Dubai: amendment of DIFC Arbitration Law

By Brian Boahene

The Dubai International Financial Centre (DIFC) is a separate common law jurisdiction within the United Arab Emirates (UAE). The founding legislation of the DIFC prescribes that financial free zones in the UAE such as the DIFC shall not take any step that may lead to the contravention of any international agreements to which the UAE is or shall be a party. The UAE acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 2006. Accordingly, the UAE is bound by its obligations under the convention from this date, and as such the laws of its free zones, including those of the DIFC, should also comply with such obligations. However, until the recent amendment, there was a direct inconsistency between the DIFC Arbitration Law No 1 of 2008 and the UAE’s obligations under the New York Convention.

Article II (3) of the New York Convention requires the court of a contracting state to refer a matter to arbitration upon the request of a party, in a matter that is the subject of a valid arbitration agreement, unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. In contrast, article 13 (1) of the DIFC Arbitration Law had previously only obligated the DIFC court to stay or dismiss an action in favour of an arbitration agreement, where the arbitration was seated in the DIFC — it did not expressly provide for a stay where the arbitration was seated outside of the DIFC. This brought into question the extent to which the DIFC court could stay/dismiss proceedings brought before it that were subject to a foreign arbitration agreement, and two decisions of the DIFC court in 2012 confirmed that article 13 (1) as drafted was inconsistent with the UAE’s obligations under the New York Convention…

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