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ArbitrateAD – A new forum for Construction Disputes

The Abu Dhabi International Arbitration Centre branded as ‘ArbitrateAD’, has now commenced operation with the recent publication of its new set of arbitration rules (dated 1 February 2024). The forum ushers in a new era of arbitration in Abu Dhabi, and is expected increasingly to administer a significant portion of construction disputes in the region, going forward.

ArbitrateAD replaces the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC). Pending cases with ADCCAC will continue to be administered by the existing team under the auspices of ADCCAC. New disputes, including those where the parties had agreed to submit their disputes to arbitration under the ADCCAC Rules, will be administered by the AbitrateAD, and be carried out under its new arbitration rules.

With DIAC implementing new rules in 2022 and the SCCA being established with new rules in 2023, ArbitrateAD’s 2024 new rules and refurbished structure now rival its local and international competitors. On its face, ArbitrateAD appears to have established a centre that promises to be a highly effective international forum for justice in commercial disputes.

Some initial key takeaways of the new rules are as follows:

  1. Court of Arbitration – Article 3 establishes a Court of Arbitration (Court) which is the independent administrative body of the centre. The Court has supervisory authority over the arbitration and dispute resolution services of ArbitrateAD and is independent from the Abu Dhabi Chamber of Commerce. 

  2. Default Seat – Whilst the seat of the arbitration can be agreed by the Parties, in the absence of this, the default seat is the Abu Dhabi Global Market (ADGM). However, Article 22(2) provides that the Court is not bound to that default position, providing that the Court can decide otherwise “after giving the parties a reasonable opportunity to be heard” and “considering all the relevant circumstances”. 

  3. Language – Unlike the ADCCAC Rules where Arabic is prescribed as the default language (in the absence of alternative agreement of the parties), Article 23 provides that the initial language of the proceedings shall be determined by the Case Management Office, and following constitution of the Tribunal, the matter will be decided by the Tribunal. Whilst no guidance is provided as to how such decision will be made, one would expect factors such as the language of the contract and communications throughout the project to play a strong role in this. No doubt, after the formation of the Tribunal, the languages that the Tribunal members are capable of working in, is also expected to be a contributory factor in such decision. 

  4. Expedited Proceedings – Unless the parties had agreed to resolve the dispute pursuant to the ADCCAC Rules, any claim with a value of less than AED 9m (the value being determined by aggregating the value of all claims and counterclaims) will be determined on the papers, pursuant to expedited procedures set out in Article 36. 

  5. Award Timings – Pursuant to Article 38(3), the Tribunal shall have a maximum period of 9 months from the date of the initial case management conference to make its award on the merits. Article 38(4) however provides that such period may be extended by the Court on its own volition, upon the request of the Tribunal and/or joint request of the parties. Despite this, Article 38(3) provides a target, which seems aimed at swift resolution of disputes. 

  6. Scrutiny of Awards – Article 40 provides that before signing an Award, the Tribunal must submit it to the Court for scrutiny. Whilst the Court cannot affect the Tribunal’s liberty to decide the merits of the case, it can “suggest for the Tribunal’s consideration modifications to the Award, including drawing the Tribunal’s attention to any required changes to the form of the Award, apparent clerical errors, inconsistencies or omissions in the Award or to matters addressed in the Award Checklist.”

  7. Costs of the Arbitration – Unlike the ADCCAC Rules, Article 50(6) provides a clear implication that the party that loses the case will be responsible for the costs, stating that “[u]nless otherwise agreed by the parties, the Tribunal shall, at the request of a party, apportion the costs of the arbitration and the parties’ legal costs and expenses, between the parties, having regard to the outcome of the case, each party’s contribution to the efficiency and expeditiousness of the arbitration and any other relevant circumstances.” 

  8. Advance on Costs – Article 51(4) provides that if any party fails to pay its share of the advance, the Case Management Office shall give the other party(ies) the opportunity to do so. Such provision is one that is likely to be exploited by respondents. However, changes to the Tribunal’s discretion on costs, where the conduct of the parties is taken into account when it comes to the Tribunal’s consideration on costs, may dissuade respondents from neglecting this obligation (which in essence shows an element of contempt to the procedure), as it may come back to bite them later on.

Overall, the ArbitrateAD Rules appear to establish a compelling arbitral forum that will be well suited to handling construction disputes. It is also fair to say that such rules differ substantially from the ADCCAC Rules that were in place prior to 1 February 2024. Such changes may have a real impact on many parties who were previously dissuaded from bringing their case under the ADCCAC Rules.

For example, employers who had international contractors bound to arbitration pursuant to ADCCAC Rules could at times (for claims under or around AED 3,000,000) essentially call the contractor’s bluff when they threatened to bring a claim to arbitration. This was because they knew that the costs and risks associated with bringing such claim would likely outweigh the potential award.

This could also be compounded at times by the parties neglecting to agree a language of the arbitration. This left foreign contractors, who had contracted and communicated in English throughout the course of a project, now forced to bring their claim in Arabic. Such factors created additional cost (translation) and complexity (simply following such proceedings and reviewing witness statements and materials in a foreign language), that no doubt prevented many strong claims from proceeding.

Provided that such claims are not time barred, they can now proceed under the new ArbitrateAD rules, and this is likely to open the door for many contractors, subcontractors and consultants to reconsider their claim and now bring it to a forum that can not only award them their claim, but the costs of the proceedings as well.

We look forward to seeing how the centre moves forward from this juncture. Based on the clear, progressive and functional arbitration rules, we expect to see it building a long-term future in the administration of UAE and regional construction disputes.

 

 

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