IBA Conference: Dispute Resolution in the Arab Region
May 16, 2016: 9.30-10.00AM
Good morning distinguished guests, ladies and gentleman. I’m delighted to have the opportunity to speak to you this morning.
If we had held a conference a decade ago on “dispute resolution in the Arab world,” we likely wouldn’t have needed two days for the programme, we could probably have been done and dusted in a morning session.
There were local courts and a smattering of arbitration centres, with the really big cases going outside the region. The system worked fine (although enforcement was an issue) but gave businesses relatively little choice about how to resolve their disputes.
Fast forward to 2016 and the transformation is truly remarkable. This region is today arguably the most dynamic part of the world for dispute resolution, with the UAE an especially powerful driving force.
Most visible has been the emergence of dedicated English-language, common law commercial courts operating alongside established local courts. The first of these was the DIFC Courts in 2006, with other specialised courts opening in Doha, and most recently Abu Dhabi.
By operating in English and according to Common Law principles, these courts offer a level of familiarity and comfort to international businesses, which in turn encourages investment and expansion.
Alongside the growth of specialised courts, the Arab world has also seen the emergence of dedicated alternative dispute resolution centres. In Dubai alone there is DIAC and the recently relaunched DIFC-LCIA. They will be soon be joined by the Emirates Maritime Arbitration Centre, which will bring an even greater level of specialisation to the region’s dispute resolution landscape, while reinforcing Dubai’s position as a global shipping hub.
The number of arbitration centres has increased rapidly in recent years. While this has been a welcome trend, and good for business, I think the speed of development will now tail off. Indeed, as government budgets shrink, I would not be surprised if we see a level of consolidation and mergers among the region’s arbitration centres over the coming years. But I will leave that debate for another day.
All these new courts and arbitration centres have been the catalyst for another important trend, a trend that is immediately visible to everyone here this morning. None of the institutions I have mentioned could have succeeded without the large number of top class legal counsel who now call this part of the world home.
The Middle East used to be something of a hardship posting for lawyers. Indeed, when I came in 1997….Not anymore. For both home grown and international talent, this region offers a uniquely interesting and varied career path. In Dubai alone, you can choose to practice English-language Common Law, Arabic-language Civil Law, litigation or arbitration. Or you can choose to work in all of these areas, as an increasing number of practitioners are doing.
Once practicing, standards are maintained by the outstanding work of organisations like Dubai’s Legal Affairs Department, under the stewardship of His Excellency Dr. Lowai Mohammed Belhoul, and the introduction of initiatives such as CLPD to keep the people in this room at the top of their game.
In some ways, the creation of these specialised commercial courts and arbitration centres has been a case of the Arab world catching up with Europe, North America and parts of Asia. But recently, emboldened by what has been achieved over the last decade, we have seen the Arab world start to take the lead in certain areas of dispute resolution.
Take the synthesis between litigation and arbitration, for instance. Not only did we adopt arbitral best practices in disclosure for our court rules, but, in 2015, the DIFC Courts introduced a first of its kind Practice Direction where a DIFC Courts judgment can result in the judgment creditor obtaining an arbitral award which can be enforced in the 150 plus countries which have acceded to the New York Convention. The innovation offers parties the advantages of both litigation and arbitration, and potentially increases the speed of settlement.
The recently formed DIFC Academy of Law has also broken new ground in the delivery of legal services in the Middle East, particularly in the area of cross-training legal practitioners and law students in both the Common and Civil Law Systems. And I’m delighted to say this work was recognised as recently as Thursday when the Academy won the “In House Innovation Award” at by the Association of Corporate Counsel for the Middle East.
In my opinion, the arbitral award innovation and the training of lawyers to seamlessly work across different systems are emblematic of the start of a new era of commercial justice in the Arab world, where this region no longer plays catch up to more established jurisdictions, but begins to lead from the front.
This is evident in other, less headline grabbing areas. Perhaps because of their relative youth, judiciaries in this region have proven themselves to be early adopters of the latest technology. Investment in technology was arguably the catalyst that enabled the DIFC Courts to go from a start-up to one of the world’s leading English-language commercial courts in less than a decade. Technology allows for greater fairness, for instance by ensuring both sides are informed of court matters at the same time, while enhancing accessibility through modern case management systems that allows for 24-7 operations and the ability to conduct hearings via videolink from anywhere in the world. Increasingly sophisticated smartphone technology means this trend is only likely to accelerate in the future, and again, I fully expect courts from the Arab world to be at the forefront.
Perhaps because of their location at the nexus of Europe, Africa and Asia, commercial courts and arbitration centres from this region have also proven themselves to be particularly outward looking. The DIFC Courts are on the path to being the most connected commercial courts in the world, with formal enforcement agreements in place with some of the world’s leading courts including London, New York, Singapore and Australia. How far can this connectivity go? Is the era of international courts nigh? I will be presiding over a debate on this very topic tomorrow, so I must maintain my objectivity on the subject for the time being, but I do think it’s a very important and extremely pertinent debate to have.
I would also argue that the Arab world has taken the lead in the area of customer service. For too long courts in many jurisdictions have taken the view that they are a necessity, that citizens must use them and, with that mind-set, many have lost sight of their role in serving the community. Significantly, research shows that the settlement rates in commercial cases are higher where the courts provide a positive user experience.
From their early days, the DIFC Courts embraced their commitment to serve those who entrust them with their disputes, however big or small. They were the first court in the world to achieve TISSE certification, and the first local Government entity in the UAE to be awarded 5 Stars for service excellence. Also, they are the only court which I know about to have 100% its court user respondents to a survey saying that they would recommend the DIFC Courts to others.
But what has driven the scale and speed of development in dispute resolution in the Arab world over the last decade? It is sometimes suggested that the answer is competition. If it was true that the world’s commercial courts are in competition, I doubt we would be seeing the leading commercial courts of the world linking together, as I described a moment ago.
No, in my view, the driving force has not been competition between courts for cases, but rather competition between countries for investment. When it comes to resolving disputes, businesses like choice and they need certainty, and it is no coincidence in my opinion that the judiciaries in the Arab world that can offer both choice and certainty are also among the most economically successful.
Few rational companies would invest money, resources or intellectual property in a country with questions marks around legal protection. Likewise, effective commercial courts are essential enablers for local companies to thrive. The interest charged on loans, for instance, is influenced by the risk of a default not being enforced by the local courts. Evidence suggests that the disparity between credit rates in markets with good commercial courts to those without is as much as 200 basis points.
Put simply, effective commercial courts have become major points of difference within the region in the race for global investment.
Excuse my bias, but I hold Dubai up as the prime example of this causality. Businesses in Dubai are free to choose between litigation and arbitration; common versus civil law; or English versus Arabic language – whichever system best suits their specific needs.
Entities like the Dubai Courts, DIFC LCIA and DIAC, working alongside the Dubai Courts, combine very successfully to create a climate of certainty for companies and people investing, working and living in emirate.
Because they have been able to attract some of the world’s best international judges, the DIFC Courts are able to help big business resolve the largest and most complex disputes. The average case value before the Court of First Instance in 2015, excluding arbitration related cases and counter claims, was AED89 million, compared to AED51.1 million in the preceding year, while almost all were international disputes. Big business can – and increasingly does – bring its disputes to Dubai.
Equally, because the DIFC Courts established the region’s first Small Claims Tribunal, they are also able to speedily and cost effectively help SMEs with much smaller disputes, typically less than AED500,000 in value.
So for the biggest multinationals or the smallest start-ups, Dubai, and increasingly the wider Arab world, now has abundancy of facilities to help them resolve a dispute.
In my opinion, the development of modern commercial courts and arbitration centres should rank among the region’s foremost achievements of the last decade. I am not talking about the facilities themselves, but rather the certainty that they have brought to the businesses and individuals operating and living in the region.
Because being a world class commercial court or arbitration centre is not an end in itself. For the DIFC Courts, that means helping to make the UAE one of the best places in the world to live and work – the UAE’s 2021 Vision. And could that happen without having one of the world’s best courts? We think not, which is why we are so excited about the work we still have ahead of us.
The transformation in commercial dispute resolution in the Arab world over the last decade has been nothing short of remarkable. But I also believe we are just at the beginning of the story.
Across the region, new courts and arbitration centres are opening or are in the planning, and I am sure we will also see further synthesis between the two. It is a hugely exciting time to be in the region.
Dispute resolution in the Arab world is alive and well and deserves its place on the international stage.
Thank you for your time this morning.