How the environment for arbitration in the Middle East is evolving

Global businesses are being attracted to invest in states such as the UAE, Saudi Arabia, and Qatar as those states accelerate their plans to diversify their economies, which have been built around oil and gas extraction and exports.

National visions developed in the UAE, Saudi Arabia, and Qatar, taken together, envisage the delivery of major new renewable energy and transport projects, improvements to digital connectivity, and the establishment of entirely new population centres featuring homes, shops and community facilities.

The scale and value of those projects offer commercial opportunities and are reflected in economic growth forecasts that suggest the economies of those states will grow faster than the global average in the next couple of years.

While businesses will welcome steps that have been taken in Middle Eastern jurisdictions to make it easier and cheaper for them to set up operations and invest in those states, another factor in the attractiveness of those jurisdictions is the confidence businesses can have in achieving fair and efficient resolution of disputes. There have been recent developments in the UAE, Saudi Arabia, and Qatar in this regard.

Several important amendments were made to the UAE Arbitration Law last year, including new provisions on the appointment of arbitrators and that promote modern arbitration methods, such as virtual fora and the use of technology, and greater freedom for the parties to agree on procedures. Other changes impose stricter requirements for arbitrators to maintain impartiality and independence.

Arbitral institutions in the UAE are also taking steps to improve their attractiveness as centres for resolving disputes. For example, the Abu Dhabi International Arbitration Centre, known as ‘arbitrateAD’, opened recently and published modern arbitration rules, while the effects of structural reforms to arbitration institutions and associated new arbitration rules in Dubai are also starting to be felt.

Whilst the range of arbitral institutions in the region continue to grow, parties should pay attention to the impact that incorporating a particular set of institutional rules into their arbitration agreement might have on the resultant award. In Dubai, two recent decisions have brought this issue to the fore. The Dubai Court of Cassation upheld a partial annulment of an International Chamber of Commerce (ICC) award insofar as it awarded legal costs, determining that the ICC Rules did not contain an express power to award the costs of a party’s legal representatives. Contrast this with a decision of the Dubai Court of Appeal some weeks earlier, when the court rejected an application seeking to set aside an award arguing that the Rules of the Dubai International Arbitration Centre did not expressly allow the recovery of legal costs. Developments in this area will be monitored closely and serve as a reminder that such issues continue to evolve in many Middle Eastern jurisdictions.

In Saudi Arabia, a fundamental modernisation of the law governing civil contracts took effect in late 2023. The Civil Transactions Law (the Civil Code) codifies rules around, for example, contract formation, execution and termination, acts causing harm, and loss and damages, and it includes specific provisions tailored to contract types such as construction, agency, insurance, and partnership contracts. While regard still needs to be had to underlying principles of Sharia, the basis for Islamic law, the Civil Code makes it easier for businesses to understand their rights and obligations under Saudi law. This is likely to give business greater confidence to make Saudi law the governing law of their contracts.

Like in the UAE, other specific steps have been taken to develop Saudi Arabia’s reputation as an arbitration hub. This includes the publication last year, by the Saudi Center for Commercial Arbitration (SCCA), of new arbitration rules, which among other things emphasise the use of technology in arbitration proceedings and empower tribunals to hold hearings remotely. With a range of mega- and giga-projects underway or planned in Saudi Arabia, we are seeing an increasing trend towards seeing the SCCA being referred to in dispute resolution clauses in infrastructure contracts in the country.

In Qatar, a new Arbitration Act was introduced in 2017 to cover both civil and commercial matters. The provisions are based on the UNCITRAL model law on international commercial arbitration.

According to the Qatar News Agency in March 2023, the Qatari Ministry of Justice reported that 50 arbitration cases had been resolved during 2022. Of those 50 decisions, 19 were made by the Qatar International Center for Conciliation and Arbitration (QICCA). Almost half of the decisions were issued in English language.

Under Qatar’s Arbitration Act, while a tribunal of arbitrators has jurisdiction over the arbitral proceedings, there is scope for annulment of the awards made in arbitration by the courts in Qatar. However, there have been no reports of any successful annulment applications since the law was introduced in 2017.

Looking to the future of arbitration in Qatar, there are potential reforms on the horizon. These include a requirement on parties to send a copy of an award made in arbitration to the Ministry of Justice and a requirement for parties to obtain the Qatari prime minister’s approval of any arbitration agreement in an administrative contract for that agreement to be valid.

Co-written by Nesreen Osman of Pinsent Masons.