Dubai puts arbitration centre stage

The DIFC is making efforts to become a player in the multibillion-dollar business of commercial arbitration.

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Dubai is working on becoming a hub for everything from the flower and tea trade to aviation - and now, add arbitration to the list. With a change in the law this week allowing parties with no connection to the Dubai International Financial Centre (DIFC) to settle disputes under its auspices, the DIFC will step up its efforts to become a player in the multibillion-dollar business of arbitrating commercial disagreements and disputes between private parties including businesses and individuals. While the centre has a long way to go - no disputes have been settled so far - it is betting on two things to eventually kick-start the arbitration industry and perhaps some day make it a major centre of the industry globally: an increasing number of potential disputes as trade and business expands in the region, and a tie-up with the London Court for International Arbitration (LCIA), one of the oldest global institutions for commercial dispute resolution. Arbitration provides a structured forum in which parties with disagreements - two businesses, for example, or an individual and a business - can resolve them with the help of professionals in a far quicker and less expensive way than is offered by the official court system. In the more litigious Western nations, the practice is far more widespread than in Asia or the Middle East. In New York, for example, the New York Stock Exchange arbitration centre has already had 2,612 requests for arbitration this year. There are at least five other arbitration centres in the GCC - most notably the Bahrain Arbitration Centre - that offer services to the global community. Yet so far, most regional parties are opting either to try cases in public courts abroad, or simply settle out of court. "Part of it is the cultural overlay on business here - disputes are usually worked out between parties because it's simply not a litigious society," said Dean Ferris, the chief legal officer at the DIFC. "As the regional financial and property markets become increasingly sophisticated, however, disputes will likely arise and few centres other than that at the DIFC will be able to deal with the scale and complexity of those issues." The DIFC's arbitration centre, although still in a formative phase, is not without its advantages. Any awards administered by the DIFC will be readily accepted and enforced "as is" by regional courts without requiring extra litigation. The centre also provides a geographically convenient location to settle disputes with a legal framework that is internationally recognised, making it a viable choice for international companies seeking neutral ground. "The number of cases in the region could increase by 50 per cent over the next three to five years, with a doubling every five or so years, on the optimistic side of projections," said Mike Lennon, a partner at Baker Botts in London. "It will be an important and interesting trend for arbitration practitioners to watch." DIFC officials are also banking on the LCIA brand to put the DIFC on the global arbitration map in a hurry. "Partnering with a giant like the LCIA is a common approach taken in Dubai to set standards at a global level quickly," said Mr Ferris. In the short term, the DIFC will compete with other centres in the region for business. But longer term, as business and trade ties expand between East and West, the Gulf may be able to exploit its geography. Patrick Bourke, a partner at Norton Rose in Dubai who was involved with the drafting of the new arbitration law, said the DIFC's "position as a neutral counterpoint between Asia and Europe, as well as its joint badge with the LCIA, could eventually be a gateway into the international arena". Building a name in the local scene first, to build credibility, is a first step, Mr Ferris said. "Cases will come from all over the world, though more [will initially come] from the region because of proximity and familiarity," he said. "The centre won't take on major players from day one, but as it builds and its stature becomes more visible, links will be made to the international community."