Decree No. 34 of 2021

On 20 September 2021, H.H. the Ruler of Dubai issued Dubai Government Decree No. 34 of 2021 concerning the Dubai International Arbitration Centre (DIAC), with immediate effect upon its publication. The decree sought to consolidate Dubai’s institutional arbitration framework under a revamped DIAC while preserving access to both onshore Dubai courts and the offshore Dubai International Financial Centre (DIFC) courts.

The Decree included an annex detailing DIAC’s statute, establishing its headquarters in onshore Dubai while mandating the creation of a branch in the DIFC. Notably, Article 4 of the Decree abolished the Emirate Maritime Arbitration Centre (EMAC) and the DIFC Arbitration Institute (DAI), triggering early assumptions that the DIFC-LCIA Arbitration Centre had also been dissolved. However, the DIFC-LCIA’s fate only became clearer with subsequent provisions.

Under the Decree, DIAC was granted a six-month transition period from 20 September 2021 to complete its institutional overhaul. Modeled after globally recognized arbitration institutions like the ICC and LCIA, DIAC now operates through a newly established arbitration court alongside its Board of Directors and administrative body. The Decree’s transitional provisions further stipulated that DIAC must administer all pending arbitrations previously overseen by the abolished centers under their respective rules until new DIAC rules were adopted. Most importantly, article 6 of the decree explicitly confirmed the continuing validity of arbitration agreements predating the Decree’s enforcement, subject to parties’ consent to transfer cases to DIAC.

Following the Decree’s issuance, DIAC adopted new arbitration rules in March 2022 and reached an agreement with the LCIA: cases registered before 20 March 2022 would remain under LCIA’s administration, while the ones registered after 20 March 2022 would fall under the DIAC’s jurisdiction. This administrative shift has led to divergent interpretations in various jurisdictions regarding the enforceability of pre-Decree DIFC-LCIA arbitration clauses.

While some foreign jurisdictions rejected the rules dictated by the Decree mandating referral of DIFC-LCIA arbitration agreements for administration under DIAC, the Decree has received wide judicial validation by UAE courts which confirmed, on multiple occasions, that DIFC-LCIA arbitration agreements remain enforceable but would be administered by the DIAC under the DIAC Rules.

The legal issue affecting consolidation of claims  

While we will not delve into the question pertaining to the suitability of the approach adopted by the Decree, an important question arises in applying said Decree. It has been established in the UAE at least that DIFC-LCIA arbitration agreements would remain valid, and arbitration agreements referring to the DIFC-LCIA would remain in force, rendering the arbitrations related thereto administered by the DIAC. Taking this matter a step further, the question that arises pertains to what would happen to DIFC-LCIA arbitration agreements in which the parties to the arbitration agreement had agreed on changes and amendments to the DIFC-LCIA rules, changes and amendments that would otherwise be acceptable under the DIFC-LCIA rules. Would the DIAC maintain such changes and amendments and transfer them to the DIAC rules, honoring the parties’ intention? Or would it consider that the abolishment decreed under the Decree would mean that the parties’ changes to the DIFC-LCIA rules would no longer apply, and the DIAC rules in their entirety would instead apply, without due regard to acceptable amendments made by the parties to said rules. 

Are parties’ amendments to the DIFC-LCIA rules under their arbitration agreement transferable to the DIAC rules in applying the Decree?

In a recent arbitration case where Triumph & Co. is representing the Claimant, the above question was raised. While neither of the parties disputed the jurisdiction of DIAC based on all the above, the parties’ concern was whether the amendments to the DIFC-LCIA rules agreed upon under the arbitration agreement should be preserved under the DIAC rules and maintained by the DIAC. 

The answer to this question was particularly interesting for the Claimant from a claims consolidation perspective. As the Claimant’s claims arose out of three different contracts with the Respondent, the Claimant sought to consolidate all such claims under a single arbitration, subject to the DIAC rules of 2022, relying on article (8) of said rules. At the same time, the arbitration clauses agreed upon under the different contracts, although all referring to arbitration under the DIFC-LCIA rules, had introduced different changes and amendments to the DIFC-LCIA rules.

What would then be the fate of such changes, and how would this affect the consolidation of claims under the DIAC Rules 2022?

The parties’ arbitration agreements

The Claimant in this case is the contractor and the Respondent is the employer under four different construction contracts, each governing a cluster as part of one big construction project in Dubai, UAE. 

Disputes arose pertaining to the non-settlement of the Claimant’s dues despite the completion of the clusters, leading the Claimant to submit a request for arbitration in November 2024 after failed attempts to resolve the dispute amicably, requesting from the DIAC to consolidate the claims arising out of the four contracts under one, in application of article 8 of DIAC rules 2022. 

The respective arbitration clauses under the respective contracts were as follows:

• Clause 1 provides for arbitration under DIFC-LCIA Rules with article 24.5 of the rules being deleted;
• Clause 2 and 3 provide for the same, in addition to article 28 being deleted and replaced by an agreed upon provision by the parties;

The Claimant requested the consolidation of all such claims under a single Request for Arbitration subject to DIAC Rules 2022 on the basis that (i) all the arbitration agreements invoked involve the same parties, (ii) the arbitration agreements are compatible and (iii) the claims arise out of a series of related transactions, in application of article 8.2 (b) of the DIAC rules. 

In the case at hand, and although the critical question addressing the validity of changes made by the parties to the DIFC-LCIA rules, and whether they should be maintained by the DIAC and applied to the DIAC rules, was raised, the respondent aligned with the claimant, and accepted the consolidation, without challenge or reservation as regards to the existing amendments to the DIFC-LCIA rules under the arbitration agreements.

Despite this, the matter is currently being examined by the DIAC arbitration court for determination. It would be interesting to see how the Decree would be applied in such instances, and how the DIAC arbitration court would deal with parties’ amendments to the DIFC-LCIA rules under the arbitration agreements. Will the DIAC arbitration court endeavor to fully preserve the parties’ intention? Or will it consider that the changes and amendments under the DIFC-LCIA arbitration agreements fall with the DIFC-LCIA and would therefore be disapplied by DIAC?

Conclusion

The administration of disputes by DIAC where the arbitration agreements refer to the DIFC-LCIA, following the introduction of the Decree, aligns with the position of UAE onshore courts and the DIFC courts, that affirmed the validity and enforceability of such arbitration agreements and supports the principle of party autonomy by ensuring the continuity of arbitration agreements, reinforcing the effectiveness of arbitration agreements even amid institutional changes. 

However, what will happen to the amendments and changes introduced by the parties to a DIFC-LCIA arbitration agreement, especially with the impact this can have on the request for claims consolidation?

This article has been prepared by:

Cesar Ghaleb– Founding Partner, Dubai

Nour Abi Rashed– Associate, Dubai