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Drafting an Efficient Business Arbitration Agreement

In the realm of dispute resolution, arbitration stands as an alternative method, steering parties away from the courtroom. This approach offers swiftness, cost-effectiveness, and adaptability, all while safeguarding the confidentiality and amicability between the involved parties. However, the essence of arbitration hinges upon a crucial element: a valid and enforceable arbitration agreement. Within the confines of this article, we shall embark on an exploration of crafting an arbitration agreement that aligns with the UAE Federal Law No. 6 of 2018 on Arbitration (referred to as the “Arbitration Law”). This law applies to arbitrations conducted within the UAE or governed by UAE law.

Deciphering the Arbitration Agreement

What exactly constitutes an arbitration agreement? It takes the form of a contract, delineating the intricacies of the arbitration process. This includes but is not limited to specifying:

  • The Range of Disputes Covered
  • The Number and Qualifications of Arbitrators
  • The Stipulated Rules and Procedures
  • The Incontestable Authority of the Arbitration Award

Varieties of Arbitration Agreements

Arbitration agreements come in different forms:

  1. Parties can proactively opt for arbitration before disputes arise. This can be achieved through a distinct arbitration agreement or by integrating an arbitration clause into their primary contract, which can cover either all or select potential disputes.
  2. Even if a lawsuit has already been initiated in court, parties can still opt for arbitration. In such cases, the arbitration agreement should explicitly outline the issues subject to arbitration.
  3. Parties can establish an arbitration agreement by referring to another document containing an arbitration clause. This document might be a standard contract or an international treaty. The reference must be sufficiently clear to incorporate the arbitration clause into the contract.

What Are the Prerequisites for a Valid Arbitration Agreement?

For an arbitration agreement to be deemed valid, it must adhere to the following conditions:

The agreement must be executed by either a natural person possessing the legal capacity to act or a legal entity’s representative duly authorized to enter into such an arbitration agreement. Should the individual signing the arbitration agreement lack the requisite authority or capacity, the agreement may be rendered null and void.

It must pertain to matters eligible for arbitration. Arbitration cannot be employed for subjects beyond the parties’ control, including criminal issues, personal status matters, or concerns of public policy.

The agreement must be documented in writing; otherwise, it will be invalidated. Article 7 of the Arbitration Law outlines various methods through which a written arbitration agreement can be established, including the execution of a document bearing the signatures of the involved parties, an exchange of written correspondence, a reference to another document incorporating an arbitration clause, or a court judgment confirming the arbitration agreement.

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Creating an Arbitration Agreement in the United Arab Emirates (UAE)

An arbitration agreement, whether pre- or post-dispute, standalone or within a contract clause, must contain these key elements for clarity and enforceability:

  1. Clearly define which disputes, whether from a specific contract or a current issue, are subject to arbitration to avoid ambiguity.
  2. Specify the number (always an odd number) and qualifications of arbitrators, or delegate to a third party like an arbitration institution. Default rules apply if parties can’t agree.
  3. The regulations and processes of arbitration: Within the arbitration agreement, it is essential to outline the regulations and processes that will oversee the arbitration proceedings. These may encompass aspects such as the language, location, and governing law of the arbitration, as well as the rules about evidence and disclosure. Additionally, it should define time constraints, the potential for extensions, the use of interim measures and emergency arbitrators, and the associated fees and arbitration costs.
  4. Parties involved have the flexibility to either formulate their regulations and processes or opt to embrace the guidelines provided by 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).
  5. The binding nature of the arbitral decision: The arbitration agreement must explicitly state the parties’ commitment to honor and adhere to the arbitral award, which shall be considered final and binding upon them. Parties may also opt to relinquish their right to appeal or challenge the award, with exceptions limited to specific grounds such as the invalidity of the arbitration agreement, procedural irregularities, overstepping of authority, or breaches of public policy.

You may also read Creating a Powerful Arbitration Agreement for Your Business: A Step-by-Step Guide

GA Lawyers in Dubai offer comprehensive assistance in managing arbitration agreements, tailoring their approach to suit the specific circumstances and the nature of the conflict. Their services encompass tasks such as crafting, assessing, or bargaining over an arbitration pact on behalf of a client, advocating for the client during the arbitration proceedings, and contesting or enforcing the arbitration award. With their expertise and experience, the Arbitration Lawyers at GA Lawyers are adept at guiding clients toward the most suitable strategies, safeguarding their rights and concerns, and achieving a just and expeditious resolution of the dispute.

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