REUTERS | Thomas Peter

Abu Dhabi ups its game

Compared to Dubai, Abu Dhabi, capital of the UAE, can seem like a poor relation. However, Abu Dhabi is rapidly catching up. In this post I look at three recent developments which show that Abu Dhabi is emerging as a jurisdiction to give Dubai a run for its money. 

Three positive new developments were announced in July 2017,  which it is hoped will bring Abu Dhabi to the forefront of dispute resolution in the Middle East.

Background

As well as landmark mega-projects like the Burj Khalifa, Dubai has an established dispute resolution infrastructure incorporating the popular “onshore” Dubai International Arbitration Centre (DIAC), as well as the “offshore” Dubai International Finance Centre (DIFC), the leading finance hub in the Middle East. The DIFC has its own common law courts, arbitration centre (the DIFC-LCIA) and arbitration law. It has proven itself adept at conducting construction arbitrations, and enforcing arbitral awards, with speed and ease: something of an achievement in the Middle East.

In 2014, some ten years after Dubai, Abu Dhabi launched its answer to the DIFC, the Abu Dhabi Global Market (ADGM). Unlike the DIFC, English common law is directly applicable in the ADGM (by virtue of the Application of English Law Regulations 2015). This means that Technology and Construction Court (TCC) judgments from England and Wales apply directly to construction disputes subject to ADGM Law.

In April and May 2016 the ADGM Courts signed Memoranda of Understanding with the Abu Dhabi Judicial Department and Federal Ministry of Justice respectively. These memoranda recorded an agreement to “take all necessary measures that will ensure that enforcement of the ADGM Courts’ judgments and arbitration awards issued in ADGM may be sought before the federal courts in the UAE.”

This was a critical first step in broadening the appeal of ADGM as an arbitral seat, which would otherwise have had a very narrow applicability for companies and assets located within ADGM.

Recent developments

The following three recent developments represent a significant step towards the ADGM being able to serve as a true alternative forum for dispute resolution for the construction industry:

  • A new full-service ADGM Arbitration Centre will be established within the ADGM supported by the International Chamber of Commerce (ICC) Court, which will set up a representative office in the ADGM. It will feature state-of-the-art technology, and should be able to start accepting registration of new arbitration cases soon after opening at the beginning of 2018. An ADGM seated arbitration also means that the two pro-arbitration ADGM courts, the ADGM Court of First Instance and Court of Appeal (headed up by Lord Hope) will be the curial courts supervising any arbitration.
  • A new Federal Arbitration Law (incorporating elements of the UNCITRAL Model Law) is expected to be enacted later this year. Arbitrations seated in Abu Dhabi are currently governed by a small section within the UAE Federal Civil Procedures Code, which is widely regarded as an inadequate framework for modern-day arbitrations. The new law would bring it in line with international standards and with the recent updates to arbitration laws in the wider region including, Bahrain, Qatar and Saudi Arabia.
  • Law No.13 of 2017, which comes into effect on 26 August 2017, will introduce a flat rate of AED 5,000 for enforcement of arbitral awards and presumably ADGM judgments. The current court fee for enforcement in the Abu Dhabi courts is 3% of the value of the award, without a maximum cap. Given that arbitral awards on flagship construction projects often exceed AED 100 million, the court fees for enforcement alone can reach several million AED, which can act as a barrier to enforcing parties.

Significance for construction industry

Contracts with the Abu Dhabi government, employer in many of the biggest construction projects in Abu Dhabi, mandated an Abu Dhabi seated arbitration under the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC) Rules. It is hoped that the ADGM’s decision to pair itself with the ICC, one of the leading arbitral institutions in the Middle East and the world, will encourage parties, particularly the Abu Dhabi government, to choose to seat their construction disputes in the ADGM. Of course, even if future government contracts stipulate ADGM-ICC arbitration, it will be some time before these contracts are the subject of disputes.

Watch this space

Critics may note that the first draft of the new Federal Arbitration Law was circulated in 2006. Until the new Federal Arbitration Law is introduced, the ADGM, with its own arbitration law, offers a viable (and preferred) alternative to “onshore” Abu Dhabi seated arbitrations. The ADGM Arbitration Regulations 2015 are based on the UNCITRAL Model Law and therefore reflect international best practice, with tweaks to maximise party autonomy and control and to ensure finality of awards, meaning that the ADGM has one of the most up-to-date arbitration laws in the world.

How does a party who has obtained a favourable arbitral award through the new ADGM-ICC enforce that award in “onshore” Abu Dhabi where the award debtor’s assets are based? The process is expected to be similar to that established in Dubai: namely that an ADGM seated award will be recognised and executed as a judgment of the Abu Dhabi courts on the basis of the principle of mutual recognition.

However, it is not yet clear whether a formal enactment of Abu Dhabi law will be necessary for this mutual recognition to take place. It will be some time until the first test case for this route of enforcement is decided, and we eagerly anticipate further clarification on this point.

Berwin Leighton Paisner LLP Richard Dupay

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