DIAC or UAE mainland Courts? Navigating Dispute Resolution Strategy in the UAE

Written by Andre Yeghiazarian and Avi Bhandari, Dispute resolution and IP lawyer at gunnercooke LLP

Businesses operating in or through the UAE are increasingly opting to resolve disputes through arbitration, with the Dubai International Arbitration Centre (DIAC) emerging as the institution of choice. This shift in trend is grounded in institutional reform and the comparative inefficiencies of onshore litigation.

Structural constraints of UAE onshore courts

Despite reforms introduced by the 2022 Civil Procedure Law, onshore UAE courts continue to pose significant challenges for commercial litigants. These include Arabic-only proceedings, limited specialist judicial expertise in complex commercial matters, rigid procedural rules, and unpredictable cost recovery mechanisms. The absence of dedicated commercial or technology courts outside the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) further compounds the limitations for international or technical disputes.

Reconstitution of DIAC in 2022

In 2022, DIAC hit refresh. The institution released a new set of arbitration rules, overhauling what many users saw as a dated and sluggish system. The changes were not superficial; they were aimed at addressing long-standing procedural inefficiencies and modernising the arbitration framework to align with international best practices.

One major shift? The default seat of arbitration is now the DIFC, not onshore Dubai, where the DIFC Courts are seen as arbitration-friendly and known for their pro-enforcement stance. This change alone has serious implications. Around 15-25% of DIAC cases since 2022 were seated in DIFC by default due to silent arbitration clauses. That is a strategic win for parties wanting international enforceability and a common law backdrop.

DIAC’s new rules include strict timelines for tribunal appointments, reducing the drag that plagued old cases. The Centre recorded 10 consolidation requests and 4 joinder applications in 2023, indicating the effective uptake of new multi-party and multi-contract mechanisms. A further 33 arbitrations involved multiple contract claims. Emergency arbitration is also live and functional. In 2023, two emergency arbitrators were appointed within one day, and in both cases, preliminary orders were issued in less than two weeks. That level of interim relief does not exist in practical terms in UAE court litigation.

Tech integration

DIAC’s recent partnership with Opus 2 is a statement of intent. With cloud-based case management, secure virtual hearing rooms, and digital document handling, DIAC is now equipped to accommodate modern, remote, and cross-border proceedings, a marked contrast to the paper-based processes of the UAE court system.

Cost recovery? Getting closer to reality.

Historically, UAE courts have been inconsistent about awarding legal costs. Under the old DIAC rules, tribunal and admin fees were recoverable, but counsel fees were out of scope unless expressly agreed. The 2022 Rules changed that. Article 36 explicitly includes legal representative fees in the definition of recoverable costs. In 2023, the Dubai Court of Appeal upheld a tribunal’s award of counsel costs.

For commercial entities operating in sectors such as construction, shipping, real estate, technology, and cross-border trade, DIAC now offers a more efficient, enforceable, and procedurally sophisticated alternative to onshore litigation. According to DIAC’s latest annual report, it registered 340 new cases in 2023, with UK parties ranking third in foreign party participation. This rise is not merely coincidental, but it reflects a growing comfort level with DIAC’s rules, infrastructure, and legal ecosystem.

What’s next?

DIAC’s transformation since 2022 has resolved many of the operational issues that once discouraged parties from choosing the Centre. Its updated rules, improved case management, and embrace of technology suggests an ambition to align with international arbitration norms. While time will tell how the new administrative structures manage the growing caseload, the early indicators are promising.

That said, parties should still review their existing dispute resolution clauses carefully. Following Decree 34 and the consolidation of the DIFC-LCIA into DIAC, questions remain about how legacy agreements referring to the now-defunct DIFC-LCIA will be treated. Contracting parties should seek tailored advice to ensure their arbitration clauses remain enforceable and aligned with current institutional frameworks.