13 Oct 2021

Joint venture partners fail to agree way forward for DIFC-LCIA Arbitration Centre

London Court of International Arbitration calls for urgent resolution to ‘outstanding questions’ over centre’s winding down

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The DIFC-LCIA Arbitration Centre's two institutional joint venture partners are yet to agree on how to wind down the influential body after a radical shake-up of Dubai's arbitral institutions left it in limbo.

Statements issued last week by the Dubai International Financial Centre (DIFC) and the London Court of International Arbitration (LCIA) only served to underline the differences between the two parties.
 
While the DIFC said it had asked the LCIA to administer cases awaiting resolution by the centre – now effectively in run-off mode – the LCIA highlighted 'outstanding questions that needed to be resolved 'as a matter of urgency' including 'the current status of the DIFC-LCIA casework team'.
 
International arbitration specialists were taken by complete surprise when Dubai's ruler, Sheikh Mohammed bin Rashid Al Maktoum, issued Decree No. 34 of 2021 on 24 September 2021, the date on which it was gazetted.
 
It provided for the merger of the DIFC Arbitration Institute (DAI) and the Emirates Maritime Arbitration Centre (EMAC) into Dubai's international Arbitration Centre (DIAC), to be relaunched with a new court and arbitral rules.
 
The changes have led to much uncertainty for arbitrators, lawyers and clients operating regionally, given the popularity of the DIFC-LCIA, which was not mentioned in the decree despite the effective dissolution of the DAI as its local sponsor.

GLP understands that some law firms with ongoing cases before the affected institutions have taken legal advice on how their clients may be impacted, including on potential enforcement issues and whether cases should be transferred directly to the LCIA, for which a mechanism exists in the DIFC-LCIA's rules.
 
In its statement, the DIFC said it had proposed that the LCIA "will directly administer all ongoing arbitrations, mediations and other ADR proceedings referred to the DIFC-LCIA".
 
It said staff would be seconded from the DIAC to oversee this process "until such proceedings are concluded," and there would be "no change or interruption to the services provided to parties and arbitrators".
 
For its part, the LCIA said it was neither consulted nor given notice of the reforms. It added that as recently as April 2021, the DIFC had reconstituted the DAI "in a way that was consistent with maintaining the joint venture" such that the LCIA "was fully expecting… the arrangements previously in place to continue".
 
It said outstanding issues included the secretariat's "ability to access the funds held by DAI on behalf of the parties to existing DIFC-LCIA cases and [how] the authorities intend to equip DIAC to perform its new functions".
 
Meanwhile, senior figures within Dubai's legal community have stepped forward to defend the reforms with leading regional law firm Al Tamimi arguing 'it was natural to unify Dubai's efforts to create a renowned international arbitration centre'.
 
Writing in Gulf News, Dr Habib Al Mulla, of Baker & McKenzie Habib Al Mulla, said that claims that "the move away from the LCIA will damage Dubai's reputation as an international arbitration hub…. neglects a compelling fact that the DIFC-LCIA never promoted Dubai."
 
However, Essam Al Tamimi, chairman of Al Tamimi, echoed the views of many arbitration lawyers in the region when he said the DIFC-LCIA centre had "contributed tremendously to the progress of arbitration in the UAE".
 
Supporters of the centre noted that its secretariat was continuing to help organise Dubai's Arbitration Week, which takes place, in November 2021.

Dubai was ranked as the 10th most-popular arbitration seat in this year's influential International Arbitration Survey, which was conducted by Queen Mary University of London (QMUL) and White & Case. Rival international legal hub Singapore, by contrast, celebreated joint billing in first place with London.

Read the DIFC's statement here and the LCIA's statement here.

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