Update on Dubai Decree No. 34 of 2021: LCIA to administer DIFC-LCIA arbitrations commenced on or before 20 March 2022, DIAC to administer cases commenced from 21 March 2022

Under the agreement between the DIAC and the LCIA:

• The LCIA will step-in to administer arbitrations commenced under the DIFC-LCIA Arbitration Centre’s (the DIFC-LCIA) Arbitration Rules on or before 20 March 2022 (where they have been assigned a DIFC-LCIA case number), and shall apply the DIFC-LCIA Arbitration Rules.
• The DIAC will administer all DIFC-LCIA arbitrations commenced from 21 March 2022 (or where they have not been assigned a DIFC-LCIA case number), and shall apply the revised DIAC Arbitration Rules. 

Background

The Decree came into force on 20 September 2021 and abolished the DIFC-LCIA’s key stake-holder and administrator, the DIFC Arbitration Institute, and transferred its assets and operations to the DIAC, the main onshore Dubai arbitration institution.

Whilst it was hoped that the impact of the Decree on ongoing DIFC-LCIA arbitrations would not be material, there have been examples of arbitral tribunals staying existing DIFC-LCIA arbitrations and deferring hearings due to uncertainties as to the functionality of the DIFC-LCIA, its ability to administer DIFC-LCIA arbitrations and issues concerning access to funds deposited with the DIFC-LCIA to pay arbitral tribunal fees.

The DIAC and the LCIA had been in ongoing discussions regarding a potential resolution to these issues in advance of the expiry of the six month transition period that was fixed in the Decree, which expired on 20 March 2022.

DIFC-LCIA arbitrations, with a DIFC-LCIA case number, commenced on or before 20 March 2022: the LCIA to administer such arbitrations under the DIFC-LCIA Arbitration Rules 

It has been announced that an agreement has been reached between the DIAC and the LCIA, which provides for the LCIA to step-in to administer DIFC-LCIA arbitrations commenced on or before 20 March 2022, where they have previously been registered by the DIFC-LCIA and assigned a DIFC-LCIA case number. These DIFC-LCIA arbitrations will be administered under the DIFC-LCIA Arbitration Rules.

This development should help resolve a number of the administrative issues affecting ongoing DIFC-LCIA arbitrations caused by the Decree. For example, the LCIA has confirmed that deposits made to the DIFC-LCIA Arbitration Centre in those cases on account of arbitration costs will now be transferred to the LCIA.

DIFC-LCIA arbitrations commenced from 21 March 2022 or where no DIFC-LCIA case number has been assigned: DIAC to administer such arbitrations under the revised DIAC Arbitration Rules

There remains a number of agreements that provide for DIFC-LCIA arbitration where proceedings have not yet been commenced, but may be commenced in the future. For those disputes, as of 21 March 2022, parties wishing to commence DIFC-LCIA arbitrations should register these directly with the DIAC. These DIFC-LCIA arbitrations will be administered under the revised DIAC Arbitration Rules, which have recently been updated and take effect from 21 March 2022. See our previous article on the revised DIAC Arbitration Rules here.

The DIAC will also administer DIFC-LCIA arbitrations commenced on or before 20 March 2022, where they have not yet been registered by the DIFC-LCIA and assigned a DIFC-LCIA case number.

It is anticipated that complex legal issues could arise in relation to DIFC-LCIA arbitrations administered by the DIAC, and that there may be challenges that will need to be finally determined by the courts of the arbitral seat and/or during enforcement proceedings. Further details, and guidance, in respect of how the DIAC’s administration of DIFC-LCIA arbitrations will work under the DIFC-LCIA Arbitration Rules may help to mitigate the risks of such challenges.

Conclusion

The agreement that has now been reached between the DIAC and the LCIA is welcome news that should allow ongoing DIFC-LCIA arbitrations to proceed without further delay or complication. 

Looking ahead, parties should not provide for DIFC-LCIA arbitration in their new contracts; and, may want to consider obtaining legal advice in respect of commencing new arbitrations under existing contracts which contain a DIFC-LCIA arbitration agreement.