Expedited Proceedings under the DIAC Arbitration Rules

According to Annual Report 2022 issued by the Dubai International Arbitration Centre (“DIAC”), the amounts in dispute in 45% of cases that DIAC registered in 2022 (152 of 340) did not exceed AED 1,000,000 (approximately USD 272,000).^[1]

The financial viability of commencing such arbitral proceedings, without even starting to consider the strength of the claim(s) and the likelihood of successful recovery of any awarded amounts, is largely dependent on two elements: arrangements with respect to legal fees between legal representatives and their instructing party (for example, third party funding^[2] or contingency fee agreements), and costs of the arbitration set by DIAC comprising DIAC’s administrative fees and expenses and arbitrators’ fees and expenses.^[3]

It is important to stress that unless the advance on costs, which should be shared equally by the parties,^[4] is paid in full to DIAC, the arbitral proceedings will not continue.^[5]  It is quite common that the respondent(s) are reluctant to contribute 50% of the advance on costs and the claimant(s) are forced to substitute 50% of the respondent(s) share of the advance on costs to proceed with the arbitration.^[6]  Conversely, one should keep in mind that, nowadays, the substituting party may apply to the Tribunal, once constituted, for an award for such substituted costs.^[7]

With this in mind, it seems pertinent to consider the possibilities of expedited proceedings under Article 32 (Expedited Proceedings) of DIAC Arbitration Rules 2022 (the “DIAC Rules”)^[8] that is aimed at improving the viability of arbitral proceedings with amounts in dispute not exceeding AED 1,000,000 or any another amount, subject to the parties agreement.

Notably, however, DIAC’s Annual Report 2022 does not provide the number of cases, where arbitrations were conducted on the basis of expedited proceedings in accordance with Article 32.

Article 32 comprises six sub-sections, which will be considered consecutively below.

Article 32.1:

“Expedited proceedings shall take place:

• unless the parties agree otherwise in writing, if the total of the sum(s) claimed and counterclaimed is below or equals AED 1,000,000 (exclusive of interest and legal representation costs) or any other threshold amount as may be determined by the Board of Directors of DIAC from time to time; or
• if, the parties agree in writing; or
• in cases of exceptional urgency as determined by the Arbitration Court upon an application by a party,

and in all cases if considered appropriate by the Arbitration Court, based on the relevant circumstances.”

This sub-section sets out the criteria to be satisfied for the arbitral proceedings to qualify for expedited proceedings.  Thus, expedited proceeding “shall” take place if the amount in dispute between the parties does not exceed AED 1,000,000 (approximately USD 272,000), excluding interest and fees for legal representation.  The threshold may be amended by DIAC’s Board of Directors.^[9]

Furthermore, the parties may agree in writing to exclude their dispute from application of the expedited proceedings or increase/decrease the AED 1,000,000 threshold.

Moreover, the Arbitration Court[10] has discretion to order application of expedited proceedings in cases of exceptional urgency “upon an application by a party” and, ultimately, in all cases if the Arbitration Court considers it appropriate.

Article 32.2:

“Prior to the constitution of the Tribunal, and following the earlier of the submission of the Answer or the time period in which the Answer should be submitted, a party may submit an application for the arbitration to be conducted on an expedited basis. Any such application including all accompanying documents, shall be submitted to the Centre by email or in accordance with the terms of use of any electronic case management system implemented by the Centre. The Centre shall notify the application to all other parties in compliance with Article 3.3 and 3.4. The other parties to the arbitration may comment on the application for an expedited proceedings within 7 days of receipt of the application. If no comments are made, the application shall be deemed to be unopposed.”

Article 32.1 (see the section above) begins with a prescription that expedited proceedings “shall take place” followed by a list of individual and separate criteria, which, if satisfied, should trigger the expedited proceedings mode.  Thus, one may interpret that provision to command automatic application of the expedited proceedings to an arbitration if one of the criteria is satisfied.

However, Article 32.2 provides any party with an option (“may”) to apply for expedited proceedings between (i) the submission of the Answer or the deadline for the submission of the Answer (if no Answer is submitted) and (ii) the establishment of the Tribunal.

Article 32.2 does not appear to detail any particular criteria or circumstances in which an application for the application of expedited proceedings may or must be made.  One way of interpreting it may be to view it as applicable only to Article 32.1(c), i.e., the criterion requiring “an application by a party” in “cases of exceptional urgency as determined by the Arbitration Court.”  One may also take the view that while such an application is not necessary where Articles 32.1(a) and/or 32.1(b) apply, a party “may” nonetheless apply to the Centre, if only to make sure that these criteria are not overlooked.

Yet, Article 32.3 still seems to provide for the Arbitration Court’s ultimate discretion to determine that the application of the expedited proceedings would be “reasonable” in “view of all the relevant circumstances”, where “any of the criteria for expedited proceedings” set forth in Article 31.1 are met (please see the section below).

In any case, applications under Article 32.2 should be supported by documents and submitted to the Centre by email or using the Centre’s electronic case management system (once in place).  Thereafter, the Centre will notify all other parties of the application.  The other parties have the option (“may”) of commenting on the application.  The application will be considered “unopposed” by the Centre in absence of any comments by the other parties.

Article 32.3:

“Provided the advance on costs of the arbitration is paid in full, if the Arbitration Court is satisfied that any of the criteria for expedited proceedings has been met and in view of the relevant circumstances it is reasonable to allow such proceeding, the Centre shall seek to appoint a Tribunal consisting of a sole arbitrator within 5 days of the Arbitration Court’s decision.”

Pursuant to Article 32.2, allowing arbitrations to proceed on an expedited basis is subject to the Arbitration Court’s satisfaction that “any of the criteria for expedited proceedings has been met” and a determination that it would be “reasonable” to do so “in view of all the relevant circumstances.”  That said, Article 32.3 does not specify whether an application by a party in accordance with Article 32.2 will be required for the Arbitration Court to reach such satisfaction.

Accordingly, reading Article 32.3 in conjunction with Articles 32.1 and 32.2 (please see the relevant sections above), it seems reasonable to suggest that it is presently uncertain whether or not the conduct of arbitration on the basis of expedited proceedings will take place automatically through the satisfaction of one of the criteria listed under Article 32.1 or will require, in any case or only based on a certain criteria, an application under Article 32.2.

In any case, DIAC requires that the advance on costs be paid in full prior to the Centre “seek[ing] to appoint” the Tribunal within 5 calendar^[11] days of the Arbitration Court’s satisfaction.  In this regard, presumably, the advance on costs must be paid in full before the Arbitration Court will consider if the arbitration will be allowed to proceed on expedited basis.  Presumably, in case of the parties’ agreement on a three-member Tribunal and until the application of expedited proceedings, the parties will be required to pay the advance on costs based on the potential appointment of three arbitrators.

Furthermore, Article 32.3 prescribes that the Centre “shall seek to appoint a Tribunal consisting of a sole arbitrator” but does not specify whether a sole arbitrator shall still be appointed notwithstanding, say, the parties’ agreement to a three-member Tribunal in the original arbitration agreement.

The number of arbitrators appointed in an arbitration, of course, has a significant effect on the advance on costs.  According to DIAC’s Cost Calculator,^[12] an advance on costs (which includes the administrative fees and arbitrators’ fees but does not include the arbitrators’ expenses, which stands at 20% of the arbitrators’ fees^[13]) for a claim of up to AED 1,000,000 stands at the following averages:

Amount in Dispute Advance on Costs —
Three Member Tribunal (A) Advance on Costs —
Sole Arbitrator (B) Difference (A)/(B)AED 250,000 29,500 AED(27.4% of the amount in dispute) AED 68,500(11.8% of the amount in dispute) AED 39,000(56.9%)AED 500,000 AED 102,250(20.5% of the amount in dispute) AED 40,750(8.2% of the amount in dispute) AED 61,500(60.1%)AED 750,000 AED 139,250(18.6% of the amount in dispute) AED 59,750(8% of the amount in dispute) AED 61,500(57.1%)AED 1,000,000 AED 161,750(16.2% of the amount
in dispute) AED 67,250(6.7% of the amount
in dispute) AED 94,500
(58.4%)

Thus, cost savings associated with a potential decrease in the number of arbitrators from three to one is likely to average 58.1% of the advance of costs.  In this regard, it seems reasonable to suggest that if the original advance on costs was paid in full based on the potential appointment of three arbitrators, pursuant to Article 2.1 and 4.2 of Appendix I to the DIAC Rules, the Centre will reconsider/lower the advance on costs and refund the difference.

On a separate note, it may be contended that based on the use of the term “seek to appoint”, that the Centre does not guarantee that the appointment of the Tribunal will be made within 5 calendar days but it will endeavour to do so.

Article 32.4:

“Having due regard to the ability of the parties to present their respective cases, and after consultation with them, the Tribunal shall decide on the procedure to be adopted in the arbitration conducted on an expedited basis.  The Tribunal may limit the scope of any evidence to be submitted, giving due consideration to the expedited nature of the arbitration and the requirements to issue the Final Award within the time limit prescribed by Article 32.5 below.”

Article 32.4 gives the Tribunal a wide discretion on how to achieve the three-month time limit for issuing the Final Award set down in Article 32.5 (see the relevant section below), which is circumscribed only by its duty to consult with the parties and be mindful of their ability to present their cases.

Curiously, Article 32.4 gives only one example of how the Tribunal may tailor the arbitral proceedings to suit their expedited nature, namely by placing restrictions on the scope of any evidence to be submitted. In practice, the Tribunal could consider imposing shorter time limits on written submissions, witness and expert evidence^[14] (which, by extension, reduces their volume), and/or limiting or entirely dispensing with document production.  The parties may also agree that “no reasons are to be given” in the Final Award.^[15]

Another common time-saving option would be to forego hearing(s) in favour of documents-only proceedings.^[16]  However, given that this option is not directly provided in Article 32.4,^[17] the Tribunal’s decision to hold a hearing or not, potentially remains subject to Article 26.1,^[18] which provides that, if any party requests a hearing, the Tribunal’s discretion will only extend to determining the modality of the hearing.

Article 32.5:

“The time limit within which the Tribunal must issue the Final Award is 3 months from the date of the transmission of the file to the Tribunal by the Centre, unless extended by the Arbitration Court on exceptional grounds.”

Article 32.5 establishes an ambitious time limit for the conclusion of the arbitration and issuance of the Final Award, namely three months from the date when the file is transmitted to the Tribunal.^[19] This is half of the usual time frame for an expedited arbitration, which stands, for example, at six months under SIAC Arbitration Rules 2016^[20] and ICC Arbitration Rules 2021^[21] (although in the latter case the six-month time limit begins to run from the date of the case management conference, which must be convened no later than 15 days after the transmission of the file to the tribunal^[22]) or 180 days (or within 30 days from the closure of the proceedings, whichever event occurs first^[23]) under SCCA Arbitration Rules 2023.^[24]

In this regard, Tribunals and the parties will have to act swiftly as the 3-month time limit may be extended by the Arbitration Court only “on exceptional grounds.”  Conversely, the Tribunal will also have to balance the expedited nature of the proceedings against the fundamental right of the parties to present their respective cases, which the Tribunal must have “due regard to” under Article 32.4.

Article 32.6:

“The Tribunal may, upon an application by a party or on its own initiative, seek approval from the Arbitration Court to continue to conduct the arbitration on a non-expedited basis.  The Arbitration Court shall consider the application, having due regard to the relevant circumstances including submissions of the parties and comments from the Tribunal.  Where a determination is made to discontinue the expedited procedure, the same Tribunal shall continue to conduct the arbitration.”

Article 32.6 recognises that at some point during the expedited proceedings, which are tailored to relatively straightforward cases, the parties and the Tribunal may find themselves in a situation where the expedited nature of the proceedings is no longer appropriate.  For example, a particular issue may require extensive witness or expert evidence, or the amount of amended claim or counterclaim may surpass the AED 1,000,000 threshold.  Should this come to pass, the Tribunal may, whether on its own initiative or upon an application by a party, request the Arbitration Court’s approval to switch to the non-expedited procedural mode. Similar to Article 32.3 (please see the relevant section above), the Arbitration Court has the ultimate discretion to determine whether such a change is merited.

Crucially, this provision preserves the composition of the Tribunal in case of such a change, which should not only ensure procedural efficiency but also safeguard against the parties using this procedural mechanism as a guerrilla tactic.

Conclusion

The expedited procedure mode available in Article 32 of the DIAC Rules is a positive development aimed at making arbitration more viable for cases where the amount in dispute is below or equal to AED 1,000,000. The key advantages of the expedited procedure are (i) a single-member Tribunal, which, compared to a three-member Tribunal, results in average cost savings of 58.1% of the advance of costs, (ii) potential for less legal fees to be incurred by the parties given that the timeframe of the proceedings is rather constricted (subject, of course, to specific fee arrangements between legal representatives and instructing party), and (iii) expeditious resolution of the dispute with the Final Award to be issued within three months from the transmission of the file to the Tribunal.

Considering the present lack of certainty as to the need to make an application for expedited proceedings under Article 32, the parties should consider erring on the side of caution and filing an application for conducting the proceedings on an expedited basis even if satisfying criteria set out in Article 32.1(a) or 32.1(b).

Further, it would be instructive for all practitioners to know if (i) the Arbitration Court would appoint a sole arbitrator in accordance with Article 32.3 notwithstanding the parties’ agreement to a three-member Tribunal in the original arbitration agreement, and (ii) the Tribunal’s authority to decide “on the procedure to be adopted in the arbitration conducted on an expedited basis” in accordance with Article 32.4 includes authority to decide to conduct proceedings on document-only basis (without hearings) notwithstanding a party’s application for a hearing, effectively overriding Article 26.1.

[1] https://www.diac.com/wp-content/uploads/2023/06/diac-annual-report-2022.pdf

[2] Article 22 of the DIAC Rules.

[3] Article 36 of the DIAC Rules.

[4] Article 3.2 of Appendix I to the DIAC Rules.

[5] Article 3.4 of Appendix I to the DIAC Rules.

[6] Article 3.3 of Appendix I to the DIAC Rules.

[7] Article 3.3 of Appendix I to the DIAC Rules.

[8] All references to articles in this note, except where expressly stated otherwise, are to articles the DIAC Rules.

[9] https://www.diac.com/wp-content/uploads/2023/06/diac-annual-report-2022.pdf

[10] https://www.diac.com/en/about-diac/diac-arbitration-court/

[11] Article 3.7 of Appendix I to the DIAC Rules.

[12] https://www.diac.com/en/adr-services/arbitration/arbitration-costs/cost-calculator/

See also Table on Costs and Fees available at https://www.diac.com/wp-content/uploads/2023/05/DIAC-2022-Rules-EN.pdf

[13] https://www.diac.com/en/adr-services/arbitration/arbitration-costs/fees-and-costs/

[14] Although one is unlikely to have expert evidence in expedited proceedings in the first place.

[15] Article 34.4(g) of the DIAC Rules.

[16] Article 26.6 of the DIAC Rules.

[17] Unlike in other arbitration rules, including Singapore International Arbitration Centre (“SIAC”) Arbitration Rules 2016, International Chamber of Commerce (the “ICC”) Arbitration Rules 2021, or Saudi Center for Commercial Arbitration (the “SCCA”) Arbitration Rules 2023.

[18] Article 26.1 of the DIAC Rules provides as follows: “If either party requests a hearing or hearings for the presentation of evidence by witnesses or for oral argument or for both or, failing such request, the Tribunal decides that such hearing or hearings should take place, the Tribunal shall determine whether such hearing(s) shall be held in person, by telephone or through any other appropriate means of virtual communication including video conferencing.”

[19] Article 35.1 of the DIAC Rules (the DIAC Rules provide for a 6-month time limit to issue a Final Award in non-expedited cases).

[20] Article 5.2(d) of SIAC Arbitration Rules 2016.

[21] Article 4.1 of Appendix VI to ICC Arbitration Rules 2021.

[22] Article 3.3 of Appendix VI to ICC Arbitration Rules 2021.

[23] Article 10.1 of Appendix II to SCCA Arbitration Rules 2023.

[24] Article 10.2 of Appendix II to SCCA Arbitration Rules 2023.