A Guide of Drafting Business Friendly Arbitration Agreements in the UAE

There has been an increase in the popularity of arbitration to address business disagreements in the United Arab Emirates (UAE). Thus, an arbitration agreement is essential for any business dealing with other companies in the UAE, since it provides a well-organized and fair way of solving disputes. An arbitration agreement can be useful to all parties involved when it is carefully drafted to ensure that the whole process of solving a dispute is over quickly and without much difficulty.

Legal Framework for Arbitration Agreements in UAE

An arbitration agreement is a contract between two or more parties, outlining how disputes will be resolved through arbitration instead of going to court. Thus, the UAE Federal Arbitration Law (Federal Law No. 6 of 2018) is the main legal framework through which all these processes are done.

The UAE’s Federal Arbitration Law therefore follows the best practices of international arbitration as envisaged by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This law provides the legal basis for the enforceability and validity of arbitration agreements within the UAE. It thereby ensures that disputing parties can rely on this process of arbitrating their disputes quickly and effectively.

Importance of Arbitration Agreements in the UAE

  • Arbitration agreements provide a legally binding alternative to court proceedings and find recognition and enforcement under the Federal Arbitration Law in the UAE.
  • The seat of arbitration, applicable rules, and selection of arbitrators may be chosen by the parties, making it possible for them to tailor the arbitration process to their specific needs and desires.
  • In most cases, arbitration is conducted in private such that businesses will be able to cover up the commercial secrets and protect the reputation of their business through its confidential character.
  • Particularly in cross-border transactions, when concerns about fairness in some jurisdictions may arise, arbitration offers a neutral ground for dispute resolution.
  • In general, arbitration is quicker and less expensive than traditional court litigation, especially when dealing with complicated business issues, thus giving rise to efficiency.

To this end, well-structured agreements on arbitration catering to these main issues will enable businesses in UAE to benefit from this possibility of dispute settlement and safeguarding their commercial interests.

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Key Elements of Effective Arbitration Agreements

For drafting an arbitration agreement in the UAE, it is obligatory that the following key clause should be included:

  1. Legal Capacity: The parties to the arbitration agreement must have the legal capacity to enter into the agreement. Legal capacity means the parties must be competent enough and must have completed the legal age to make the agreement in order to prevent any disputes arising regarding its enforceability and validity.
  2. Arbitration Scope: It is very imperative to mention the types of dispute covered by arbitration agreement. It helps in avoiding the confusion about the issues that can be resolved with the help of arbitration.
  3. Arbitral Institution: Mention the arbitral institution, e.g., The Dubai International Arbitration Centre (DIAC) that will govern the arbitration proceedings, if desired. The UAE Arbitration Law allows flexibility in choosing an institution
  4. Seat of Arbitration: It is important to expressly state where arbitration is to take place. This is necessary so as to establish applicable rules of arbitration and what possible enforcement measures might be taken in the event of implementation of an arbitral award.
  5. Number of Arbitrators: State how many arbitrators are going to resolve the dispute (single arbitrator or panel).
  6. Language of Arbitration: Specify the language that is going to be used throughout the entire arbitration process.
  7. Applicable Rules: Specify the rules that will apply in conducting the arbitration process. These may be the rules of a chosen arbitral institution or a specific set agreed upon by both parties.

Additional Considerations:

  • Authority to Sign: Ensure that the signatories have legal capacity to bind their respective parties into an arbitration agreement.
  • Form of Agreement: The arbitration agreement could either be made separately or as a clause in a main contract but must be recorded in writing for purposes of enforceability.

Note: It is advisable to get legal advice from a lawyer who specializes in arbitration and practices in the UAE so as to ensure that your agreement is comprehensive and compliant with the local law and rules of regulations.

Drafting Considerations for Business-Friendly Agreements

The following guidelines can be considered while creating an arbitration agreement business-friendly in the UAE:

  • Be Flexible: Include provisions in the agreement to ensure flexibility that would allow any changes or developments which may arise during the proceedings within the arbitration process.
  • Stay Neutral: Make sure the arbitrator(s) and place of arbitration are neutral so that everything about the process looks fair and impartial to all concerned.
  • Keep it Efficient: Input into the agreement elements that will make the arbitration process more efficient, such as setting time limits or using quicker procedures for some kinds of disputes.
  • Make It Enforceable: Remember to get very particular about the language used in the contract to ensure it can be upheld under UAE law, specifically the Federal Arbitration Law.
  • Have a Dispute Resolution Plan: You may want to include in the contract a step- by- step plan for resolving disputes. Dispute resolution plans help the parties to seek mediation or negotiation before going to arbitration.

These key points, included in your arbitration agreement, can thus help to make sure any disputes are settled in a fair, efficient, and business-friendly way within the UAE legal system.

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How Drafting Lawyers at Notary Public Dubai May Assist You

Should you need assistance drafting an effective arbitration agreement for your business needs within the UAE, our experienced legal drafting team at Notary Public Dubai is here to help. Our team of experienced drafting lawyers work together to make sure that your arbitration agreements are on point and unique. No matter whether it is a reparation, settlement agreements or other legal papers, their expertise guarantees accuracy, clarity, and enforceability.

Contact us for trustworthy legal drafting.