Dispute Resolution Trends in Iberia and the UAE: An overview of recent developments

by Natalia Barroso Carmona FCIArb, Robert Sliwinski FCIArb, Chartered Arbitrator and Antonio Amusategui Batalla MCIArb

This paper is the result of the Ciarb event that took place on 19 October 2022, organised by Ciarb Iberian Chapter, representing Spain, Portugal and Andorra, and by Ciarb UAE Branch, comprising the seven emirates forming the United Arab Emirates (UAE).  It aims to provide an overview of the recent and most relevant changes in the alternative dispute resolution institutions and rules within these two jurisdictions, analysing their similarities and differences to identify prevalent trends.

The United Arab Emirates and Iberia (Portugal, Spain and Andorra) are two pivotal regions for distinct reasons. The former is renowned for its highly dynamic economy, which has made it a leading market in the construction industry for the last two decades, and for its central location, which makes it a key player in the surrounding countries. In contrast, Iberia's significance lies in its role as a bridge between Europe and Spanish and Portuguese-speaking countries in America, all major players on the international scene due to their sizeable populations, contribution to world GDP, and participation in world trade.[1]

An inherent part of commercial transactions are the disputes that arise when business turns sour, and as a result, it is not a surprise that the Dubai International Arbitration Centre (DIAC) is “the region’s largest alternative dispute resolution centre".[2]

In order to enhance the importance of Dubai in the dispute resolution industry, some changes were recently introduced, such as those resulting from Decree 34 [3] dated 14 September 2021 and the new DIAC Arbitration Rules 2022[4], which took effect on 21 March 2022. The fundamental changes put in place were to establish one single arbitration centre in Dubai and to promote Dubai as one of the top jurisdictions for arbitrations in the world[5], making the DIAC the only arbitration centre in Dubai.

The arbitration landscape in the UAE has undergone significant changes in recent years. In addition to these changes, there have also been noteworthy developments in mediation, another key alternative dispute resolution method. In April 2021, the UAE implemented Federal Law No. 6, also known as the Mediation Law, which aims to establish a robust mediation framework within the country. Among the most significant changes introduced by this new law is the protection of "without prejudice communications" during mediation. This means that any concessions or communications made during the mediation process cannot be used in court, thereby promoting open and honest communication between the parties involved[6].

In addition to this, and as part of the measures seeking to boost confidence in mediation, on 14 September 2021, Dubai Law No. 18 of 2021 (the Mediation Centre Law) came into force, which introduced, among other things, the novelty that parties are now free to bring disputes to the Centre by mutual agreement following Article 3 of the Mediation Law. Also, the new law covers a wider jurisdiction, although some specific matters remain outside of its competence, such as urgent lawsuits, disputes in which the government is a party, or disputes related to personal status, among others[7]. The Mediation Law in the UAE seeks to promote a culture of alternative dispute resolution and to establish mediation as a preferred method of resolving disputes.

When examining Iberian dispute resolution institutions and laws, it becomes apparent that several changes have been implemented that bear similarities to those undertaken in the UAE, particularly Dubai. For instance, the Centro Internacional de Arbitraje de Madrid (CIAM) was established on 1 January 2020 as part of a strategy to establish a single arbitration centre in Madrid. The CIAM serves as an international hub for arbitration, catering to disputes in Iberia and Latin America, given the common roots and languages shared by many countries in that region.   

The establishment of the CIAM in Madrid is a significant development in Iberia's arbitration landscape, signaling the jurisdiction’s commitment to providing a robust and efficient dispute resolution mechanism. The merger of the four institutions that gave rise to the CIAM (the ‘Corte de Arbitraje de Madrid,’ the ‘Corte de Civil y Mercantil de Arbitraje,’ the ‘Corte Española de Arbitraje,’  and the 'Corte de Arbitraje del Ilustre Colegio de Abogados de Madrid’), ensures that the centre is well-equipped to handle a broad range of domestic and international disputes. Moreover, with its strong international presence, the CIAM is poised to attract more foreign investors, who may seek to resolve their disputes in a neutral and impartial setting.

With regards to mediation, countries forming the Ciarb Iberian Chapter, such as Spain, have also been pursuing ways to boost the use of mediation as a way to resolve controversies through the "Law on Procedural Efficiency Measures for the Public Justice Service [8]", which is expected to come into force by the second quarter of 2023.

The above emphasises the interesting nature of the two regions as they highly influence two different cultures, and the similarities between the strategies implemented to boost confidence in alternative dispute resolution methods to resolve controversies.

Another similarity between the two regions in which these arbitral institutions are located is that their arbitration laws are based on the UNCITRAL Model Law, and both adopt a civil law system, although the UAE also incorporates the Sharia law system.  It is also to be noted that there are additionally two common law systems operating within the UAE; the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) free zones. This is of importance when considering international arbitration as the default seat of the arbitration within the new DIAC Arbitration Rules 2022 is the DIFC allowing for common law procedures to be used in challenging or enforcing arbitral awards.

However, it should be noted that Sharia laws[9] in the UAE affect disputes that are not considered arbitrable due to public policy, including family disputes such as divorce, inheritance, and child custody, among others.  It could therefore be said that Sharia law does not affect arbitrable matters.

In conclusion, it is observed that the UAE and the countries in the Iberian jurisdiction, such as Spain, have implemented similar strategies to establish themselves as hubs for dispute resolution within their respective regions. Given their shared cultural and linguistic connections with two significant geographical markets, both arbitral institutions offer an attractive value proposition, which could make them among the most preferred arbitral institutions globally. It is essential to note that these developments are part of a broader trend towards alternative dispute resolution methods that offer flexibility, speed, and confidentiality, making them a preferred choice for many individuals and businesses alike. As such, they will likely continue to play a critical role in resolving disputes in their respective regions.

[1] José Manuel García-Margallo Revista UNO - América Latina, España y Europa October 2015  https://www.revista-uno.com/numero-21/america-latina-espana-y-europa/ accessed 6 April 2023

[2] Dubai International Arbitration Center https://www.diac.com/en/about-diac/ accessed 6 April 2023

[3] Decree No. (34) of 2021 Concerning the Dubai International Arbitration Centre

[4] Dubai International Arbitration Center https://www.diac.com/en/adr-services/arbitration/diac-arbitration-rules-2022/ accessed 6 April 2023

[5] Jon Bridgewater, Greg Sibbald, Courtney Rothery DIAC takes it all: the integration of Dubai’s arbitration institutions, 23 September 2021 https://www.lexology.com/library/detail.aspx?g=d7d5e24a-7892-412c-973a-649780dfe80d accessed 6 April 2023

[6] John Barlow, Yaman Al Hawandeh, Richard Gimblett, Federal Law No 6 heralds new dawn for mediation law in the UAE https://www.hfw.com/Federal-Law-No-6-heralds-new-dawn-for-mediation-in-the-UAE accessed 6 April 2023

[7] Sachin Kerur Alison Eslick Soham Panchamiya UAE bolsters new Mediation Law by upgrading its centre for mediation 8 November 2021 https://www.reedsmith.com/en/perspectives/2021/11/uae-bolsters-new-mediation-law-by-upgrading-its-centre-for-mediation accessed 6 April 2023

[8] 121/00097 Proyecto de Ley de medidas de eficiencia procesal del servicio público de justicia 22 April 20022

[9] The United Arab Emirates Government  The Federal Judiciary 23 February 2023 https://u.ae/en/about-the-uae/the-uae-government/the-federal-judiciary accessed 6 April 2023