UNITED ARAB EMRITES Law and Practice Contributed by: Ali Dakhlallah, Karen Seif, Matthew Page and William Prasifka, Habib Al Mulla & Partners
large-scale commercial contracts executed in the UAE include arbitration provisions as a standard clause. Sectors that rely heavily on arbitration include: • construction and infrastructure, where disputes are technical and high-value; • energy and natural resources, often involving for- eign investors; • maritime, shipping and offshore services; and • joint venture, shareholder and M&A disputes. Domestic companies also increasingly use arbitra- tion, particularly where the parties seek privacy and procedural flexibility. While litigation remains common for smaller or purely domestic disputes, arbitration is firmly established as the preferred mechanism for complex commercial conflicts in the UAE. 3.2 Restrictions on Use of Arbitration While arbitration is broadly permitted in the UAE it is subject to important legal restrictions. The cen- tral requirement is that only disputes involving rights that may be compromised or settled can be referred to arbitration. This reflects a public policy principle embedded in UAE law. Disputes that cannot be arbitrated upon include: • criminal matters, as they involve public rights; • personal status issues, such as marriage, divorce and inheritance; • certain labour disputes, particularly where statutory protections apply; and • some aspects of commercial agency disputes, which may initially fall under mandatory commit- tees. Additionally, the capacity to arbitrate is strictly enforced. Arbitration agreements must be signed by persons with express authority to do so, and failure to establish proper authority may render the agreement invalid. This has been a common ground for jurisdic- tional challenges. Unilateral arbitration clauses, where only one party has the right to commence arbitration, have also been scrutinised and may be deemed unenforceable.
Overall, while arbitration is widely accepted, UAE law carefully balances party autonomy with public policy limitations. 3.3 Advantages of Arbitration Arbitration is perceived as highly advantageous in the UAE due to its neutrality, enforceability and confi- dentiality. For foreign parties, arbitration avoids local court procedures and provides reassurance that dis- putes will be resolved by neutral decision makers. The enforceability of awards under the New York Conven- tion is a major attraction for international commerce. Advantages include: • confidential proceedings, protecting sensitive com- mercial information; • party autonomy, allowing control over seat, lan- guage and arbitrators; • expert decision-makers, particularly in technical disputes; and • international enforcement, reducing enforcement risk. Arbitration also offers procedural flexibility, which is especially valuable in complex disputes. Parties can tailor procedures to suit the nature of the dispute and reduce unnecessary formality. In offshore seats such as the DIFC or ADGM, arbitration benefits from strong judicial support based on common law principles. Another significant advantage is the relative insula- tion from lengthy multi-tier appeals. Arbitral awards are generally final, which provides legal certainty and commercial finality. These features explain why arbi- tration is strategically preferred for large-scale UAE commercial disputes. 3.4 Disadvantages of Arbitration Despite its popularity, arbitration in the UAE is not with- out disadvantages. One commonly cited concern is cost, particularly in institutional arbitration where arbi- trator fees, administrative costs and expert expenses can be substantial. For mid-value disputes, arbitration may be more expensive than court litigation. Another disadvantage is limited appeal rights. While finality is often an advantage, it can be problematic
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