arbitrateAD – Rules of the Game: Take a Seat

This is our second article on the newly formed arbitrateAD. In our first article, we discussed arbitrateAD’s institutional framework and touched upon what its rules might look like.

Two months on from the publication and promulgation of arbitrateAD’s Arbitration Rules on 1 February 2024 (Rules), and having registered our first request for arbitration with arbitrateAD, this article will:

1. offer a comparison of some of the key provisions within the Rules against other widely used arbitration centres in the region; and
2. analyse and contrast the practical implications of an ADGM-seated arbitration under the Rules against the default approach under the Abu Dhabi Commercial Conciliation and Arbitration Centre’s (ADCCAC) rules.

As previously discussed, the Rules have largely replaced the ADCCAC rules from 1 February 2024. However, the ADCCAC rules remain applicable to ongoing arbitrations initiated before such date. Nonetheless, parties have the option to voluntarily adopt the Rules through mutual agreement.

What is clear at this early juncture is that the Rules mark a significant enhancement over the ADCCAC rules and brings arbitrateAD more in line with other modern arbitration rules. The Rules will have a significant impact on the procedure and relief available to parties that may in fact have agreed to the ADCCAC Rules. In particular, the fact that ADGM will be the default seat for arbitrations is likely to have a greater impact than what may otherwise have been expected. Parties with agreements that include the ADCCAC Rules will therefore be well advised to consider the effect of the changes on any arbitration agreements they have that refer to the ADCCAC Rules.  

Key matters introduced by the Rules

The Rules contain a number of noteworthy new or amended provisions.

Consolidation

A party may request the Court of Arbitration (Court) to consolidate multiple pending arbitrations into a single arbitration where:

1. all parties agree to consolidate;
2. all claims in the respective arbitrations are made under the same arbitration agreement; or
3. the claims arise from more than one arbitration agreement, which agreements are compatible, and the relief sought stems from the same transaction or series of transactions. This includes cases where the dispute arises from a principal contract and its ancillary or related contracts.[1]  

Article 12(c) of the Rules, unlike the ICC Rules[2], does not mention that the multiple arbitration agreements need to be between the same parties. However, this is implied given an arbitration agreement can only bind the parties that have agreed to arbitrate.

Thus, an example where Article 12(c) may apply to enable consolidation of arbitrations, is where:

1. A and B enter Contract 1 for A to purchase machinery. Contract 1 includes the payment and delivery terms.
2. A and B also agree to a related Contract 2 for B to provide maintenance and support services.
3. Both contracts contain compatible arbitration agreements.
4. A is late in paying for the machinery. B in turn breaches its maintenance obligations.
5. A commences an arbitration for breach of Contract 2 and B commences for breach of Contract 1.

Multiple Contracts

Article 10(1) of the Rules provides:

‘’A party may bring a single arbitration asserting Claims arising out of or in connection with more than one contract or more than one Arbitration Agreement.’’ (emphasis added)

This provision seems to suggest, unusually, that not only may a party assert claims under more than one arbitration agreement, but it can claim under multiple contracts without a requirement that the contracts contain a compatible arbitration agreement.

In effect it appears to suggest that a Claimant can effectively seek to consolidate what would otherwise have been separate arbitrations when commencing the arbitration.  We would therefore suggest that claims may be asserted under both contracts only where they contain compatible arbitration agreements or the other conditions that apply to consolidate have been satisfied. However, given the vague language and the unusual connotation considering that the Rules separately address consolidation, it remains to be seen how this will be interpreted and applied in practice.

Expedited Proceedings

Expedited procedures are applicable to arbitrations with a disputed value of AED 9,000,000 or less, unless the parties have agreed otherwise.[3] This value includes the total sum of all claims and counterclaims. In such proceedings, the tribunal must issue its final award within 4 months from the date it receives the case file, with the option to extend the period for a maximum of 2 additional months.

The increased value of disputes that can be subject to expedited procedures will be welcomed by parties seeking to recover funds in relatively simple matters as regionally arbitrations are often viewed as slow. The ability to commence expedited proceedings may therefore make arbitrations far more attractive where speed is required and will ensure that ArbitrateAD is likely to be able to better compete with the Courts for certain types of disputes.   

Emergency Arbitration

In cases where urgent interim relief, such as freezing assets, is sought, a party has the option to request the appointment of an emergency arbitrator. Emergency arbitration was not available under the ADCCAC Rules.[4]

The Court will endeavour to appoint an emergency arbitrator within 1 day of receiving the application and proof of payment of the applicable fee from the centre’s case management office. Subsequently, the emergency arbitrator must render a decision on the application within 10 days of being appointed.

Early dismissal of claims

Like the SIAC Rules of 2016, the Rules empower tribunals to order the early dismissal of claims or defences that are manifestly:

1. without legal merit; or
2. inadmissible or outside the tribunal’s jurisdiction.[5]

This provision mirrors the authority exercised by common law judges to issue summary judgment when claims lack genuine prospects of success or to dispose of a claim or defence based on a point in time. Again, this is a very welcome amendment as arbitrations can be costly.  Allowing summary dismissal will avoid the incurring of unnecessary costs in relation to claims that are without merit.

Terms of Reference

Like the ICC Rules, the Rules contain a provision on Terms of Reference (ToR).[6] ToRs contain formal particulars such as the identities and addresses of the parties, as well as a synopsis of their claims.  ToR may also address procedural matters, particularly where the parties have agreed to proceed on a basis that has not been fully addressed in the arbitration agreement, or which amends aspects of the Rules.

However, unlike the ICC Rules, arbitrateAD tribunals are not mandated to issue a ToR; it remains optional. Nevertheless, ToRs can prove beneficial, particularly for less experienced arbitrators, arbitrating parties, or both. They ensure that tribunals address administrative and case management matters at the outset of a case which can facilitate the expeditious resolution of proceedings.

The impact of having ADGM seated arbitrations

The Rules provide that the default seat for arbitration will be the ADGM unless the parties explicitly agree otherwise.[7] This is likely to be the most significant change for parties that have agreed to an ADCCAC arbitration clause considering that, to the extent that parties affirmatively elected a seat, they are likely to have simply selected Abu Dhabi as a seat.  ADGM is in Abu Dhabi and is expressly recognised as such as a matter of Abu Dhabi law.  As such, it is unlikely that a party that agreed “Abu Dhabi” will be able to suggest that the parties explicitly agreed otherwise. 

The seat determines the legal ‘’home’’ of the arbitration in that arbitrations are subject to the seat’s arbitration legislation, applicable procedural / mandatory laws, and the supervision of the seat’s courts.

Previously, unless the parties agreed another seat, an ADCCAC arbitration seated in Abu Dhabi would have been subject to the “onshore” Federal UAE Arbitration Law No. 6 of 2018 and other “onshore” Federal procedural laws that may be of application. However, arbitrations with an ADGM seat will be subject to the ADGM Arbitration Regulations 2015 (the Regulations) and the ADGM Courts’ supervision. Save for such bespoke laws / regulations that apply in ADGM, the common law of England (including the principles and rules of equity) is of direct application in the ADGM.[8] The corollary is that arbitration claims, which include any application to the ADGM Courts under the Regulations or affecting the arbitration[9], will benefit from a wealth of judicial precedent and remedies available to support the arbitration that are available in ADGM, but not the “onshore” Abu Dhabi Courts.

While rare in the context of international arbitration, where Tribunals are generally given a wide discretion with procedural matters, the significant differences between the “onshore” civil law and wholesale adoption of English law in ADGM could result in some unexpected outcomes for disputing parties if they had anticipated the default seat would have been “onshore”. Similar problems can also arise where the governing law and law of the seat classify the same issue differently (i.e., it is procedural under one law and substantive under another).

Certain of these outcomes may be readily apparent and anticipated, for example, the need for representatives having to have notarised powers of attorney for an arbitration seated “onshore” or different approaches to the awarding of interest: simple interest “onshore” and compound interest in ADGM. What qualifies as ‘’procedure’’, however, is not always as straightforward as it may include borderline issues, including issues that parties may expect to be a question of ‘’substance’’ under a civil law and therefore subject to the agreed governing law. For instance, under English law, ‘’heads of damages’’ (i.e., what losses are actionable) is a matter of substance. The tribunal in our example will therefore apply the governing law of the contract (e.g., UAE law) to determine whether a party is entitled to claim for a particular type of loss (e.g., loss of profit). Quantification of damages, however, is a matter of procedure under English law. Thus, the tribunal could conceivably apply (i) UAE law to determine whether a claim is actionable and (ii) English law to arrive at quantum. This means that a party could be subject to a restriction (e.g., limitations on quantum) or enjoy a benefit not available under the substantive law.The tribunal will have to decide which to apply. Picking one over another could have significant consequences for a party.

Most of the procedural differences arising from the change in default seat will likely be covered in the Rules, the Regulations, or the contract. Fundamentally there are however significant differences in procedure between civil and common law governed jurisdictions. Parties should therefore be aware of the impact an ADGM-seated arbitration can have, particularly in circumstances where contracts refer to the ADCCAC Rules and no seat has been specified.

Recognition and Enforcement

The Regulations also contain certain mandatory provisions which parties cannot derogate from and will need to be aware of.[10] This includes the rules on recognition and enforcement of awards.

Parties seeking to apply for a recognition or enforcement order must apply to the ADGM Courts under Rule 232 of the ADGM Court Procedure Rules and the formalities under Practice Direction 10 .

Such formalities include, for example, that the application must be accompanied by a witness statement setting out[11]:

1. the parties to the arbitration;
2. the arbitration agreement between the parties pursuant to which the dispute was referred to arbitration;
3. a summary of the dispute;
4. the award;
5. the relief awarded; and
6. whether any amounts have been paid under the award, and the amounts outstanding under the award.

Enforcement in the ADGM

ADGM arbitration awards are enforceable in the ADGM as if they are ADGM Court judgments.[12] This means that a party seeking to enforce an award in the ADGM can avail itself of the ADGM Courts’ various enforcement powers. These include (amongst others)[13]:

1. writ of control (taking control of goods);
2. attachment of earnings;
3. obtaining a third-party debt order;
4. charging orders;
5. orders for:
   1. possession of land;
   2. sale of land or other property over which the judgment creditor has the benefit of a charge; and
   3. requiring judgment debtors to provide information about their means or any other matter about which information is needed for enforcement.

Enforcement in Abu Dhabi but outside the ADGM

There are additional steps that award creditors must take where the award debtor has assets outside of the ADGM against which they would like to execute against. This inevitably means additional time and costs.

Such steps include applying for a certified copy of the ADGM Court’s recognition order (amongst others).[14]

There are two routes to enforcing an award in Abu Dhabi.[15] These are by way of:

1. direct application to the Abu Dhabi Courts for enforcement under the Civil Procedure Code; or
2. an application to the ADGM Courts to deputise the Abu Dhabi Courts. This route is only available where the outstanding debt exceeds USD 100,000.

To date there have been a limited number of attempts to enforce ADGM awards outside of the ADGM in Abu Dhabi.  While there clearly is a political will to ensure seamless enforcement occurs, there is nevertheless ongoing risk until the system has been fully tried and tested on numerous occasions.  

A bright future ahead

The arbitration landscape in Abu Dhabi holds great promise following the  introduction of the Rules. arbitrateAD has evidently carefully crafted the Rules by integrating provisions from various prominent institutions, whilst also incorporating its own distinctive elements to address regional nuances.

The fundamental changes that have been introduced means that parties with  ADCCAC arbitration clauses in their agreements should consider whether such agreements still address the matters intended. Similarly, parties who may have avoided arbitration can now consider whether arbitration pursuant to the Rules may not offer a better form of dispute resolution for their needs than arbitrations under other institutional rules or in the Courts. All in all, parties now enjoy a broader array of institutions available to administer arbitrations in the region, providing increased flexibility and choice.

For further information, please contact Jennifer Eakins, Chris Chetty, Khaled AlMulla or Alfred Thornton.