The Rise of Arbitration in the Middle East

Arbitration is seen as a better alternative to litigation. Generally, it is less costly and less time consuming than going to court. Arbitrating a dispute also allows the parties more autonomy and privacy, considering the end result, unlike a court judgment, will not be public record. Parties can choose which arbitration rules to follow, the choice of law, and the situs of the arbitration procedure. For businesses, taking the time to draft an arbitration clause in a contract can save businesses thousands, if not millions, of dollars. Recently, the countries of the Middle East have begun to focus more on arbitrating disputes rather than litigating them.

In 2006, the United Arab Emirates (“UAE”) acceded to the New York Convention, joining over 70 other nations to this international arbitration agreement.  By ascension, signatories  to the New York Convention assert any arbitration award will be enforceable in that country. In contrast, a court judgment would still need to be enforced in a court of law. The UAE is the center of commercial activity in the Middle East and its signing opened the door for arbitration to be seen as a legitimate method for resolving disputes. In 2007, the Dubai International Arbitration Center revised its arbitration rules, and became a more attractive center for arbitration. While these developments are not necessarily “recent”, it has taken the intervening years for arbitration to develop and flourish.

A recent study by the Economic Intelligence Unit identified breaches of contract, payment defaults and intellectual property thefts as the biggest concerns facing international businesses. IP theft is a growing concern among businesses, especially domestic companies who wish to expand to an international market. The report went on to state that an increasing number of IP related disputes will be brought before arbitration proceedings.

For the countries of the Middle East, the inadequacy, and turmoil in recent cases, of the local judicial systems are seen as a big weakness for international businesses. If a company’s IP cannot be protected or contracts cannot be enforced, is it worth doing business in that country? With the developments in arbitration, the answer may be yes.

Cultural differences are also an issue. Arbitration is a very different beast than litigation. A court must adhere to the rule of law; a  rule set in stone that has lasted for centuries. Parties can essentially choose at the outset which rule of law they do, and do not, want to use.  It is also, arguably, a much more modern tool. In an area of the world where modernity is not necessarily seen as positive, these developments are a helpful aid to any business wishing to expand into this market.

Source: The Saudi Gazette 


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