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Jun 10, 2009 - business management. In pursuing the accomplishment of its mission, the School will strive to achieve the following broad-based goals: △.
International Commercial Arbitration in the Arabian Peninsula∗ Working Paper 09 – 004 10 June 2009

Damien P. Horigan, BA, MA, JD, LLM American University in Dubai

School of Business Administration School of Business Administration „ P.O. Box 28282 Dubai, UAE „ Tel: +971 04 399-9000 „ Fax: +971 04 399-8899

Order Number: Working Paper SBA 09-004

Mission

The mission of the School of Business Administration (SBA), consonant with the overall Mission of AUD, is to provide UAE, GCC and international students with high quality, forward-looking, career-oriented educational programs in the management of business organizations, with the option of selecting concentrations in one or more functional areas of business management. In pursuing the accomplishment of its mission, the School will strive to achieve the following broad-based goals:

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To ensure the highest level of student satisfaction with the School’s educational experience.

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To ensure that the School’s educational program are continually aligned with the employment needs of the market for business professionals.

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To ensure the School’s sustainable growth through recruitment and retention of appropriately qualified faculty.

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To provide faculty with a supportive environment that is conducive to their professional growth.

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To continually enhance the School’s reputation and visibility through maintaining a close relationship with the business community.

This document was produced by the School of Business Administration. The ideas and opinions expressed in this document are those of the authors and do not necessarily reflect those of AUD, or its employees. Interested parties may use the report in part or whole, providing they maintain the integrity of the report and do not misrepresent its findings or present the work as their own.

Recommended Citation Damien P. Horigan, 10 June 2009, International Commercial Arbitration in the Arabian Peninsula, American University in Dubai, SBA Working Paper 09-004

For additional copies of this report, contact the SBA Resource Center at AUD

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Abstract: Alternative dispute resolution (ADR) as a means of resolving business disputes seems to be growing in popularity in the countries of the Arabian Peninsula. One of the more important forms of ADR is arbitration. This working paper looks at the development, current use, and possible future of international commercial arbitration in the Arabian Peninsula with a special emphasis on the United Arab Emirates (UAE).

Key words: Commercial Arbitration, Alternative Dispute Resolution, Law, United Arab Emirates, Arabian Peninsula JEL classification: K33, K40, K12

______________________ Damien P. Horigan, School of Business Administration, American University in Dubai, P.O Box 28282, Tel: 971-43183325, [email protected] ∗ An earlier version of this paper was presented at the 6th Asian Law Institute (ASLI) Conference held in Hong Kong in May 2009. Here I wish to acknowledge the generous support that I received from the American University in Dubai in the form of a faculty teaching offset grant and a travel grant to attend the ASLI Conference.

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I. Introduction

For purposes of this paper, I define Alternative Dispute Resolution (ADR) broadly as being any lawful method of dispute resolution other than going to court namely, litigation. ADR has ancient roots.1 For example, the use of mediation, which will be explained later, can be traced back thousands of years in China.2 Likewise, certain traditional forms of ADR have a long history in the Middle East.3

In recent decades ADR has grown in popularity in many parts of the world.4 Modern forms of ADR appear to be gaining increasing acceptance in the countries of the Arabian Peninsula.5 Among the various countries in the region, ADR has become more widespread in the United Arab Emirates6 (UAE).7

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Some writers prefer not including arbitration under the umbrella of ADR. JANE JENKINS & SIMON STEBBINGS, INTERNATIONAL CONSTRUCTION ARBITRATION LAW (2006) 139 [hereinafter JENKINS & STEBBINGS]; CUSTODIO P. PARLADE, CONSTRUCTION ARBITRATION 1 (1997) [hereinafter PARLADE]. This exclusion is presumably due to arbitration’s quasi-judicial and normally binding nature, which makes it closer in spirit to litigation than either negotiation or mediation. Moreover, arbitration is older than certain other forms of ADR. International commercial arbitration can be defined simply as being arbitration involving disputes between businesses from two or more countries. Of course, arbitration in the widest sense can also encompass disputes involving individuals or governments. 2 Cao Pei, The Origins of Mediation in Traditional China, in AMERICAN ARBITRATION HANDBOOK ON INTERNATIONAL ARBITRATION AND ADR 235 (Thomas E. Carbonneau & Jeanette A. Jaggi, eds., 2006). 3 Essam Al Tamimi & Mary Helen Mourra, Introduction: Arbitration in the Middle East and North Africa, in THE PRACTITIONER’S GUIDE TO ARBITRATION IN THE MIDDLE EAST AND NORTH AFRICA iii (Essam Al Tamimi, ed. 2009) [hereinafter AL TAMIMI & MOURRA]. Furthermore, since the early 20th century, negotiation and arbitration have been used to settle international disputes related to contracts involving oil concessions in the region. Atef Suleiman, THE PETROLEUM EXPERIENCE OF ABU DHABI 121-140 (2007). 4 See, e.g., Richard H. Kreindler, Arbitration or Litigation?: ADR Issues in Transnational Disputes, in AMERICAN ARBITRATION ASSOCIATION HANDBOOK ON INTERNATIONAL ARBITRATION AND ADR 1 (Thomas E. Carbonneau & Jeanette A. Jaggi, eds., 2006). See also DISPUTE RESOLUTION AND CONFLICT MANAGEMENT IN CONSTRUCTION: AN INTERNATIONAL REVIEW passim (Peter Fenn et al, eds., 1998); W. LAURENCE CRAIG ET AL, INTERNATIONAL CHAMBER OF COMMERCE ARBITRATION 2-6 (1985) [hereinafter CRAIG]. 5 AL TAMIMI & MOURRA, supra note 3, at iii. See also Richard Harding, A love and hate relationship, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Nov. 2008, at 41. 6 The UAE is a federation of seven emirates consisting of Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah, and Fujairah. UAE CONSTITUTION, Preamble & Art. 1. The emirates of Dubai and Ras Al Khaimah have retained their own court systems while the others have joined Abu Dhabi in forming a national judiciary. SABAH M.A. MAHMOUD, UAE COMPANY LAW AND PRACTICE

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This stands in contrast to the situation of just a few years ago especially in regards to international commercial arbitration.8 For example, it was only in 2006 that the UAE joined an important multilateral treaty called the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which is popularly known as the New York Convention. 9

II. A Brief Overview of Arbitration and ADR

Some forms of ADR are directly linked to court systems10 while others function more or less independently.11 There are various types of ADR including hybrid forms along with differing usage of certain key terms that can potentially result in confusion

1-3 (4th ed. 2008) [hereinafter MAHMOUD]. Incidentally, this arrangement is quite different from the parallel system of state and federal courts found in the United States (US). See, e.g., RENE DAVID & JOHN E.C. BRIELEY, MAJOR LEGAL SYSTEMS IN THE WORLD TODAY 425-430 (3rd ed. 1985). 7 Essam Al Tamimi & Emma van Son, United Arab Emirates, in THE PRACTITIONER’S GUIDE TO ARBITRATION IN THE MIDDLE EAST AND NORTH AFRICA 181-194 (Essam Al Tamimi, ed. 2009). 8 ESSAM AL TAMIMI, PRACTICAL GUIDE TO LITIGATION AND ARBITRATION IN THE UNITED ARAB EMIRATES 147-161 (2003) [hereinafter AL TAMIMI]. 9 United Nations Commission on International Trade Law (UNCITRAL), Status: 1958 - Convention on the Recognition and Enforcement of Foreign Arbitral Awards (last visited June 4, 2009) http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html. In fact, a number of other Arab states including both Bahrain and Qatar had joined the New York Convention before the UAE did so. Id. Certainly, this treaty has done much to promote the use of arbitration as an effective means of resolving international business disputes. 10 Here I am referring to things like pretrial or settlement conferences and court referrals of parties to mediation. Such practices can be found in quite a few jurisdictions. In the United States, for example, facilitating settlement is one of the officially stated purposes for the pretrial conferences conducted by judges in civil cases in the federal district courts. FED. R. CIV. P. 12. Likewise, in East Asia, since the 1990s Singapore has used settlement conferences and referrals to mediation in order to dramatically reduce the number of cases going to trial. WALEED HAIDER MALIK, JUDICIARY-LED REFORMS IN SINGAPORE 39-40 (2007). In the UAE, the federal courts can engage in mediation/conciliation. Dispute resolution – looking into the future, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Mar. 2009, at 14 (excerpts of speeches by Hadef Al Dhahiri and Omar Bin Sulaiman). 11 Indeed, for years some have spoken about the large-scale privatization of justice. JIM V. LOPEZ, PRIVATE JUSTICE: ALTERNATIVE DISPUTE RESOLUTION IN THE PHILIPPINES 1-7 (1996) [hereinafter LOPEZ]. Nevertheless, courts can still sometimes become involved in arbitrations given the main restrictions on party autonomy. JENKINS & STEBBINGS, supra note 1, at 165-167.

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even among lawyers. Yet, ADR can be divided into three general categories: negotiation, mediation, and arbitration.12

Negotiation consists of the parties to a dispute negotiating to find a settlement either directly or with the help of advisers such as lawyers.13 Potentially, negotiation can be the cheapest and fastest form of ADR.

Mediation involves a neutral third-party guiding the parties towards a settlement.14 Mediation can also be quick. Likewise, mediation is typically inexpensive, but, unlike a judgment from a court, mediation is not legally binding.

The terms mediation and conciliation are often used interchangeably although sometimes a distinction is made between the two with mediation being merely facilitative and conciliation being more evaluative in nature.15 Others prefer to describe such processes as facilitative mediation versus evaluative mediation.16 In any event, a facilitative approach seeks an effective resolution while an evaluative approach is more rights-based.

Variations on mediation include, among others, early neutral evaluation (ENE),17 mini-trials,18 and the somewhat controversial hybrid of Med-Arb.19

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Nicholas Gould & Victoria Russell, Claims and Dispute Resolution, in CONSTRUCTION LAW AND MANAGEMENT 433-511 (Keith Pickavance, ed., 2007) [hereinafter GOULD & RUSSELL]; JENKINS & STEBBINGS, supra note 1, at 127-142. Naturally, each has its advantages and disadvantages. 13 GOULD & RUSSELL, supra note 12, at 434. 14 See generally SHARON C. LEVINGTON & JAMES L. GREENSTONE, ELEMENTS OF MEDIATION (1997). 15 GOULD & RUSSELL, supra note 12, at 434-436; JENKINS & STEBBINGS, supra note 1, at 131. 16 GOULD & RUSSELL, supra note 12, at 434. 17 ENE is the referral of a dispute to an expert in the field who then issues a non-binding decision on the merits. JENKINS & STEBBINGS, supra note 1, at 137. 18 A mini-trial, also known as an executive tribunal, is a hybrid of mediation and an adversarial proceeding like what is found in arbitration or litigation. Teams from the two sides to a dispute present evidence and arguments before a panel typically made up of a neutral along with the decision-makers

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Arbitration, which is normally based on a contractual provision,20 entails the parties bringing a dispute before an arbitral tribunal consisting of an arbitrator or a panel of arbitrators (usually with three members)21 that then decides the case in the form of an award, which resembles a judgment from a court.22 Arbitral proceedings are typically private as opposed to the public nature of most court proceedings.23 Arbitration is normally slower and more expensive than mediation, but it can be faster than litigation. In terms of costs, arbitration is sometimes more expensive than litigation because of the need to pay arbitrator fees and, when institutional arbitration is being used instead of ad hoc arbitration, institutional fees as well. In contrast, judges are paid salaries by governments while court fees (filing fees, etc.) tend to be modest in many jurisdictions. Nevertheless, getting a good result is ultimately the most important concern to many parties.

Variations on arbitration include, among others, expert determination and dispute review boards (DRBs).24

from both sides. After the hearing is over, the neutral can mediate between the decision-makers away from their support staff and advisers. JENKINS & STEBBINGS, supra note 1, at 136. Mini-trials still appear to be relatively rare worldwide. GOULD & RUSSELL, supra note 12, at 482. 19 GOULD & RUSSELL, supra note 12, at 436. Med-Arb is a two-stage process with arbitrators acting first as mediators and then, if necessary, as arbitrators. JENKINS & STEBBINGS, supra note 1, at 141. 20 Of course, it is important that the contract contain a properly drafted arbitration clause. A poorly drafted arbitration clause can cause serious problems. Arbitral institutions typically provide model clauses that should enable lawyers avoid such problems when drafting contracts. CRAIG, supra note 4, at 43-46. 21 JENKINS & STEBBINGS, supra note 1, at 145-146. It is worth noting that arbitrators can be not only lawyers, but also engineers, architects, or other professionals. Hence, they often have technical expertise about fields such as construction that most judges lack. 22 LOPEZ, supra note 11, at 16. One important difference between litigation and arbitration is finality because there is typically no provision for appeals in arbitral proceedings. GOULD & RUSSELL, supra note 12, at 461. 23 LOPEZ, supra note 11, at 16. Besides privacy, arbitration offers other advantages over litigation like procedural flexibility. 24 GOULD & RUSSELL, supra note 12, at 436. DRBs developed around very large construction projects like the Hong Kong International Airport that involve numerous companies. Collin Wall & Timothy Hill, Hong Kong, in DISPUTE RESOLUTION AND CONFLICT MANAGEMENT IN CONSTRUCTION: AN INTERNATIONAL REVIEW 161, 168-170 (Peter Fenn et al, eds., 1998). Other common names for DRBs include dispute adjudication boards and simply dispute boards. JENKINS & STEBBINGS, supra note 1, at

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As its name suggests, expert determination means that a neutral with relevant technical expertise will decide a particular issue for the parties.25 As for DRBs, the members of a DRB can be selected in advance before any dispute arises.26 However, in mainstream arbitrations the tribunal is normally selected only after a dispute has arisen.27

III. Arbitration in the Arabian Peninsula

In the countries of the Arabian Peninsula, perhaps the most common forms of ADR for international commercial disputes would be negotiation and arbitration while mediation seems less common.28 Moreover, certain newer variations like DRBs appear to be unusual.29

For parties that select arbitration as the method for ultimately resolving disputes certain choices have to be made regarding various issues such as the language (or languages) of the arbitration. The most basic issue, though, is whether the arbitration should be ad hoc or institutional.30 For those that select institutional arbitration, it largely comes down to which institution should be used.

105-113. See also Anthony Page, Dabbling in dispute resolution, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, July 2008, at 38. 25 GOULD & RUSSELL, supra note 12, at 482-485. 26 PARLADE, supra note 1, at 5-8. 27 JENKINS & STEBBINGS, supra note 1, at 144-145. 28 This is an impression that I have gained mostly through a series of private conversations with lawyers based in Dubai and elsewhere during the past few years. 29 In light of the generally confidential nature of ADR, it is impossible to come up with exact figures on the usage of the different forms of ADR. Moreover, some ADR institutions are reluctant to even release general statistics. 30 JENKINS & STEBBINGS, supra note 1, at 81-82.

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A considerable number of disputes from the region end up being handled by famous arbitral institutions from outside of the region31 like the International Chamber of Commerce (ICC),32 the London Court of International Arbitration (LCIA), or the American Arbitration Association (AAA),33 to name just three. Yet, there are increasing options for institutional arbitration within the region including new regional affiliates for both the LCIA34 and the AAA.35

A number of countries in the region have at least one homegrown arbitral/ADR institution although some of them are of relatively recent origin plus the level of activity as well as the perceived quality of the institutions (and their arbitrators or other neutrals) can vary significantly.36

A few bodies are connected with particular industries while many are associated with chambers of commerce.37 An example of the second category would the Qatari

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In the broad Middle East and North Africa (MENA) region, one can find two of the four regional centers for international commercial arbitration connected with an international intergovernmental organization known as the Asian-African Legal Consultative Organization (AALCO). The bodies are in Cairo and Tehran, respectively. CRCIA, Cairo Regional Centre for International Commercial Arbitration (last visited June 4, 2009) http://www.crcica.org.eg/; TRAC, Tehran Regional Arbitration Centre (last visited June 4, 2009) http://www.trac.ir. Incidentally, the other two AALCO-affiliated regional centers are based in East Asia (Kuala Lumpur) and Sub-Saharan Africa (Lagos). 32 Although the ICC has its headquarters in Paris, ICC arbitrations can be conducted just about anywhere. CRAIG, supra note 4, at 49-51. Within the MENA region, one can find ICC national committees in certain countries. THE PRACTITIONER’S GUIDE TO ARBITRATION IN THE MIDDLE EAST AND NORTH AFRICA passim (Essam Al Tamimi, ed. 2009). The number of ICC cases with a party from the UAE has increased from seven in 2004 to 41 in 2008. Moreover, the UAE as the place of arbitration for ICC cases has increased from zero cases in 2004 to nine cases in 2008. Email from Sami Houerbi to Damien Horigan dated Feb. 22, 2009 (copy on file with the author). 33 Michael F. Hollering, How the AAA International Arbitration Program Works, in AMERICAN ARBITRATION ASSOCIATION HANDBOOK ON INTERNATIONAL ARBITRATION AND ADR 103-114 (Thomas E. Carbonneau & Jeanette A. Jaggi, eds., 2006). 34 See infra note 55. 35 See infra note 67. 36 THE PRACTITIONER’S GUIDE TO ARBITRATION IN THE MIDDLE EAST AND NORTH AFRICA passim (Essam Al Tamimi, ed. 2009). Frankly, a few institutions might exist in name only. 37 It should be kept in mind that many of the domestic chambers of commerce in the region are essentially government-linked entities.

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International Center for Arbitration, which is liked to the Qatar Chamber of Commerce and Industry based in Doha.38

In the UAE, the two major chambers in Abu Dhabi and Dubai, respectively, established their own bodies during the 1990s. Abu Dhabi has the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), which is a part of the Abu Dhabi Chamber of Commerce and Industry.39 Dubai has the Dubai International Arbitration Centre (DIAC), which is hosted by the Dubai Chamber.40

ADR services are sometimes provided by chambers in the northern emirates.41 For example, the Ajman Chamber of Commerce and Industry hosts the Ajman Centre for Trade Conciliation and Arbitration.42 Likewise, there is a Sharjah Commercial Reconciliation and Arbitration Center.43 Recently, the Ras Al Khaimah Chamber of Commerce and Industry announced that it would be setting up an arbitral institution of its own.44

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Qatar Chamber of Commerce & Industry, Declaration to Establish The Qatari International Center for Arbitration (posted in 2007) http://www.qcci.org/English/Qa_Int_Ar_En/Pages/default.aspx. See also Ahmad Anani, State of Qatar, in THE PRACTITIONER’S GUIDE TO ARBITRATION IN THE MIDDLE EAST AND NORTH AFRICA 125-136 (Essam Al Tamimi, ed. 2009). 39 ADCCAC, Abu Dhabi Commercial Conciliation and Arbitration Centre (last visited June 4, 2009) http://www.adcci.gov.ae:90/public/adccac/index.html. The ADCCAC was established in 1993. AL TAMIMI, supra note 8, at 147. 40 DIAC, Dubai International Arbitration Centre (last visited June 4, 2009) http://diac.ae/idias/. The DIAC was originally set up in 1994 as the Dubai Chamber of Commerce & Industry Commercial Conciliation & Arbitration Centre. AL TAMIMI, supra note 8, at 147. Incidentally, the Dubai Chamber of Commerce & Industry has renamed itself as simply the Dubai Chamber. 41 The northern emirates are Sharjah, Ajman, Umm Al Quwain, Ras Al Khamiah, and Fujairah. See, e.g., CROSS BORDER LEGAL PUBLISHING FZ LLC, UAE FREE ZONE INVESTMENT GUIDE 16-22 (2005). These five emirates are each smaller than either Abu Dhabi or Dubai in terms of land area as well as population. Id. 42 Ajman Chamber, Ajman Centre for Trade Conciliation and Arbitration (last visited June 4, 2009) http://ajcci.gov.ae/eacac.php. This institution seems to handle mostly local disputes and function largely in Arabic. 43 Sharjah Chamber of Commerce & Industry, Sharjah Commercial Reconciliation & Arbitration Center (last visited June 4, 2009) http://www.sharjah.gov.ae/ContactUs/Rules.asp. This institution seems to have recently undergone some type of reorganization. 44 RAK Sanctions Charter for Commercial Arbitration Centre, AL TAMIMI & CO. LAW UPDATE, Sept. 2008, at 10.

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Presently, the DIAC appears to be the most active arbitral institution in the UAE and, indeed, one of the more active bodies in the entire region.45 Also, it has a strong international focus,46 as befits a regional business capital,47 whereas other institutions seem to concentrate more on local disputes. Certainly, the DIAC has done much to quickly develop Dubai into a regional hub for arbitration. An indication of the DIAC’s international standing would be its membership in the Asia Pacific Regional Arbitration Group (APRAG).48 In fact, the DIAC is the first, and so far only, Arab member of the APRAG.49

The DIAC’s caseload has been increasing.50 In addition, the DIAC has seen a number of major cases with large amounts of money at stake.51

Dubai is also home to a relatively young institution called the International Islamic Centre for Reconciliation and Arbitration (IICRA), which was officially established in 2005 and began offering services in 2007.52 The specialty of the IICRA is resolving

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This is a general feeling that I have gained from working in the UAE since 2006. Unfortunately, my requests for statistics and other information from certain ADR bodies in the region were not answered as of the time of writing. Moreover, some institutions have little or no presence on the Internet. 46 The DIAC can easily handle cases in either Arabic or English as many of its staff members are bilingual. 47 AAMIR A. REHMAN, DUBAI & CO.: GLOBAL STRATEGIES FOR DOING BUSINESS IN THE GULF STATES passim (2008) [hereinafter REHMAN]. 48 APRAG, Members of APRAG (last visited June 4, 2009) http://aprag.org/members/index.html. 49 Id. 50 A total of 77 cases were filed at DIAC in 2007, and that number increased to 100 in 2008. Email from Sharon Karim to Damien Horigan dated Jan. 14, 2009 (copy on file with the author) [hereinafter KARIM]. Furthermore, during the first half of 2009, the number of cases filed at the DIAC had already matched the total filed during all of 2008. Middle East Business Report (BBC World television broadcast, May 23, 2009, interview with Hussam S. Talhuni, Director, DIAC). 51 During 2008, the amounts in dispute at the DIAC reportedly ranged from AED 120,000 to AED 10.5 billion. KARIM, supra note 50. In this connection, during the period in question the UAE dirham was pegged to the US dollar at AED 3.67 for one dollar. See, e.g., UAE AT A GLANCE 2008 4 (Ibrahim Al Abed et al, eds., 2008). 52 IICRA, The International Islamic Centre for Reconciliation and Arbitration (last visited June 5, 2009) http://www.iicra.net/English/indexe.htm; Bilal Ahmad Khan, Reconciling under Shari’a, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Dec. 2007, at 32 [hereinafter KHAN].

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disputes involving Islamic banks and financial institutions.53 Given the rapid growth of Islamic, or Sharia complaint, banking and finance during recent years in the Arabian Peninsula and beyond,54 the IICRA has the potential at least to be an important global ADR body.

An even newer arbitral institution in Dubai is the DIFC-LCIA Arbitration Centre.55 This body has been set up within a financial free zone known as the Dubai International Financial Centre56 (DIFC).57 However, the institution can serve parties that have no connection with the DIFC.58

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KHAN, supra note 52, at 32. Jonathan Ames, Business spirit, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Dec. 2007, at 14. The Arabic term Sharia, which can also be transliterated as Shari’a, refers to Islamic law. For a basic introduction to Islamic law, see C.G. Weeramantry, ISLAMIC JURISPRUDENCE: AN INTERNATIONAL PERSPECTIVE (The Other Press 2001) (1988). For some general background on Islamic finance, see Theodore Karasik, Frederic Webrey, and Steven Strom, Islamic Finance in a Global Context: Opportunities and Challenges, 7 CHI. J. INT’L L. 379 (Winter 2007). For a look at how Islamic law can impact arbitration, see Faisal Kutty, The Shari'a Factor in International Commercial Arbitration, 28 Loy. L.A. Int'l & Comp. L. Rev. 565 (Summer 2006). 55 In early 2008, the LCIA set up the DIFC-LCIA Arbitration Centre. DIFC-LCIA Arbitration Centre, DIFC-LCIA Arbitration Centre (last visited June 4, 2009) http://www.difcarbitration.com/; Kathryn Young, Arbitration deal thrusts Dubai to dispute forefront, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Mar. 2008, at 7; Jonathan Ames, The new arbiter, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Apr. 2008, at 18. 56 See generally AL TAMIMI & COMPANY, SETTING UP IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE (2nd ed. 2008) (provides a detailed overview of the DIFC from a legal perspective) (hereinafter AL TAMIMI & COMPANY). The DIFC has been designed to be a hub for both conventional and Islamic forms of banking and finance. Id, at 21. 57 At the federal level, the legal framework for the DIFC includes an amendment to Article 121 of the UAE Constitution along with Federal Law No. 8 of 2005 (concerning financial free zones), Cabinet Resolution No. 28 of 2007 (supporting regulations), and Federal Decrees No. 35 of 2004 (establishing the DIFC). At the emirate level, the framework includes the Law of the Dubai International Financial Centre, Dubai Law No. 9 of 2004 and the Law of the Judicial Authority at the Dubai International Financial Centre, Dubai Law No. 12 of 2004. English translations can be found at: DIFC, DIFC Laws & Regulations (last visited June 4, 2009) http://difc.ae/laws_regulations/index.html. DIFC statutes can be accessed at: DIFC, Enacted Laws (last visited June 4, 2009) http://difc.ae/laws_regulations/laws/enacted_laws.html. The free access on the Internet to DIFC statues, which are drafted in the English language, is in contrast to the relative difficulty and expense involved in obtaining good quality English translations of various federal and emirate laws in the UAE. Kathryn Young, Inside Information, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Apr. 2009, at 19. 58 In this respect, the DIFC-LCIA Arbitration Center differs from an earlier body, the Broadcasting and Publications Standards Tribunal, which was envisioned for another free zone, the Dubai Technology and Media Free Zone (the free zone that covers Dubai Media City, etc.). Dubai Technology and Media Free Zone Authority, The Dubai Technology and Media Free Zone Broadcasting and Publication Standards Tribunal Regulations 2003 (Nov. 4, 2003) http://www.tecom.ae/law/law_7.htm. 54

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The main advantage of the DIFC-LCIA Arbitration Centre is the fact that the DIFC has been set up as an English common law jurisdiction59 legally separate from the rest of Dubai.60 This feature provides a legal system that would be readily understood by many foreign parties yet located in the UAE. In fact, the DIFC has its own court system61 in the form of the DIFC Courts that consist of a trial court called the DIFC Court of First Instance and one appellate court called the DIFC Court of Appeal plus a Small Claims Tribunal.62 Parties could thus elect not only to use the DIFC-LCIA rules,63 but also to have DIFC law be the substantive law of the arbitration.64 All this makes the DIFC-LCIA Arbitration Centre unique in the region. 59

Law on the Application of Civil and Commercial Laws in the DIFC, DIFC Law No. 3 of 2004, Part 2, §8(2)(e) (refers to “the laws of England and Wales” as a source of law for the DIFC). 60 Like the rest of the UAE, Dubai outside of the DIFC has a mixed legal system, functioning in the Arabic language, based on secular laws in the civil law tradition of Europe and religious laws inspired by Islam. MAHMOUD, supra note 6, at 1-6. This is despite the fact that what are now the seven emirates of the UAE along with Bahrain and Qatar had all been British protectorates until the early 1970s. AHMED AL-SUWAIDI, FINANCE OF INTERNATIONAL TRADE IN THE GULF 24-25, 39 (1994). See also George N. Sfeir, MODERNIZATION OF THE LAW IN ARAB STATES: AN INVESTIGATION INTO CURRENT CIVIL, CRIMINAL, AND CONSITUTIONAL LAW IN THE ARAB WORLD (1998); William M. Ballantyne, ESSAYS AND ADDRESS ON ARAB LAWS (2000). A rough parallel to the role of the DIFC in Dubai and the UAE can be found in Hong Kong’s current status as the only common law jurisdiction in China. Hong Kong Basic Law, art. 8. For some background on Hong Kong’s unique legal identity, see Sir Anthony Mason, The Role of the Common Law in Hong Kong, in THE COMMON LAW LECTURE SERIES 2005 1-25 (Jessica Young & Rebecca Lee, eds., 2006). 61 The Law of the Judicial Authority at Dubai International Financial Centre, Dubai Law No. 12 of 2004; Court Law, DIFC Law No. 10 of 2004. The texts for both these statutes can be found at DIFC, Laws & Regulations: Enacted Laws (last visited June 4, 2009) http://difc.ae/laws_regulations/laws/enacted_laws.html. 62 DIFC Courts, DIFC Courts (last visited June 4, 2009) http://www.difccourts.ae. The DIFC Courts have been modeled largely after the English Commercial Court. Sara Hamdan (The National, Abu Dhabi), DIFC court ready for business (updated Oct. 9, 2008) http://www.thenational.ae/article/20081009/BUSINESS/463127537/1005/rss. In England, the Commercial Court is a part of the Queen’s Bench, which is, in turn, a division of the High Court. GARY SLAPPER & DAVID KELLY, THE ENGLISH LEGAL SYSTEM 99-100 (5th ed. 2001). See also Her Majesty’s Courts Service, Commercial Court (last visited June 4, 2009) http://www.hmcourts-service.gov.uk/infoabout/admiralcomm/commercial_court.htm. 63 DIFC-LCIA Arbitration Rules (2008) (copy on file with the author). Of course, these have been influenced by the LCIA Arbitration Rules from London. LCIA Arbitration Rules (1998). Yet, parties could theoretically opt for another set of rules. In any event, the DIFC-LCIA Arbitration Centre also has its own mediation rules. DIFC-LCIA Mediation Rules (2008) (copy on file with the author). Naturally, the institution provides model ADR clauses for contracts. DIFC-LCIA Recommended Clauses (no date) (copy on file with the author). 64 In this connection, it is worth noting that the DIFC has its own arbitration statute. DIFC Law No. 1 of 2008. This statute replaces the earlier DIFC Arbitration Law, DIFC Law No. 8 of 2004. The current DIFC Arbitration Law, like its predecessor, has been influenced by the work of the UNCITRAL in creating suggested legislation in this field. Specifically, many of the provisions of the UNCITRAL Model Law on International Commercial Arbitration of 1985 (as amended in 2006) have been incorporated with slight modification into the DIFC Arbitration Law. On a different point, a detailed and carefully drafted contract along with a good set of arbitration rules can minimize the impact of

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The major disadvantage of the DIFC-LCIA Arbitration Centre is its sheer newness because it was set up less than two years ago. Obviously, this body lacks the track record of the DIAC.65 Furthermore, the overseas enforcement of DIFC-LCIA arbitral awards remains something of an open question at the moment although in theory the New York Convention should generally facilitate such enforcement.66

Be that as it may, a possible rival to the DIFC-LCIA has been announced in nearby Bahrain. In late 2008, the AAA’s International Center for Dispute Resolution and the Ministry of Justice & Islamic Affairs of the Kingdom of Bahrain signed a Memorandum of Understanding to establish a body to be called the Bahrain Chamber for Dispute Resolution – AAA.67 This new institution could prove to be acceptable for those American businesses that are already familiar with the AAA. Moreover, in terms of economic opportunities, there is a bilateral free trade agreement (FTA) to attract American businesses to Bahrain and vice versa.68

Bahrain has had decades of experience in hosting offshore banking units69 and has expanded upon that role with the creation of the Bahrain Financial Harbour (BFH),70

substantive law thereby somewhat reducing the draw of DIFC law. For some thoughts on this issue, see CRAIG, supra note 4, at 53-54. 65 To partly overcome this shortcoming, the DIFC-LCIA can build upon the reputation and experience of the LCIA in London. For an overview of the LCIA, see LCIA, LCIA Arbitration and ADR Worldwide (last visited June 4, 2009) http://www.lcia-arbitration.com/. 66 Even with the New York Convention, in actual practice the enforcement of arbitral awards overseas is not always straightforward. For instance, enforcing such awards has often proven to be difficult in Saudi Arabia despite the fact that Saudi Arabia is a signatory to the New York Convention. Salah Deeb, Kingdom of Saudi Arabia, in THE PRACTITIONER’S GUIDE TO ARBITRATION IN THE MIDDLE EAST AND NORTH AFRICA 137-147 (Essam Al Tamimi, ed. 2009) [hereinafter DEEB]. 67 Joint Press Release (Manama & New York, Dec. 2, 2008) (copy on file with the author). 68 The FTA between Bahrain and the US took effect in 2006. Office of the United States Trade Representative, Bahrain Free Trade Agreement (last visited June 4, 2009) http://www.ustr.gov/trade-agreements/free-trade-agreements/bahrain-fta. 69 REHMAN, supra note 47, at 120-122. 70 BFH, Bahrain Financial Harbour (last visited June 4, 2009) http://www.bfharbour.com. The BFH could be viewed as being primarily a real estate development.

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but, unlike the DIFC, the BFH is not a separate jurisdiction.71 Bahrain’s legal system is a mixed one with Arabic as the official language.72 However, Bahrain has already had significant previous experience with arbitration because it has been home to the Gulf Cooperation Council (GCC) Commercial Arbitration Centre since the mid 1990s.73

There is also the possibility that a formal arbitral or ADR institution might be set up someday within an emerging financial hub in the region namely, the Qatar Financial Centre (QFC).74 In certain respects, the QFC is similar to the DIFC, but the QFC is not, strictly speaking, a free zone.75 Be that as it may, the QFC does have its own laws76 and its own judiciary,77 which, like those of the DIFC, are based on English models.78 In fact, there already is an arbitration law on the books for the QFC.79

71

AL TAMIMI & COMPANY, supra note 56, at 13. Id. 73 GCC Commercial Arbitration Centre, GCC Commercial Arbitration Centre (last visited June 4, 2009) http://www.gcac.biz/ (mostly in Arabic). See also Juris International, Arbitration and Mediation Centres (last visited June 4, 2009) http://www.jurisint.org/en/ctr/45.html. The GCC itself is an international intergovernmental organization made up of six member states: Saudi Arabia, the UAE, Oman, Kuwait, Qatar, and Bahrain. GCC, The Cooperation Council for the Arab States of the Gulf: Member States (last visited June 5, 2009) http://www.gccsg.org/eng/index.php?action=GCC. 74 QFC, Qatar Financial Centre (last visited June 4, 2009) http://www.qfc.com.qa. 75 Legally, the QFC was established by the QFC Law, Qatar Law No. 7 of 2005. For an English version of this law, see QFC, QFC Legislation (last visited June 4, 2009) http://www.complinet.com/qfcra/display/display.html?rbid=1557&element_id=2. For more about the QFC, see About the QFC (updated Mar. 13, 2009) http://www.qfc.com.qa/output/Why_QFC.aspx; Philip Thorpe, Building Better Markets, TRENDS: THE INTERNATIONAL MAGAZINE ON ARAB AFFAIRS, Mar. 2008, at 146-150; Qatar: Making the Rules, AL TAMIMI & COMPANY LAW UPDATE, Apr. 2006, at 6; Sundip Roy, Qatar’s Grand Ambitions, EUROMONEY, Apr. 2006, retrieved via LexisNexis; Insurers’ New Favourite Destination, REACTIONS (UK), Apr. 2007, retrieved via LexisNexis; Stephen Timewell, Qatar: Good Omens of Upheaval, THE BANKER, June 1, 2007, retrieved via LexisNexis. 76 Technically, the term “regulations” is used rather than “laws” for the QFC. QFC, QFC Legislation (last visited June 4, 2009) http://www.complinet.com/qfcra/display/index.html. The QFC’s regulations occupy a position similar to that of the DIFC’s laws while the QFC’s rules roughly correspond to the DIFC’s regulations. However, at this point in time, the QFC has a smaller amount of legislation than the DIFC. 77 QFC Civil and Commercial Court, QFC Civil and Commercial Court (last visited June 4, 2009) http://www.qfccourt.com/. QFC Regulatory Tribunal, QFC Regulatory Tribunal (last visited June 4, 2009) http://www.qfctribunal.com/index.php. Previously, these bodies were called the QFC Tribunal and the Appeals Body, respectively. QFC Pushes on with New Legal System, EUROWEEK, May 26, 2006, at 16. See also Kathryn Young, Woolf predicts QFC court will play a regional role, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Feb. 2008, at 8. 78 Despite the fact that a number of prominent English and commonwealth judges have been selected to serve on the bench, the QFC judiciary has apparently not decided a single case or even issued 72

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Among other things, this law enables the QFC Civil and Commercial Court to act as the appointing authority for arbitrators, if needed.80 Likewise, this same court would be the court for any recourse against an arbitral award.81

Accordingly, starting such an institution based at the QFC could be a logical move assuming, of course, that Doha is actually a big enough market to support both an ADR institution at the QFC and the previously mentioned Qatari International Center for Arbitration at the Qatar Chamber of Commerce and Industry. Otherwise, the chamber’s body could be occasionally linked to the QFC.82

IV. Future prospects

The global recession has had an impact on the economies of the Arabian Peninsula.83 Therefore, in the near future the region will likely witness continued growth in ADR in general and international commercial arbitration in particular. Certainly, business disputes and litigation generally tend to increase during economic downturns.84 Nonetheless, according to some sources, the current crisis has resulted in fewer cases thus far than might have been expected under the circumstances.85

procedural rules. Richard Harding, Court conundrum, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Aug. 2008, at 14. See also Sarah Simms & Andrew Watson, Courting approval, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, May 2009, at 30. 79 QFC Regulation No. 8: QFC Arbitration Regulations (2008). The text is available online at: http://www.complinet.com/qfcra/display/display.html?rbid=1557&element_id=3. 80 QFC Arbitration Regulations, art. 14. 81 QFC Arbitration Regulations, art. 41. 82 For instance, the parties to a dispute conceivably might select QFC law rather than regular Qatari law as the law of the arbitration, and so on. 83 Johnathan Ames, Time for Reflection, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Jan. 2009, at 5. 84 Johnathan Ames, Registered for Action, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Nov. 2008, at 46 (interview with Mark Beer). 85 Jonathan Ames, Too Broke to Sue, THE BRIEF: MIDDLE EAST LAW FOR THE BUSINESS PROFESSIONAL, Feb. 2009, at 20 (interview with Sir Anthony Coleman).

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There is also the likelihood that other ADR institutions will be set up in the region.86 As was mentioned earlier, both the LCIA and AAA have already made commitments to the region. Furthermore, there is the potential for something at the QFC.

Another possible place for such a body would be at a planned financial hub called RAK Financial City87 to be located in the UAE’s northernmost emirate, Ras Al Khaimah.88 As mentioned earlier, the Ras Al Khaimah Chamber of Commerce and Industry has announced the creation of its own arbitral institution. At this point in time, it is not clear if that body would also handle cases from RAK Financial City or if a separate one would be created specifically for RAK Financial City.

Finally, Saudi Arabia, which is the largest Arab economy,89 stands out as a place where there could be significant growth in international commercial arbitration. Litigation still seems to be preferred over arbitration in Saudi Arabia, but in recent years there has an apparent increase in the use of arbitration despite the current lack of a formal arbitral institution operating actively in that country.90

86 For example, there have been some moves toward forming a specialized arbitral institution to deal with maritime matters. Jose Franco (Khaleej Times, Dubai), Maritime industry wants Dubai arbitration centre (posted on Apr. 7, 2008) http://www.khaleejtimes.com/DisplayArticleNew.asp?xfile=data/business/2008/%0A%0AApril/busine ss_April200.xml§ion=business&col=. 87 Ras Al Khaimah launches Financial City, GULF BUSINESS, July 2007, at 14; RAK Investment Authority, RAK sets up Financial City (posted June 12, 2007) http://www.rak-ia.com/News.aspx?id=21. 88 In this connection, it is worth recalling that Ras Al Khaimah, like Dubai, has retained its own court system. MAHMOUD, supra note 6, at 3. Hence, it is conceivable that a separate judiciary might be established someday for RAK Financial City assuming the project itself survives the global recession. 89 REHMAN, supra note 47, at 111-117. 90 DEEB, supra note 66, at 139.

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