An arbitration clause is a critical component of commercial contracts in Dubai, offering parties a structured, private alternative to court litigation. Its effectiveness depends on careful drafting. A poorly constructed clause can cause delays, increased costs, and procedural uncertainty.
To secure a reliable and enforceable dispute resolution mechanism, parties should consider several key elements. This guidance addresses the core principles of drafting under Dubai arbitration law.
Define the Scope of Disputes:
Clearly specify which disputes the clause covers. A broad clause, such as “any dispute arising out of or in connection with this contract,” provides wide application. Parties might prefer a narrower scope, for example limiting arbitration to specific issues like price adjustments or technical specifications. Ambiguous language about the clause’s reach can itself become a subject of dispute, so clarity at the outset prevents initial challenges.
Designate a Reputable Institution:
Selecting an administering arbitration institution provides a pre-established procedural framework. In Dubai, common choices include the Dubai International Arbitration Centre (DIAC), the DIFC-LCIA Arbitration Centre, or the ICC International Court of Arbitration. Simply naming “DIAC” or “ICC” incorporates their current rules, which manage arbitrator appointment, timelines, and administrative support. Avoid ad-hoc clauses without clear procedural rules, as they often lead to complications.
Specify the Seat of Arbitration:
The legal seat, or place, of arbitration determines the procedural law governing the process and the courts that exercise supervisory jurisdiction. Popular seats in the UAE are Dubai and the Dubai International Financial Centre (DIFC). A clause might state: “The seat of arbitration shall be Dubai, UAE.” This choice connects the arbitration to a supportive legal framework and influences the enforceability of the final award.
Clarify Procedural Details:
While institutional rules provide a backbone, tailoring certain details increases efficiency. State the number of arbitrators (one or three), the language of the proceedings (e.g., English), and the governing law of the contract itself. For example: “Arbitration shall be conducted in English by three arbitrators under the DIAC Rules, and the contract shall be governed by UAE federal law.”
Ensure Enforceability:
The clause must meet formal requirements for validity. It should be in writing and show the parties’ clear agreement to arbitrate. Reference any future amendments to institutional rules to maintain validity. Consider including a waiver clause, stating that parties waive the right to appeal the award on substantive grounds, aligning with the finality principle central to arbitration.