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Creating a Powerful Arbitration Agreement for Your Business: A Step-by-Step Guide

Arbitration serves as an alternative dispute resolution method enabling parties to resolve conflicts without resorting to the court system. It offers advantages such as expedience, cost-effectiveness, flexibility, confidentiality preservation, and the maintenance of good relations among involved parties. Nevertheless, the viability of arbitration hinges on the presence of a valid and enforceable arbitration agreement. This article delves into crafting an arbitration agreement in compliance with the UAE Federal Law No. 6 of 2018 on Arbitration (referred to as the “Arbitration Law”), which pertains to arbitrations conducted within the UAE or governed by UAE law.

So, what exactly constitutes an arbitration agreement? Essentially, it’s a contractual document outlining the arbitration process’s terms and conditions. This includes defining the dispute’s scope, specifying the number and qualifications of arbitrators, stipulating the applicable rules and procedures, and establishing the binding nature of the final award.

Varieties of Arbitration Agreements

Arbitration agreements can take various forms to facilitate dispute resolution.

  1. Preemptive Arbitration Agreements: Parties may choose to preemptively address potential disputes by crafting a distinct arbitration agreement or embedding an arbitration clause within their primary contract. This agreement can encompass all or a portion of potential conflicts that may arise in the future.
  2. Post-dispute Arbitration Agreements: Parties also retain the option to engage in arbitration proceedings after a dispute has already emerged, even if legal action has been initiated in a court of law. For such cases, the arbitration agreement must explicitly outline the specific issues eligible for arbitration.
  3. Referential Arbitration Agreements: Additionally, parties can establish an arbitration agreement by cross-referencing another document containing an arbitration clause. This reference must be sufficiently clear to integrate the clause into the contractual framework. Such documents may include standard contracts or international treaties.

What Constitutes a Valid Arbitration Agreement?

To be deemed valid, an arbitration agreement must adhere to the following criteria:

1. It must be executed by an individual possessing the legal capacity to act or by a duly authorized representative of a legal entity empowered to enter into arbitration agreements. Failure to meet this requirement may render the agreement null and void.

2. The subject matter must pertain to issues that are amenable to arbitration. Matters beyond the parties’ discretion, such as criminal cases, personal status disputes, or matters of public policy, are not eligible for arbitration.

3. The agreement must be documented in writing; otherwise, it will be considered void. Article 7 of the Arbitration Law outlines various acceptable methods of creating a written arbitration agreement. These include a document signed by all parties involved, an exchange of written correspondence, a reference to another document containing an arbitration clause, or a court decision confirming the arbitration agreement.

Creating an Arbitration Agreement in the UAE

In the UAE, crafting an arbitration agreement can occur both before and after a dispute emerges. Such an agreement may take the form of a standalone document or be embedded within another contractual arrangement. Regardless of its structure or timing, the arbitration agreement must encompass the following elements to ensure both clarity and enforceability:

1. Defining the Scope of Disputes: The arbitration agreement must clearly outline the scope of disputes subject to arbitration. This can include all or specific disputes arising from a particular contract or relationship, or a specific dispute that has already arisen. Employing precise and unambiguous language is crucial to prevent any confusion regarding which disputes are eligible for arbitration.

2. Determining Arbitrator Details: The agreement should specify the number of arbitrators who will constitute the arbitral tribunal. The number should always be an odd one and can range from one to multiple arbitrators. Parties can also agree upon arbitrators’ qualifications, nationality, or other criteria, or delegate this responsibility to a third party, such as an arbitration institution. In cases of no mutual agreement, the Arbitration Law provides default rules for arbitrator appointments and challenges.

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3. Establishing Arbitration Rules and Procedures: The arbitration agreement should set out the rules and procedures governing the arbitration process. This encompasses decisions regarding the language, location, and governing law of the arbitration, as well as rules about evidence, disclosure, timeframes, extensions, interim measures, emergency arbitrators, and arbitration-related fees and costs. Parties can either formulate their own rules and procedures or opt to adopt the regulations of an arbitration institution, such as the Dubai International Arbitration Centre (DIAC), the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), or the International Chamber of Commerce (ICC).

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4. Acknowledging the Binding Nature of Awards: The arbitration agreement should unequivocally state that the parties consent to adhere to and abide by the arbitral award, which is final and binding on all involved parties. Furthermore, the agreement can encompass provisions whereby the parties waive their right to appeal or challenge the award, except on specific grounds, such as the invalidity of the arbitration agreement, due process violations, an excess of authority, or breaches of public policy.

GA Lawyers in Dubai offer comprehensive support for arbitration agreements tailored to the specific needs and circumstances of the dispute. Their services encompass a wide range of options, including drafting, reviewing, and negotiating arbitration agreements on behalf of clients. Additionally, an GA lawyer can act as a representative during the arbitration proceedings or take on the role of challenging or enforcing arbitration awards. With their expertise and experience, an Arbitration Lawyer from GA Lawyers can provide valuable counsel to clients, ensuring the protection of their rights and interests while facilitating a fair and efficient resolution of the dispute.

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