The Abu Dhabi Global Market Arbitration Regulations 2015

By Nicholas Querée (Associate at Peters & Peters Solicitors LLP in London)

1.    On 21 October 2015, the Abu Dhabi Global Market (“ADGM”), the most recent in a line of financial free zones in the Middle East, formally opened for business.  Like its forebears, the Qatar Financial Centre (“QFC”) and the Dubai International Financial Centre (“DIFC”), the ADGM is empowered to enact its own civil and commercial laws with the aim of providing an attractive legal and regulatory environment for companies minded to establish in the new jurisdiction, and encouraging inward investment to and a greater diversification of the Emirate’s economy.

2.    In common with the QFC and the DIFC, the ADGM has determined that its legal system will follow the common law tradition; indeed, ADGM legislation, the English Law Regulations 2015, provide that English court judgments will have direct application for the purpose of interpreting ADGM statutes.  Where ADGM laws are silent, English common law (and even some English statutes such as the Contracts (Rights of Third Parties) Act 1999) will apply.

3.    Much of the ADGM’s statutory framework is now already in place, including legislation governing company law, financial services, insolvency, employment and property.

4.    As with the QFC and DIFC, the ADGM will operate its own court system acting independently from Abu Dhabi “onshore” judicial system.  In common with the DIFC, the ADGM will operate both first instance and appellate courts with members of its judiciary recruited from established common law jurisdictions.  Appointments to date have been impressive.  Lord Hope, a former Law Lord and Justice of the UK Supreme Court will act as Chief Justice, and will be joined on the ADGM bench by Lord Saville of Newdigate, his former colleague in the UK Supreme Court, Kenneth Hayne AC, a former Justice of the High Court of Australia, Sir Peter Blanchard, a former judge of New Zealand’s Supreme Court, and William Stone QC, formerly the judge in charge of the Commercial List within the High Court of Hong Kong.

The ADGM arbitration law

5.    Following a 2015 consultation on draft regulations (the “Consultation”), the ADGM’s Arbitration Regulations 2015 (the “Regulations”) are now in force.

6.    The Regulations operate to establish the legal framework for any arbitration seated in the ADGM, as well as for the recognition and enforcement of arbitral awards by the ADGM courts (who will, in most cases, exercise limited supervision over the conduct of arbitral proceedings seated in the ADGM).

7.    The Consultation makes it plain that the Regulations have been “designed to encourage the enforcement of agreements to arbitrate and arbitral awards and to facilitate the arbitral process”.  To that end, the Regulations closely follow the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”).  In particular, the Regulations make provision for arbitral tribunals to rule on their own jurisdiction and grant interim measures, and regulate the extent to which ADGM courts may decline to recognise or enforce awards, in a manner which will be well familiar to arbitration practitioners.

8.    To the extent that the Regulations substantively depart from the Model Law, they do so, as the Consultation suggests, to “maximise party autonomy and control over the arbitral process”.  There are three substantive differences.

9.    First, the Regulations give broad discretion to arbitral tribunals to consolidate multiple parallel arbitral proceedings into one single arbitration where it is in “the interests of justice” to do so and the proposed additional party is either a party to the arbitration agreement or has given consent in writing.  The exercise of this power is subject to review by the ADGM courts.  The Consultation suggests that this new power “will make ADGM arbitration proceedings significantly more fit‐for‐purpose, streamlined and cost‐effective”.  This power does presently exist elsewhere.  For example, Article 6B of the Hong Kong Arbitration Ordinance permits the consolidation of arbitral proceedings where the Hong Kong court deems it “just” to do so.  Judgments interpreting Article 6B, such as Shui On (Shui On Construction Co Ltd) v Moon Yik Co [1987] HKLR 1224 (a decision of the High Court of Hong Kong), may well prove useful in identifying the true scope of the power contemplated by the Consultation.

10.    Second, whilst the Regulations provide that, as the default position, any award made in the ADGM will be subject to the exclusive (and limited) review by the ADGM courts, the parties may elect to waive the right to apply to the court to set aside that award should they wish.  Parties may also choose to limit the grounds on which any challenge might be brought.  The ADGM has elected to follow jurisdictions including France, Switzerland, Sweden and Belgium, all of which permit the effective waiver of a right to challenge an arbitral award before the courts.

11.    Third and finally, provisions in the Regulations address confidentiality within the arbitral process.  In common with the DIFC and other jurisdictions, unless otherwise agreed, no party to an ADGM arbitration may publish, disclose or communicate any information relating to either the arbitration proceedings or an award made in those proceedings, save where disclosure is necessary to protect or pursue a legal right, to enforce or challenge the award, is required by law, or where disclosure is made to a legal or other professional advisor.  The Regulations also establish a presumption that all proceedings relating to arbitral matters before the ADGM courts will be held in private.  There are two exceptions, namely where either: (a) the parties agree otherwise, or (b) the court is satisfied that the proceedings “ought” to be heard in open court.

Recognition and enforcement of arbitral awards

12.    In relation to recognition and enforcement, the ADGM Regulations adopt the wording of the Model Law.  Notably, the DIFC’s Arbitration Law contains the same rubric.  Judgments of the courts in that jurisdiction have led to the DIFC being used as a “conduit” for the enforcement of foreign arbitral awards in “onshore” Dubai as well as the UAE more widely: see, e.g., XX (1) X1 (2) X2 v (1) Y1 (2) Y2 (29 July 2015, DIFC Court of First Instance).  Time will tell whether the ADGM courts adopt a similarly permissive approach to recognition and enforcement, and whether parties will identify any material advantage in choosing to seek recognition in the ADGM over the DIFC.  It is also worth noting that, as matters stand, there is no memorandum of understanding between the ADGM and the Abu Dhabi “onshore” courts to match that currently in place between the courts of the DIFC and of Dubai.  This may, in time, present award holders with obstacles to enforcement not experienced by those whose arbitrations have been seated in the DIFC.

Observations

13.    It is clear that much effort has been exerted in establishing the ADGM as a modern, and attractive legal and regulatory architecture, including in seeking to encourage parties to arbitrate their disputes in the ADGM as well as establish a business presence there.  Time will tell whether arbitration users discern any particular benefit in one system or another, over geographical location.  Arguably, the DIFC already has the march on the ADGM enjoying an established arbitral institution to hear claims (the London Court of International Arbitration affiliate, the DIFC-LCIA), an existing body of jurisprudence giving greater certainty to parties choosing to seat in the DIFC, and an established relationship between offshore and onshore courts to enable effective and meaningful enforcement of awards.  It remains to see whether the ADGM’s legislative innovations will prove sufficiently enticing to persuade parties to elect the ADGM’s new, untested offering over the DIFC or, indeed, any number of other alternative arbitral offerings in London, Singapore and elsewhere.  What is clear is that the emergence of financial free zones presents an increasing challenge to other major commercial centres, not only in terms of tax and revenue policies, financial services regulation, etc, but in relation to international dispute resolution too.