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Last year myself and Mohamed ElGhatit, the first Director and Registrar of the DIFC-LCIA Arbitration Centre (DIFC-LCIA) since its relaunch in November 2015 wrote an article for the 2016 GAR Middle Eastern and African Arbitration Review. Mohamed has decided to return to private practice at the end of March 2017, so the first major change for DIFC-LCIA this year will be the appointment of a new registrar, the trustees expect to announce who that will be before the end of March 2017.
I do not propose to repeat in this article the information in last year’s article about the history of DIFC-LCIA. Its objectives remain to promote and administer effective, efficient and flexible arbitration and other ADR proceedings for parties doing business throughout the Gulf and MENA regions. Instead, I will deal with changes in DIFC-LCIA and what DIFC-LCIA has achieved in its first year of operation since its re-launch and other changes.
At the end of 2016 J William Rowley QC retired as chairman of the board of the LCIA and a trustee of DIFC-LCIA. His place on the board of trustees of DIFC Arbitration Institute (DAI) was taken by Audley Sheppard QC, the new chairman of the LCIA board. LCIA is entitled at all times to nominate and have two of the five trustees of DAI as its appointees. This ensures that LCIA, which provides technical assistance and know-how to DIFC-LCIA (which is, in effect, a joint venture with DAI to operate DIFC-LCIA) maintains a sufficient level of participation in DAI to help to ensure that DIFC-LCIA operates to the same standards of international excellence as those recognised as being provided by LCIA. This is reassuring to the users of DIFC-LCIA who benefit from this relationship. Importantly, under the Arbitration Rules of DIFC-LCIA it is the LCIA Court that appoints arbitrators in its arbitrations, having taken due regard of nominations made by parties pursuant to the arbitration agreement, but based upon recommendations made by the DIFC-LCIA registrar. This ensures the input of local and regional knowledge into the appointment process. The role of the LCIA Court is also crucial in determining challenges to arbitrators and this provides confidence to its users that challenges will be dealt with impartially, in accordance with LCIA’s standards and free from any (perceived) prospect of local or regional political or commercial involvement in the process. There has, in fact, been only one challenge to an appointment during 2016 and this challenge failed.
The next important change that occurred in 2016 was the introduction of the new DIFC-LCIA Arbitration Rules with effect from 1 October 2016 – I shall briefly review these in a separate section.
The other major change that has occurred is that with the appointment of Mohamed and the promotion later in 2016 of Isabella Becker to the role of case manager, following training in London by LCIA, the handling of casework has transitioned from the situation that had prevailed for several years when there was no locally based DIFC-LCIA registrar and a registrar or assistant registrar based in London handled the casework, to one where the casework is handled in DIFC-LCIA in Dubai with the assistance of Jackie van Haersolte, the Director General of LCIA and her team. The financial aspects of administering DIFC-LCIA arbitrations has also transitioned to DIFC-LCIA in Dubai.
As a result of these casework changes DIFC-LCIA is more active and visible locally and regionally on the casework front and receives many enquiries by phone and email along with more users visiting the offices of DIFC-LCIA than previously.
The Rules changes
The changes to the DIFC-LCIA Rules reflect those made two years earlier to the LCIA Rules. It is the writer’s view that one of the least-heralded changes, but in future terms the more important, is the option for users to file requests for arbitration online using a standard electronic form available on DIFC-LCIA’s website and to pay the registration fee electronically (article 1.3). Although this is clearly the most efficient way to commence a DIFC-LCIA arbitration many local users are still delivering requests by hand and regional users and those from further afield by courier. Last year there was even one case where a lawyer from overseas flew to Dubai and then travelled to DIFC-LCIA to deliver the request personally. There is, I believe, a general recognition among users and institutions that greater efficiency in international arbitration must be encouraged. How much cheaper and more efficient it is to file requests for arbitration online and to make payment electronically than to deliver by hand, courier or personally from another country should be obvious and is to be encouraged.
In DIFC-LCIA arbitrations the response may also be submitted to the registrar in electronic form (as email attachments) as well as in paper form or in both forms. If submitted on paper then one more copy for a sole arbitrator is required or three more copies where there is a three-member tribunal. There is also a standard electronic form available online on the DIFC-LCIA website for the submission of the response (article 2.3). Pursuant to article 1.4, the date of commencement of the arbitration is the date of receipt of the request and the registration fee.
The next potentially important change in the DIFC-LCIA Rules was the addition of article 9B, which provides for the appointment of an emergency arbitrator. This change follows the same fashion as has occurred in the rules of most major arbitral institutions. As this rule has only been in place since 1 October 2016 and does not apply to arbitration agreements concluded before that date unless the parties have opted into it or, even after that date if the parties have agreed in writing at any time to opt out of it, it would perhaps not be surprising for readers to learn that to date (March 2017) there have not been any requests for the appointment of an emergency arbitrator under DIFC-LCIA Rules. Such requests must be made prior to the formation or expedited formation of the arbitral tribunal to conduct emergency proceedings or determine urgent matters or order emergency or protective measures pending the formation of the tribunal. An emergency arbitrator will be a sole arbitrator and the application (which should be filed preferrably by electronic means) must (article 9.5) set out (i) specific grounds for requiring the appointment of an emergency arbitrator; and (ii) the specific claim with reasons for emergency relief. The application must be accompanied by the applicant’s written confirmation that the applicant has paid or is paying the DIFC-LCIA’s fee under article 9B (currently 50,000 dirhams) plus the emergency arbitrator’s fee of 120,000 dirhams. The application fee is non-refundable and the emergency arbitrator’s fee is non-refundable if the LCIA Court appoints an emergency arbitrator.
Although there have not yet been any emergency arbitrator appointments (up to March 2017) so long as ‘DIFC’ or ‘Dubai International Financial Centre’ is chosen as the seat of the arbitration the writer’s view is that any properly made emergency arbitrator order or award is likely to be supported by the DIFC courts, which will be the curial courts and are regarded as ‘arbitration friendly’.
The next important changes relate to amendments to articles 1.5 and 2.5 of the DIFC-LCIA Rules specifically providing at the request and response stages that there may be one or more claimants or respondents and article 15.6 which gives the tribunal the right to make additional directions as to any part of the written stage of the arbitration (including witness statements, submissions and evidence), particularly where there are multiple claimants and multiple respondents or any cross-claim between two or more claimants or between two or more respondents.
The new rules have also provided additional powers to the arbitral tribunal, on the application of the parties, to order consolidation with the approval of the LCIA Court where all the parties to the arbitrations to be consolidated so agree in writing (article 22.1(x)) where one or more other arbitrations subject to the DIFC-LCIA Rules commenced under the same arbitration agreement or any compatible arbitration agreement between the same disputing parties, provided that no arbitral tribunal has yet been formed for such other arbitrations or, if already formed, that such tribunal is composed of the same arbitrators.
Under article 22.6 the LCIA Court may also determine, after giving the parties a reasonable opportunity to state their views, that two or more arbitrations subject to the DIFC-LCIA Rules and commenced under the same arbitration agreement between the same disputing parties, shall be consolidated to form one single arbitration subject to the DIFC-LCIA Rules, provided that no arbitral tribunal has yet been formed by the LCIA Court for any of the arbitrations to be consolidated.
Possibly the most controversial changes to the Rules are to be found in article 18 of the Rules entitled ‘Legal Representatives’. Article 18.2 provides that prior to the tribunal’s formation the registrar may request from any party (i) written proof of the authority granted by that party to any legal representative designated in its request or response; and (ii) written confirmation of the names and addresses of all such party’s legal representatives in the arbitration. After its formation, at any time the arbitral tribunal may order any party to provide similar proof or confirmation in any form it considers appropriate. Thereafter, in accordance with article 18.3 any intended change or addition by a party to its legal representatives shall be notified promptly in writing to all other parties, the arbitral tribunal and the registrar and can only take effect with the approval of the arbitral tribunal. The purpose of requiring such approval is found in article 18.4, which gives the tribunal the right to withhold approval where any change or addition could compromise the composition of the tribunal or finality of an award. This change was felt to be necessary to discourage the guerrilla tactic employed in some arbitrations whereby a party that wished to stall or delay the arbitral proceedings would deliberately change their legal representatives or add a representative to the team to create a conflict with a member of the tribunal and disrupt the proceedings.
In addition to dealing with such conduct, which should be discouraged, the new DIFC-LCIA Rules follow the LCIA Rules in going further, namely with measures to encourage proper and consistent conduct of all parties’ legal representatives. Article 18.5 provides that each party shall ensure that all its legal representatives appearing by name before the tribunal have agreed to comply with the general guidelines contained in the Annex to the DIFC-LCIA Rules as a condition of such representation and that each party, by agreeing to the DIFC-LCIA Rules, represents that its legal representatives have agreed to such compliance.
Article 18.6 empowers the tribunal to whom a complaint is made by one party against another party’s legal representative so appearing before the tribunal to decide whether or not the legal representative has violated the guidelines in the Annex and to impose any of the following sanctions: (i) a written reprimand; (ii) a written caution as to future conduct in the arbitration; and (iii) any other measure necessary to fulfil within the arbitration the general duties required by the arbitral tribunal under articles 14.4(1) and (2). Under article 14.4 the tribunal has (in broad terms) the duty to act fairly and impartially and allow the parties reasonable opportunity to put their cases and deal with those of their opponents and to adopt procedures suitable to the circumstances of the arbitration, avoiding unnecessary delay and expense to provide a fair, efficient and expeditious means for the final resolution of the parties’ disputes.
The general guidelines found in the Annex make it clear that they do not derogate from the arbitration agreement nor are they intended to undermine any legal representative’s primary duty of loyalty to the party represented in the arbitration and to present that party’s case effectively. Similarly they do not derogate from the mandatory laws, rules of law, professional rules or codes of conduct to the extent that they apply to a legal representative appearing in the arbitration. Subject to the above, the guidelines require that a legal representative shall not engage in activities intended unfairly to obstruct the arbitration or jeopardise the finality of any award; should not knowingly make any false statement to the arbitral tribunal or the LCIA Court; should not knowingly procure or assist in the preparation of or rely upon any false evidence; should not knowingly conceal or assist in the concealment of any document (or any part thereof) which is ordered to be produced by the tribunal; should not deliberately initiate or attempt to initiate with any member of the arbitral tribunal or with any member of the LCIA Court making any determination or decision any unilateral contact relating to the arbitration or the parties’ dispute which has not been disclosed in writing prior to or shortly after the time of such contact to all other parties, the tribunal and the registrar.
Those readers not already familiar with the requirements of the general guidelines for parties’ legal representatives may wonder why it was felt necessary to introduce them. It is, in the writer’s view, a sad commentary on the conduct of some legal representatives in international arbitration. But for such conduct there would have been no need for the guidelines.
The development of the centre
With the arrival of the first full-time registrar shortly after the relaunch of DIFC-LCIA it has been possible, as mentioned above, to transition casework on the Centre’s existing cases during 2016. From a relatively low base 2016 saw a 20 per cent increase in cases (from 15 in 2015 to 19 in 2016) with, on average, somewhere between 20 and 30 cases being administered at any one time principally from Dubai but subject to LCIA’s supervision and assistance.
For the first several years following the relaunch, a principal focus of DIFC-LCIA’s business development initiatives is to increase the knowledge of and recognition of DIFC-LCIA. To achieve that DIFC-LCIA embarked on many initiatives.
It has progressed discussions with a number of partners with whom to collaborate to provide training and seminars as well as developing its own seminar offerings.
Successful events have included the ‘Introduction to Mediation in MENA’ seminar held in conjunction with the DIFC Academy of Law.
The most successful event held, which over 200 practitioners attended, was DIFC-LCIA’s Symposium held for half a day during Dubai Arbitration Week.
The DIFC-LCIA’s website was also completely overhauled along with its marketing materials and designs for the covers of its new Rules to make them recognisable and distinctive. A DIFC-LCIA Instagram account was opened in 2015 and efforts are made to keep it up to date with news of various events in which DIFC-LCIA have been involved and other developments.
DIFC-LCIA has endorsed and co-organised or participated in more than a dozen events in the UAE in 2016, most notably:
- the XXIV Old Buildings Annual Dubai Seminar;
- Dispute Resolution in DIFC and onshore with Two Temple Gardens;
- US DoC and Afghani Counsel seminar;
- Indian Business Counsel event on Dispute Resolution in UAE;
- JETRO seminar on the advantages of DIFC-LCIA Arbitration;
- a Young ICC Annual event in Dubai (co-organised);
- the Dubai Courts’ Annual conference on Developments in Law and Practice in the UAE; and
- the Clyde & Co Regional Road Show.
During 2016, the DIFC-LCIA also held more than 150 one-on-one meetings with barristers, private practice practitioners as well as in-house counsel in the UAE. The purpose of these meetings was to ascertain the interest and usage of DIFC-LCIA Rules by parties, as well as to further promote the DIFC-LCIA as it aspires to be the recognised international arbitration centre focused on the region.
DIFC-LCIA also jointly organised a number of events in targeted jurisdictions that do considerable business in the UAE and the region. These included the following:
- USA Road Show – jointly organised with Hogan Lovells and King and Spalding – these events targeted US companies as well as private practice practitioners advising clients interested in doing (or already doing) business in the region; (events and seminars were held in New York, Washington and Houston). DIFC-LCIA also held an event at the UAE Embassy in Washington where members of the US-UAE business council were invited;
- China Road Show – (this was organised during a visit to Shanghai to speak at the Annual Kluwer event). Targeted law firms were selected for their work in advising clients with interests in the region (these including K&L Gates, Hogan Lovells and Clyde & Co).
- Europe Road Show – DIFC-LCIA pitched and spoke at various events organised by law firms. The target audience were GCs and transactional practitioners advising clients in the region. The road show was held in London (partly with Dubai Economic Department) and Germany. Law firms participating included Brown Rudnick, Freshfields, White & Case and Hogan Lovells).
- In December 2016, as part of an initiative between the emirate of Ras Al Khaimah and DIFC Dispute Resolution Authority, DAI signed an agreement on arbitration cooperation with the RAK Executive Council, which provides that government agencies in RAK (including all government departments, institutions, bodies, authorities, free zone authorities and government selected corporations) and local and foreign investors, may enter into contracts that provide for DIFC-LCIA with a seat in DIFC as the forum for dispute resolution.
- The agreement includes a commitment for DIFC-LCIA and RAK to engage in an outreach programme (which shall start this year). This agreement may provide a useful template for agreements with other emirates, states and free zones.
- In addition to these initiatives, DIFC-LCIA is also setting up its Users’ Council to provide (inter alia) lawyers, experts and arbitrators in the region with a forum to provide feedback to DIFC-LCIA.
2016 has been an interesting and busy year for DIFC-LCIA. Since its relaunch it is now set on a firm foundation to develop as it journeys towards its goal of being the leading international arbitral institution in the region.