The Abu Dhabi Global Market ("ADGM"), a financial freezone in the United Arab Emirates, has enacted new arbitration regulations based on the UNCITRAL Model Law to create a new "pro-arbitration" seat in the Middle East. The ADGM Arbitration Regulations 2015 (the "ADGM Regulations") were enacted on 17 December 2015, and allow contracting parties to choose the ADGM as the seat of arbitration – no link is required to the ADGM for it to have jurisdiction.
The ADGM was recently established by decree of the Ruler of Abu Dhabi in 2013 and began operating in 2014. Similar to the Dubai International Financial Centre (the "DIFC"), the ADGM operates its own self-contained common law legal system, however, the ADGM directly incorporates English common law and a list of English statutes into its legal system by reference. In contrast, the DIFC has created its own separate body of substantive laws, with English law only applied in the event of conflict or gaps in DIFC law.
Since 2008, the DIFC has been offering offshore arbitration under the DIFC Arbitration Law, which is also based on the UNCITRAL Model Law. Therefore, the ADGM Regulations bring the ADGM into direct competition with the DIFC as an offshore seat of arbitration in the United Arab Emirates. However, unlike the DIFC which hosts the DIFC-LCIA Arbitration Centre, the ADGM does not currently have its own arbitration institution. Therefore, parties can select ADGM as the seat, with the arbitration administered by an institution of choice, such as the ICC or the LCIA; otherwise, the proceedings will be ad hoc – ie the parties would agree their own arbitration procedure subject only to the Regulations and other relevant ADGM laws, but without an institution to oversee the process.
The ADGM Regulations were enacted following a consultation process, and the UNCITRAL Model Law was used as a starting point on the basis that this provides a widely recognised global standard. The key modifications to the UNCITRAL Model Law are summarised as follows:
- Enhanced confidentiality and privacy, given the nature of the business that will be conducted in the ADGM and the prevailing culture of discretion in the region, which prohibit disclosure of not only the existence of ADGM arbitration proceedings and awards but even related court proceedings;
- Greater scope for the consolidation of two or more related arbitrations covering similar subject matter and the joinder of third parties to an existing arbitration, reflecting the multi-party nature of many infrastructure projects in the region; and
- An option for parties to dispense entirely with the right to bring an action to set aside an arbitral award in the ADGM Courts, which has the effect of making the award completely final and “unappealable”, eliminating perceived uncertainties with respect to potential local court interference.
It is evident that the ADGM Regulations have expanded Abu Dhabi's arbitration offering, and it is hoped that the ADGM Regulations will be well received by the market. It remains to be seen whether the ADGM will prove to be a more popular choice for offshore arbitration than the DIFC. However, given that the ADGM has only recently been established, further developments are likely, such as the establishment of an ADGM arbitration centre.
For further information, please contact Caroline Kehoe, Partner, Laura Askew, Associate or your usual Herbert Smith Freehills contact.