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DUBAI OFFICE MOVE

IMPORTANT INFORMATION

We are excited to announce that our Dubai office is in the process of moving to new office premises in Bay Square, Business Bay.

During the move, there will be certain unavoidable disruption. From Sunday 2 September to Thursday 6 September, please contact our Dubai team by email or on their mobile number. Work will continue as normal during the move.

ENFORCING AN ARBITRATION AWARD IN THE UAE

The United Arab Emirates (the “UAE”), as a financial and business hub of the Middle East, with dynamic economy development and a pleasant business environment, attracts many international investors.

The tremendous flow of investment gives rise to a great number of transactions between the investors and the development of trade relationships both with and within the UAE.

However, in practice, there are many breaches of contractual obligations, which create disputes between the parties. Referring these disputes to local courts is often time-consuming and unpredictable decisions are made. Arbitration is often more favourable to parties in trade relationships, than traditional court proceedings.

The UAE Government strives to encourage investors, as well as to create an efficient legislative system. Accordingly, it seeks to react to loopholes in the legislation system and it recently issued Federal Law No.6 of 2018 on Arbitration (the “New Arbitration Law”) on 3rd of May of 2018, and it is already in force across the UAE.

The New Arbitration Law has superseded the Civil Procedure Code’s clauses, which previously regulated arbitration procedures in the UAE. The New Arbitration Law is based upon the UNICITRAL Model Law of Commercial Arbitration.

By adopting a new, separate arbitration law, the UAE has taken a big step towards modernizing its laws and adopting best international arbitration practices.

SCOPE OF APPLICATION OF THE NEW ARBITRATION LAW

The New Arbitration Law applies to:

  1. Any Arbitration conducted in the UAE, unless the Parties have agreed that another law should govern the Arbitration, (but note that the choice of another Law must not conflict with the public order and morality of the State)
  2. Any international commercial arbitration conducted abroad, if the Parties have chosen this law to govern such Arbitration.
  3. Any arbitration arising from a dispute in respect of a legal relationship, whether contractual or not, governed by UAE law, save as excepted by special provision.

ARBITRATION AGREEMENT

The New Arbitration Law envisages that the parties enter into an arbitration agreement before any dispute arises, by either incorporating an arbitration clause within the agreement governing their relationship, or as a separate arbitration agreement. This agreement, whichever form it may take, must be in writing, otherwise it shall be considered null and void.

An arbitration agreement may also be concluded even if the dispute has already arisen and action has been brought before the court, in which case the parties must agree to refer the dispute to arbitration in writing before the relevant court.

One of the important requirements in relation to the arbitration agreement is that the agreement shall be signed by the respective and duly authorized person, who is entitled to sign an arbitration agreement or arbitration clause on behalf of parties. Our advice to clients is always to ensure the capacity of the counter-party’s representative, because apparent authority creates a number of issues in the UAE.

Arbitration clauses shall be deemed as separate independent agreements, and shall not be subject to invalidity and nullity, even if another part or the whole of the containing agreement is considered null and void.

CHALLENGING ARBITRAL AWARDS

Article 53 of the New Arbitration Law sets out the procedure to challenge an arbitration award and lists the circumstances where it may be challenged.

An interested party may challenge an arbitration award before the Court either by filing a case to nullify the award or by contesting the process when the application is already submitted to enforce the award.

The following circumstances may lead to an order to set aside or nullify an award

  • Where there is no arbitration agreement entered into by the parties or such agreement is nullified, or it was lapsed.
  • Where one of the parties in the moment of signing the arbitration agreement, was not duly authorized to do so or under some incapacity.
  • Where the representative of a party had no legal capacity to sign an arbitration agreement or arbitration clause. Signatories to an arbitration agreement/clause must have direct authorization to do so.
  • Where a party did not comply with required procedure of notification on arbitration process or appointment of Arbitrator or the Arbitral Tribunal breached due process or for any other reason beyond his control.
  • Where the arbitral award excludes the application of the Parties’ choice of law for the dispute.
  • Where the arbitral tribunal or arbitrator was appointed in breach of law or of the arbitration agreement/clause.
  • Where the arbitral proceedings were marred by irregularities that affected the award or the arbitral award was not issued within determinate time frame.
  • Where the award contains decisions on matters not falling within the terms of the submission to arbitration or beyond its scope, provided that, if the decisions on matters submitted to Arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to Arbitration may be set aside.

BINDING FORCE

The award issued in compliance with the New Arbitration Law will be binding on the parties and no longer subject to appeal, and the award shall be enforced by the Court.

ACTION TO SET ASIDE AWARD  –

The Arbitration award is final, however it may be challenged by virtue of action to set aside the award in whole or in part To set aside an award means to “declare the award to be disregarded in whole or in part[1].

 

The Courts decision to set aside the award is final. Nevertheless, the Law allows a decision to set aside to be appealed in the Court of Cassation

 

The law in Article 54 determines the time limit for the seeking party to file an action to set aside the award as:

 

“An action to set aside an arbitral award shall be time barred after 30 days from the date of notification of the award by the party seeking to set it aside.”

 

The Court may suspend the setting aside process for 60 days, in order to give the Arbitral Tribunal an opportunity to take any action or amend the form of the award which may then eliminate the grounds for setting aside  without affecting the substance of the award.

 

ENFORCEMENT OF AN ARBITRATION AWARD

The most crucial issue for the winning party of the arbitration is to enforce the award once issued. The Arbitral award is final and binding on parties once it is issued, and if the parties do not comply with the award, then further steps can be taken to enforce the award in the UAE.

Previously, to enforce an arbitration award, the winning party had to file a case in the local courts to ratify it. The enforcement process in the local courts was a time-consuming process due to lack of the legislation system regulating arbitration.

The New Arbitration Law contains a new, less complicated, procedure of enforcement. Article 55 of the New Arbitration Law sets out the following requirements to enforce the award:

The parties to the dispute must submit a request for the confirmation and enforcement of the arbitration award with the Chief Justice of the Court, supported by the following documents:

  1. The original award or a certified copy
  2. A copy of the Arbitration Agreement
  3. An Arabic translation of the arbitral award, attested by a competent authority, if the award is not issued in Arabic
  4. A copy of the minutes of deposit of the award in Court

Within sixty days upon submission of the request, the Chief Justice of Court and any other judges delegated by the Chief Justice of Court, shall order the arbitral award to be confirmed and enforced, unless it finds one or more grounds for setting aside the award under section 1 of Article 53.

However, we must highlight that the Chief Justice of Court has not yet issued any order confirming awards and no delegation has been granted to another judge. From a practical point view, it would seem that this provision is currently not applicable because the court system is currently under technical development.

STAY OF ENFORCEMENT OF AWARD

Article 56 states that a action to set aside an arbitral award does not stay its enforcement. Nevertheless, the Court seized of the action to set aside the award may order a stay of enforcement if so requested by a Party showing good cause.

The interested party shall provide a security or monetary guarantee, if the court orders a stay of enforcement. The court shall decide, within 60 days from the date of the order, what action to take.

The Law does not specify what grounds can defined as a good reason for the court to order a stay of enforcement.

RECOURSE AGAINST ENFORCEMENT OF AWARD

The seeking party may file an appeal to the competent Court of Appeal within the 30 days from the date following notification of the Court’s decision to grant or deny enforcement of an arbitral award.

CONCLUSION

Before the New Arbitration Law came into place, arbitrations were governed by Civil Procedure Code in Articles 203 to 218. Such a lack of developed arbitration legislation framework often led to complications with enforcing arbitration awards.

Although many uncertainties remain from a procedural point of view, (i.e. as the practical application of the law yet remains to be seen) and the Court system still has not launched the option to submit the above-mentioned request for enforcement of an arbitration award, it is understood that this shall take place in the near future.

We believe that New Arbitration Law will shed light on existing ambiguities in arbitration procedures.  Enforcement will facilitate solutions to current problems of the framework which will, hopefully, in turn result in an efficient and explicit legal framework governing arbitration proceeding, as well as the enforcement of arbitration awards.

In more simplified terms, a claiming party can now directly enforce an arbitration award in the UAE rather than having to file a case to ratify the award first.

[1] Redfern, A., Hunter, M., Blackaby, N. and Partasides, C., Law and Practice of International Commercial Arbitration, London 2004, Sweet & Maxwell

 

Al Dahbashi Gray– Malika Kashagonova  – 28 August 2018

Al Dahbashi Gray is a full-service UAE firm that provides an unparalleled legal service, connecting international clients and partners seamlessly with the region, and promoting a better understanding of the Middle East internationally.

 

Somalia – The Next Investment Opportunity?

By Jan-Carl Stjernswärd

Somalia – not your typical travel destination. “Black Hawk Down”, tv footage of dead bodies, pirates and starving children flash through the mind. Yet the disastrous civil war and American intervention occurred more than 25 years ago. Piracy was largely eliminated around four years ago. Today’s Somalia is a very different place and is currently undergoing an economic renaissance. Bustling ports, modern highways, mineral deposits and fresh seafood entice investors and adventure-seekers alike. This millennia-old civilization is once more taking its place on the world stage.

What has led to this interest? In short, its location and Ethiopia’s growth. This, and some of the opportunities available are discussed below.

Strategic Location

Real estate agents always say location is the single most important factor when choosing whether to buy a property or not. Geopolitics is no different.

One of the miracles of economic growth over the last decades has been Ethiopia. This thriving consumer economy of 120 million has had its GDP increase by six fold from around USD 12 billion in the year 2000 to around USD 72 billion as of 2017. Yet this landlocked economy has not had a port of its own since Eritrea seceded as an independent state in 1991. Relations deteriorated, leaving the country dependent upon neighbouring Djibouti. This in turn led to Djibouti’s remarkable development.

As well as hosting one of Africa’s busiest and most efficient container terminals, Djibouti has a major oil terminal and now a mixed use port, the latter built with Chinese money. It also hosts French, American, Japanese, Chinese and EU bases, with Spanish and other Europeans also permanently based there.

Although relationships between Ethiopia and Djibouti remain strong, relations between Djibouti and certain other nations – particularly the UAE – are more fragile. In part this (and the strategic need for Ethiopia to have more than one route to the sea) have led to an increased interest in Somalia and Somaliland.

DP World signed to develop Berbera (Somaliland) in 2016, and recently agreed to develop a free zone there. Its subsidiary, P&O Ports, then signed with Bosaso, Somalia, in 2017. Meanwhile, Chinese and Turkish interests are developing other parts of the country – with Turkey a major investor in Mogadishu. Currently, Berbera and Bosaso are seen as the two most strategic plays, both being on the Red Sea, through which flows some 60% of the world’s shipping.

Each of Berbera and Bosaso could serve Ethiopian demand – as well as help Somaliland and Somalia develop themselves – both via Djibouti (if transit is permitted) and directly through various overland routes.

In short Somalia sits on some prime geopolitical real estate. As Ethiopia continues to grow, it will require several ports to service it. The only other potential player – Sudan – requires over 1,500 km of transit over non-asphalted roads. While this has led to rivalry between the three ports, outside commentators would note that Ethiopia’s economy will (and may already) be strong enough to sustain all of them.

Goods will not only be flowing in. As Ethiopia imports vehicles, wind turbines and machinery, it exports agricultural produce, leather goods and – soon – oil and gas. Again, each of Djibouti, Somaliland and Somalia are vying to host the export terminal. Reports of Djibouti being chosen appear premature.

Foreign Players

Somalia was once shunned by the international community as a pariah state. Now it is being courted as a bride by many a wealthy prince. The UAE, Turkey and Saudi Arabia all seek to establish military bases in Somalia. Even the US is reported to have a semi-covert presence in the country.

What all this means is that the security situation is rapidly improving. The most problematic region remains the capital, Mogadishu, with Puntland (Bosaso Port) and Somaliland (Berbera Port) both being stable and relatively safe.

The Hospitality Sector

At present, there is no international hotel operator in Somalia, but companies from Europe, Turkey and China have all been recently eyeing the market. It is rumoured that a new hotel may open in Bosaso, Puntland, and Garowe, Puntland, as port engineers, oil prospectors, geologists and surveyors all flood the city. The highway from Bosaso to Garowe is 500km but takes only about 4.5 hours to drive – Garowe, a pleasant leafy garden city and the capital of Puntland, is only a short distance from the Ethiopian border. A dry port is planned for the border area as well as a free zone in Bosaso.

For the non-business traveller, virgin mountain ranges, deserts, geothermal springs, bush and pristine beaches await to be explored. Combine this with ancient architectural sites, organic cuisine and friendly locals and you have a growing market for tourists looking for a fresh experience.

A Flat Society

Somalis have for centuries been nomads. As with other nomadic societies that this correspondent has visited in Central Asia and Africa, there is an ingrained sense of hospitality and trust between people. There is no real class pyramid, and pauper and businessman alike often share the same table at restaurants, political meetings and social gatherings. For a foreign investor, this is refreshingly different from many other sub Saharan countries, underpinned by a strict pecking order of rent seekers.

This sense of grass roots democracy is reflected in some of Somalia’s political life. No President in either Puntland or Somaliland has ever been elected for two consecutive terms – transition of power has been peaceful and uncontested, as this correspondent can attest to having attended the inauguration of the current Somaliland President in Hargeisa in December of 2017.

Also enriching Somalia’s economic and social life are its large diaspora community (stemming mainly from people fleeing the civil war of the early 1990s). Somali communities exist in the UK, North America and Scandinavia. Encountering an otherwise normal looking Somali with a heavy Mid Western drawl peddling his wares in a lively provincial town is becoming an increasingly more frequent experience as educated diaspora members return to Somalia to capitalize on new opportunities. Large sums of cash are remitted through this network, using the Islamic finance system of hawala, in and out of the country. Indeed, in the absence of banks, Somalia has developed some cutting edge solutions to cater for payment solutions, including e-wallets on your phone through which most payments can be made.

 

All in all, while inter clan rivalry remains an issue, foreign guests are invariably shown respect and friendship by the ordinary Somali.

The Future

Even though political and security challenges remain, it seems likely that Somalia’s economic boom will iron out these problems over the next few years. Meanwhile, for the investor seeking potentially triple digit returns and with a healthy appetite for risk (and seafood), Somalia offers many interesting opportunities in the energy, hospitality, finance and infrastructure sectors.

Jan-Carl Stjernswärd, 27 February 2018
jcs@adglegal.com

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When entering into a contract, it is always sensible to consider what would happen if the other party defaults on one or more of their obligations. The purpose of this article is to give you a simplified and brief understanding on how the local UAE courts estimate the level of damages that the non-defaulting party may actually receive in the event of breach of contract.

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When entering into any written transaction, there is often a provision regarding the method of dispute resolution – usually either arbitration or litigation. If you have not had much experience with disputes you may not afford much attention to this, and you may be unlikely to object to whatever dispute resolution method is proposed. Also, it does not help that most lawyers don’t tend to explain the differences between the methods of dispute resolution and the significance of choosing one over the other, unless specifically asked.

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