any reputational damage that a dissolution of the DIFC-LCIA is more likely than not to produce on Dubai as a seat of arbitration and in order to curb the potential flight of DIFC-LCIA references from Dubai (and most certainly from the DIAC as an institutional framework for the arbitration given the practical limitations that would prevent the DIAC from administering a reference under the DIFC-LCIA Rules), it might be envisaged that the DIAC and the LCIA negotiate a new form of inter-institutional co-operation under the umbrella of a new DIAC-LCIA.

This would facilitate the transition from the DIFC-LCIA to an offshore DIAC and allow the offshore DIAC to take over the operations of the DIFC-LCIA without any institutional fall-out by a simple rebranding exercise (provided evidently that appropriate inter-institutional agreements were to be put in place between all relevant stakeholders, including the DIAC and the LCIA, to the desired effect)[23]: This would allow the existing DIFC-LCIA staff to transfer to a new DIAC-LCIA and continue to administer existing and future references under a renamed (yet otherwise unchanged) set of DIAC-LCIA Rules. The new DIAC-LCIA would operate out of the existing offices of the DIFC-LCIA in the DIFC, which would be rebranded as the DIAC-LCIA. This would create the basis of a historically unprecedented inter-institutional relationship based on each institution’s unrivalled expertise in the administration of arbitral proceedings under their respective institutional rules,[24] a relationship, in which the LCIA would continue to lend its undivided support to the continued success of the DIAC’s future offshore operations[25]. Given that the new DIAC will be divorced from the Dubai Chamber of Commerce and Industry (DCCI), provided that the LCIA is willing, there would not appear to be any practical, legal or political obstacles in the way of any such co-operation. The LCIA, for sure, would stand to benefit from its continued physical presence in the DIFC, standing firm in its direct competition with the ADGM-ICC in the region.

Conclusion

For Decree No. 34/2021 to develop its full potential and for that potential to be put to best use in an endeavour to promote the development of Dubai into a truly global arbitration hub, the relevant stakeholders would be well advised to turn their minds and efforts to transitioning the DIFC-LCIA to a new DIAC-LCIA, which would continue to operate unchanged from its predecessor on the model of the LCIA. This could be easily achieved by a simple name change (subject to the DIAC and the LCIA signing relevant terms of agreement, not dissimilar to those, one should think, that defined the joint venture between the DIFC and the LCIA). Only time will tell where developments over the next six months will take the future of arbitration in Dubai. That said, in the hope that these words will be heard by those who are able to influence those developments, this is call for the creation of a new DIAC-LCIA!


[1]     This article is based on G. Blanke, “DIFC-LCIA and new DIAC in the light of Dubai Government Decree No. 34/2021: business as usual … at least for now”, Thomson Reuters Practical Law Blog, 28 September 2021.

[2]     See the Official Gazette for the Government of Dubai No. 531 of 20 September 2021.

[3]     See Art. 7, Decree No. 34/2021, which expressly provides for the continued competence of the onshore Dubai and offshore DIFC courts in UAE arbitration.

[4]     See Art. 3, Decree No. 34/2021.

[5]     See Art. 2, Decree No. 34/2021, albeit that the DIAC, in any event, has had a representative office in the DIFC since 2016.

[6]     See Art. 4(1)-(2) and Art. 8, Decree No. 34/2021, repealing the foundational laws of the EMAC.

[7]     See Art. 10, DIAC Statute.

[8]       Ibid.

[9]       See Arts 11(1), 11(5)-(7) and 11(14), DIAC Statute.

[10]       See Art. 11(8), DIAC Statute

[11]       See Art. 11(8), DIAC Statute

[12]     See Art. 4B, DIAC Statute.

[13]     See Art. 4A(1), DIAC Statute.

[14]     See Art. 4B(2), DIAC Statute.

[15]     See Art. 4A(1) and (2), DIAC Statute.

[16]     Ibid.

[17]     Ibid.

[18]     See Art. 5A(1)-(3), Decree No. 34/2021.

[19]     See Art. 5A(4), Decree No. 34/2021.

[20]     See Art. 5B, Decree No. 34/2021.

[21]      See Art. 6, Decree No. 34/2021.

[22]     Described by the former Chief Justice Sir Anthony Evans as “essentially a joint venture between the DIFC and the London Court of International Arbitration (‘LCIA’), one of the leading players in the arbitration world”; see http://www.difc-lcia.org/overview.aspx.

[23]    In other words, the joint venture that originally existed between the DIFC and the LCIA will essentially be “transferred” to the DIAC and the LCIA.

[24]     For the avoidance of doubt, this would differ from the LCIA’s failed joint venture experience in India and Mauritius in that the new DIAC-LCIA would capitalise on the existing success of the DIFC-LCIA, currently administering a total of around 180 references under the DIFC-LCIA Rules

[25]   By, for example, allowing the DIAC-LCIA to use the LCIA-templated set of arbitration rules and by sharing the LCIA’s case management systems in order to facilitate the effective and efficient administration of arbitration references under the rebranded DIAC-DIFC Rules

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About the interviewee

Dr. Gordon Blanke is Founding Principal of Blanke Arbitration FZCO Dubai/London/Paris and author of Commentary on the UAE Arbitration Chapter, Thomson Reuters/ Sweet&Maxwell, 2017.

Before establishing his own firm, Dr. Blanke was a Partner of International Commercial and Investment Arbitration with DWF (Middle East) LLP in the DIFC, Dubai. Prior to joining DWF, he was Counsel and Sector Leader of International Arbitration in Baker & McKenzie.Habib Al Mulla’s Dubai and Abu Dhabi offices. Dr. Blanke has wide-ranging 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 (ICC, LCIA, DIFC-LCIA, DIAC, ADCCAC, GCC, JAMS, SCC, etc.) and in ad hoc (incl. GAFTA and LMAA) arbitrations seated in the US, Europe, the Middle East and Asia held for a variety of industry sectors, including aviation, private equity, banking and finance, construction/real estate, commodities, hospitality, travel/leisure, cosmetics, IT, telecoms, oil & gas, shipping etc. Dr. Blanke has also been appointed to the CIETAC, ADCCAC and CRCICA Panel of Arbitrators.

Dr. Blanke has sat as Chairman, Sole Arbitrator and Co-arbitrator in over 70 ICC, SCC, DIFC-LCIA, DIAC, ADCCAC, AjCCCA and ad hoc arbitrations, including international commercial, construction, real estate, corporate and other disputes of varying sizes, governed by English, Italian, Swedish and UAE law and is a Member of the Chartered Institute of Arbitrators in London, England.

In the 2014 and 2015 editions of The Legal 500, Dr. Blanke is recommended for international arbitration in the UAE and is praised as “very professional” in The Legal 500 2016 edition. He is recommended, including for construction arbitration, in The Legal 500 EMEA 2019 edition. Dr. Blanke is listed as a leading arbitration specialist in Who’s Who Legal 2016 and Who’s Who Arbitration – Future Leaders 2017, 2018, 2019 and 2020 and in Who’s Who Legal: Arbitration 2021. He is further known for his expertise in international antitrust arbitration, having been an active member of the former ICC Task Force for Arbitrating Competition Law Issues.