Arbitrators to face jail in UAE

29 November 2016

Arbitrators to face jail in UAE

On 29 October 2016, Article 257 of the UAE Federal Penal Code No. 3 of 1987, was amended by Federal Decree Law No. 7 of 2016 to read as follows:

“Anyone who issues a decision, expresses an opinion, submits a report, presents a case or proves an incident in favour of or against a person, in contravention of the requirements of the duty of neutrality and integrity, while acting in his capacity as an arbitrator, expert, translator or fact finder appointed by an administrative or judicial authority or selected by the parties, shall be punished by temporary imprisonment.

“The aforesaid categories of persons shall be barred assuming once again the responsibilities with which they were tasked in the first instance, and shall be subject to the provisions of Article 255 of this Law.”

(Translation kindly supplied by Hasan Arab, Co-Head of Litigation, Al Tamimi & Co.)

The measure has caused understandable concern amongst the international arbitral community with Global Arbitration Review reporting that some arbitrators would no longer undertake appointments in the UAE and others stating that they would consider resigning from existing tribunals. We would counsel some caution to those considering the latter course of action – an arbitrator who withdraws without valid reason after having accepted his appointment may be held liable for compensation (Article 207(2) of the Federal Code of Civil Procedure). It seems unlikely that the courts in UAE would regard a change in UAE law as a valid reason for resignation.

There is concern that this criminal jurisdiction will be abused, with disgruntled parties making unsubstantiated criminal complaints against arbitrators, prompting unwarranted criminal investigations. Even before these amendments were introduced, there have been attempts to make criminal complaints against arbitrators sitting in Dubai. Those complaints were ultimately dismissed, but gave rise to significant international criticism. These recent amendments clearly increase the potential for parties to place illegitimate pressure on arbitrators.

There is no doubt that this is damaging to the reputation and attraction of the UAE as an arbitral seat, but the significance should not be over-estimated. The provisions have been in existence for nearly 30 years in relation to court-appointed experts and translators. We are informed that they have been rarely if ever invoked. Anyone abusing the criminal process could, in principle, themselves face prosecution, although this does not appear to have deterred unscrupulous parties from making groundless allegations in the past.

The UAE has a history of well-intentioned if ill-considered initiatives (we refer to our article on Dubai Decree No. 19 of 2016 “Concerning the establishment of a Judicial Tribunal for the Dubai Courts and DIFC Courts” of 4 August 2016). In this case it may well be that the Federal legislature was simply attempting to assimilate the position of arbitrators with that of experts and translators without fully realising the consequences, both legally and for the reputation of the Union.

One legal consequence is a potential tension with Article 22 of the DIFC Arbitration Law which provides:

“No arbitrator, employee or agent of an arbitrator, arbitral institution, officer of an arbitral institution or appointing authority shall be liable to any person for any act or omission in connection with an Arbitration unless they are shown to have caused damage by conscious and deliberate wrongdoing. This Article does not affect any liability incurred by an arbitrator by reason of his resigning.”

It is theoretically possible for an arbitrator to be in “contravention of the requirements of the duty of neutrality” without being guilty of “conscious and deliberate wrongdoing”. The UAE Federal Penal Code applies in the DIFC with the same force as elsewhere in the Emirates, as the DIFC is only exempted from Federal civil and commercial laws, not criminal laws (Federal Law No.8 of 2004: Regarding The Financial Free Zones in the United Arab Emirates).

It is understood that there are moves planned for all of the affected institutions and senior legal figures to lobby for the repeal of the amendment.

Legal update written by Michael Black QC of XXIV Old Buildings.