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UAE approves arbitration law after 11 years

ANALYSIS: The Emirates News Agency has reported that the UAE's Federal National Council has approved the current draft of the Federal Law on Arbitration in Commercial Disputes (Federal Arbitration Law).01 Mar 2018

The draft Federal Arbitration Law, which has been said to be imminent since the UAE acceded to the 1958 New York Convention in 2006, is believed to be based on the UNCITRAL Model Law.

According to the Al Bayan newspaper the Federal National Council "stressed the importance of supporting economic development and attracting investments in seeking to achieve growth and stability for the UAE national economy".

Al Mobasher Newspaper has also reported that Sheikh Mohammed bin Abdullah al-Nuaimi, member of the Federal National Council and Chairman of the Constitutional and Legislative Affairs Committee, said that many articles have been introduced and amended, to ensure a secure environment for investments within the UAE economy.

According to Al Mobasher Newspaper, Sheikh Mohammed bin Abdullah al-Nuaimi explained that in view of the unprecedented economic growth witnessed by the UAE, a federal law on commercial arbitration is necessary to accommodate the State's economic reality, as well as to maintain and encourage the steady and secure inflow of investments. Sheikh Mohammed bin Abdullah al-Nuaimi also explained that the enactment of a federal arbitration law should be taken as an indicator of security for investors, and a step in line with the State's UAE Vision 2021. 

An UNCITRAL-based arbitration law would bring the UAE's arbitral framework into line with international standards. Arbitral proceedings seated in the UAE are currently governed by a 15 article arbitration chapter from the Federal Civil Procedure Law which are not based on the UNCITRAL Model Law. A new Federal Arbitration Law would presumably repeal the 15 articles in question.

The Al Mobasher newspaper has reported that the draft of the Federal Arbitration Law is composed of 61 articles, divided into six chapters; that is 25 more than the UNCITRAL Model Law. Other reports across the years have previously noted that the draft law may also incorporate elements from the Egyptian Arbitration Law.

While obtaining Federal National Council approval is an important step towards effecting this significant reform to the UAE's arbitration law, there are still a  number of further steps that must be taken before the new law becomes reality. According to article 110 of the UAE Constitution draft federal laws are enacted after the adoption of the following procedure: the Council of Ministers first prepares a draft of the law and submits this to the Union National Council, also known as the Federal National Council. Once approved by the Federal National Council, the Council of Ministers submits the draft law to the President of the Union for his agreement and then presents it to the Supreme Council for its ratification. Once ratified by Supreme Council, the President of the Union would sign the law which is then promulgated.

According to Article 111 of the UAE Constitution, promulgated laws are to be published in the Official Gazette of the Union within a maximum of two weeks from the date of their signature and promulgation by the President of the Union after the Supreme Council has ratified them.  Ratified federal laws are enforced either from the date of their publication in the official gazette or three months after their publication unless otherwise is expressed in the law itself.

The enactment of a new federal law on arbitration would be welcome news for arbitration in the UAE. This would go a long way to modernise the law governing arbitrations seated in the UAE, a jurisdiction which is already seen as a regional arbitration hub. The enactment of a new Model Law-based arbitration law is likely to further strengthen the UAE's position as a regional hub for arbitration, and may also may alleviate some of the uncertainty caused by recent changes to the UAE's Penal Code.  It remains to be seen whether the draft law introduces a definition of neutrality and integrity/impartiality and bias in relation to arbitrators following the recent changes to the Federal Penal Code.

Bill Smith and Maria Mazzawi are arbitration experts with Pinsent Masons, the law firm behind Out-Law.com