Commercial Arbitration in Dubai – Comprehensive Guide

Introduction

Commercial arbitration has become the preferred method for resolving commercial disputes in Dubai, due to its speed, confidentiality, and flexibility compared to regular judiciary. In this comprehensive guide, we review everything you need to know about commercial arbitration in Dubai.

What is Arbitration?

Definition: Arbitration is alternative method for dispute resolution, where both parties agree to appoint one or more arbitrators to decide their dispute with binding ruling.

Difference Between Arbitration and Judiciary:

Aspect	Arbitration	Judiciary
Speed	Faster (6-12 months)	Slower (1-3 years)
Confidentiality	Complete	Public
Judge Selection	By agreement	Appointed by state
Cost	Higher initially	Lower fees but may prolong
Appeal	Very limited	Available at several levels
Specialization	Specialized arbitrators	General judges
Flexibility	Flexible procedures	Strict procedures

Types of Arbitration in Dubai

1. Institutional Arbitration

Definition: Arbitration administered by specialized arbitration institution.

Famous Arbitration Centers in Dubai:

A) Dubai International Arbitration Centre (DIAC)

One of oldest and most famous centers
Applies UNCITRAL rules
Specialized in commercial disputes

B) DIFC-LCIA International Arbitration Centre

In Dubai International Financial Centre
Applies LCIA rules
For international financial and commercial disputes

C) DIFC Arbitration Institute

Part of DIFC Courts
Independent judicial system
Applies English law

D) International Chamber of Commerce (ICC)

Regional office in Dubai
For large international disputes
Highest cost

Advantages:

Clear and specific rules
Professional administration
List of approved arbitrators
Ready facilities

Disadvantages:

Higher cost
Less flexible than ad hoc arbitration

2. Ad Hoc Arbitration

Definition: Arbitration outside institutional framework, where parties agree on all details.

Advantages:

Complete flexibility
Lower cost
Greater speed

Disadvantages:

Needs detailed agreement
Procedural disputes may arise
No administrative body

Effective Arbitration Conditions

1. Arbitration Clause in Contract

Correct Drafting:

Example – DIAC Arbitration Clause:

"Any dispute arising out of or relating to this contract shall be referred to and
finally resolved by arbitration under the Arbitration Rules of the Dubai International
Arbitration Centre (DIAC).
Place of arbitration: Dubai, United Arab Emirates.
Language: Arabic/English.
Number of arbitrators: One/Three."

Essential Elements:

Clear reference to arbitration
Specify arbitration center (if any)
Specify place of arbitration
Specify language
Specify number of arbitrators

2. Independent Arbitration Agreement

After Dispute Arises: If no prior arbitration clause, parties can agree later to resort to arbitration.

Example:

"The parties agree to refer the existing dispute between them regarding [dispute description]
to arbitration under [arbitration rules]."

Arbitration Procedures

Stage One: Commencing Arbitration

1. Notice of Arbitration:

Sent by claimant party
Specifies dispute and claim
Proposes arbitrator (if needed)

2. Response to Notice:

From respondent party
Within specified period (usually 30 days)
May include counterclaim

3. Constitution of Arbitral Tribunal:

Selection of arbitrators
Verify their independence
Arbitrators’ acceptance of appointment

Stage Two: Preliminary Proceedings

Preliminary Session:

Determine time schedule
Agree on procedures
Determine applicable law
Discuss required evidence

Submission of Briefs:

Statement of claim (from claimant)
Statement of defense (from respondent)
Additional briefs (if needed)

Stage Three: Hearings

Session Procedures:

Present evidence
Hear witnesses
Interrogate experts
Closing arguments

Usually:

1-3 sessions
At arbitration center premises
Parties and their lawyers attend

Stage Four: Issuing Award

Arbitration Award:

Full reasoning
Binding on parties
Final (usually)
Enforceable

Duration:

Usually 30-60 days after last session
May be longer in complex cases

Arbitration Costs

Administrative Fees

Dubai International Arbitration Centre (DIAC):

Registration fees: 5,000 – 20,000 AED
Administrative fees: according to dispute value (2-5%)

DIFC-LCIA Centre:

Slightly higher than DIAC
Varies by case

Arbitrators’ Fees

Influencing Factors:

Dispute value
Case complexity
Number of arbitrators
Arbitrator’s reputation

Estimation:

One arbitrator: 50,000 – 300,000 AED
Three arbitrators: 150,000 – 1,000,000 AED

Lawyers’ Fees

According to:

Working hours
Case complexity
Lawyer’s reputation

Estimation:

Simple case: 50,000 – 150,000 AED
Complex case: 200,000 – 1,000,000+ AED

Advantages of Arbitration

1. Speed

Usually 6-12 months
Much faster than judiciary

2. Confidentiality

Closed sessions
Details not published
Protects companies’ reputation

3. Specialization

Specialized arbitrators
Deeper understanding of dispute
More accurate decisions

4. Flexibility

Flexible procedures
Agreed time schedule
Choice of arbitrators

5. Finality

Final and binding award
Difficulty of challenge
Quick closure

6. International Enforceability

New York Convention 1958
Enforcement in 160+ countries
Easier than enforcing foreign judicial judgments

Disadvantages of Arbitration

1. High Cost

Arbitrators’ fees
Administrative fees
Lawyers’ and experts’ fees

2. Limited Appeal

Usually cannot appeal
If there’s legal error

3. Difficulty Binding Non-Signatory

Arbitration binds only signatories
Difficulty adding third parties

4. May Be Slower Than Expected

In complex cases
If there’s non-cooperation

Enforcing Arbitration Awards

In UAE

Procedures:

Submit enforcement request to competent court
Attach original and translated arbitration award
Prove notification of other party
Pay fees

Conditions:

Final award
Doesn’t violate public order
Proper notification