Most, if not all, of the Big Three Dubai Master Developers’ (and a fair few of the more modest Developers’) Sale and Purchase Agreements (“SPAs”) for off-plan properties contain arbitration clauses where all disputes arising are to be referred to Dubai arbitration proceedings before , for example, the Dubai International Arbitration Centre (“DIAC”) with Dubai and UAE law as the applicable law. In 2007, the newly incorporated DIAC assumed the mantle from the Dubai Chamber of Commerce and Industry’s Rules of Commercial Conciliation and Arbitration which had been in place since 1994 but were, by common consensus, ripe for revision. The Rules were re-vamped in 2007 and were loosely based upon a number of sets of rules/models from various fora including the London Court of International Arbitration, the International Chamber of Commerce, the Singapore International Arbitration Centre, and the United Nations Commission on International Trade Law and were universally accepted as a welcome improvement on the previous Rules. The UAE has of course acceded to and ratified the New York Convention of 1958 which helps in foreign enforcement proceedings.

Generally, the usual justifications for removing the jurisdiction of the home Courts to adjudicate on the substance of these property disputes are that arbitration is better, cheaper and faster than litigation before the home Courts. Notwithstanding that the inclusion of these arbitration clauses in SPAs was seen at the time of their introduction as an attempt to promote Dubai as a regional centre of arbitration, the mantra of “better, cheaper and faster” does not bear too close a comparison to the relatively high standards of integrity, quality, costs and speed which the Dubai Courts afford.

Better? The introduction of the Dubai Property Court last year saw the formation of a specialist bench of judges with training and experience of property disputes. The Court also has access to a panel of surveyors, engineers, architects, accountants and other property experts from which it can draw upon appropriate expertise to assist in some of the more technical aspects of property disputes. DIAC can, also, draw upon a list of arbitrators and experts and, of course, the parties themselves are free to agree the appointment of the arbitrator/arbitral panel and any relevant experts although, of course, one of the main reasons to arbitrate is that the arbitrator him or herself is appropriately qualified and experienced in technical matters. Even if the parties are able to agree on suitable arbitrator/expert candidates much of the utility in arbitrating is lost where an arbitrator delegates the review and adjudication of technical matters to a third party expert.

Whilst technical issues have their part to play in off-plan property disputes- undoubtedly, legal issues and the correct interpretation and application of the relevant laws to the factual matrix relevant in each particular case is (in the author’s view) paramount. Whom would you rather have fulfilling this judicial function- a judge or arbitrator? Non-Arabic speaking expatriates, however, may gain substantial comfort from taking part in arbitration proceedings in English (i.e. the new Rules provide that the default language of the arbitration shall be the language used in the arbitration agreement which are invariably in English or Arabic) whereas local Court proceedings are conducted in Arabic.

Cheaper? DIAC Tribunal Fees and administrative costs are calculated by reference to a certain percentage of the actual claim amount. These combined fees/costs range from around AED 7,000 to a whopping AED 680,000 for a claim although, of course, the Tribunal may award these costs to be paid by whatever party it decides should bear them. Added to this there are the costs of ratification of the Tribunal’s Award before the Dubai Court where an award may be potentially challenged and/or set aside by a Dubai Court of First Instance on certain grounds including serious procedural defects. It should be noted that, the judgement of the Dubai Court of First Instance may be appealed subsequently to the Courts of Appeal and Cassation respectively and this may add, not insignificantly, to the legal professional costs incurred. On the other hand, Dubai Court filing fees are also calculated by reference to a percentage of the claim amount although the maximum filing fees are comparatively modest at AED 30,000 for the Court of First Instance; AED 6,000 for the Court of Appeal and a paltry AED 1,700 (including an AED 500 deposit) for the Court of Cassation which is the highest Court in the Emirate’s Court structure.

Faster? Given the “avalanche” of property disputes being filed before the Dubai Property Court this year, arbitration would appear to offer a means of reaching an adjudicated decision more quickly than via the log-jammed Courts. However, the degree of autonomy given to the arbitrating parties by the new Rules affords ample opportunity for an unscrupulous party to delay/impede an envisaged procedural timetable. Not insubstantial delays can be incurred by the parties simply arguing about the appointment of appropriate arbitrators/experts. Even if an Arbitral Award is obtained relatively quickly the successful party is still required to proceed through the ratification process before it may be enforced via the Emirate’s Execution Courts. The ratification process is unavoidable and- potentially -can add several months to the enforcement process. Although the ratification process is not required to enforce a substantive judgement of the Court , there is, of course, the usual appeal process from the Court of First Instance to the Court of Appeal (to be filed within 30 days from the date of judgement) and from there –on points of law only- to the Court of Cassation -to be filed within 60 days of the judgement of the Court of Appeal.

Dubai Courts regularly uphold valid arbitration agreements and will usually stay any Court proceedings filed by a party to a valid arbitration agreement in respect of relevant disputes pending determination of an arbitral tribunal. Local Courts, however, jealously guard their jurisdiction and if the parties to an arbitration agreement agree to waive the arbitration clause the local Court will accept jurisdiction to hear the case. Although it would appear to be unlikely that the Master Developers would readily agree to waive such arbitration clauses - perhaps a smaller Developer may be persuaded to do so – if, of course, it perceives any distinct advantage in doing so.

One should also bear in mind that if a party to a valid arbitration agreement files a case to be heard before a local Court and does not assert the arbitration clause/agreement and, following the summons process, the Defendant does not- at the very first appearance before the Court -assert the non-jurisdiction of the Court by virtue of the arbitration clause/agreement then the litigating parties shall be taken to have waived the arbitration clause and the Court shall consider itself entitled to hear the case.