Arbitration considerations for Israeli and United Arab Emirates entities following the Abraham Accords

In an exciting geopolitical development in August 2020, Israel and the United Arab Emirates (UAE) established formal diplomatic relations. It is anticipated that the historic “Abraham Accords” will lead to vibrant commercial activity between two of the Middle East’s most prosperous economies.

Arbitration will be the preferred method of resolving cross-border disputes arising between Israeli and UAE entities. This article explores some of the key features of arbitrating in these respective jurisdictions.

Institutions

The forum and arbitration rules are important in framing how your arbitration will be run. Each forum has a different set of arbitral rules. Some of the centres also have template arbitration clauses which can be used as a starting point when drafting.

The UAE offers both “onshore” arbitration forums (most commonly the Dubai International Arbitration Centre and Abu Dhabi Commercial Conciliation and Arbitration Centre -ADCCAC) and “offshore” arbitration forums (most commonly Dubai International Financial Centre collaboration with the London Centre for International Arbitration - DIFC-LCIA, and the more recently established Abu Dhabi Global Market Arbitration Centre). The International Chamber of Commerce Arbitration (ICC) is also still a commonly-used forum for parties in the UAE, particularly within the construction industry.

Israel’s foremost arbitration institution is the Israeli Institute of Commercial Arbitration (IICA). This has specific rules for international arbitration. Most arbitrations, however, are advanced pursuant to the provisions of the Israeli Arbitration Law and/or contractually agreed clauses which set the specific format and rules of the arbitration.

Confidentiality

The default position is that arbitrations in the UAE are confidential. If they choose, parties can agree otherwise.

Despite being a key benefit of arbitration generally, the Israeli Arbitration Law does not establish confidentiality in regards to arbitration proceedings. However, institutions such as the IICA impose a duty of confidentiality on all participants, including witnesses. Even so, we recommend those arbitrating in Israel consider including express confidentiality provisions in any arbitration agreement.

Costs

Under UAE law, costs are generally not recoverable by the successful party (other than a nominal amount). Whilst most institutional rules give the power to award costs to the arbitrators, some rules (such as the ADCCAC Rules) are less clear about this. As such, we would recommend providing within the arbitration agreement or the initial terms of reference the arbitrator(s) clear power to award costs as they see fit. Often then, the successful party is awarded a significant amount of its costs to be paid by the losing party.

Similarly, significant costs are often borne by the losing party in Israeli arbitrations. This is typically at the arbitrator’s discretion - IICA’s Rule 8.6 gives the arbitrator a wide remit to award costs as it sees appropriate. If the parties wish to obtain certainty, the arbitration agreement should cover such issues.  

Enforcing the award

To enforce an arbitration award in the UAE, the successful party must apply to the Court of Appeal for confirmation of the award. Upon ratification of the award, the award can be enforced through mechanisms made available by the UAE enforcement courts.

The UAE is a signatory to the New York Convention 1958. The effect of this is that foreign awards, as well as ‘offshore’ awards, can be enforced domestically in the local UAE courts.

Israel is also a signatory to the New York Convention. Israeli courts are generally for enforcement of arbitral awards, both domestic and foreign. A motion to enforce an arbitral award has to be filed with a district court, enclosing a certified copy of the award (signed by the arbitrator) and annexing the original arbitration agreement (or a copy authenticated pursuant to Israeli law).

Challenging the award

In the UAE, parties have 30 days to challenge an Award. The various grounds for challenging an Award are broadly similar to those set out in Article V of the New York Convention. One of the more common grounds for challenging an arbitration award in the UAE over the last number of years has been the capacity of the signatory of the arbitration agreement itself. An award can still be nullified if the arbitration agreement was entered into without the requisite legal capacity. Therefore, it is essential that the persons signing on the behalf of the contracting parties have the necessary special authority to do so (e.g. via a power of attorney).

In Israel, parties have 45 days to challenge an award. There are ten grounds for challenging an award, also mirroring the grounds for challenging a foreign arbitration award contained in Article V of the New York Convention. Of potential relevance in the context of Israeli companies doing business in the UAE for the first time, is the grounds for challenging an award deemed contrary to public policy. We note, however, that Israeli courts are very reluctant to refuse to enforce an arbitration award for public policy reasons, only exercising such discretion in exceptional circumstances. 

Comment

Both the UAE and Israel have reasonably well-developed international arbitration eco-systems. One would certainly hope that UAE and Israeli companies would receive fair treatment in each other’s jurisdiction regardless of the somewhat fraught geopolitical history.

However, it is common for parties involved in cross-border trade to prefer a neutral venue for arbitration. In the case of UAE and Israeli companies trading for the first time, agreeing to a neutral venue such as London and being governed by institutional rules (e.g. LCIA rules or ICC rules) is likely to give more confidence to both parties for a fair, just and impartial result, and may represent a more pragmatic option in the circumstances.

For more information on the UAE international arbitration system and cross-border trade in the Middle East, please contact Mark Wilson or Peter Ellingham.

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