Ad Hoc Arbitration

Arbitration is an alternative dispute resolution mechanism where the parties choose the arbitration process as an alternative to going to court. In the process, an arbitrator performs a similar role to that of a judge and they ensure that the parties to the dispute have a reasonable opportunity of presenting their case without partiality. An Arbitration usually concluded with the arbitrator issuing an award that is final and binding on the parties.

UAE being the Business hub of the Middle East, Arbitration is a popular method of dispute resolution among businesses irrespective of the size and nature of the dispute. The arbitration process is generally a consensual process between the parties as they agree to refer their dispute to arbitration through the ‘arbitration clause’ which is usually included in the main contract between the parties. However, the parties may separately agree to arbitration at any stage even after a dispute has arisen.

The provisions of Federal Law No. 6/2018 apply to any arbitration conducted in the UAE unless the parties hereto agree that another law should govern the arbitration. The UAE Arbitration Law is largely based on the UNCITRAL Model Law on International Commercial Arbitration 1985. All UAE Federal Courts can and often do appoint arbitrators in ad hoc arbitral proceedings where the parties have either specified this in the arbitration agreement/clause or are unable to agree on the authority responsible for the appointment of the tribunal.

Some advantages of arbitration over litigation in the UAE include:

• The language barrier which is often associated with court proceedings can be bypassed through the Arbitration process. Arbitration can be conducted in English, or in any other language agreed to by the parties, whereas local court litigation is always in Arabic.?
• The proceedings are private and can be maintained confidential
• For disputes involving technical subject matters, arbitrators with the requisite expertise can be appointed to resolve the disputes.
• There are limited avenues for appealing arbitral awards and the merits of a decision cannot be challenged.

Institutional Arbitration and Ad Hoc Arbitration?

An institutional arbitration in UAE is one in which a specialized institution such as DIAC or ADCCAC intervenes and takes on the role of administering the arbitration process. Each Arbitration institution has its own set of rules which provides a framework for the arbitration, and its own form of administration to assist in the process. There are currently two financial free zones established in the UAE that have separate arbitration legislation, Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM). The choice of institutional arbitration is ideal for disputing parties that do not want to involve in determining all the aspects of the arbitration proceeding. Arbitration centers provide rules, venues for hearings, experienced administrative staff, and a panel of arbitrators within which is possible to select the most suitable arbitrator.

An ad hoc arbitration is the dispute resolution mechanism in which the parties have not selected an institution to administer the arbitration. An Ad hoc Arbitration has the potential to be more flexible, faster, and cheaper than institutional proceedings. The administrative charges for services and use of the facilities of an Arbitration institution alone provide an excellent incentive to use the ad hoc procedure which is far more cost-effective. A primary advantage of the ad hoc process is its flexibility, enabling the parties to decide the dispute resolution procedure themselves. However, this will of course require a greater degree of effort, cooperation, and expertise from the parties to determine the arbitration rules.?

Advantages of Ad Hoc Arbitration

There is increasing popularity among the business community and lawyers for Ad hoc Arbitration considering the fact that a properly structured ad hoc arbitration should be more cost-effective, and better suited to all kinds of disputes and claims. The ad hoc process works smoothly on the cooperation and expertise from the parties to determine the arbitration rules and rely on the mutually appointed arbitrator to organize and administer the arbitration.?

In an Ad hoc Arbitration process, the parties will have the freedom to determine all aspects of the arbitration themselves - for example, the number of arbitrators, appointing those arbitrators, the applicable law, and the procedure for conducting the arbitration.

Ad hoc arbitration is less expensive than institutional arbitration as the parties will only have to pay fees for the arbitrators, lawyers, or representatives and the costs incurred in conducting the proceedings rather than paying fees to an arbitration institution. If the amount in dispute is considerable, these fees can be prohibitively expensive. In order to reduce costs, parties and the arbitrators may agree to conduct the arbitration at the arbitrator's office.

It is said that parties are the masters of arbitration. However, this is questionable in institutional arbitration, where the institution effectively acquires the parties' powers to make decisions. Although ad hoc arbitration may seem preferable in today's modern and commercially complex world, it is really only suitable when parties are cooperative to come for an amicable solution irrespective of different aspects of disagreements they have.?