Expert urges dispute clause review following DIAC and LCIA latest agreement

Madelaine Power of Pinsent Masons, who practices across the GCC and London, said that the effect of the DIAC and LCIA agreement is that some disputes arising under business contracts may now fall to be resolved in accordance with the DIAC arbitration rules by default. She said businesses will want to update their disputes resolution clauses if the DIAC is not their preferred forum.

The new DIAC and LCIA agreement reflects the fact that there have been major structural changes recently in relation to arbitration in Dubai.

Last year, Dubai law makers moved to abolish the Dubai International Financial Centre’s Arbitration Institute (DAI) and the Emirates Maritime Arbitration Centre (EMAC) and transfer the rights and obligations of those institutions to the DIAC. New arbitration rules for the DIAC were subsequently finalised and took effect on 21 March 2022.

The suite of reforms had implications for the DIFC-LCIA arbitration centre, which was a partnership between the DAI, in respect of the Dubai International Financial Centre, and the LCIA. 

In a joint statement, the DIAC and LCIA have confirmed that the LCIA will administer all arbitrations referring to the DIFC-LCIA rules that were commenced on or before 20 March 2022 by applying the DIFC-LCIA Rules; and that the DIAC will administer all arbitrations referring to the DIFC-LCIA Rules that were, and are, commenced after 21 March 2022 by applying the newly amended DIAC Rules, unless otherwise agreed by the parties. 

Madelaine Power of Pinsent Masons said: “The joint statement provides clarity to parties with ongoing arbitrations under the DIFC-LCIA rules. It also provides that all dispute resolution proceedings that refer to the DIFC-LCIA Rules commenced after 21 March 2022 shall be administered by DIAC, under the updated DIAC Rules, unless otherwise agreed by the parties.”

“There are many construction, oil and gas and commercial agreements that still contain references to the DIFC-LCIA Rules which are now no longer operational. If parties want to use the LCIA Rules or, do not want to be bound by the DIAC Rules, they will need to amend their disputes resolution clause. We advise seeking tailored advice and revisiting this now with your counterparty, prior to a dispute arising, to avoid unnecessary confusion and cost at a later stage,” she said.