September 17, 2015

Emirates Maritime Arbitration Centre

Following consultation with shipping industry representatives including a number of regional maritime law firms and as part of a strategy to increase confidence in the UAE market, the Dubai Maritime City Authority has recently announced an initiative to establish a specialised maritime arbitration centre known as the "Emirates Maritime Arbitration Centre" (EMAC).

EMAC seeks to fill a geographic/time zone gap in the international maritime arbitration market between London and the Far East by establishing a regional maritime centre in the UAE which will operate in line with the wishes expressed by its potential users.  Crucially, the indication is that the default seat of EMAC arbitrations will be the Dubai International Financial Centre (DIFC).

That is important because the designated seat of any arbitration determines, amongst other things, the law governing the conduct of the proceedings and the court which will have supervisory jurisdiction over the arbitration.  It is that court which will ultimately decide important matters such as any challenges at the seat to the final award and the extent to which the parties are able to obtain interim measures in support of the proceedings from that supervisory court.  It is also relevant to parties in the region because the enforcement of a foreign arbitral award in the UAE is, despite recent advances, still relatively uncommon and can be problematic in the courts of the UAE (outside of the DIFC Courts).

Although most existing maritime arbitral institutions recognise the right of the parties to select the seat of any proceedings conducted pursuant to their rules, it is currently uncommon for maritime parties to choose a UAE seat.  Institutional arbitrations which are conducted pursuant to rules such as the LMAA, SMA, SIAC and HKIAC are usually seated in London, New York, Singapore or Hong Kong.  As a result, parties often face difficulties when seeking to enforce in the UAE any foreign maritime awards or court orders made during the course of proceedings in support of the arbitration.

EMAC will seek to capitalise on the arbitration-friendly approach of the Courts of the DIFC by providing that the seat of any arbitration conducted pursuant to the EMAC Rules will be the DIFC, unless the parties expressly agree a different seat.

DIFC seated arbitrations are supervised by a common law court in the English language pursuant to the DIFC Arbitration Law (which is based on the UNCITRAL Model Law). Critically, the DIFC Courts are party to a Memorandum of Guidance with the Dubai Courts, which together with the provisions of Dubai Law 12 of 2014 (the Judicial Authority Law), provides for the automatic reciprocal enforcement of judgments (which would include arbitral awards in respect of which the DIFC Courts have ordered recognition and enforcement) without a review of the underlying merits of that judgment or the underlying award taking place.

The advantage for EMAC of a DIFC seat is, therefore, the potential to limit a recalcitrant party's ability to un-meritoriously challenge an order or award of the Tribunal. Any final award rendered in DIFC seated arbitration will also be enforceable in any New York Convention signatory state as the DIFC Courts are considered UAE Courts and therefore benefit from the UAE being a signatory to that Convention.

The EMAC Rules will also adopt a "light-touch" approach to case management, in common with other maritime arbitral institutions, and will seek to incorporate the most successful aspects of both ad hoc and institutional arbitration to ensure that disputes are handled as quickly and cost-effectively as possible.

Against this background, the EMAC Rules are expected to provide for any dispute to be resolved by a sole arbitrator in the absence of the parties' express agreement to the contrary. Further, the sole arbitrator will be appointed by EMAC within thirty days of a request for arbitration being filed in the event that the parties are not able to agree on the appointment. Whilst the EMAC Rules will not restrict the timeframe in which proceedings are to be concluded, final awards must be issued within ninety days of the date on which the hearing is deemed closed, subject to any extension of time granted by the Tribunal and/or Registrar and to settlement of the Tribunal's fees.

One feature of the EMAC Rules which will be familiar to users of existing arbitral institutions, will be the option for parties to elect for small claims, fast-track or document-only arbitrations. Whilst the criteria to be applied when allocating claims to each of these types of arbitration is not yet finalised, EMAC intends to issue separate sets of rules to deal specifically with small claims, fast track arbitration, mediation and other alternative dispute resolution methods.  This could potentially provide a cost-effective forum for the determination of relatively low value and straightforward claims for cargo damage,  unpaid freight or demurrage or hire.  Presently the time and costs spent pursuing such claims in maritime arbitrations centres overseas and then enforcing in the UAE through the local courts makes the pursuit of such small claims unattractive.

There is no indication yet as to whether there will be mechanisms for a Tribunal to hear consolidated or concurrent claims where there are common parties and issues of fact, which are a feature of some other maritime arbitration centres. Consolidation and concurrency are useful in disputes where chains of charterparties and sale contracts are involved and such mechanisms would be welcomed by the maritime community.

Whilst the EMAC Rules are at an advanced stage of drafting, the exact date on which they will come into force and EMAC will become operational is yet to be announced.  Given the UAE's success in the transport, logistics and maritime sectors and its position as a global and regional business hub, if the EMAC Rules are attractive and the centre then administers arbitrations effectively and with a light touch, the potential exists for EMAC meet some of the needs of local and international companies in the maritime sector including marine insurers, shipowners, charterers, repairers, ship builders and port terminal operators.