Arbitration in Dubai – The Arabian Tsunami?19 Oct

Fuelled by the downturn in construction and Developers going out of business the Dubai International Arbitration Centre (DIAC) is reporting a tenfold increase in registration of arbitration claims. In August 2009 it reported 180 arbitration claims had been filed by June with twice the number expected by year end. Other press reports indicate DIAC has been recruiting experienced case manager from Europe including ICC Paris experts to increase the number of personnel handling these cases. DIAC says it is on course to manage between 250 and 300 dispute cases before the end of 2009. The centre had handled 206 this year cases by the start of September against 100 cases in the whole of 2008. DIAC reports it has six to ten times the number of cases compared to other dispute centres in the region. Internationally it believes it is becoming close to London and Paris in the number of cases.

Herbert Smith has flown a second senior partner from London to deal with rush and Clyde & Co says is handling twice as much dispute-related work this year compared with last. Among the cases pending is a claim involving a UAE contractor seeking US$681 million in payments from a Developer? Any number of litigation partners will tell you the whole of Dubai is gearing up for a litigation bonanza. But will it happen? There are a lot of nasty letters flying around in cyberspace but no one seems to have pressed the ‘go’ button yet.

There is an apparent lack of enthusiasm evident in local businesses and their managers to have their disputes resolved by what is seen largely as a foreign process. The United Arab Emirates signed and passed into law the New York Convention in August 2006. Dubai awards can be enforced in any Convention Country and foreign awards can be brought to the Dubai Courts. There are as yet no reported examples of successful enforcement of foreign awards. The Dubai EPC Contract of choice is FIDIC Rainbow collection so many cases will be pending at ICC Paris as well.

Of the 4 or 5 arbitrations I have been involved in this year all but one has settled around the time the arbitration process got under way and just before the panel could earn respectable fees. Why would a sane contractor spend 2 to 3 million dollars chasing an impecunious Developer through arbitration in Dubai when at a deep discount to his final account he can at least generate enough cash flow to keep his business afloat? Liquidity is now reportedly returning to the Dubai market and many contractors will be reanalysing the risk profile of taking cases through arbitration to recover more than may be on offer in a forced settlement. The siren has sounded but there is no sign of the big wave reaching the shore just yet.