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Is your business in Dubai making the right choice when it comes to resolving disputes: Arbitration vs Court litigation? In the UAE, particularly Dubai, the choice often narrows down to the Dubai International Financial Centre (DIFC) courts or the Dubai International Arbitration Centre (DIAC). This blog delves into why arbitration often emerges as the superior option for businesses, highlighting cost, time, appeal processes, enforcement, interim orders, and alternative dispute resolution (ADR).
In legal agreements, jurisdiction clauses determine where disputes will be resolved. These clauses should not be overlooked as mere boilerplate text. Instead, they require careful consideration to avoid future complications.
Cost Considerations
DIFC Courts
Initiating a claim in DIFC courts entails significant initial fees, borne by the claimant. However, if successful, these fees can be recovered from the defendant.
DIAC
Arbitration at DIAC starts with a registration fee. Subsequent costs, including tribunal and administrative fees, are shared equally. The 2022 amendments to DIAC rules also allow the winning party to recover legal costs from the losing party, reducing the claimant’s financial burden.
Time Efficiency
DIFC Courts
The duration of a DIFC court case ranges from eight months to two years, influenced by various factors like interim applications and evidence.
DIAC
Arbitration timelines at DIAC are flexible, set by the tribunal in consultation with parties. Recent amendments allow for expedited proceedings, potentially concluding within three months, making it a faster alternative.
Appeal Processes
DIFC Courts
Appeals in DIFC courts require permission and can only be based on errors in law, facts, or procedural injustice. The decision by the Court of Appeal is final.
DIAC
DIAC awards can be challenged on limited grounds such as improper execution of the arbitration agreement or the tribunal exceeding its authority. These decisions can be appealed further to the Court of Cassation.
Enforcement of Decisions
DIFC Courts
Enforcing a DIFC court judgment involves filing an enforcement proceeding, leading to appropriate orders by the execution court.
DIAC
A DIAC award needs to be ratified by a court before enforcement. Once ratified, it is treated as a court judgment and can be enforced similarly.
Interim Orders
DIFC Courts
DIFC courts can issue interim orders, enforceable through similar procedures as final judgments.
DIAC
Tribunals can issue interim orders, but these require recognition before enforcement. The DIFC courts now recognize interim orders irrespective of the arbitration’s seat.
Alternative Dispute Resolution (ADR)
Both DIFC courts and DIAC encourage ADR methods like mediation. DIAC has a structured mediation process with set timelines, whereas DIFC courts allow parties to mediate but lack a standardized procedure.
UAE’s Commitment to Arbitration and International Conventions
Also, The UAE is a party to the New York Convention since 2006, ensuring the enforcement of arbitral awards. The UAE is also part of various bilateral and multilateral treaties, enhancing the recognition and enforcement of arbitral awards internationally. When comparing Arbitration vs. Court, the UAE has distinct arbitration laws for onshore and offshore jurisdictions. The onshore laws were amended in 2023, while DIFC and ADGM followed their own regulations, all based on the UNCITRAL Model Law.
Arbitration Institutions and Legal Framework in the UAE
The UAE hosts several arbitration bodies, including DIAC, arbitrateAD, and others in Sharjah and Ras Al-Khaimah. The ICC, SCCA, and RAC have also established offices in the UAE. Foreign arbitral providers can operate in the UAE, especially in free zones like ADGM and DIFC. UAE courts generally support arbitration, although inconsistencies can arise in onshore courts due to the lack of a binding precedent doctrine.
Key Elements for Drafting Effective Arbitration Agreements
Arbitration agreements should be clear, specifying the seat, language, number of arbitrators, and applicable law. Offshore agreements need to clearly indicate the supervisory jurisdiction to avoid conflicts. Reach out to Dubai legal consultants who can help you out in arbitration agreements.
Conclusion
Choosing Arbitration vs Court litigation offers businesses flexibility, cost efficiency, faster resolutions, and enforceable interim measures. Properly drafted jurisdiction clauses can safeguard business interests and provide clarity in dispute resolution processes. Engaging a legal expert to draft or review these clauses is crucial to avoid future legal pitfalls. For further guidance & assistance reach Dubai Lawyers or top corporate law firms in Dubai.