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How to draft an effective Arbitration Agreement for your Business

Arbitration is a form of alternative dispute resolution that allows parties to settle their disputes without going to court. Arbitration can be faster, cheaper, and more flexible than litigation, and it can also preserve the confidentiality and goodwill of the parties involved. However, arbitration is not possible without a valid and enforceable arbitration agreement. In this article, we will explain how to write an arbitration agreement that complies with the UAE Federal Law No. 6 of 2018 on Arbitration (the “Arbitration Law”), which applies to arbitrations conducted in the UAE or governed by UAE law.

What is an Arbitration Agreement?

An arbitration agreement is a contract that specifies the terms and conditions of the arbitration process, such as the scope of the disputes, the number and qualifications of the arbitrators, the rules and procedures to be followed, and the binding effect of the award.

Types of Arbitration Agreement

  1. The parties can agree to arbitrate their disputes before they arise, by making a separate arbitration agreement or by including an arbitration clause in their main contract, covering all or some of the potential disputes between them.
  2. The parties can also agree to arbitrate their disputes after they arise, even if they have already filed a lawsuit in court. In this case, the arbitration agreement must specify the issues that will be subject to arbitration.
  3. The parties can also make an arbitration agreement by referring to another document that contains an arbitration clause, such as a standard contract or an international treaty, as long as the reference is clear enough to incorporate the clause into the contract.

What Are The Requirements For A Valid Arbitration Agreement?

An arbitration agreement must meet the following requirements to be valid:

  • It must be made by a natural person who has the legal capacity to act or by the representative of a legal person authorized to conclude the arbitration agreement. If the person who signs the arbitration agreement does not have the necessary authority or capacity, the agreement may be null and void.
  • It must relate to matters that can be submitted to conciliation. Arbitration is not allowed for matters that are not subject to the parties’ disposal, such as criminal matters, personal status matters, or public policy matters.
  • It must be made in writing, or otherwise it will be null and void. Article 7 of the Arbitration Law specifies the different ways that an arbitration agreement can be made in writing, such as in a document signed by the parties, in an exchange of letters or other means of written communication, in a reference to another document that contains an arbitration clause, or in a court decision confirming the arbitration agreement.

Read more about- Arbitration procedures and practice in UAE

How to Draft an Arbitration Agreement in the UAE?

An arbitration agreement can be made before or after the dispute arises, and it can be in the form of a separate agreement or a clause in another contract. However, regardless of the form and timing of the arbitration agreement, it should include the following elements to ensure clarity and enforceability:

  • The scope of the disputes: The arbitration agreement should define the scope of the disputes that will be submitted to arbitration, whether they are all or some of the disputes arising from a specific contract or relationship, or a particular dispute that has already arisen. The parties should use clear and precise language to avoid any ambiguity or confusion about the arbitrability of the disputes.
  • The number and qualifications of the arbitrators: The arbitration agreement should specify the number of arbitrators that will form the arbitral tribunal, which can be one or more, but always an odd number. The parties can also agree on the qualifications, nationality, or other criteria of the arbitrators, or delegate this task to a third party, such as an arbitration institution. If the parties do not agree on these matters, the Arbitration Law provides default rules for the appointment and challenge of the arbitrators.
  • The rules and procedures of the arbitration: The arbitration agreement should state the rules and procedures that will govern the arbitration process, such as the language, seat, and law of the arbitration, the rules of evidence and disclosure, the time limits and extensions, the interim measures and emergency arbitrators, and the fees and costs of the arbitration.

The parties can either agree on their own rules and procedures, or adopt the rules of an arbitration institution, such as the Dubai International Arbitration Centre (DIAC), the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), or the International Chamber of Commerce (ICC).

  • The binding effect of the award: The arbitration agreement should confirm that the parties agree to abide by and comply with the arbitral award, which will be final and binding on them. The parties can also agree to waive their right to appeal or challenge the award, except on the grounds, such as the invalidity of the arbitration agreement, the lack of due process, the excess of authority, or the violation of public policy.

HHS lawyers in Dubai can help with arbitration agreements in various ways, depending on the role and the context of the dispute. An HHS lawyer can draft, review, or negotiate an arbitration agreement for a client, represent the client in the arbitration process, or challenge or enforce the arbitration award. An Arbitration Lawyer at HHS Lawyers can use their knowledge and experience to advise the client on the best course of action, protect the client’s rights and interests, and resolve the dispute in a fair and efficient manner.

M. Al Khatem

Trademark & Intellectual Property

M. Al Khatem is a senior Trademark and Intellectual Property (IP) expert in HHS Lawyers. He has handled some of the firm’s complex, high-profile cases – many involving the protection of trademark and IP rights.