Extending the culture of arbitration

“Challenges keep me going. I deliver the best of my abilities when I encounter a challenge.” With this mantra, Dr. Habib Al Mulla, Partner and Chairman, Baker & McKenzie Habib Al Mulla has achieved great success throughout his career and became one of the United Arab Emirates’ most highly respected legal authorities. Having founded the law firm Habib Al Mulla in this country nearly three decades ago, Dr. Habib has over 30 years’ experience in UAE law and has drafted many of the modern legislative structures in place in Dubai.

 

In an exclusive interview with Capital Business, Dr. Habib affirmed that the UAE is the largest economy in the region after Saudi Arabia, and the modus operandi of doing business in this country are by far superior to any other jurisdictions in the region. “We are following best practices similar to the strategies adopted in New York, London, Singapore. However, many regulations in the UAE require improvements today. Some rules need to be addressed more than others, namely the commercial sector and commercial laws in particular. I feel sorry that the commercial business law has not been updated since its issuance in 1993 based on the Kuwaiti commercial law, issued in 1980. Things have changed since then, and the economy has significantly changed as well. We have been talking about a new commercial companies’ law for years now. Moreover, we do not have an arbitration law yet, nor a foreign direct investment law, or a modern comprehensive insolvency. Therefore, many areas need improvements, and this ought to be a top priority with regard to modernizing the UAE’s legislation.”

When asked about the labor Law, he admitted that although the UAE’s labor law is good, it needs some enhancements. “The first draft was issued in 1980 and amended in 1986, and we haven’t seen dramatic changes since then,” he said.

 

Dr. Habib is behind the concept of financial free zones in the UAE and was the architect of the legal framework establishing the Dubai International Financial Centre (DIFC), the first financial free zone in the UAE. Moreover, he has served as legislative committee Chairman of the Dubai Financial Services Authority (DFSA), which supervises regulated companies in DIFC and monitors their compliance with applicable laws, regulations and rules.

“When we talk about regulatory aspects in the UAE, we need to differentiate between various sectors and at the same time different jurisdictions,” noted Dr. Habib. “DIFC has proved itself as an excellent regulator for adopting the best practices and providing an efficient and safe platform for businesses and financial institutions. Moreover, the Global Marketplace Abu Dhabi (GMAD) is also having a separate regulator similar to that at DFSA, and I expect it to excel. However, there have been few improvements in the onshore regulatory authorities and we have now a regulator dedicated to the insurance sector, which has always been needed,” he continued.

 

The financial sector has been facing many regulatory issues, and Dr. Habib is well aware of this fact. One of the main issues that this sector has been dealing with is that the central bank law is outdated.

“The current law has been in place for many years and does not reflect the developments that the banking and capital markets sectors have witnessed in the last decade. Therefore, the UAE is in need of a modern banking and capital markets law, and the government has been very keen in modernizing this law based on a new model called twin peaks.”

 

The new legislation is being finalized and waiting to be enacted. It will involve the Central Bank and The Securities and Commodities Authority (SCA). “There will be two regulators in the state. The first one will be dealing with banks and companies operations and the other with sovereign operations of the banking sector and the monetary aspect of the state,” he noted.

 

 

In reply to our question about how he measures the regulations adopted by banks in the UAE concerning postdated cheques, the veteran declared, “I have my own opinion in this regard; I believe that it is about time for federal penal code to stop considering issuing bounced cheques as criminal actions. This practice has affected many genuine businesses and is considered inappropriate with a modern insolvency law or whenever a company is filing for insolvency protection. It is also a burden on both the police force and the persecution courts. All these years, this rule has not helped at all in preventing issuing bounced cheques as the issue continues to occur.” 

 

Baker & McKenzie Habib Al Mulla

Since July 2013, Baker & McKenzie Habib Al Mulla- the first international law firm to fully merge with a UAE firm- has grown to become the UAE’s only full service law firm with global outreach and presence. With 77 offices around the world, the firm provides all areas of legal services from a small litigation claim to cross border highly sophisticated transactional work.

“Our strategy is to attract the best talent in the market as well as maintain it and provide a proper training for UAE nationals. We have recently worked on the largest share acquisition in the UAE market that is worth about $US 2 billion, which the regulator has recently approved. The growth of the market has also helped us and the merging between Habib Al Mulla and Baker & McKenzie came at the right time when the UAE and Dubai in particular were experiencing a recovery.”

Recently, the leading UAE law firm announced that its Chairman, Dr. Habib has been appointed Chairman of the Board of Trustees (the Board) of the Dubai International Arbitration Centre (DIAC) by decree of HH Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai, in December 2014.

DIAC, which was established in 1994 as the "Centre for Commercial Conciliation and Arbitration", provides a high caliber of arbitration services and facilities on an international scale.

 

Commenting on his appointment, Dr. Habib said, “I have been the Vice Chairman of trustees of DIAC for two terms now. I know this organization since its inception. In the last ten years, DIAC has grown to become one of the top five international arbitration centers in the world and is by far the number one arbitration center in the region. However, the dynamics of the market have changed and DIAC needs to continue its growth path as the leading arbitration center in the region.”

In light with the above, he mentioned that DIAC‘s main focus this year is to appoint a new director. “Although the administrative structure of DIAC has allowed it to continue its daily operations without people noticing any kind of deficiency, it is time to have a director that can lead DIAC and take it to the next level. We are working on that. My target is to appoint a new director on board within the first half of the year as well as a commission working on updating the governing rules of DIAC, which were issued a long time ago.”

 

Settlement of disputes by arbitration

Disputes can arise in any environment. The UAE’s economy is much diversified, and as a result, disputes between parties are diversified. “The real estate sector being the main driving factor behind Dubai’s economy and business plays a major part of disputes between parties. After this sector, comes general corporate and commercial issues related to trading, distribution, joint ventures like structure acquisitions and merging between companies. These are the main areas of disputes that shape the UAE dispute resolution practice.”  

Elaborating furthermore, he added, “Naturally, when someone gets into business or any kind of commercial activities, it is normal for them to have different opinions from their peers or colleagues with regard to constitutional performance of the contract, which certainly leads to disputes. Conventionally, courts have been the first choice. I believe that with the complication and sophistication of trading activities, it is important to realize that courts are not as expedient as the parties may wish their disputes to be resolved. Courts are overwhelmed with a number of cases, and it is appropriate for parties to look at other dispute resolution options such as arbitration and meditation. The advantage of mediation is that parties will resolve their dispute in such a way that allows them to keep on practicing their business activity in the future. As for the arbitration, the parties will have the choice of appointing arbitrators that they believe have the necessary skills and expertise in the particular disputes that they need to examine.”

Settling disputes by arbitration has always been faster and less complicated and time-consuming than going to courts. “DIAC has played a significant and critical role in enhancing and spreading the culture of arbitration so that people understand, realize and rely on arbitrations as a choice of dispute resolution,” declared Dr. Habib.  

Nevertheless, DIAC is not only serving the UAE market, but also the GCC region. “Ten years ago, people were only relying on courts as a means of settling their disputes, and even if they were to opt for arbitration they would have chosen foreign jurisdictions such as ICC in Paris. Today, I think there is confidence and trust in DIAC, not only in the UAE but also in the wider region. DIAC was very instrumental in spreading this culture and today, we have more than seven arbitration centers in the UAE.”

He continued, “The concrete confidence in the rules and efficiency of DIAC attracted businesspersons in the region to rely on DIAC as their choice of arbitration center. We need to expand this model beyond the immediate region and reach areas like the Subcontinent and North Africa. This is part of DIAC’s mission today to present itself in those regions as a choice of dispute resolution.”

 

**By Jenny Kassis

SUBSCRIBE TO OUR NEWSLETTER