On 23 December 2020, the Abu Dhabi Global Market (the "ADGM") enacted Amendment No. 1 of 2020 to the ADGM Arbitration Regulations 2015 (the "Arbitration Regulations"). The amendments to the Arbitration Regulations reflect the continuous effort by the ADGM to establish itself as a progressive seat of arbitration, codify international best practice and accommodate the changing needs of the various stakeholders to arbitration.
Amendment No. 1 of 2020 follows a five-year review by the ADGM of arbitration laws of Model Law jurisdictions, rules of the major arbitral institutions and arbitration-related cases and judgments, and a Consultation Paper inviting public comments on the proposed updates. These updates refresh the Arbitration Regulations and are aimed at making the Arbitration Regulations more contemporary and aligned to international best practice. The notable amendments are discussed in greater detail below.
A. Opting-in to an ADGM-seated Arbitration
When the Arbitration Regulations were first published, the exact scope of the ADGM's arbitral jurisdiction was unclear. Commentators expressed doubt as to whether a subject-matter nexus to the ADGM was required for parties to select the ADGM as the seat of arbitration.
Following amendments made to the Founding Law of the ADGM (Abu Dhabi Law No. 4 of 2013) in 2020, the ADGM confirmed its status as an "opt in" jurisdiction. Parties with no connection to the ADGM can therefore agree to have their disputes resolved by the ADGM Courts or an arbitral tribunal in an ADGM-seated arbitration.
In line with the changes to the Founding Law, the Arbitration Regulations have been updated to confirm that parties can agree to have their disputes determined by way of arbitration seated in the ADGM despite having no other connection to the ADGM. Section 35(2) of the Arbitration Regulations now provides that "[i]f the parties have agreed that the seat of arbitration shall be the Abu Dhabi Global Market, no other connection with the Abu Dhabi Global Market is required for these Regulations to apply".
B. Formalities of Arbitration Agreements
Prior to Amendment No. 1 of 2020, the Arbitration Regulations provided that the arbitration agreement was to be in writing. Section 14(2) now clarifies that an arbitration agreement can be in writing without it being recorded in writing by the parties themselves. This provision is similar to Section 5(4) of the Arbitration Act 1996 in England and Wales.
The amendments to Section 14(2) of the Arbitration Regulations also provide that while the arbitration agreement must be in writing, a party's agreement to be bound by the arbitration agreement may be provided orally or by conduct.
C. Unilateral or Asymmetrical Clauses
A new provision at Section 14(6) has been introduced to clarify that an arbitration agreement which contains a unilateral or asymmetrical right to refer a dispute either to an arbitral tribunal or a court does not contravene the Arbitration Regulations and will not be rendered invalid. Unilateral option clauses provide for a certain method of dispute resolution but also give one party the right to elect to refer a dispute to an alternative dispute resolution forum. The English courts have considered unilateral clauses to be valid and binding1 and the Arbitration Regulations now take a similar stance.
D. Interim Measures
Amendments to Section 31(2) clarify that ADGM's Court of First Instance (the "Court") has the power to issue interim measures in relation to arbitration proceedings, just as it would in court proceedings. These interim measures include the taking of evidence or any provisional or conservatory measures.
Further, the amendments to Section 31(3) provide that the Court's power to make an order for interim measures also applies where (i) the seat of the arbitration is outside of the ADGM or no seat has been designated, or (ii) the interim measure is sought against a non-party to the arbitration agreement. The amendments to the Arbitration Regulations are broader in scope than the recent judgment in case A and B v C, D and E,2 where the English Court of Appeal expressed willingness to compel third-party witness evidence, and go a step further in that they also expressly apply to provisional or conservatory measures.
Sections 31(4) and (5) introduce the process for obtaining an interim order. If the case is one of urgency, the Court has the discretion to make such orders, on the application of a party, as it thinks necessary for the purpose of preserving evidence or assets. If it is not one of urgency, the Court can only act on the application of a party upon notice to the other parties and the arbitral tribunal.
E. Summary Disposal of Claims
An entirely new section - Section 42 - has been introduced which addresses the summary disposal of claims, counterclaims and defences. Section 42(1) allows parties, unless agreed otherwise, to apply to the tribunal for a "summary disposal of part or the whole of a claim, counterclaim or defence, on the basis that any other party has no real prospect of success in respect of the relevant part or whole of the claim, counterclaim or defence".
Under Section 42(2), the arbitral tribunal has been afforded "full discretion" to decide whether to allow such an application to proceed. An advantage of this provision is to allow expeditious determination of a baseless claim or defence instead of going through the time-consuming and expensive process of full arbitration proceedings, although it is yet to be seen how arbitral tribunals will interpret "no real prospect of success".
F. Rules of Procedure
A new Section 34(2) has been introduced which clarifies that "the parties are free to agree to adopt, in whole or part, the ADGM Arbitration Centre Arbitration Guidelines, regardless of the seat or the applicable rules of procedure." The ADGM Arbitration Guidelines can operate alongside any applicable arbitration laws or institutional rules and do not compete with them. For a more detailed discussion of the ADGM Arbitration Centre Arbitration Guidelines, refer to our earlier article.
Section 34(4) further makes clear that the arbitral tribunal's primary goal is to ensure the arbitration is carried out in a fair, efficient and expeditious manner. Section 34(4) requires the arbitral tribunal to "adopt procedures which are suitable to the circumstances of the particular case, avoid unnecessary delay and expense, and facilitate fair, efficient and expeditious conduct of the arbitration".
G. Mandatory and Non-Mandatory Provisions
A new Section 9 has been introduced which identifies the mandatory and non-mandatory provisions of the Arbitration Regulations. This section will provide welcomed clarity as to (i) which provisions cannot be contracted out of, and (ii) circumstances in which parties can make their own arrangements, such as by agreeing a set of institutional rules.
H. Embracing Technology to Accommodate the Changing Needs of the Arbitration Community
A number of amendments have been made to various provisions of the Arbitration Regulations which support the use of technology in the arbitration. These changes include:
- Technology in the Arbitral Process: Section 34(5) provides that the arbitral tribunal shall consider the use of technology in order to enhance the efficient and expeditious conduct of the arbitration. A non-exhaustive list of circumstances where technology may be used is listed, including, for example, the use of electronic means to submit or exchange documents and the use of an online case management platform. Under this section, parties are afforded flexibility to use technology at various stages of the arbitration. It is important to emphasise that the technology-driven means of facilitating an arbitral process are simply options and are in no way mandatory. The tribunal retains a wide level of discretion as to which methods (if any) are relevant and appropriate on a case-by-case basis.
- Technology at Hearings: previously, the Arbitration Regulations provided that an arbitral tribunal could decide whether to hold an oral hearing or whether proceedings could be conducted on the basis of documents and other materials. Under the new Section 43(2), arbitral tribunals can now also decide whether the hearing is to be conducted, in whole or in part, by video conference, telephone or other communication technology, unless the parties choose otherwise. A new Section 43(3) has also been introduced which provides that if a hearing is to be held in person, a party may apply to the arbitral tribunal for any of its fact or expert witnesses to attend by video conference, telephone or other communication technology. Given the increasing popularity of virtual hearings in the face of the pandemic, these are helpful additions to the Arbitration Regulations.
- Technology for the rendering of the Award: Section 55(3) previously stated that the award shall be deemed to have been made at the seat of the arbitration, irrespective of where it is written or signed. Section 55(3) has now been amended to also clarify that the award may be signed by the arbitral tribunal in person, or by electronic means. A new provision has also been introduced at Section 55(4) to confirm that an award signed by electronic means shall have the same legal validity and enforceability as an award that has been signed manually.
I. Third-Party Funding
In recognition of the increasing use of third-party funding in arbitration, a new Section 37 has been introduced which requires a party to notify all parties and the arbitral tribunal of the existence of any third-party funding agreement and the identity of the third-party funder. This follows other institutional rules, such as the SIAC Investment Arbitration Rules and HKIAC Arbitration Rules, which require funded parties to disclose the existence of a funding agreement. The Consultation Paper clarified that the purpose of this notification was to allow each tribunal member to consider whether this arrangement raised any potential conflict of interest issues.
J. Module 6 of the ADGM Arbitration Guidelines – Counsel Conduct
Section 44 is a new section and is based on Module 6 of the ADGM Arbitration Guidelines, which addresses the conduct of counsel in arbitral proceedings.
Section 44(1) lists various conduct from which parties are prohibited from engaging, as they deviate from the expected standards of good conduct of Party Representatives. Section 44(2) identifies the types of sanctions the Tribunal may impose if a complaint is made by one party against another Party Representative after giving the relevant Party Representative an opportunity to make representations. Under Section 44(3), the arbitral tribunal's decision is to be provided in writing. Section 44(4) provides that, in all cases, the arbitral tribunal is entitled to consider the conduct of the parties and the Party Representatives when making any decision allocating the costs of the arbitration between the parties.
K. Court's Assistance in Taking Evidence
The amendments to Section 48(1) set out a non-exhaustive list of areas where the Court, or any competent court, may assist in taking evidence. This is subject to the relevant court's competence and rules on taking evidence under Section 48(2).
Conclusion
The amendments to the Arbitration Regulations provide increased clarity and certainty in respect of ADGM-seated arbitration. The changes reflect the ADGM's willingness to adapt to global developments and will no doubt increase the appeal of adopting the Arbitration Regulations and ultimately the ADGM as an arbitral seat.
The revisions also allow for greater flexibility in the way the arbitration process can be conducted, particularly with the introduction of explicit provisions accommodating virtual hearings and electronic submissions. Such provisions will no doubt be welcomed by the arbitration community given the current restrictions imposed by the COVID-19 pandemic.
1 NB Three Shipping Ltd v Harebell Shipping Ltd [2005] 1 Lloyds Rep 509.
2 A and B v C, D and E [2020] EWCA Civ 409.
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