Renewal Of DIAC Rules Include Updates On Third Party Funding And Costs Recovery

Published date20 June 2022
Subject MatterLitigation, Mediation & Arbitration, Arbitration & Dispute Resolution
Law FirmErso Capital Advisors LLC
AuthorErso Capital

On the 2nd of March 2022, the Dubai International Arbitration Centre ("DIAC") published the DIAC Arbitration Rules 2022 ("the 2022 Rules"). The Rules follow the re-launch of DIAC by Decree No. 34 of Year 2021, which abolished existing arbitration centres - including the DIFC-LCIA and EMAC - and created a single consolidated arbitration centre in the DIAC.

The 2022 Rules position serves the aim of positioning Dubai as a leading arbitration hub, by establishing a framework of modern arbitration procedures that introduce efficiency and flexibility to DIAC Arbitration proceedings and strengthen DIAC's position as one of the leading global arbitration centres.

Third-party funding

The previous rules published fifteen years ago, did not address the issue of third-party arbitration funding. Though Funding is not as widely used in the UAE, as it is in other jurisdictions, its use is on the rise in UAE. The new rules expressly allow third-party funding, provided that the funding arrangement is concluded before the tribunal is constituted. A party using third-party funding must also disclose the identity of the funder, as well as whether the funder has committed to any adverse cost liability.

Article 22 of the 2022 Rules provides that parties who enter third-party funding arrangements must promptly disclose this fact to all other parties and the centre and must disclose whether the funder has committed to an adverse cost liability.

Recovery of legal fees

DIAC tribunals can now award legal fees and expenses as part of the costs of the arbitration. Under the 2007 rules and costs appendix, only DIAC's administrative fees and fees and expenses of the tribunal and experts could be awarded. This position was previously upheld by the onshore courts, even for instance where arbitration agreements had expressly permitted "legal costs" to be recovered.

The prior costs rules meant that successful parties had to stomach their own legal costs. This impacted many claimants seeking to recover relatively low damages sums in the UAE. As there would be little point in incurring the significant legal costs associated with arbitration to recover relatively modest sums. The 2022 rules update is therefore a hugely positive development, one that is likely to allow more worthy parties to bring their claims before a tribunal and increase access to justice in the UAE.

Other changes

  • DIFC Default Seat -The 2007 Rules provided for onshore Dubai as the default seat of arbitration where the...

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