International arbitration in 2025

Following the dissolution of the DIFC-LCIA in late 2021 pursuant to Dubai Decree No. 34 of 2021 (Decree 34), DIAC made significant changes to its corporate and administrative structure and took over a large caseload. Changes to DIAC’s administrative structure included forming a new arbitration court and overhauling its case management team. In 2022, DIAC rolled out new arbitration rules emphasizing the use of technology to reduce arbitration’s carbon footprint and including provisions on consolidation, joinder and third-party funding as well as mechanisms for expedited proceedings. The rules designate the Dubai International Financial Centre (DIFC) as the default seat of arbitration. DIAC’s 2023 Annual Report, published in October 2024, shows an increasing caseload and improved gender diversity, with women accounting for 54 percent of the appointments made by the DIAC Arbitration Court in the first half of 2024.

As part of its strategy to strengthen the UAE’s position as an arbitration hub, the Abu Dhabi International Arbitration Centre (arbitrateAD) was launched in early 2024, replacing the Abu Dhabi Commercial Conciliation and Arbitration Centre. ArbitrateAD’s new rules promote green practices, regulate joinder and consolidation and allow for early dismissal of claims, expedited procedures and emergency arbitrations. They provide that the Abu Dhabi Global Market (ADGM) is the default seat, giving users certainty in a supportive judicial environment.

In KSA, the Saudi Center for Commercial Arbitration (SCCA) is key to the Kingdom’s efforts to position itself as another arbitration-friendly jurisdiction. In 2023, the SCCA also adopted new arbitration rules aimed at enhancing transparency and efficiency. The new rules encourage the use of technology for document filing and case management and allow parties to select Online Dispute Resolution Procedure Rules (ODR) for low-value disputes.

The abolition of the DIFC-LCIA has sparked legal challenges regarding the enforceability of arbitration agreements referencing the DIFC-LCIA Rules and awards rendered under such agreements. Some of these challenges were heard outside the UAE, such as the proceedings in Baker Hughes Saudi Arabia Co. Ltd v Dynamic Industries before the District Court of New Orleans, Louisiana and DFL vs DFM [2024] SGHC 71 before the Singapore High Court. Both cases made headlines for refusing to give effect to Decree 34. However, in the past few days, the US Court of Appeals for the Fifth Circuit quashed the decision of the District Court of New Orleans and remanded the case back to the lower court for reconsideration. This suggests the controversy surrounding enforcement of DIFC-LCIA arbitration agreements is far from over.

Unsurprisingly, courts in the UAE have enforced legacy DIFC-LCIA arbitration agreements. Thus, in the UAE, the abolition of the DIFC-LCIA should have limited impact on the enforceability of arbitration agreements that refer to DIFC-LCIA arbitration.

UAE courts are reassessing long-standing challenges for arbitration users. Recent decisions in Dubai and Abu Dhabi affirm arbitration as the primary method for resolving international commercial disputes. These rulings signify a major shift from the traditional UAE judicial perspective, which for decades viewed arbitration as an “exceptional” means of dispute resolution. This shift is significant as the traditional view informed many decisions that unreasonably restricted the interpretation of arbitration agreements and expanded the scope for setting aside awards.

In Case No. 1514/2022 (Commercial) the Dubai Court of Cassation distinguished, for the first time, between questions of jurisdiction and admissibility. It held that whether pre-conditions to arbitration have been satisfied is a question of admissibility not jurisdiction. This distinction implies that courts should not interfere with an arbitral tribunal’s assessment of admissibility, which falls within the tribunal’s authority to rule on the merits – except in cases involving potential infringements of public policy or due process.

Finally, the Dubai courts have shown openness to international standards in recent cases challenging arbitral awards on grounds of arbitrator independence or impartiality. In those decisions (for example, in Case No. 606/2024 (Commercial)), the Dubai Court of Cassation cited the IBA Guidelines on Conflicts of Interest in International Arbitration to determine whether the impugned conduct constituted sufficient grounds to set aside the arbitrator’s award.

These and other decisions reflect a more sophisticated approach by the Dubai courts, aligning their outlook on arbitration with international best practice.

Nevertheless, a recent decision from the Dubai Court of Cassation highlights the need for caution with ‘sole option’ or ‘unilateral arbitration’ clauses. Common in finance documents, these clauses grant one party the sole discretion to select the forum. In Case No. 735/2024 (Commercial), the court accepted jurisdiction and refused to apply a sole option clause in favor of arbitration, holding that the clause does not constitute a valid arbitration agreement under the laws of the UAE.

The court acknowledged that there are varied approaches to sole option clauses but found that the clause at issue was not a binding arbitration agreement. It remains uncertain whether this decision will have broader application, but the Court of Cassation’s scepticism toward such clauses is evident. This contrasts with the approach of the ADGM and DIFC courts, which have both recognized the validity of sole option clauses.

According to the latest SCCA statistics, 92 percent of motions to set aside arbitral awards in 2022 were unsuccessful. This positive trend continued in 2024, solidifying the Saudi courts’ reputation for being pro-enforcement. Two cases exemplify the progressive stance of Saudi courts:

• In Case No. 4531064951 of 1445H, the Riyadh Commercial Court upheld an arbitration agreement despite a challenge regarding an alleged unauthorized signatory. The plaintiff sought to circumvent the arbitration agreement and argued that it was unenforceable because its own signatory was not authorized to bind the company to arbitration. The court rejected this argument, holding that the plaintiff was estopped from benefiting from its own or its employees’ wrongdoing. The approach of the Saudi courts is noteworthy because arbitration agreements are often successfully challenged in Middle Eastern courts for reasons relating to the authority of the signatory.

• In another judgment from the Dammam Court of Appeal in Case No. 4530620517 of 1445H, an agreement referring disputes to a final and binding determination by a third party chosen by the parties was held to be a valid agreement to arbitrate. Although the agreement did not explicitly mention “arbitration,” the court deduced the parties’ intent to arbitrate based on their autonomy in selecting the third party and the absence of a need for explicit agreement on the binding nature of court determinations, which is otherwise the default.

These decisions reflect an increasingly consistent pro-enforcement approach by the Saudi courts, reinforcing the Kingdom’s pro-arbitration agenda. Saudi Arabia’s pro-arbitration stance is also reflected in the Minister of Finance’s approval of several unified government contracts incorporating the SCCA’s model clause as the default dispute resolution mechanism. Additionally, the Ministry of Commerce has also issued several model contracts that include the SCCA’s model clause.