The DIFC-LCIA Arbitration Rules have been slightly amended with effective date of October 1, 2016. In a nutshell, the new DIFC-LCIA Arbitration Rules have incorporated provisions regarding the access to emergency arbitrator (see Article 9B); provision for multi–party disputes (see Articles 1.5 and 2.5); measures to increase efficiency and avoid delays in proceedings (see Articles 9C, 10 and 11); and online filing and commencement of proceedings (see Articles 1.3 and 2.3). It seems clear that the amendments have the purpose to expedite and simplify the arbitration proceedings.
However, the introduction of an ‘Emergency Arbitrator’ gives a party access to interim relief even prior to the constitution of the Arbitration Tribunal.
What is an Emergency Arbitrator?
The constitution of the Arbitration Tribunal, i.e. the appointment of the arbitrators, inevitably can be time-consuming. A problematic situation might arise where interim relief is needed by one party before the tribunal has been constituted. In order to bridge this time-gap, most arbitration rules contain provisions for the appointments of an emergency arbitrator. As such an emergency arbitrator deals with requests for urgent interim relief, such as an interim injunction, before the main tribunal is constituted.
In light of the above situation the newly included Article 9 B provides:
- 9.4 Subject always to Article 9.14 below, in the case of emergency at any time prior to the formation or expedited formation of the Arbitral Tribunal (under Articles 5 or 9A), any party may apply to the LCIA Court for the immediate appointment of a temporary sole arbitrator to conduct emergency proceedings pending the formation or expedited formation of the Arbitral Tribunal (the “Emergency Arbitrator”).
- 9.5 Such an application shall be made to the Registrar in writing (preferably by electronic means), together with a copy of the Request (if made by a Claimant) or a copy of the Response (if made by a Respondent), delivered or notified to all other parties to the arbitration. The application shall set out, together with all relevant documentation: (i) the specific grounds for requiring, as an emergency, the appointment of an Emergency Arbitrator; and (ii) the specific claim, with reasons, for emergency relief. The application shall be accompanied by the applicant’s written confirmation that the applicant has paid or is paying to the DIFC-LCIA Arbitration Centre the Special Fee under Article 9B, without which actual receipt of such payment the application shall be dismissed by the LCIA Court. …..
- 9.8 The Emergency Arbitrator shall decide the claim for emergency relief as soon as possible, but no later than 14 days following the Emergency Arbitrator’s appointment. This deadline may only be extended by the LCIA Court in exceptional circumstances (pursuant to Article 22.5) or by the written agreement of all parties to the emergency proceedings. The Emergency Arbitrator may make any order or award which the Arbitral Tribunal could make under the Arbitration Agreement (excepting Arbitration and Legal Costs under Articles 28.2 and 28.3); and, in addition, make any order adjourning the consideration of all or any part of the claim for emergency relief to the proceedings conducted by the Arbitral Tribunal (when formed).
The application fee is fixed at AED 50,000 (appr. USD 13,600) and the Emergency Arbitrator’s fee amounts to AED 120,000 (appr. USD 32,700)
By inserting Article 9 B the DIFC-LCIA Arbitration opens the door for granting interim relief for the parties of an arbitration prior to the constitution of the Tribunal.
The Enforceability of an Emergency Arbitrational Award
The practical impact of the introduction of an “Emergency Arbitrator” seems to be limited, as the nature of an interim injunction normally requires a sudden and immediate execution, e.g. in the case of an attachment of certain assets. If, for example, the claimant fears that the respondent will dissipate assets outside a specific jurisdiction, a request for an interim injunction before an Emergency Arbitrator might even increase this risk, as Section 9.4 of the DIFC-LIAC Rules 2016 requires that the Applicant and the Arbitration Centre respectively have to notify the Respondent with the request to issue an interim junction. By doing so, the Respondent will be aware of the request and has sufficient time to defeat the purpose of the interim measure, i.e. transferring his funds to a safe haven.
In contrast, in most jurisdictions the national courts issue interim junctions without notifying the Respondent about the request to issue an interim junction, so called ex parte (without notice). Arbitration tribunals, however, never hear ex ante or make ex parte orders.
If the national courts issue an interim junction, it can be executed immediately and it reaches the Respondent without any warning. As such, interim junctions issued by national courts, have – compared to an interim junction of an Emergency Arbitrator – more “bite” and are more effective.
Moreover, the enforceability of an award of an Emergency Arbitration cannot be compared with the recognition and execution of final arbitral awards. The recognition and execution of a final arbitral award is governed in most jurisdictions by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (“The New York Convention”). As the award of the emergency arbitrator is not (even) binding for the Tribunal that will at a later stage deal with the dispute, it is at least controversial whether an Emergency Award is governed by the Convention. Thus, if it comes to an award of an Emergency Arbitration one has to consider the position of the local courts that have jurisdiction regarding the execution whether they will enforce such award.
In light of the above, the appointment of an ‘Emergency Arbitrator’ still might make sense in the following cases:
- An interim relief of an ‘emergency arbitrator’ serves its purpose in ongoing contractual relationships mostly in construction case, e.g. an application for specific performance under an existing agreement or the release of an interim payment under a construction contract.
- The Appellant seeks to keep the entire dispute confidential.
- It is clear or expected that the Respondent will apply voluntarily with the interim injunction of the Emergency Arbitrator
- The competent local courts are inefficient or might be partial
In this context, it is worthwhile to mention that Article 9B provides that it shall not prejudice any party’s right to apply to a state court or other legal authority for any interim or conservatory measures before the formation of the Arbitration Tribunal.
The practical impact of emergency arbitration will be limited due to the above mentioned practical obstacles. In certain situations, it will be a case by case decision whether Emergency Arbitration is worth the candle.
An important means for Employers to protect their business, confidential information and secrets from departing employees is the arrangement of so-called post termination restriction clauses.
Article 127 of the Labour Code of the UAE provides that an employer may agree on a post-contractual non-competition clause with an employee who, due to their employment with the employer, has knowledge of the clients of the employer or confidential information or business secrets, as long as the employee is at least 21 years of age. A valid non-competition clause must be limited in time and is restricted both geographically and to a specific business area. In addition, the severity of the non-compete clause must be necessary in order to protect the legitimate interests of the employee.
Alongside this – with fewer restrictions for the employee – the following post-contractual clauses can also be agreed upon:
- Non-Poaching Clause: Undertaking by the employee not to poach any other employees in the event of leaving the employer;
- Non-Solicitation Clause: Prohibition against soliciting customers of the employer to oneself or to a new employer, following departure from the company; or
- Non-Dealing Clause: Prohibition against maintaining professional contact with clients of the employer, independent of the question of who established the contact.
A violation of a Non-Competition Clause or of the other above-mentioned Post-Termination Restrictions may lead to claims for damages of the employer against the (former) employee. The burden of proof – for instance, of a violation of the Non-Competition Clause – and of the damages lies with the (former) employer. As a general rule, the violation of the Non-Competition Clause can be proven relatively easily. This is not the case with the damages or the amount of the damages, as the existence of damages is not sufficiently demonstrable in numerous cases, as a result of which the (former) employer would lose the case.
However, there is a possibility that in a contract, in addition to the Post Termination Restriction, a contractual penalty is agreed upon for the case in which the Post-Termination Restrictions have been violated by the employee. Insofar as a contractual penalty of this kind has been agreed upon, the burden of proof will be reversed. The employer now only has to prove the violation of the restriction clause and will demand the agreed contractual penalty from the (former) employee. The employee now has to demonstrate that these agreed damages have not arisen, or are disproportionate. As the Civil Code, with regard to contractual penalties, contains provisions whereby a judge may ‘open’ a contractual penalty clause, caution is advised in the formulation of a contractual penalty.
The claim for damages against a former Employee must be made at the competent Labour Court. In this case it is important that before the commencement of the lawsuit – as in all matters of employment law – the parties have to take the case to the ‘Labour Department’, which will attempt to bring about an amicable settlement. It is only when these ‘conciliatory proceedings’ have failed that cases can be taken to the Labour Court. It should be emphasized that the ‘Dubai Court of Cassation’ has decided that failed ‘conciliatory proceedings’ due to unpaid wages do not entitle the employer to make claims for damages due to the violation of a Post-Termination Restrictions by a (former) employee. Separate ‘conciliatory proceedings’ are to be carried out for this purpose.
Article 9 – Amended; Law 33 of 2008
- The Landlord and Tenant must specify the Rent in the Tenancy Contract. Should the parties omit or fail to specify the agreed Rent, the Rent must be the same as that of similar Real Property.
- The Tribunal will determine the Rent of similar Real Property taking into account the criteria determining the percentage of Rent increase set by RERA, the overall economic situation in the Emirate, the condition of the Real Property, and the average Rent of similar Real Property in similar Real Property markets within the same area and in accordance with any applicable legislation in the Emirate concerning Real Property Rent, or any other factors which the Tribunal deems appropriate.
RERA will have the authority to establish criteria relating to percentages of Rent increase in the Emirate in line with the requirements of the prevailing economic situation in the Emirate.
Unless otherwise agreed, the Rent will cover use of the Real Property amenities such as swimming pools, playgrounds, gymnasiums, health clubs, car parks, and other amenities.
The Tenant will pay the Landlord the Rent on the dates mutually agreed upon. Where there is no agreement or where it is impossible to verify the payment dates, the Rent must be annually paid in four (4) equal instalments to be paid in advance.
Article 13 – Amended; Law 33 of 2008
For the purposes of renewing the Tenancy Contract, the Landlord and Tenant may, prior to the expiry of the Tenancy Contract, amend any of the terms of the Tenancy Contract or review the Rent, whether increasing or decreasing it. Should the Landlord and Tenant fail to reach an agreement, then the Tribunal may determine the fair Rent, taking into account the criteria stipulated in Article (9) of this Law.
Article 14 – Amended; Law 33 of 2008
Unless otherwise agreed by the parties, if either party to the Tenancy Contract wishes to amend any of its terms in accordance with Article (13) of this Law, that party must notify the other party of same no less than ninety (90) days prior to the date on which the Tenancy Contract expires.
Article 15 – Amended; Law 33 of 2008
The Landlord will be bound to hand over the Real Property in good condition, which allows the Tenant full use as stated in the Tenancy Contract. However, the parties may agree upon renting an unfinished Real Property provided that the Tenant agrees to complete the construction of the Real Property in a manner to render it suitable for use as intended. The identity of the party who will incur the costs of completing the construction will be determined in the Tenancy Contract.
Unless otherwise agreed by the parties, the Landlord will, during the term of the Tenancy Contract, be responsible for the Real Property’ maintenance works and for repairing any defect or damage that may affect the Tenant’s intended use of the Real Property.
The Landlord may not make to the Real Property or any of its amenities or annexes any changes that would preclude the Tenant from full use of the Real Property as intended. The Landlord will be responsible for such changes whether made by him or any other person authorised by the Landlord. Further, the Landlord will be responsible for any defect, damage, deficiency, and wear and tear occurring to the Real Property for reasons not attributable to the fault of the Tenant.
The Landlord must provide the Tenant with the approvals required to be submitted to the competent official entities in the Emirate whenever the Tenant wishes to carry out decoration works or any other works that require such approvals, provided that such works do not affect the structure of the Real Property and that the Tenant has the official documents requesting such approvals.
The Tenant must pay the Rent on due dates and maintain the Real Property in such a manner as an ordinary person would maintain his own property. Without prejudice to the Tenant’s obligation to carry out the restorations that have been agreed upon or which are customary for Tenants to undertake, the Tenant may not make any changes or carry out any restoration or maintenance works to the Real Property unless so permitted by the Landlord and after obtaining required licences from the competent official entities.
When entering into a Tenancy Contract, the Landlord may obtain from the Tenant a security deposit to ensure maintenance of the Real Property upon the expiry of the Tenancy Contract, provided that the Landlord undertakes to refund such deposit or remainder thereof to the Tenant upon the expiry of the Tenancy Contract.
Upon the expiry of the term of the Tenancy Contract, the Tenant must surrender possession of the Real Property to the Landlord in the same condition in which the Tenant received it at the time of entering into the Tenancy Contract except for ordinary wear and tear or for damage due to reasons beyond the Tenant’s control. In the event of dispute between the two parties, the matter must be referred to the Tribunal to issue an award in this regard.
Unless the Tenancy Contract states otherwise, the Tenant must pay all fees and taxes due to Government entities and departments for use of the Real Property as well as any fees or taxes prescribed for any sub-lease.
Unless otherwise agreed by the parties, upon vacating and surrendering possession of the Real Property, the Tenant may not remove any leasehold improvements made by the Tenant.
Unless otherwise agreed by the parties to the Tenancy Contract, the Tenant may not assign the use of or sub-lease the Real Property to third parties unless written consent of the Landlord is obtained.
Article 25 – Amended; Law 33 of 2008
The Landlord may seek eviction of the Tenant from the Real Property prior to the expiry of the term of the Tenancy only in the following cases:
- where the Tenant fails to pay the Rent or any part thereof within thirty (30) days after the date a Notice to pay is given to the Tenant by the Landlord unless otherwise agreed by the parties;
- where the Tenant sub-lets the Real Property or any part thereof without obtaining the Landlord’s approval in writing. In this case, the eviction will apply to both the Tenant and Sub-Tenant. However, the Sub-Tenant’s right to claim compensation from the Tenant will be preserved;
- where the Tenant uses the Real Property or allows others to use it for any illegal purpose or for a purpose which breaches public order or morals;
- where the Tenant of commercial Real Property leaves the Real Property unoccupied for no valid reason for thirty (30) consecutive days or ninety (90) non-consecutive days within the same year, unless agreed otherwise by both parties;
- where the Tenant makes a change to the Real Property that renders it unsafe in a manner that makes it impossible to restore the Real Property to its original state, or damages the Real Property wilfully or through gross negligence, by failing to exercise due diligence, or by allowing others to cause such damage;
- where the Tenant uses the Real Property for a purpose other than that for which the Real Property was leased, or uses the Real Property in a manner that violates planning, construction, and use-of-land regulations in force in the Emirate;
- where the Real Property is condemned, provided that the Landlord must prove this by a technical report issued by or attested to by Dubai Municipality;
- where the Tenant fails to observe any obligation imposed on him by this Law or any of the terms of the Tenancy Contract within thirty (30) days from the date a Notice to perform such obligation or term is served upon him by the Landlord; or
- where competent Government entities requires demolition or reconstruction of the Real Property as per urban development requirements in the Emirate.
For the purposes of paragraph (1) of this Article, the Landlord will give Notice to the Tenant through a Notary Public or registered post.
- Upon expiry of the Tenancy Contract the Landlord may request eviction of the Tenant from the Real Property only in any of the following cases:
- where the owner of the Real Property wishes to demolish the Real Property to reconstruct it, or to add any new constructions that will prevent the Tenant from using the Real Property, provided that the required permits are obtained from the competent entities;
- where the Real Property is in a condition that requires restoration or comprehensive maintenance that cannot be carried out in the presence of the Tenant in the Real Property, provided that the condition of the Real Property is verified by a technical report issued by or attested to by Dubai Municipality;
- where the owner of the Real Property wishes to take possession of it for his personal use or for use by any of his first-degree relatives, provided that the owner proves that he does not own another Real Property appropriate for such purpose; or d. where the owner of the Real Property wishes to sell the leased Real Property.
For the purposes of paragraph (2) of this Article, the Landlord must notify the Tenant of the eviction reasons twelve (12) months prior to the date set for eviction, provided that this notice is given through a Notary Public or registered post.
Article 26 – Amended; Law 33 of 2008
If the Tribunal awards the Landlord possession of the Real Property for his personal use or for use by any of his first-degree relatives in accordance with sub-paragraph (c) of paragraph (2) of Article (25) of this Law, the Landlord may not rent the Real Property to a third party before the lapse of at least two (2) years from the date of possession of the Real Property by the Landlord in case of residential Real Property and three (3) years in case of non-residential Real Property, unless the Tribunal, in its discretion, sets a shorter period. Otherwise, the Tenant may request the Tribunal to award him a fair compensation.
Disclaimer: The following text comes from the Dubai Land Department’s RERA Law.
Article 4 – Amended; Law 33 of 2008
- The contractual relationship between Landlord and Tenant will be regulated by a Tenancy Contract detailing, in a manner allowing no room for uncertainty, a description of the leased Real Property, the purpose of the tenancy, the term of the Tenancy Contract, the Rent and payment method, and the name of the owner of the Real Property, if the Landlord is not the owner.
- All Tenancy Contracts or any amendments to such Tenancy Contracts related to Real Property which are subject to the provisions of this Law will be registered with RERA.
Term of Tenancy Contract
The term of a Tenancy Contract must be specified. Where the term is not specified in the Tenancy Contract or where it is impossible to prove the alleged term, the Tenancy Contract will be deemed valid for the period specified for payment of the Rent.
Where the term of a Tenancy Contract expires, but the Tenant continues to occupy the Real Property without any objection by the Landlord, the Tenancy Contract will be renewed for the same term or for a term of one year, whichever is shorter, and under the same terms as the previous Tenancy Contract.
Where a Tenancy Contract is valid, it may not be unilaterally terminated during its term by the Landlord or the Tenant. It can only be terminated by mutual consent or in accordance with the provisions of this Law.
The term of a sub-Tenancy Contract entered into between the Tenant and Sub-tenant will expire upon the expiry of the term of the Tenancy Contract entered into between the Landlord and Tenant, unless the Landlord expressly agrees to extend the term of the sub-Tenancy Contract.