LexisNexis met with Essam Al Tamimi, Founder and Senior Partner at Al Tamimi & Company, to hear his thoughts on some of the key themes and ideas that lie at the heart of the 4th Arab Lawyers Forum. Speaking to Hussain Hadi, Head of LexisNexis Middle East, Essam shared his views on a range of topics including how lawyers can play a role in facilitating growth in the Middle East, the drive to meet international standards of best practice, managing the inescapable advance of disruptive technology, and what the development of arbitration in the Arab world means for lawyers. The interview, which has been divided into five sections, is available to watch on the homepage of the event’s official website: http://www.arablawyersforum.com/.
by Ian McDougall – Executive Vice President and General Counsel of LexisNexis
In Europe, at least, Brexit is the ongoing major news story. There is hardly a week that goes by without a Brexit story. Either the European Union complains about the UK Government, or the UK Government makes some comment about post Brexit arrangements.
With regard to international relations between the UK and the European Union, we are about to enter new territory and it is complicated by the way that the EU was set up. One important aspect of the existing, and soon to be new, relationship is the issue of trade. But before we get to that, it may be worth spending a little time on the background.
The European Union
The EU is a creature of the post-World War 2 reconstruction of Europe. It was/is an attempt at unifying countries that had repeatedly fought wars against each other; each one more devastating than the one before. The idea of creating a Union, was in itself, not a new one. Politicians for many years had dreamed about the unification of European countries. Some tried to bring it about by force, and some through diplomacy. For many, a mechanism by which this might happen was trade. By aligning trading conditions, it was argued, there would be an opportunity to gradually align and integrate economies. As economies became more integrated, this would create the environment for eventual full political union (in other words, a single country). Winston Churchill, in a speech on 9 September 1946 at the University of Zürich, Switzerland, suggested the notion of a “United States of Europe” as a post war European settlement.
In pursuance of this ambition, 1952 saw the creation of the European Coal and Steel Community, which was declared to be a first step in the federation of Europe. In 1957, Belgium, France, Italy, Luxembourg, the Netherlands and West Germany signed the Treaty of Rome, which created the European Economic Community (EEC) and established a customs union. Effectively, a barrier free trade zone where laws and regulations would be aligned to enable trade to take place as if within the same country. Other structures, institutions and, indeed, countries followed.
The Treaty of Rome was modified on a number of occasions until the current EU. The European Union as we know it today with 27 countries and many more law-making powers, was formed by the Treaty of Maastricht in 1992 and then amended by the Lisbon Treaty in 2009. For the purpose of this article, many of the political implications of that Treaty are not relevant. However, the Treaties comprise two key elements that have led to the current situation.
Firstly, the European Union establishes primacy of law. European Law is superior to, and overrides, the law of the Member State where that law conflicts with EU law. For those unfamiliar with this, let me give a regional analogy: imagine the laws of the UAE being overridden and rendered invalid by judges from countries outside the UAE. An interesting thought. I once asked a person in the United States what he would think of a US law rendered invalid by Judges from Mexico, Guatamala, Costa Rica and Honduras. He found the idea incomprehensible. That seems to be the common reaction when I ask the question around the world.
Secondly, the European area is a tariff and barrier free zone for trade. Provided that the rules of the EU are followed by the member state, trade can move freely from one state to another within the Union.
The Problem of Brexit
These two elements: supremacy of Law and conduct of Trade, have led directly to the issues that are now faced as a result of “Brexit” (A portmanteau word from “Britain” and “Exit”).
Firstly, when the Treaties were drafted, it would appear that not much thought was given to the idea that a country may want to leave the EU. As a result, no detailed mechanism was established to allow such a thing to happen. Effectively it was imagined the EU is a one-way journey with a single destination.
Secondly, the idea that a Member State may eventually resent the fact that it no longer had ultimate law making power was also never considered. The subsuming of a nation State’s law making power (what many would refer to as it sovereignty) into the greater EU was considered to be a logical and necessary requirement. For a number of reasons, this view has come to be challenged more often in recent times leading to campaigns in different member states to leave the EU.
Surprising many, the UK held a referendum on continued membership. Surprising many more, the UK voted to leave the EU. The UK formally notified the EU of its decision to leave on 29 March 2017 initiating the “formal withdrawal procedure” for leaving the EU, committing the UK to leave the EU on 29 March 2019. Although I use the expression “formal withdrawal procedure” that is a description of a process that doesn’t actually exist! Article 50 of the Treaty states, inter alia:
- Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
- A Member State which decides to withdraw shall notify the European Council of its intention…..the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.
- The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification …….. [The clock is ticking!]
This means the process is “to be agreed” on a case by case basis. Or, to put it into legal terms, Article 50 might be considered an “agreement to agree”. Interestingly, in many courts, such a thing might be considered unenforceable if it was included in a simple commercial contract.
An interesting prospect arises as a result; namely that the withdrawal from the EU must also “take account” (whatever that means) of the framework for the leaving Member State’s future relationship with the EU (also to be agreed).
The big question, therefore, is on trade. If the laws are not the same, and if the State concerned is no longer prepared to abide by all the internal EU laws, then trade barriers are erected on the same basis as those in place for any other non-Member country.
Many argue, as a result of the change in trading relationship, that Brexit could reduce the UK’s real per-capita income in the medium and long-term. The extent, or even realisation, of this is currently unknown and leads to an increased desire to formulate an agreement with the EU to facilitate a trade agreement before the time limit in Article 50 expires.
Free Trade Zones
Having had the opportunity to live in Dubai, I see it as a good regional example to use, as a comparative analysis, of where Britain could be heading.
Free Trade Zones (FTZs) are a very interesting concept. These special economic zones are set up with the objective of offering tax concessions, customs duty benefits and other concessions to expatriate investors. There are more than 30 Free Zones operating in Dubai. FTZs in Dubai (and the wider UAE) are governed pursuant to a special framework of rules and regulations. A Free Zone Authority offers business licenses to foreign-owned businesses.
The interesting point about this is that they are trade zones where special, and different, rules apply even though they are administered by the same State that administers the non-free trade zones. In fact, the EU has a precedent for this on a different subject matter. The Union has strict Data Protection laws which prohibit the transfer of personal data to countries not offering the same level of protection.
The United States is a country designated by the EU as not having sufficient protections for personal data. To facilitate the movement of personal data (important for the conduct of trade!) the EU-US “Privacy Shield”, agreed on 2 February 2016, creates a system where US companies, operating in the US, are subjected to EU rules.
Brexit – EU Trade Zones
Perhaps the opportunity exists to use the UAE model as an example of best practice in this field?
It would seem that the precedent, and opportunity, exists for the UK and the EU to come to a trade arrangement in a very speedy and effective manner. We could imagine a situation where the UK sets up a number of commercial “EU Trade Zones” in different locations around the country; probably connected to ports in some way, where companies could choose to locate.
The zones would be subject to the trade (and other) rules of the EU, while still being located within the UK. Those areas, currently under EU law, where the member state has law-making discretion (for example taxes), would also apply in the zone. So the UK could set the tax rates for the zone as it sets its own tax rates now. The police would be UK police. The UK courts would have jurisdiction, etc. The zone would be administered in every respect by the UK government.
Whatever customs arrangements are necessary (as a result of the UK no longer being within the EU customs union, would take place at the Zone’s perimeter (I have avoided using the emotive word “border”!) much as happens now. For example, the UK us not a member of the EU passport free (“Schengen”) zone. When travelling to France on the Eurostar train from London, one must pass through French customs at Euston Station in London.
In all of the press coverage of the Brexit “negotiations” that have taken place so far, the idea of EU trade zones within the UK does not appear to have been raised. Perhaps the UAE has found a model that can be a solution in many areas of the world? Perhaps this modest article can raise that question for consideration?
The most significant development in dispute resolution in the UAE, without a doubt, is the recent promulgation of the UAE’s standalone Arbitration Law. Federal Law No 6/2018 which was Gazetted on 15 May 2018, officially brings into place a UNCITRAL modelled law which significantly improves the UAE legal regime on arbitration and formally repeals the previous provisions on arbitration in the UAE Civil Procedure Code.
Practitioners of dispute resolution in the UAE will welcome the new law, as many of the ambiguities of the former arbitration regime have been ameliorated.
With the announcement of this new law, it is clear that the UAE has improved its process for legislative reform.
Prior to the new law being enacted, the law on arbitration was restricted to scant articles of the UAE Civil Procedure Code, Federal Law No. 11/1992. With the new law however, we see the introduction of a comprehensive framework for arbitration which is in line with international norms and best practices.
The new law has adopted the UNCITRAL-based model for arbitration legislation (United Nations Commission on International Trade Law). This means that the legal framework for arbitration in the UAE has been significantly modernised and now UAE seated arbitrations can be seen to be very much in line with international best standards, in the following ways:
Unlike its predecessor, the new arbitration law distinguishes between domestic and international arbitrations.
Article 2(1) states that any arbitration conducted in the UAE will be subject to this arbitration law, unless the arbitrating parties agree that their dispute be subject to a different provision of law, such as the DIFC Arbitration Law.
Article 3 outlines the circumstances in which onshore arbitration can be considered international. For example, if the arbitrating parties have their head office in two or more countries at the time of conclusion of the arbitration agreement. In this situation, consideration has to be made to the parties’ domiciles and the country which has most relevance to the subject matter of the arbitration agreement.
In relation to arbitration proceedings conducted outside the UAE, the new arbitration law can apply to their dispute as per article 2(2), if all parties agree.
The new law confirms that it applies to any arbitration relating to a legal relationship which is governed by UAE law, unless another provision of law states otherwise (article 2(3)). For instance, disputes relating to employment issues or criminal activity cannot be arbitrated and accordingly, are governed by UAE Labour Law and the Penal Code.
It is still a mandatory requirement for an arbitration agreement to be in writing. However, now the law clearly expands on the criteria which will satisfy the written component of an arbitration agreement. For instance, article 7(2)(a) provides that an arbitration agreement will be considered to be in writing and therefore valid, if it is contained in a document signed by both parties, or it is noted within a written or electronic correspondence exchanged between the parties.
Consequently, the written requirement for an arbitration agreement has become less prohibitory as it now encompasses electronic correspondence, which in turn illustrates the legislature’s acknowledgement of modern business practices. This is further exemplified by the new law permitting correspondence to be sent via fax or email (article 24(1)(b)), and hearings or deliberations by Arbitral Tribunal’s, to be performed via telephone or other modern means of communication (article 28(2)(b)).
The concept of separability has now been introduced within the law in article 6(1). Meaning, an arbitration agreement contained in the main body of a contract will be considered as independent. As a result, any revocation or termination of the main contract will not affect the arbitration agreement, subject to the main contract being valid.
The formation, obligations and nomination process concerning arbitral tribunals are examples of some of the developments arising out of the new law, which will be discussed in turn below. However, it is important to note that there are two additional changes to the law which relate to new powers being invested in arbitral tribunals and due to their significance, these will be explained under their own subheadings below; judicial competence and interim precautionary measures.
In relation to formation, the previous arbitration law stated; if more than one arbitrator is appointed, their number should always be uneven. Whereas now the default position is that if the arbitration agreement is silent on appointment, the arbitral tribunal should be made up of three arbitrators, not only one, unless the relevant onshore arbitration centre decides otherwise. This is noted in article 9(1).
The new law contains a non-discrimination clause in article 10(2), unseen in the former arbitration legislation. Confirming that unless it has already been agreed upon between the parties, or provided for by law, an arbitrator is not required to be of any given gender or nationality.
Regarding the arbitrators’ obligations, the updated law affirms that they must disclose any doubts of their impartiality or conflicts of interests to all parties and the Arbitral Tribunal at the point of acceptance and throughout the arbitral proceedings, in line with article 10(3). The previous arbitration chapter did not explicitly state this responsibility and instead this principle was developed through case law.
Article 11 sets out the method for nomination if the parties have not otherwise agreed on the procedure within the arbitration agreement. Contrasting the Civil Procedure Code, the new law helpfully explains how the nomination process will operate in different scenarios, for instance if a sole arbitrator or several arbitrators are being appointed to an arbitration.
Arbitral Tribunals now have the capacity to decide on their own jurisdiction which includes hearing challenges made on the grounds that an arbitration agreement is unenforceable (article 6(2)), or that the subject matter of the dispute is not covered by the same, as per article 19(1). The same provision goes on to elucidate that Arbitral Tribunals can decide on any plea to the jurisdiction either in a preliminary decision or in the final arbitral award.
In the event the Arbitral Tribunal considers they can competently hear the dispute within a preliminary decision, article 19(2) sets out the time periods in which either party can request the competent court to rule on that matter and when the court should issue their decision. The time limits in which parties have to file a plea to the jurisdiction of the Arbitral Tribunal are set out at article 20.
Having these unequivocal deadlines when an Arbitral Tribunal makes a determination, undoubtedly provides more certainty to parties and their representatives about when these challenges will be heard and ruled upon. Although, article 19(2) states that the proceedings will be stopped until the court makes a decision on jurisdiction, unless the Arbitral Tribunal is inclined to continue at the request of one of the parties. In light of the efficiency of the new law, it is assumed that the exception in article 19(2) will be exercised by both the parties and Arbitral Tribunals.
Interim and Precautionary Measures
The old arbitration chapter did not provide for any interim measures. However now, at the request of either party or at the discretion of the Arbitral Tribunal, such measures can be awarded. Article 21(1) advances an extensive list of the types of interim relief and precautionary measures available to arbitrating parties, which include:
i. Preserving evidence that may be material to the resolution of the dispute – article 21(1)(a);
ii. Preventing the dissipation of assets or property which a subsequent award may be satisfied – article 21(1)(c). This is the most common precautionary measures sought by parties during arbitral proceedings;
iii. Maintaining the status quo pending determination of the dispute – Article 21(1)(d). For instance, an order which upholds the contracting parties’ relationship until the arbitral proceedings have been completed.
After an interim measure has been issued by the Arbitral Tribunal and after obtaining written permission, the party to whom an order has been successfully granted may request that the competent court enforce the order. The competent court then must enforce the order within 15 days of the request being received. Article 21(4) also states that the successful party must serve their request on all parties involved.
The provisions concerning enforcement of interim orders by the competent court are held in article 18. Article 18(2) confirms that the President of the competent court can order appropriate provisional or precautionary measures, at any time prior to or during arbitral proceedings, regardless of whether they are potential or current.
Recognition and Enforcement
Previously, the process of recognising and enforcing both domestic and foreign arbitral awards within the onshore courts was infamous for unmeritorious challenges being advanced by award debtors. An example being, award debtors could nullify awards on the grounds that not all of the pages of a final award had been signed by every member of an Arbitral Tribunal or because an arbitrator had failed to legitimately swear in witnesses for a hearing. As a result these types of procedural challenges created lengthy and costly battles between the arbitrating parties.
However, the new law positively provides that the party who wishes to enforce the arbitral award, namely the award creditor, must submit an application to the competent court confirming the award and requesting its enforcement. Article 55(1) outlines all the accompanying documentation which must be submitted with the enforcement request.
The competent court then has 60 days from receipt of the award creditor’s application to enforce the arbitral award. However, this cannot be undertaken by the court if any of the subsections of article 53(1) are met.
Previously, case judgements were all that lawyers could rely upon when assessing whether their clients arbitral award was at risk of being nullified, meaning the nullification procedure was unpredictable. As the doctrine of stare decisis is not followed within the UAE onshore courts since they operate under a civil system, case judgments in reality provide little security. This is because they do not create binding precedents, which leaves room for inconsistency.
All the unpredictability should dissipate as article 53(1) encompasses very limited circumstances in which an arbitral award can be set aside or nullified, for example:
i. Article 53(1)(b), if one of the parties at the time of enforcement thereof, lacks capacity or is of diminished capacity in accordance with the law;
ii. Article 53(1)(d) if one of the parties is unable to present their case as a result of not being put on notice of the appointment of arbitrators, or of the arbitral proceedings;
iii. Article 53(1)(f) if the composition or appointment of one of the arbitrators does not adhere to the new Arbitration law, or the Arbitration agreement between the parties.
Article 54(2) provides a strict 30 day time limit for a party to commence nullification proceedings once they are notified of the arbitral award being granted by an Arbitral Tribunal.
The only other mechanism available to an award debtor to challenge the enforcement of an arbitral award is by raising a challenge during the award creditor’s application for ratification and enforcement before the competent court, as per article 53(1).
The revised nullification process is headed in the right direction as it not only gives greater certainty to companies and individuals already based in the UAE, but also to those contemplating investment and trade here, which in turn will strengthen the UAE economy.
Continuing Arbitral Proceedings
Permitting electronic communication during arbitral proceedings and providing clearer deadlines and procedures for the enforcement and nullification of arbitral awards are just some of the examples which will help increase the productivity of proceedings. Allied to this, there are numerous subsections throughout the new legislation which confirm that arbitral proceedings should continue notwithstanding:
i. A party contending that an arbitration agreement is invalid, revoked or terminated as per article 6(2);
ii. Action being brought before a court despite a legitimate arbitration agreement existing as noted in article 8(2). Another tactic which was used by award debtors to stall the enforcement of arbitral awards;
iii. Any challenge being made against an arbitrator pursuant to article 15(3);
iv. A competent court considering an application for enforcement of an interim or provisional measure in line with article 18(3).
The significance of this much-anticipated development should not be understated. The UAE has long been a regional hub for international arbitrations, despite the law governing arbitration being underdeveloped. That is now a thing of the past.
The new law will no doubt further bolster confidence in the use of arbitration in the UAE and the UNCITRAL-based arbitration law most certainly brings the UAE’s arbitral framework in line with international standards. The new federal law on arbitration was not a rushed afterthought. Indeed, lawyers in the UAE have been waiting for the enactment of this law for the best part of 11 years.
Thankfully, the new Federal Arbitration Law has greatly improved the uncertainty caused by the previous articles on arbitration within the UAE Civil Procedure Code, and will without a doubt further boost the UAE’s already sterling reputation as a hub for of international arbitration.
The law came into force one month following the date of its publication in the Official Gazette (dated 15 May 2018 – Issue No. 630) as per article 61, and will regulate all current arbitrations. It is essential that all professionals involved in onshore arbitral proceedings which are or could be, subject to the new arbitration law, become well-versed with its modernisation.
International Bechtel Co. Ltd. V. Department of Civil Aviation of the Government of Dubai 300 F. Supp. 2d 112 (DDC. 2004)
Written by Areen Jayousi, Partner.
Horizons & Co Law Firm, UAE
+97150 284 2926
Areen has over a decade of diverse experience in managing commercial disputes in the Middle East, gained through private and in-house legal practice in the region. His particular expertise is the preparation and conduct of arbitrations and dispute resolution for complex development projects, as well as national and international litigation.
Areen has successfully represented clients in high profile and complex cases, including multi-million dollar arbitrations, before the International Chamber of Commerce, Dubai International Arbitration Centre and the London Court of International Arbitration. He is a registered arbitrator with the Dubai International Arbitration Centre and is regularly called upon in this regard.
As head of arbitration his specific focus is arbitration cases related to real estate, property and construction, however he has also been paramount to the success of many litigation cases within the firm. Being familiar with both civil and common law legal systems, Areen often implements his expertise on UAE law by providing legal advice and opinions to large international law firms regarding detailed subject matters.
This week the spotlight is on real estate developments in the GCC, where Abu Dhabi’s Urban Planning and Municipality Department has announced a number of facilities including real estate developers will be exempt from fines imposed on delays in registering their real estate transactions for the first time. Developers are now exempt from 10,000 AED fines if they are late in registering their businesses. The exemption is valid for all transactions made on properties but which have not been registered.
Elsewhere, Oman’s Housing Ministry has announced it has set up a centre to help developers clear all project approvals in 27 days. The aim is to boost the sector in the Sultanate and reduce paperwork levels. Previously developers had to approach different Government agencies to get approvals which could take upto two years.
After two months of electoral turmoil, the highest court of Iraq ordered on Thursday a manual recount of all the votes casted during the last legislative elections of May 12.
Despite an election that seemed optimistic – at least from a legal and procedural standpoint, Iraq is still living great political uncertainty. Several political parties have come out with accusations of fraud – and such claims have obviously increased doubts on the electoral results in a country still struggling to perfect its democratic process. As a result the Iraqi Parliament demanded a recount of all votes.
Supreme Judicial Council President, Chief Justice Medhat al-Mahmoud announced on Thursday that “The Court finds the decision of Parliament [taken on 6 June] in favor of manual counting does not violate the provisions of the Constitution”.
What does this mean for the Iraqi democratic process? Should Iraqis be reassured that the Rule of Law, through independent courts, have taken on the fight for fair élections?
The European Parliament and Council passed a regulation (EU) 2016/679 to refresh the data and privacy protection laws for European Union States. The new regulation is commonly known as the General Data Protection Regulation (GDPR) and came into effect on 25 May 2018. The GDPR has defined the rights of EU individuals relating to how their data is collected, stored, processed and used by organisations. Any organisation that handles the data of any EU citizen is bound by the provisions of the GDPR. This regulation is applicable globally and fines of up to 4% of worldwide turnover or 20 million euros (whichever is greater) will be levied on businesses breaching them. GCC organisations and businesses need to consider whether they collect, store, process or control any data for EU citizens and revise their own governance and enterprise risk management frameworks to comply with the GDPR provisions.
Read full article here.
The Governors of the GCC monetary agencies and Central Banks have agreed to establish a Gulf disbursements company to facilitate money transactions between them. All members have contributed to the company’s capital and are seeking specialist consultations on the payment system. The company will be headquartered in Riyadh and a secondary office will be based in Abu Dhabi. The aim is to provide a quick and safe environment for financial transactions between them.