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Introduction
With Decree No. 34, which came into force in 2021, the highly respected DIFC-LCIA, a joint venture between the London Court of International Arbitration (LCIA) and the Dubai International Financial Centre (DIFC), was dissolved. All assets, liabilities, pending cases, and personnel of the dissolved institutions were transferred directly to the Dubai International Arbitration Center (DIAC). The strategic aim of this consolidation was to bring together arbitration services in Dubai under a single, unified, and modernized mega-institution (DIAC).However, this top-down merger created significant legal uncertainty, particularly for parties who had chosen DIFC-LCIA as the dispute resolution venue in their existing contracts. These parties had not consented to arbitration at DIAC. This situation led to an enforceability issue.
In the chaotic environment created by Decree No. 34 and under the imperative to preserve Dubai's reputation as an arbitration center, it became imperative for DIAC to rapidly update its outdated 2007 rules. The DIAC 2022 Rules, which came into force on March 21, 2022, are a comprehensive reform package aimed at bringing DIAC in line with the modern standards of leading international institutions such as the International Chamber of Commerce (ICC) and the LCIA. Perhaps the most important strategic change in the DIAC 2022 Rules concerns the determination of the seat of arbitration. Unless otherwise agreed by the parties, the default seat of arbitration is now the Dubai International Financial Centre (DIFC). Along with these changes, the DIFC legal system, which is independent of Dubai's "onshore" legal system, English-speaking, and based on Common Law principles, has begun to be adopted.
Impact of the 2022 Amendments on the DIAC
The 2022 amendments introduced comprehensive changes to the procedure of adjudication. The way has been paved for hearings to be conducted using virtual communication tools. The use of electronic signatures has been envisaged. These changes aim to eliminate the logistical obstacles that were previously encountered. In addition, procedural actions such as the consolidation of cases and changes of parties have been introduced with the 2022 amendments.
A significant change has been made in the cost calculation. The abolished DIFC-LCIA, like its partner LCIA, used an hourly rate model. The DIAC 2022 Rules, however, have abandoned this model and adopted a value-based cost table also used by the ICC and the Istanbul Arbitration Center (ISTAC). Third-party funding of cases is explicitly permitted, but this permission is subject to a transparency requirement.
The DIAC 2022 Rules exempt arbitrators, DIAC, and its staff from liability for any actions or omissions related to arbitration.
Where the amount in dispute is below AED 1 million (approximately USD 270,000), an expedited procedure aimed at resolving the dispute quickly is provided for. Furthermore, the expedited procedure may be applied if the parties agree, regardless of the amount, or if the arbitral tribunal so decides.
An important deficiency in the DIAC 2007 Rules has been remedied by introducing an "Emergency Arbitrator" mechanism for parties requiring urgent interim measures (such as provisional attachment, evidence preservation, cessation of a specific action, etc.) before the main arbitral tribunal is constituted.
Comparative Analysis: DIAC, ISTAC, ICC, and LCIA
DIAC, ICC, and ISTAC calculate arbitrator fees and administrative costs based on a tariff determined according to the amount in dispute. However, at LCIA, fees are determined based on the actual time spent by the secretariat and arbitrators. DIAC has abandoned the hourly model of its former partner DIFC-LCIA and switched to the ICC/ISTAC model. Additionally, looking at the monetary limits for applying the centers' expedited proceedings:
ICC: USD 3 million. It is designed as the default procedure for medium-sized commercial disputes.
DIAC: AED 1 million (approximately USD 270,000). It is only a tool for small claims.
ISTAC: 5 million TL (approximately USD 120,000). ISTAC is ambitious in terms of speed in this category, with a target decision period of 3 months.
There is no monetary limit in the LCIA. Instead, it provides for a mechanism whereby the arbitral tribunal may immediately dismiss claims that are manifestly unfounded.
The DIAC 2022 Rules, inspired by the ICC, have introduced a "scrutiny" mechanism. The newly established DIAC Arbitration Court reviews the draft before the arbitral tribunal signs the award. However, this mechanism is deliberately designed to be weaker and faster than the ICC's famous "scrutiny" process. Unlike the ICC, the DIAC Tribunal's scrutiny is limited to procedural review and does not address the merits of the decision. The ICC, on the other hand, conducts a substantive review that enhances the quality and enforceability of the decision.
Strategic Assessment and Conclusion
When adding an arbitration clause to an international contract, the choice between these four institutions depends on the nature of the dispute, the amount involved, and the parties' priorities:
DIAC: Ideal for transactions involving the Middle East and North Africa (MENA) region; it offers international standards (Common Law, English) but seeks resolution in a regional center (Dubai). It promises a faster and potentially less bureaucratic process than the ICC.
ICC: Should be preferred in cases involving billions of dollars, extreme complexity, and where global enforcement of the decision (especially in risky jurisdictions) is critical. The ICC's "scrutiny" mechanism provides an invaluable safety net against potential arbitrator errors.
LCIA: It stands out in two scenarios: (1) In very high value but legally straightforward cases, to benefit from the cost advantage of the "hourly fee" model; or (2) When concerned that the opposing party may prolong the case with "frivolous" or "vexatious" claims, to take advantage of the "Early Determination" mechanism.
ISTAC: For transactions involving parties in Turkey or neighboring regions (Central Asia, Eastern Europe), it stands out as a low-cost, efficient, and reliable regional alternative. The Expedited Arbitration procedure is particularly competitive in terms of speed and cost for cases below 5 million TL (~120K USD).
The DIAC 2022 Rules have strongly repositioned Dubai on the international arbitration map, establishing it as a competitive and modern alternative to the ICC and LCIA. DIAC's future success will depend on how efficiently it implements these new rules, how much it can expand its pool of arbitrators with international standing, and, in particular, how much it can resolve the enforcement uncertainties created by Decree No. 34 at the international level.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
