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Opting for arbitration proceedings to resolve a dispute?

Opting for arbitration proceedings to resolve a dispute?

Take a seat...

As a litigator, I turn to the end of the contract first, because that is invariably where the governing law and dispute resolution clauses are found.  The importance of a clearly drafted dispute resolution mechanism, tailored to the requirements of the parties, is frequently underestimated.  Failure to carefully consider the form and content of dispute resolution clauses is a common, and often costly, oversight.

When drafting a contract, it is important to address the practical issues that will arise if there is a dispute.  Where are the parties located?  Where are their assets?

Arbitration is a common dispute resolution mechanism in cross-border contracts.  Certain of its advantages, when compared with court proceedings, include relative ease of enforcement across jurisdictions and usually, confidentiality of proceedings.  In addition, arbitration can allow parties to have a measure of control over the identity of the members of the tribunal.

In addition to the governing law of the contract itself, it is important to also set out which procedural law will govern any arbitration proceedings.  The 'seat' will determine the procedural law by which the parties should abide when engaging in arbitration and is best described as the 'legal place' of the arbitration.

In addition to the law of the contract and the law of the legal place of arbitration, the parties may also agree to use the rules of one of the arbitration institutions, such as the LCIA Rules, the ICC Rules, the DIFC-LCIA Rules or the DIAC Rules (to name a few).  If the parties agree to incorporate institutional rules into their contract, there are two principal consequences: they will be agreeing to apply a specific set of procedural rules and they will be agreeing that the relevant institution will administer the arbitration proceedings.  This can be an important aid to the dispute resolution process, but naturally comes at a cost in terms of fees.  Agreeing to abide by institutional rules does not affect the application of the mandatory provisions of the procedural law of the seat.

The seat of arbitration, and therefore the applicable procedural law, does not have to be the same as the governing law of the contract and does not have to be where the arbitration hearings are physically held (as long as the seat is clearly distinguished from the venue).  The seat of arbitration will determine which court the parties may seek recourse to and the process for challenge of an arbitration award.  The procedural law of the seat may also contain provisions that the parties ought to be aware of, such as provisions on time limits, language of the proceedings, nationality of arbitrators and nationality of the parties' legal representatives.

The nationality of the parties' legal representatives appearing before a tribunal in arbitration proceedings has recently been considered in Dubai following the enactment of a Federal Ministerial Resolution which appeared to restrict the ability of foreign lawyers (i.e. lawyers other than UAE nationals) to appear on behalf of arbitrating parties in UAE-seated proceedings.

This caused initial concern for the international arbitration community, however the Dubai Legal Affairs Department (DLAD) has since confirmed that all lawyers who are licensed in Dubai, including foreign lawyers (registered as legal consultants with DLAD), can appear before any arbitral tribunal seated in Dubai.  DLAD further confirmed that visiting lawyers may also appear before arbitral tribunals in Dubai, which appears to address a historically grey area.

This point arises in other jurisdictions in the Gulf.  Prior to the enactment of the Bahrain Arbitration Law in August 2015, it was necessary for parties to Bahrain-seated arbitrations to be represented by Bahraini lawyers.  The Bahrain Arbitration Law now expressly permits foreign representation in international commercial arbitration proceedings.  The use of the term "international" is noteworthy and means that for Bahraini entities, it may still be necessary to appoint Bahraini lawyers to represent before a tribunal in order to mitigate the risk that any award is challenged.

Similarly, in Oman it is arguably necessary for parties to arbitrations to be represented by Omani lawyers in order to mitigate the risk that any award might be challenged.  This is based on the premise that pursuant to the Oman Lawyers' Law (advocacy law), a foreign national (with certain, limited exceptions) cannot be licensed to practice or registered on the roll of practising lawyers in Oman and accordingly, cannot represent a party before an arbitral tribunal.  The Oman Arbitration Law does not expressly address the nationality of legal representatives.

The nuances contained within different procedural laws, including those highlighted above, demonstrate the importance of making an informed decision when considering the seat of arbitration. 

Trowers & Hamlins' International Commercial Dispute Resolution and Litigation Department operates across the Middle East from our offices in Dubai, Abu Dhabi, Bahrain and Oman, through our cooperation arrangement in Saudi Arabia, and internationally through our membership with Interlaw.

Any queries in relation to the matters identified above can be addressed to our key contacts below:

Nicola Jackson
Senior Associate - UAE
t +971 4302 5128