UAE: recent arbitration reforms while legacy DIFC-LCIA clause debate continues

However, the treatment of legacy DIFC-LCIA arbitration agreements remains an area of legal debate, particularly in jurisdictions outside the UAE. While some international courts initially questioned their enforceability, recent rulings – including a reversal by the US Court of Appeals for the Fifth Circuit – suggest growing recognition of the continued validity of DIFC-LCIA clauses, even after the “abolition” of the DIFC-LCIA Arbitration Centre under Decree No. 34 of 2021.

Institutional changes and impact on arbitration agreements

Several arbitral institutions in the UAE have undergone structural changes. The Abu Dhabi International Arbitration Centre (ADIAC) has replaced the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC) while, in Dubai, the Dubai International Financial Centre’s Arbitration Institute (DAI) and the Emirates Maritime Arbitration Centre (EMAC) were dissolved in September 2021. As a result, the DIFC-LCIA Arbitration Centre, which operated as a joint venture between DAI and the LCIA, ceased to exist.

Read more of our report on international arbitration in 2025

• International arbitration: regional, sectoral and industry developments reinforce dispute resolution status
• UAE: recent arbitration reforms while legacy DIFC-LCIA clause debate continues
• Saudi Arabia firmly on the map as key arbitration and dispute resolution hub
• New digital services and legal developments boost international arbitration usage in Qatar
• Egypt a ‘central hub’ for arbitration in the MENA region
• Investment disputes continue to drive international arbitration developments in Africa
• Southern African states form harmonised arbitration framework
• UK arbitration developments continue to enhance position as key dispute resolution jurisdiction
• French arbitration law evolves ahead of 2025 reforms
• Germany to become more attractive for international arbitration proceedings
• Singapore continues to rise as an international dispute resolution hub
• Continued improvements in international arbitration driven by new HKIAC rules and case law
• India continues work to modernise arbitration landscape
• Significant developments in Japan’s arbitration landscape
• South Korea strengthens international arbitration framework
• China continues to improve arbitration process efficiency and effectiveness
• Australian court rulings strengthen pro-arbitration stance and expand scope of arbitration
• Construction projects and contracts must consider sanctions risks
• New types of M&A disputes will drive up international arbitration cases
• Growing demand for expertise in cryptocurrency related arbitration in 2025
• Major changes crystallising in investor-state dispute settlement
• What the future holds for mediation in investor-state dispute settlement

The dissolution of DIFC-LCIA raised concerns about the enforceability of arbitration agreements referencing its rules. Transitional arrangements provided that cases registered with the DIFC-LCIA before 20 March 2022 would continue to be administered by the LCIA in London, while cases initiated after that date would be administered by DIAC under its own rules, unless parties agreed otherwise.

Judicial treatment of DIFC-LCIA arbitration agreements

Four key court decisions – three of which were appealed – illustrate the evolving treatment of legacy DIFC-LCIA clauses globally and within the UAE.

US courts: Louisiana District Court and US Court of Appeals for the Fifth Circuit

The Louisiana District Court initially refused to compel arbitration, holding that the DIFC-LCIA arbitration clause was unenforceable because the DIFC-LCIA no longer existed. The court characterised the arbitration clause as a forum-selection clause, meaning that arbitration could not proceed in the absence of the designated institution. It determined that, under US Supreme Court precedent, arbitration is a matter of contract, and courts cannot rewrite the agreement to substitute a different arbitral forum than the one expressly chosen by the parties. The court further reasoned that Decree No. 34 of 2021, which abolished the DIFC-LCIA and directed that DIAC administer its cases, could not unilaterally modify a private arbitration agreement governed by US law.

On appeal, published 27 January 2025, the US Court of Appeals for the Fifth Circuit reversed the Louisiana District Court’s decision, concluding that the District Court erred by refusing to compel arbitration consistent with the terms of the subcontract. The Court of Appeals closely analysed the arbitration clause and found that the subcontract only required arbitration under the DIFC-LCIA Rules, rather than before the DIFC-LCIA itself. The appellate court also considered whether the choice of arbitration rules inherently implied a choice of forum but – despite expressing lingering doubts that it did – the Appeals’ Court did not decide the issue on the basis that it was not integral to the subcontract. The overarching consideration was whether the parties’ intent to arbitrate was general or exclusive to a particular forum. The court determined that the parties’ dominant purpose was to arbitrate disputes generally, rather than restrict arbitration to a single institution. The court went on to add that the parties had not designated the DIFC-LCIA as the exclusive forum contemplated in the subcontract.

The case was remanded to the District Court to consider whether the DIFC-LCIA Rules can be applied by any other forum that may be available – including the DIAC, LCIA, or a forum in Saudi Arabia – and, if so, instructed it to compel arbitration in that forum. If not, the District Court must consider whether to otherwise compel arbitration in Saudi Arabia.

Singapore courts: DFL v DFM – Singapore High Court and appeal decision

In DFL v DFM, the Singapore High Court considered whether a DIAC award could be enforced when the original arbitration agreement referenced DIFC-LCIA Rules. The respondent challenged enforcement on the basis that the parties had agreed to arbitration under DIFC-LCIA Rules, not DIAC Rules, and therefore DIAC lacked jurisdiction to administer the arbitration.

The High Court agreed with the reasoning of the Louisiana District Court, finding that arbitration is a matter of contract and that parties cannot be compelled to arbitrate under a set of rules they did not explicitly agree to. However, despite this conclusion, the court ultimately enforced the award, holding that the respondent had submitted to DIAC’s jurisdiction by participating in the arbitration. This ruling was subsequently upheld on appeal.

Abu Dhabi Court of First Instance (upheld on appeal, Abu Dhabi Court of Appeal)

In contrast to the decisions in the Louisiana District Court and Singapore, the Abu Dhabi Court of First Instance upheld the enforceability of a DIFC-LCIA arbitration agreement, emphasising that the abolition of the DIFC-LCIA did not render such arbitration agreements invalid. The court ruled that:

• The parties had clearly elected to resolve disputes by arbitration, and the closure of an arbitral institution does not, in itself, nullify an arbitration agreement.
• The UAE Federal Arbitration Law (based on the UNCITRAL Model Law) ensures the continuity of arbitration agreements, even in cases where an institution ceases to exist.
• Decree No. 34 of 2021 preserved the parties’ agreement and provided that DIAC would administer disputes unless the parties agreed otherwise.

The Abu Dhabi Court of Appeal affirmed this decision, reinforcing the pro-arbitration stance of UAE courts and confirming that procedural changes do not override party autonomy or the enforceability of valid arbitration agreements.

DIFC Court of First Instance – Narcisco v Nash, DIFC Court

In Narciso v Nash, the DIFC Court of First Instance reaffirmed the enforceability of DIFC-LCIA arbitration agreements, reinforcing the approach taken by the Abu Dhabi courts. The case arose from a dispute between a main contractor, Narciso, and a subcontractor, Nash, over a construction project in Sharjah, UAE. The subcontract contained an arbitration clause requiring disputes to be resolved under the Arbitration Rules of the DIFC-LCIA Arbitration Centre. After Nash initiated court proceedings in Sharjah, Narciso applied to the DIFC Court for an anti-suit injunction to restrain Nash from continuing the proceedings, arguing that the dispute was subject to arbitration.

The DIFC Court granted the anti-suit injunction, confirming that the dissolution of the DIFC-LCIA did not render arbitration clauses inoperative. In his reasoning, Justice Black KC emphasised that Dubai Decree No. 34 of 2021 formed part of DIFC law and that the arbitration agreement remained valid and enforceable. Like the Abu Dhabi courts, he observed that the Decree did not purport to rewrite the terms of pre-existing arbitration agreements but merely provided for the continuity of arbitration administration under DIAC, unless the parties agreed otherwise.

Justice Black KC also commented on the divergent approaches taken by courts outside the UAE, noting that the Louisiana District Court’s decision may have failed to distinguish between an arbitral forum and procedural rules. He signalled a preference for the reasoning of the Abu Dhabi courts, which had upheld the continued validity of DIFC-LCIA arbitration agreements, in line with party autonomy and pro-arbitration principles.

While the DIFC Court's ruling was interim in nature, it provides a strong indication of how DIFC courts are likely to approach the enforceability of legacy DIFC-LCIA arbitration clauses, aligning with the broader pro-arbitration stance within the UAE.

Positive outlook for DIFC-LCIA agreements

While early decisions outside the UAE cast doubt on the enforceability of DIFC-LCIA arbitration agreements, recent rulings, including the US Court of Appeals’ decision, suggest a growing global recognition of their validity.

Given this positive trend, parties with DIFC-LCIA arbitration clauses can have some confidence in their enforceability, but caution remains warranted as courts in different jurisdictions are still grappling with their interpretation of Decree No. 34 of 2021 and the treatment of legacy DIFC-LCIA clauses. The most prudent course of action is for parties to review existing DIFC-LCIA clauses and consider expressly updating them to specify DIAC or another institution so as to avoid potential jurisdictional disputes or complications during enforcement when overseas courts are involved.

New arbitration rules for arbitrateAD in Abu Dhabi

Last year saw the first year of operation of the Abu Dhabi International Arbitration Centre (arbitrateAD), which was launched in December 2023 by the Abu Dhabi Chamber of Commerce to replace ADCCAC.

The new arbitration body and the new rules that took effect on 1 February 2024 are set to allow Abu Dhabi to compete with other regional institutions following recent changes in the arbitration landscape in the UAE.

The rules have been well received by the end users, and are in line with other modern institutional rules, including provisions for third-party funding and new procedures for multi-party and multi-contract claims. The Abu Dhabi Global Market (the ADGM) is the default seat of proceedings under the rules. The arbitrateAD rules are also tech-friendly, stipulating that the default mode of communication be digital, that hearings can be conducted remotely, and that awards may be signed electronically.

The centre has also recently undergone technological improvements, with the introduction of e-filing systems, and upgraded hearing venues to accommodate complex international disputes.

In another significant development, arbitrateAD has shown interest in investor-state dispute settlement (ISDS) initiatives and has signed the Equal Representation in Arbitration (ERA) Pledge, reaffirming its commitment to promote diversity within its ranks.

Growth of DIAC

The Dubai International Arbitration Centre (DIAC) has reported another year of increased caseload.

DIAC’s 2023 annual report showed an 11% jump in the number of arbitration cases administered by the centre, from 292 in 2022 to 323 in 2023. The total number of cases registered also rose by 4.4%, from 340 to 355. The total value of the cases registered in 2023 exceeded AED 5.5 billion (£1.16bn). Construction and real estate cases continued to dominate its caseload, representing almost 60% of all DIAC administered cases last year. Construction contracts were also the most common contract type in DIAC arbitrations in 2023, accounting for 40% of all underlying contracts.

DIAC also showcased the strides it has taken in the diversity sphere. The Arbitration Court’s selection of women as arbitrators reached near parity at 47% of all Arbitration Court appointments in 2023. Of the 143 arbitrators appointed in 2023, 44, or 31%, were women. Of the 60 party-nominated arbitrators, 22% were women, and of the 26 presiding arbitrators nominated by the co-arbitrators, 15% were women. DIAC also emphasised its status as signatory and active supporter of the Equal Representation in Arbitration Pledge and Campaign (ERA), the Equal Representation for Expert Witnesses Pledge and Campaign (ERE), and Racial Equality for Arbitration Lawyers Initiative (REAL.

On the technology front, DIAC recently announced its partnership with Opus 2. The partnership will launch a new digital platform to overhaul and consolidate DIAC’s current internal systems and processes. Access to Opus 2’s hearing technologies and solutions will also be offered.

Key court cases on arbitration

The past year has seen a number of important court rulings that have had an impact on aspects of arbitration in the UAE.

Non-payment of fees

The first case concerns whether non-payment of fees affect arbitration clauses. In the UAE Court of Cassation ruling, arbitration clauses remain valid even if a case is closed due to non-payment of the advance on arbitration costs, as long as no final award has been issued. This decision is a complete reversal of the prior approach taken by Dubai courts, which have consistently ruled that non-payment of the advance on costs renders the arbitration clause inoperable and as a result, the courts will have jurisdiction over the dispute. This is a positive development for arbitration in the UAE, as the ruling confirms that the UAE’s commitment to respecting arbitration agreements, even in the face of administrative or financial disruptions.

Enforcing foreign interim measures

Another important ruling focuses on the enforceability of foreign interim awards. In March 2024, the Dubai International Financial Centre (DIFC) Court of Appeal ruled that interim measures, including those issued by tribunals outside the DIFC, can be enforced as final awards under the DIFC Arbitration Law. This court decision underscores the DIFC’s alignment with international standards, such as the New York Convention, regarding the enforceability of awards. It shows the ‘arbitration-friendly’ nature of this offshore jurisdiction in the UAE.

Recovery of legal fees

Despite these positive developments, the year 2024 also saw the reporting of two much-debated decisions in the onshore UAE courts, regarding recovery of legal fees in arbitration. In a judgment issued in February 2024, the Dubai Court of Cassation set aside the part of an ICC arbitral award that related to legal costs. The court determined that the ICC rules included no express right to award such costs and the arbitration tribunal did not have the authority to grant them. However, article 38 of the ICC Rules 2021 does refer to “the costs of the arbitration shall include…the reasonable legal and other costs incurred by the parties for the arbitration” (Dubai Court of Cassation judgment No. 821 of 2023 dated 05 February 2024).

In contrast to the Dubai Court of Cassation ruling, the Dubai Court of Appeal took a different approach in a set-aside case concerning the recovery of costs in DIAC arbitration proceedings. The judgment, issued in January 2024, held that the DIAC Rules 2022 contain an explicit provision granting recover of legal representatives’ costs. Article 36(1) of the Rules includes the wording “the fees of the legal representatives and any expenses incurred by those representatives, together with any other party’s costs as assessed and determined by the Tribunal” (Dubai Court of Appeal judgment No. 33 of 2023 dated 22 January 2024).

However, in November 2024, the Dubai Court of Cassation reversed its earlier approach to article 38 of the ICC Rules 2021 in another judgment. The court confirmed that the ICC Rules allow the award of legal costs, including costs paid by a party to its legal representatives. The court considered the wording of article 38 and ordered that it must be given effect to (Dubai Court of Cassation judgment No. 756 of 2024 dated 19 November 2024).

As the UAE does not operate a system of precedent, due to the inconsistent treatment between different courts, parties seeking to arbitrate in the UAE should include an express right to recover legal representatives’ costs in a carefully drafted terms of reference at the outset of the proceedings.

Co-written by Jack Tivey of Pinsent Masons.