Why Arbitration is preferred most than going into Litigation in UAE?


Arbitration in practice is the investigation and determination of a matter or matters of difference between contending parties, by one or more unofficial persons, chosen by the parties. Compulsory arbitration is that which takes place when the consent of one of the parties is enforced by statutory provision. Voluntary arbitration is that which takes place by the mutual and free consent of the parties.

Dispute Resolution in Dubai: Arbitration over Litigation

Dubai has multiple sky-scrappers and amazingly constructed buildings and hence the country’s construction market is booming that has the potential to invite multiple investments around the globe.  It has witnessed an increment in international investment in the construction industry and other commercial sectors which means an increment in commercial disputes amongst parties involved in such transactions.

In Dubai, legal experts prefer arbitration over litigation considering the various benefits and advantages of the same. Most of the commercial agreements in Dubai contain an arbitration clause and there is less litigation in UAE. Here, we shall discuss why arbitration is preferred over litigation.

Federal Laws of UAE

In UAE Federal Law number 6 of 2018 deals with Arbitration Law governing and regulating the arbitration registered within the countries. Each arbitration institute has laid down certain set rules and regulations based on the Federal law that defines the procedure under which the arbitration will be conducted. The litigation in UAE is governed by the Federal Law on Civil Procedures of 1992 concerning cases registered before the UAE courts. In UAE there is a huge number of arbitration institutes registered within the UAE such as the Dubai International Arbitration Centre (DIAC) and the London Court of International Arbitration- Dubai International Financial Centre (LCIA-DIFC).

Advantages of Arbitration Institutes

1. Reputation

One of the biggest advantages of opting for institutional arbitration is the reputation of the institution. Decisions given under the name of any prestigious institution are easier to enforce as it is accepted by a majority of other bodies.

2. Efficient Administration

One more advantage of going for institutional arbitration is that such institutes provide trained staff to the parties for administering the whole process. The administrative staff will lay down the rules, ensure that the time limits are being complied with, and the process is going ahead as smoothly as possible.

In the case of ad-hoc arbitration, when the arbitrator himself has to do all the administrative work, it may distract him from his primary objective.

3. Clear Rules

In the case of institutional arbitration, the rules of the arbitration are generally fixed by the institution. There is no further dispute between the parties regarding the rules of the procedure, which might happen in the case of ad-hoc arbitration. Also, the rules are framed keeping all eventualities in mind, as these institutions have an experience of going through various arbitration proceedings and know what eventualities may arise. Also, the rules are flexible. There is a mechanism to oppose any part of the process which is not consistent.

4. Quality of Arbitral Panel

One of the major advantages of institutional arbitration is that they have an extensive panel of experts, who acts as arbitrators. These institutions also have arbitrators who specialize in different areas, so that any type of dispute can be resolved.

Big institutions like ICC also have a network of national committees for the appointment of arbitrators to ensure that there is no bias based on the country to which the parties belong.

5. Supervision

Apart from the administration of the arbitrational process, some institute also supervises the process, i.e., examine the award or penalty sanctioned ensuring that due process of law has been followed, and proper reasoning has been given to the parties for taking that particular decision.

6. Remuneration of the Tribunal

In the case of institutional arbitration, the remuneration to be paid to the arbitrators is already fixed. The disputing parties do not have to haggle with the arbitrators to decide the terms and amount of remuneration. The remuneration of the arbitrators in the case of institutional arbitration is based on a fixed scale. The money is paid to the arbitrators without involving them directly.

7. Default Procedure

Many institutional arbitrators expressly provide the rule that the proceedings will continue and not stop in between, even if one of the parties defaults in the course of the proceedings. For instance, Article 21(2) of the ICC Rules states that if any party fails to appear for the proceeding without giving any valid excuse, even after it has been duly summoned by the institution, the Tribunal will proceed with the proceedings.

To sum up it can be concluded that in UAE especially in Dubai, Arbitration is preferred over Litigation due to the reasons highlighted above. The arbitration process is speedy, it is less cumbersome, it is less expensive, the parties enjoy liberty, the arbitral panel has expertise based on the nature of the dispute, etc.