How to choose an arbitration clause for an international treaty in the UAE

Mainstream

An arbitration clause is not just a standard clause at the end of a contract. It is a strategic tool that determines whether you can effectively protect your interests if the deal goes wrong. In the UAE, where civil law, Anglo-Saxon common law and the unique architecture of “onshore” and “offshore” jurisdictions within a single country intersect, an incorrectly drafted clause can completely devalue legal victory.

The question is not which arbitration is the best in the world. The main question is how to choose a reservation that will ensure:

• the indisputable competence of the arbitral tribunal;
• process in a language you understand and according to transparent rules;
• the feasibility of the future decision in those jurisdictions where the assets of the opponent are located;
• Minimum risks of cancellation or refusal of recognition of the decision by local courts of the UAE.

If these aspects are not considered at the signing stage, the company risks facing years of hearings about jurisdiction, the cancellation of the arbitration award by a local court or the inability to foreclose on assets in the UAE.

Why the arbitration clause is particularly critical in UAE deals

Arbitration in the UAE is not a single system. There are two at the same time:

• Onshore arbitration under Federal Arbitration Law No. 6 of 2018, based on the UNCITRAL Model Law. The supervision is carried out by the state courts of the UAE in Arabic.
• Offshore arbitrations in the DIFC and ADGM free zones, where their own arbitration laws are in force, also based on the Model Law, but administered by common law courts in English.

In addition, there are several arbitration centers in the UAE, and their rules and reputation are different. The choice of the particular institution and place of arbitration has a direct impact on the predictability of the procedure, the language of the proceedings, the possibility of obtaining interim measures and the ultimate enforceability of the award.

An error at this stage – such as specifying an outdated institution or a vague definition of the place of arbitration – often leads to the arbitration clause being considered pathological, and the dispute is referred to the UAE state courts, which for a foreign party almost always means losing control over the process.

Key Elements of the Arbitration Clause under UAE Law

In terms of both onshore law No. 6 and DIFC/ADGM, the arbitration agreement should clearly define:

1. The scope of disputes submitted to arbitration. The wording “all disputes arising out of or in connection with a contract” is considered standard and covers, among other things, issues of validity, breach and termination of a contract.
2. Institutional or ad hoc rules. The reservation must clearly indicate which rules apply – DIAC, ICC, ADGM Arbitration Centre, etc.
3. Place of arbitration (seat). This is a key element: It depends on the seat which court will supervise and under which law the procedural actions will be assessed.
4. Number of arbitrators and the mechanism for their appointment. By default, institutions often provide for one or three arbitrators depending on the price of the claim, but parties are better off directly fixing their choices.
5. Language of the proceedings. This is of great importance for the availability of evidence and translation costs.
6. Applicable substantive law. Although technically not relevant to the reservation itself, its absence creates uncertainty that arbitrators will be forced to resolve through conflict-of-laws rules.

Each of these points should be formulated taking into account the specifics of the UAE. Let's take a closer look at them.

Selection of arbitration institution: DIAC, ICC, DIFC or ADGM?

The most popular options in the UAE:

• DIAC (Dubai International Arbitration Centre) is the leading centre of mainland Dubai. From 2023, the updated regulations are in force. DIAC can administer disputes with the arbitration venue in both onshore Dubai and DIFC, which gives flexibility.
• DIFC Arbitration Centre has replaced DIFC-LCIA since 2021. It applies rules based largely on the LCIA, administers arbitrations with seat in the DIFC. Convenient for parties seeking supervision of the English-speaking DIFC Court.
• ADGM Arbitration Centre (Abu Dhabi) is the equivalent of the DIFC center in the Abu Dhabi Free Zone. The supervision is exercised by the ADGM Court of Common Law. Ideal if the contract is related to Abu Dhabi or assets in the emirate.
• ICC (International Chamber of Commerce) – is often elected by parties who do not trust the local centers of the UAE, but the seat can be determined in the UAE (for example, in the DIFC). This combines the prestige of the ICC with the convenience of execution in the region.

The choice of the institution should take into account not only cost and speed, but also how the UAE courts perceive the decisions of a particular center. Practice shows that decisions of DIAC and DIFC centers are generally freely recognized by onshore courts, if the public order of the UAE is observed and there are no procedural defects.

Place of arbitration (seat): UAE or DIFC/ADGM?

If seat is defined as “onshore Dubai” or “mainland UAE”, then:

• The supervisory court is the local courts (Arabic, official translation of all documents);
• The decision can be reversed on the basis of Law No. 6, which includes not only the UNCITRAL model grounds, but also the specific requirements of public policy of the UAE, interpreted by local judges;
• Interaction with the court for interim measures requires the involvement of local lawyers and translation.

If the seat is defined in DIFC or ADGM:

• supervision is carried out by the courts of free zones in English, according to the rules of common law;
• The procedure for revoking the decision is more predictable and close to the English model.
• The DIFC/ADGM arbitration award can be enforced in the mainland UAE through a simple conversion procedure, without any substantive review.
• This radically reduces the language and legal risks for the international side.

Strategic advice for transactions with counterparties from the UAE: Even if the contract is subject to the law of the mainland UAE, the arbitration clause should be formulated so that the seat is in the DIFC or ADGM. This provides a neutral and English environment for oversight without loss of enforcement throughout the UAE.

Applicable law and language of proceedings

Identify the applicable substantive law. This can be UAE law, English law, Swiss law, etc. Arbitrators in the UAE are used to applying foreign law if the parties have explicitly chosen it. Don't leave this item empty.

The language of arbitration should be fixed as English, if at least one of the parties is not Arabic. In DIFC/ADGM, English is the official language of court and arbitration, which simplifies all the proceedings.

Pathology and typical errors of arbitration clauses in the UAE

Long-term practice has revealed recurring problems that make a reservation inoperable or dangerous:

• Ambiguous indication of the Institute: “Arbitration in Dubai” without the center. Leads to disputes over which regulations apply and the possible referral of the dispute to a state court.
• Reference to a non-existent institution: For example, DIFC-LCIA after 2021 or Dubai Chamber of Commerce without specifying. Courts may consider the agreement unenforceable.
• Hybrid constructions: “The ICC arbitration with a seat in onshore Dubai, but the supervisory court is the DIFC.” UAE law does not allow supervision to be exercised by a court of jurisdiction other than the place of arbitration. Such a design would be able to break the reservation.
• Absence of seat or indication of “UAE” as a country: The law requires the precise definition of the place of arbitration within the UAE – the emirate and the zone (onshore or free). Otherwise, there is a risk that the local courts will consider the agreement not concluded.
• Contradiction to public policy: For example, an attempt to exclude the right to challenge a decision entirely in onshore arbitration. Local courts can ignore such a ban and in some cases, overturn the entire arbitration agreement.

How to strengthen arbitration clause for UAE transactions

Beyond the basic elements, a strong clause for an international treaty with an UAE element should include:

• Provisions on interim measures of protection: A clear indication that arbitrators may take interim measures, including prohibitions on the disposition of assets and the retention of evidence, and that parties may seek such measures in a competent court (e.g., a DIFC or ADGM court).
• Emergency arbitrator mechanism: If the rules of the centre provide for this, it is useful to indicate that the provisions on the extraordinary arbitrator apply before the composition is formed. This is important for the urgent freezing of assets in the UAE.
• Special requirements for arbitrators: knowledge of Islamic finance law or experience in Middle Eastern construction disputes, if the subject matter of the contract so requires.
• Consolidation and accession of the parties: In complex projects (EPC, holding structures) it is necessary to provide for the possibility of combining several arbitrations and joining affiliates, otherwise parallel processes and conflicting decisions may arise.
• Confidentiality: Although arbitration in the UAE is confidential by default, it is possible to extend the provisions to protect trade secrets, taking into account the specifics of evidence in free zones.

Checklist: 12 Checkpoints Before Signing

1. Is the specific arbitration institution and its current rules specified?
2. Is the arbitration location determined to the zone (onshore Dubai, DIFC, ADGM)?
3. Does the chosen seat fit the institution's ability to administer it?
4. Is the arbitration agreement written and express (including the exchange of emails)?
5. Is the applicable substantive law specified?
6. Is the language of the proceedings recorded?
7. Is there a number of arbitrators and a mechanism for appointing them (especially if one party is weaker)?
8. Did the reservation entitle arbitrators to interim measures and did it retain the possibility of recourse to a national court?
9. Does the reservation refer to abolished institutions (DIFC-LCIA) or outdated regulations?
10. Does the reservation exclude parallel proceedings (the exclusive competence clause of the arbitration)?
11. Has the issue of the allocation of costs for arbitration and the possibility of recovering legal costs been settled?
12. Has the clause been verified to conform to UAE public policy, especially in respect of disputes related to real estate, employment or agency agreements?

Examples of Model Arbitration Clauses for the UAE

1. DIAC with seat in DIFC (recommended balanced option)

«Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the Arbitration Rules of the Dubai International Arbitration Centre (DIAC), which Rules are deemed to be incorporated by reference into this clause. The seat of arbitration shall be the Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. The number of arbitrators shall be three. The language of the arbitration shall be English. The governing law of this contract shall be the law of [England and Wales / DIFC / UAE as applicable].»

2. ADGM Arbitration Centre (for Abu Dhabi-based transactions)

«Any dispute arising out of or relating to this agreement shall be referred to and finally resolved by arbitration under the ADGM Arbitration Regulations and administered by the ADGM Arbitration Centre. The seat of arbitration shall be Abu Dhabi Global Market (ADGM). The tribunal shall consist of three arbitrators. The language of the arbitration shall be English.»

3. ICC with seat in DIFC

«All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules. The seat of arbitration shall be the DIFC, Dubai. The language of the arbitration shall be English.»

These model clauses eliminate uncertainty and meet the requirements of both the UAE onshore and free zones.

Strategy: Reservation as part of the enforcement strategy

When choosing a reservation, one should keep in mind the ultimate goal - foreclosure on assets. Therefore, the seat and the institution whose decisions are as easily recognized in the mainland courts of the UAE are preferred. Practice shows that decisions rendered in DIFC or ADGM, as well as DIAC decisions with seat in DIFC, currently enjoy the highest degree of respect from onshore vessels. In addition, the presence of a seat in a free zone allows for the use of bankruptcy and enforcement mechanisms administered by common law courts, which are often faster and more transparent.

Related services

• International Arbitration, Commercial Litigation & Cross-Border Disputes in the UAE
• Commercial Contracts & UAE Regulatory Advisory
• Enforcement of Foreign Judgments and Arbitral Awards in the UAE
• Asset Tracing & Interim Measures in the UAE
• Sanctions, Export Controls & International Compliance

Related material

• International Arbitration in the UAE: When it is more effective than the court
• Recognition and enforcement of foreign arbitral awards in the UAE
• How to collect debt under an international agreement with a company from the UAE
• Interim measures in international commercial disputes in the UAE
• New York Convention and Arbitration in the UAE: What the lender needs to know

FAQ

Can I choose to arbitrate with a seat in the UAE if neither party is located in the UAE? The UAE allows international arbitrations with a seat on its territory, even if the contract and the parties have no apparent connection with the UAE. This is often used to tie in to a convenient neutral jurisdiction.

What to do if the contract has already been signed with a pathological reservation? In some cases, it is possible to conclude a supplementary agreement amending the reservation. If a dispute has already arisen, either an ad hoc procedure will have to be negotiated or ad hoc arbitration will have to be proven, which carries risks.

English is highly recommended for an international company, even if the counterparty is from the UAE. The arbitration centre shall ensure that the arbitrators and the proceedings can be conducted in English without loss of quality. In DIFC and ADGM, this is done at the institutional level.

In an “onshore” arbitration, such an exception is likely to be invalidated by the UAE courts for reasons of public policy. In DIFC/ADGM, the right to challenge is limited, but it is not recommended to exclude it completely. It is better to provide for shortened terms.

Which to choose: With significant amounts and complex disputes (for example, construction contracts), three arbitrators reduce the risk of single-handed error. For smaller disputes, one arbitrator saves time and money. It is recommended to write a number directly to avoid a dispute at the start.

Even if there is an arbitration clause, a party may apply to the Free Zone Court (DIFC/ADGM) or the UAE Mainland Court for interim measures in support of arbitration. The DIFC and ADGM courts are willing to apply freeze orders on the English model, making them an effective tool before or during arbitration.

No, a written form, including the exchange of messages by e-mail, is sufficient if they clearly follow the will of the parties. However, special requirements may apply to real estate contracts or commercial agencies.

Conclusion

The choice of an arbitration clause for an international treaty with the UAE is not a technical detail, but a full-fledged strategy for protecting capital. A properly designed clause takes into account the architecture of jurisdictional dualism, chooses a neutral place of arbitration with supervision in English, fixes the applicable law and mechanisms for the operational protection of assets. It transforms arbitration from a risky path with unpredictable outcomes into a predictable and fast dispute resolution tool. In transactions with the UAE, it is not the one who hopes for a typical phrase that wins, but the one who constructs a clause with an eye to real execution in a particular jurisdiction.