The UAE has become an international trade hub, and the country has done a great deal to keep up with the current demands of international business regarding international arbitration. Indeed, most businesses now prefer arbitration as opposed to litigation due to the procedural and choice of law freedoms that it gives to the parties, as well as convenience of saving time and money.
Article 257 of the UAE Penal Code - a new criminal offence for arbitrators who failed to act with integrity and impartiality.
There are prominent arbitration centres that offer their services in this particular alternative dispute resolution method. To name a few, Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), DIFC (Dubai International Financial Centre) Arbitration Centre, DIFC (Dubai International Financial Centre) - LCIA (London Court of International Arbitration) Arbitration Centre, Dubai International Arbitration Centre (DIAC), Sharjah International Commercial Arbitration Centre (Tahkeem), and Emirates Maritime Arbitration Centre (EMAC) have been successfully operating in the UAE.
The new amendment to the UAE Penal Code now sanctions arbitrator offences (failure to act with integrity and impartiality) with imprisonment, and this will have significant changes to the arbitration scene in the country.
What is arbitration?
Arbitration is an alternative dispute resolution (ADR) method that is used to settle legal disputes by an arbitrator or a tribunal outside the national courts.
Most countries that are signatories to the New York Convention enforce arbitral awards except for awards that violate public policy. Parties have the freedom to choose the law, the number of arbitrators (one to three), seat of arbitration, procedural aspects such as laws and rules, etc. Arbitration can be chosen as a dispute settlement mechanism in a separate contract or included in the original agreement.
What are the common consequences if an arbitrator's partiality is suspected?
There are rules and procedural provisions that safeguard the parties from a prejudicial and biased arbitrator. For example:
UNCITRAL Arbitration Rules are accepted internationally, and Article 11 states that "as an arbitrator, he or she shall disclose any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence." Article 12 stipulates that if there are circumstances, the parties can challenge the arbitrator at any time that they become aware of his/her impartiality.
Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC) also applies the UNCITRAL Rules for neutrality and independence of arbitrators and grounds to challenge in their Procedural Regulations for Arbitration. Article 10 and 11.1 of the Rules clearly denotes this aspect.
DIFC-LCIA Arbitration Rules (2016) Article 5.3: "All arbitrators shall be and remain at all times impartial and independent of the parties; and none shall act in the arbitration as advocate for or representative of any party. No arbitrator shall advise any party on the parties' dispute or the outcome of the arbitration."
And Article 10.1 "The LCIA Court may revoke any arbitrator's appointment upon its own initiative, at the written request of all other members of the Arbitral Tribunal or upon a written challenge by any party if: … (iii) circumstances exist that give rise to justifiable doubts as to that arbitrator's impartiality or independence."
The arbitration procedures regulated in the UAE Procedural Code No. 11 of 1992 (as amended), title three, have no provisions regarding the impartiality of the arbitrators. However, the UAE Penal Code No. 3 of 1987 (as amended) has drawn out these provisions.
What are the general consequences for arbitrator offences in the UAE Penal Code?
In 2016, the UAE government issued Federal Decree No. 7 of 2016, that amended the UAE Penal Code. What was very striking to the arbitration community was the new Article 257. It provides (unofficial translation):
"Whoever issues a decision, expresses an opinion, submits a report, presents a case, or proves an incident in favor of a person or against an individual, conflicting the duty of impartiality and integrity, in his capacity as an arbitrator, expert, translator, or investigator appointed by a judicial or an administrative authority or selected by the parties shall be temporarily imprisoned.
The aforementioned categories of persons shall be barred performing once again the responsibilities that they were assigned in the first instance, and the provisions of Article 255 of this Law shall apply."
Any arbitration centres or arbitrators in the UAE, which includes without limitation, DIFC-LCIA, will be subject to the above articles of the UAE Penal Code.
If the losing party decides to file a complaint, the arbitrators or experts might not be able to leave UAE during the criminal investigation, as there is a likelihood of their passports being held by the concerned authorities of UAE.
As it is well known that fabricated reporting of a crime is punishable under the UAE Penal Code, the parties to the arbitration should caution themselves by not misusing this amendment about arbitrator offences . .
Most national procedural laws and widely used arbitration laws permits parties to the arbitration to challenge the arbitrators as well as awards that were granted by impartial tribunal or arbitrator, however, sanctions of imprisonment for arbitrator offences is less usual in other countries.
Parties should take this new development into consideration while drafting their arbitration agreements and the arbitration proceedings. It is highly improbable that there will be many cases of arbitrator offences in the UAE due to the reputable previous practices of many arbitration institutions and tribunals.
Consulting the right law firm for future decisions regarding your choice of dispute resolution could save you time and money. Our specialized legal professionals are ready to provide assistance in all legal matters in the UAE for you and your business.
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