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This article is written by Bushra Asif, pursuing Certificate course in Arbitration: Strategy, Procedure and Drafting from LawSikho.com

 

“When will mankind be convinced and agree to settle their difficulties by arbitration? – Benjamin Franklin

Table of Contents

What is Arbitration

Arbitration is a private process whereby the conflicting parties to an Agreement, choose this mechanism to settle their dispute, instead of resorting to court. They agree that one or more individuals, who have been mutually agreed upon, can make a binding decision about their dispute after receiving evidence and hearing arguments from both sides. It is sufficient to include an Arbitration clause in the main Agreement, which if validly incorporated, may survive the termination or nullity of the underlying Agreement.

Standard ICC Arbitration Clause 

All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

(ICC dispute resolution clause)

Purpose of Arbitration

Main aim of Arbitration is to resolve a dispute fairly and expediously by an impartial third party cutting out on unnecessary delays and costs. It avoids involving courts to resolve their disputes. Under it parties are free to get their dispute resolved by mutually agreeing to terms such as, who shall preside over it, where it will be held, what law will be followed, cost involved etc. 

Arbitration in GCC

In the Gulf Cooperation Council (GCC), region, over past few years, many important developments in international Arbitration took place. New arbitral institutions were established in the Kingdom of Saudi Arabia and the United Arab Emirates. Rules of Arbitration have gotten revised by local Arbitration institutions. Qatar and the United Arab Emirates have recently issued new Arbitration rules. Along with these there have been other positive developments targeting to improve the Arbitration institutions and the rules so that the region becomes more attractive for users of international Arbitration.

All GCC member states ,with the exception of Kuwait, have adopted standalone Arbitration laws based on the UNCITRAL Model Law and have their Arbitration centers as depicted in this table:

GCC STATES

DECREE/ LAWS 

ARBITRATION CENTERS

BAHRAIN

Bahrain Law No. 9/2015 on the Issuance of the Arbitration Law

The Bahrain Chamber for Dispute Resolution

QATAR

QFC Arbitration Regulations 2005;

Qatar Law 2 of 2017

The Qatar International Center for Conciliation and Arbitration (QICCA) 

DUBAI

DIFC Law No. 1/2008 DIFC Arbitration Law

Dubai International Arbitration Centre (DIAC)

DIFC-LCIA

ABU DHABI

ADGM Arbitration Regulation 2015

Abu Dhabi Commercial Conciliation and Arbitration Centre

UNITED ARAB EMIRATES

Federal Law No. 6/2018 on Arbitration.

Emirates Maritime Arbitration Centre

 

SAUDIA ARABIA

Saudi Arabia Royal Decree No. M34/1433 Arbitration Law of 2012

The Saudi Center for Commercial Arbitration

KUWAIT

Kuwait Decree-Law No. 38/1980 Promulgating the Law of Civil and Commercial Procedures and Kuwait Law No. 11/1995 on Judicial Arbitration with Respect to Civil and Commercial Matters

The Commercial Arbitration Centre of the Kuwait Chamber of Commerce and Industry (KCAC)

OMAN

Oman Sultani Decree No. 47/1997 on the Promulgation of the Law of Arbitration in Civil and Commercial Disputes;

Oman Commercial Arbitration Centre (OCAC)

Although, the legal and institutional framework for Arbitration is becoming strong in most GCC member states, however, from an international perspective, it still needs more understanding and promulgation. I have striven to write on the salient features that one must be aware about before commencing Arbitration in the GCC.

1. Enforcement Issues 

In GCC an Arbitral award has to be ratified through the local courts in order to get it enforced. This is absolutely essential for enforcement. The party seeking to get the award enforced has to file a civil suit, in the Court of Appeal, in the form of a claimant seeking ratification of the award. 

All Arab countries have acceded to the New York Convention. Nevertheless, judges may reject enforcement of a foreign Arbitration award based on some ground they deem objectionable. 

Bahrain has taken commendable strides to develop Arbitration on a judicial and autonomous level at its Arbitration center – the Bahrain Chamber for Dispute Resolution (BCDR-AAA).

A government can do a lot for the recognition and development of Arbitration. For example, it can invest and develop proper creditable Arbitration centers, provide incentives and a conducive environment for legislatures to formulate world-class Arbitration laws, make sure the Arbitration centers are being managed appropriately,  encourage independence, facilitate support, educate and train judges specialized in Arbitration and finally introduce Arbitration in training institutes and law schools. 

It is up to the governments to encourage and promote the use of Arbitration and their country as a venue for international Arbitration.

2. Arbitrability

The parties must make sure that the Arbitration clause in their Agreement constitutes a valid clause and is included as an integral part of that Agreement. 

Before inserting the Arbitration clause in the Agreement, it must be affirmed that it covers a valid subject matter which can be resolved through Arbitration under the laws of the GCC member states. Not every kind of dispute is covered by Arbitration. Employment disputes, criminal matters, matters relating to public policy and personal status issues cannot be arbitrated. Construction disputes are the most prevalent ones that get sorted via Arbitration here. These types of disputes involve certain technicalities that require an expert’s help to understand and determine the relevant issues at hand. Arbitration is not permitted in matters where “conciliation is not permitted”. These generally include matters within the exclusive jurisdiction of the courts, special committees or tribunals and matters of a public policy or public order nature.

GCC laws do not define the terms “public policy” and “public order. This breeds uncertainty around the enforceability of arbitral decisions. Common grounds for refusing enforcement of an arbitral award on public policy could include a dispute involving prohibited goods or services or anything prohibited by law.

3. Flexibility

There is no legal requirement of having a particular set or number of Arbitrators. It is up to the parties to decide, whether they want one or more than one to preside over their proceedings. The general rule stands that the number of Arbitrators should be an odd number when there is a requirement of more than one Arbitrator.

If the subject matter of the dispute is technical or requires special knowledge the parties may opt to appoint a specialist who is well versed with the topic, enabling him to understand the dispute better thus in turn giving fair well informed judgement. Moreover, the tribunal can draw from his expertise too. Whereas, in a court of law the judges rely on court-appointed experts to determine issues of law. 

In GCC, for Arbitration the parties are allowed to select their preferred language in which to conduct the proceedings. In local courts the proceedings and documents have to be in Arabic which can lead to ambiguities/ misinterpretation and significant translation costs. Very recently the UAE Supreme Court has issued judgement which dealt with uncertainty surrounding the Arbitration clause and the discrepancies created between the English and Arabic translation of it. (Globalarbitrationnews)

Parties may also decide if they want to conduct Arbitration by documentation or by holding hearings. Other key components can also be mutually agreed upon by parties, such as – venue, seat, number of arbitrators, time in which it must be resolved and preferred professional background.

4. The Cost of Arbitration in GCC

Law does not fix legal fees for Arbitration. The Parties involved and the Arbitrator/s decide upon the hourly rates and fixed fee arrangements.

Costs to the parties are generally awarded on the basis of the:

  • Submissions by parties.
  • Subject matter of the dispute (how complex it is).
  • Time consumed.
  • Discretion of the arbitral tribunal. 

Parties should try and include the costs in the Agreement itself as it will cut the hassle of deciding it later on when the relationships might have turned sour. 

5. Arbitrators

Law does not prescribe the number of Arbitrators to be present in the proceedings. However, generally the number of Arbitrators must be an odd number (if there is more than one Arbitrator).

Under Article 10 of the Arbitration law, Bahrain, it is clearly stated that the parties are free to determine their number of Arbitrators, in the absence of which it will be deemed to be three. (Law No. (9) of 2015)

Article 206 of the UAE Civil Procedure provides that an Arbitrator cannot be: a minor, legally incapacitated, stripped of his civil rights because of a criminal conviction (unless he has been rehabilitated) or bankrupt.(UAE Civil Procedure Code)

The Arbitration Law also permits the parties to agree on the gender and nationality of an Arbitrator.

It is usually incorporated in the clause in the Agreement that both the parties shall either mutually agree on a single impartial Arbitrator or shall nominate an Arbitrator each and those two shall name a chairperson. If the  Arbitrators cannot agree on the chairperson, the appointment is made by the arbitral institution. 

6. Arbitration vs Litigation

arbitration

Advantages/disadvantages

Some advantages of Arbitration over litigation include:

  • The Arbitration proceedings are confidential (unless the parties agree otherwise). Litigation proceedings, on the other hand, form part of the public record.
  • Arbitrators are chosen by the parties. When the subject matter is technical, a person who is an expert of that particular field may be chosen to arbitrate the proceedings. Whereas, the judges normally have to consult the required experts to deal with understanding technicalities involved in order to adjudicate fairly on the respected dispute.
  • Any language can be adopted for the Arbitration proceedings as the parties agree upon, whereas local court litigation is always in Arabic. 
  • Oral evidence is permitted in Arbitration, whereas only written submissions are generally permitted in the courts.
  • There are limited conditions under which a party may appeal against the arbitral award and the decision cannot be challenged on merits.
  • Arbitration, as compared to litigation, is less time consuming. Arbitration aims at providing expeditious resolution than the normal court proceedings. The parties can even set a time limit in which it must be resolved.
  • Arbitration also involves less formalities, i.e., meeting place and time, no rule book to adhere to, rules are simpler to follow. It mostly depends on what the parties have agreed to in their Agreement. Whereas, in a court of law, proper CPR rules and other pertinent laws and regulations have to be strictly adhered to.
  • Usually the courts of the countries are inundated with cases but in Arbitration a better focus on the dispute and its resolution can be had.

Some disadvantages of Arbitration when compared to litigation include:

  • Arbitral proceedings can be more costly at times due to the tribunal and administrative fees. 
  • In order for the Arbitration award to be enforceable it must be endorsed by the courts. This can cause delays and extra cost is added towards the enforcement of the award; albeit with the introduction of the revised Arbitration Laws this has improved.
  • There is no right of appeal, except on procedural grounds, and the Arbitration award is considered binding. 

In a regular court of law, a party has the right to appeal therefore the case can be delayed and the resolution may not be attained for a longer time than desired. Arbitration is a an expeditious process in comparison and the award is final and binding and generally not subject to appeal.

7. Confidentiality

The confidentiality of Arbitration hearing and awards is expressly protected by the Arbitration Law.

In GCC, Arbitration proceedings are generally considered to be fully confidential unless there is an express agreement between parties that states otherwise. This further makes Arbitration more appealing for the parties, especially when they do not want to make their dispute or issues public.

8. Right of appeal/challenge

The merits of an Arbitral award are not subject to challenge or appeal and constitutes res judicata. Awards can only be set aside on the following grounds:

  • The Agreement has lapsed or is void, or there is no/invalid Agreement that can established.
  • Party does not have the legal capacity to agree to Arbitration.
  • Due to improper notice of Arbitrator’s appointment or of the conduct of arbitral proceedings, to a party it fails to properly present its case.
  • Parties’ choice of law for the dispute is excluded in the award.
  • The tribunal or the Arbitrator was not as per the law or the agreement between the parties.
  • There is some procedural irregularity in the arbitral proceedings or the arbitral award was not issued within the required timeframe.
  • The Arbitrator’s scope does not cover the award.
  • The subject matter in question cannot be dealt with under Arbitration.
  • The arbitral award  goes against the morality of the state and is inconsistent to public order.

An action to set aside an award must be filed before Court of Appeal, within a set number of days (depending upon the jurisdiction but usually 30 days), from notification of the award. An appeal lies to the Court of Cassation. A party can also seek to contest an award during ratification and enforcement proceedings. 

The Bahraini Arbitration Law

Bahrain has spearheaded in its legal arena and continuously strives to develop, update and improve its legal framework. 

As part of this, in July 2015 Bahrain issued Legislative Decree No. 9 of 2015, promulgating the Bahraini Arbitration Law (the Arbitration Law). Although its predecessor also provided comprehensive statutory support for Arbitration.

Bahrain’s Arbitration Law adopts the UNCITRAL Model Law on International Commercial Arbitration in its entirety. This provides the businesses and individuals the freedom to include and invoke arbitral proceedings in accordance with the internationally accepted best-practice in Arbitration. 

Among other changes the revised Arbitration Law allows non-Bahraini lawyers to represent parties in international commercial Arbitrations in Bahrain. The liability of the Arbitrator is also now limited except in cases of ill will or gross negligence.

Even in these testing times of COVID when the world has forcefully slowed down, BCDR propelled ahead and many cases were dealt with successfully. Parties managed to commence Arbitration proceedings, often exclusively via online filing, and hearings were held and attended by tribunals, parties and their legal representatives, entirely remotely.

Bahrain is actively taking steps to achieve a higher standard and to promote itself as a viable venue for Arbitration in 2020. Despite the current dismal circumstances, it is evident that recent trends and developments in Arbitration will goad it in a bright future.

G.C.C Commercial Arbitration Centre

Bahrain hosts the GCCCAC – it is considered as a regional arbitration authority which is independent from the six GCC member states. On 16th November, 1994 the Arbitration Procedure Regulation was approved by the Commercial Co-operation Committee in the city of Riyadh, Saudi Arabia. A number of amendments were made to the Regulation and ratified by the Commercial Co-operation Committee at the city of Al Ain, UAE on 5th October, 1999.

It has an independent legal entity and enjoys administrative, financial and technical independence. Meanwhile, it is considered as one of the GCC organs.(GCCCAC)

The Gulf Cooperation Council Commercial Arbitration Centre (GCCCAC) received Arbitration claims worth 5.5 million US dollars which is equivalent to 2.1 million Bahraini dinars during the first quarter of the current year 2020, these Arbitration claims consists of 4 disputes and maintaining the rate of no less that one claim each month.

The acting Secretary General of GCCCAC, Al Mogahwi, confirmed that drafting an Arbitration clause in the contracts is considered as a guarantee of a swift dispute resolution especially if this Arbitration clause has an international nature such as the one present in GCCCAC; which provides protection and insurance to any investment whether it is national or international which in turn aims to attract more foreign investments. (Bahrain News Agency)

Conclusion

Perhaps after reading this article one would assume that Arbitration is the preferred option to settle disputes arising under contracts, however this is not entirely true. I believe choosing an appropriate dispute resolution method that is best suited to your Agreement is of substantial importance and could save you significant trouble later. 

The significance of the GCC Arbitration centres is on the rise – the construction industry is availing them the most for now. GCC governments are proactively working towards developing legislation that will form the legal framework for arbitration proceedings and the enforcement of awards in order to boost arbitration. International companies are gaining confidence when dealing with disputes in the GCC region as legislators continue in their efforts to reflect international standards in arbitration proceedings. 

However, this article is only intended as an overview, and should not replace seeking appropriate legal advice relating to the choice of dispute resolution for your particular situation as many exceptions exist and each agreement is unique. Therefore, I would strongly recommend seeking the advice of a competent lawyer before you take any decision relating to the choice of a dispute resolution method.


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