After the award: trends in arbitration challenges – Middle East

Transcript:

Antonia: Welcome to the next episode of Arbitral Insights by Reed Smith. Thank you for listening in. I'm Antonia Birt from Reed Smith and this podcast is something I've been excited about for some time. For the first time, we now have six years of hard data from UAE in Bahrain courts telling us how courts actually treat arbitral awards. That's not anecdote, it's evidence, and what the data shows is really more positive than many of us assumed. We led the research because the arbitration market needed more or needed to move beyond. I heard from a colleague that quotes in the Gulf aren't predictable and needed something along the lines of what we produced in the report, something that you can actually put in front of a client. So today we're here to walk you through what the numbers reveal, where the surprises are, what it means if you are advising on seat selection, enforcement risks or whether the fight is set aside application in the UAE of Bahrain. I'll cover our UAE findings, and I have with me Noof Khalid Ajaji at the Bahraini Supreme Judicial Council, who will take us through the Bahrain findings, and Lara Salem, the head of content strategy at LexisNexis, who will bring the publisher's perspective and help us pull it all together. Starting with Lara, from Lexis Nexis standpoint, why did this report matter and what gap would you say it was filling?

Lara: Well, first of all, thank you, Antonia, for having me today and for Reed Smith as well for publishing this very important report. And I'd just like to mention that this is the first time anyone has taken six years of court data from across multiple jurisdictions and subjected it to rigorous empirical analysis. So LexisNexis supported this report. Because the arbitration market has historically relied on, like you mentioned, anecdote and reputation when assessing how courts treat awards. We wanted to replace assumption with evidence. So if you're an in-house lawyer, for example, choosing a seat, a partner advising on enforcement risk, or a dispute lawyer weighing whether to resist a set-aside application, this data. Directly informs your decision making. So it's not academic, it's practical and operational intelligence. And what is important as well is that this is genuinely comparative. It examines leading seats across England and Wales, France, Hong Kong, and the Middle East, New York and Singapore, looking at volume, grounds, outcomes, time, and costs. And for LexisNexis, that is exactly where legal publishing adds value. Not simply making a judgment available, but making enough authoritative material discoverable and comparable that practitioners can see patterns rather than isolated cases. And Antonia, what struck us across the global findings is that there's no simple correlation between a seat's prestige and its volume of court challenges. The reasons for that are fascinating and commercially important. So I'd like to in turn ask you a question, Antonia. You led the UAE chapter, so you have six years of data. What's the headline for the UAE?

Antonia: Thank you, Lara. And thanks also for the support of Lexis Nexis for this initiative, which was invaluable. And I I couldn't agree more with what you said. And and this is really what the data shows. So the headline for the UE is would say confidence. We looked at every reported set-aside application in Abu Dhabi and Dubai courts since the federal arbitration law came into force in 2018 and up to the end of our study, which was the end of 2024. Overall we looked at 92 applications, ten of which fully or partially succeeded. And that's overall a success rate of just under eleven percent, which of course compares very favorably with other jurisdictions. And and Lara, as you've just mentioned, we did look across the key seats across the world and the position was encouraging. So if you do have lingering concerns about UAE courts and how they treat arbitration, the data really doesn't support that. This doesn't mean that there are no outliers, but the data confirms that awards are overwhelmingly upheld. And what struck us as well was the consistency. There was no year where the courts suddenly became more or less hostile or friendly. And it's also not true that either Dubai or Abu Dhabi courts are more or less arbitration friendly. The the pro-arbitration stance was remarkably stable. And then moving to the DISC that record was really extraordinary. during the time we looked at and and we looked for the DFC at a longer period than 2018, because of course the DFC arbitration law has been in force for some time before that. there were zero successful challenges. so what was driving that? and you know you may be asking, does it make the DFC the obvious choice? And you know, the answer is the DFC record really is extraordinary. I should, however, make an important caveat. there were two annulments that were reported this year in 2026. these were not part of our analysis because they were outside of a review window. both of these annulments were for due process reasons, which is fascinating in itself, and we can we can come back to these in in in due course. But I did review them and from my perspective, they do not show that the DFC somehow has changed its stance on arbitration in any way. That would be the wrong conclusion here. they simply confirm that where an annulment is warranted, the DFC courts will grant it. the overall arbitration friendly position is is not an accident, of course. they are experienced common law judges in the DFC applying familiar concepts and principles so that's important to to bear in mind. The analysis really is extraordinary. We have now seen some annulments, but they don't change the picture overall. and I should say the huge factor why the overall number of annulment applications in the DFC is very low is cost. in the DFC, if you bring a weak challenge, you will be paying the other side's legal costs. That really concentrates minds. Compare that with the position in Dubai and Abu Dhabi courts where costs exposure is nominal regardless of the outcome. And you can immediately see why parties are more willing to have a go onshore with an annulment application than in the DFC all overall of course choosing between the DFC and onshore UAE must factor in this economic ex incentive, which is lower for challenges in the DFC. But overall it's a conversation about risk appetite and and commercial context. and very briefly before I pass on to to Nuv, I did want to address public policy. This is of course the most feared ground for setting aside awards. And it's a question I get asked most often with respect to challenges. And the question often is would the particular award that was challenged and potentially annulled on a public policy ground have also been annulled in London or Paris. and I'd say this is one of the more interesting parts of the analysis. public policy as a ground has been argued more than any other basis in either DFC or non-shore proceedings. But the reality is that it almost never works. The gap between how often it's argued and how often it succeeds is actually enormous. Why do parties keep running it? Well, because it's broadly framed in the UAE, public policy is of course rooted in civil law principles, Sharia law, local custom. It is not strictly defined in any jurisdiction. That gives challenges particular hope in the local courts, even if the courts keep disappointing those challenges. And now coming to the question, yeah, w would these cases have been decided the same way elsewhere? Largely, yes. There is an important nuance in England or France. Public policy challenges, for example, have also very low success rates courts everywhere apply a high threshold. that doesn't mean that there are not some distinctive features here in the UAE and indeed in Bahrain. One example to be aware of is the treatment of Rest Judicarta. We have seen in these jurisdictions Rest Judicata being treated as a public policy issue, which will not be the case in some other jurisdictions, where it may be an arrow of law and therefore not susceptible to annulment. So it's important to be aware of specificities in the region, if that is where your seed is. but does it make awards less safe? the data very clearly says no. The success rate, including for public policy arguments, remains very low. So with that, Noof I'll pass over to you. Bahrain has a very different profile, and one of the real surprises in the data worldwide. Bahrain generates more set aside applications than Singapore and Hong Kong. what's going on there? Could you let us know?

Noof: Thank you, Antonia, for having me. I think the numbers here need some context. So Bahrain saw one thirty-one set-aside applications between two thousand and eighteen and twenty-four, but only ten succeeded. So that's a survival rate of more than ninety-two percent. So I would say that's a reassuring figure for parties choosing Bahrain as a seat. And if you look at those successful challenges, you will see that three involved in capacity to concern the scope of the arbitration agreement, to relate it to the tribunal, and for involved public policy. So I believe this reflects a restrained approach by the Bahraini courts in exercising their supervisory role within the Uncetral Model law framework. So while awards may be challenged, the threshold for successfully setting one aside remains high. And that's what we see from the report.

Antonia: Yeah, absolutely. Th those were our impressions as well, especially when you compare the Bahrain result to other jurisdictions. So we were very keen to ensure that we include Bahrain as part of this analysis because of this this excellent data. I wanted to briefly address the issue of costs. Costs are changing in Bahrain is that one of the important reforms that is happening now and that may impact arbitral set aside decisions?

Noof: I would look at cost as part of a broader development here in Bahrain as we are continuing to build an internationally accessible dispute resolution framework. Bahrain has an established dispute resolution landscape with institutions such as the BCDR, the GCAC, and more recently that landscape has expanded with the establishment of the International Commercial Court, the BICC, and the PCA. So the legal framework for cross-border dispute has developed alongside that as well. Bahrain adopted the Uncitral model law on cross-border insolvency and acceded to the Hague Choice of Court Convention. On mediation you have the BCDR's mediation rules that were aligned with the Singapore Convention as early as twenty nineteen. That's before even formally acceding to the convention in twenty twenty five and another important development for international practitioners I would say is the use of English language in qualifying arbitration related proceedings before the Bahraini courts. So where the legal requirements are met, enforcement and annulment proceedings above five hundred thousand BD, that's roughly one point three million dollars, can be conducted in English and that automatically extends to all court levels. So for international parties that has a significant practical benefit. It reduces the translation costs on them, saves time and I would say preserves continuity between arbitration and court proceedings.

Antonia: That's excellent to hear and I don't think many of our listeners will necessarily be aware of some of these exciting changes. Of course, time will tell over the next few years how all of these changes are implemented, but it is certainly a jurisdiction where so much is happening and it is all going into a direction of I would say arbitration and arbitration user friendliness. So really fantastic to hear and my final question if for practitioner advising a client on Bahrain as a seat right now, what would be your honest pitch with respect to Bahrain as a seat?

Noof: I would say Bahrain is arbitration friendly, both in its legal framework and in the way the courts exercise their supervisory and ancillary role. Bahrain's arbitration law is based on the UNCITRAL model law that gives international practitioners a familiar framework. In its application the judiciary supports the arbitration process while respecting the limits of judicial intervention. So for practitioners as well, visibility into the court's approach is important. and we do that by publishing the court of cassation principles regularly on arbitration. that gives parties and counsel, I believe, greater insight into how Bahrain's highest court interprets and applies the arbitration law. there are also other practical considerations, that's the ability to use English in arbitration court proceedings. So if I were advising a client on Bahrain as a seat, I would point to a familiar legal framework, a supportive judiciary, greater visibility into the court's approach and practical accessibility for international parties.

Antonia: Fantastic. Thank you so much. Lara, final question for you. Pulling this all together, what should listeners do with this data?

Lara: Well, Antonia, I I would first say use the data to challenge assumptions. Put the actual success rates, grounds, and timeframes into seat analysis, enforcement advice, and post-award strategy. This report is useful precisely because it gives practitioners a factual baseline. Second, I would separate volume from risk. example, Bahrain and the onshore UAE have active challenge dockets, but awards, as you mentioned, overwhelmingly survive. A large number of applications is not the same thing as a hostile court system, so we need to keep that in mind. Third, look beyond the headline success rates, so costs, duration, publication practices, language. The treatment of jurisdiction and public policy, and the availability of specialist courts all shape the real user experience. Fourth, pay attention to direction of travel. The UAE and Bahrain are not static systems. The report documents legislative reform, institutional development, More pragmatic judicial approaches and changes in cost and language that all point toward increased sophistication. And fifth, treat the publication as part of arbitration policy. The more judgments that are published, translated, and searchable, the easier it is for users to assess risks, for courts to develop consistent doctrine, and for the market to distinguish perception from reality. And this is where our role as a publisher comes in and why we supported this report. And sixth, and this is something I I would like to mention given that we are in the age of AI and all of these this information rests in AI models, is use AI carefully but ambitiously. So AI can help practitioners compare hundreds of decisions, detect patterns, and identify outliers, but the output is only as trustworthy as the underlying legal data. So the the source, the quality and currency and jurisdictional context and citation remain essential. And this is why again we were very supportive of this publication. So I would like to conclude that my broad regional takeaway is that the Middle East should increasingly visit be discussed as a source of arbitration jurisprudence and not merely as a place where international arbitration happens. The UAE and Bahrain data sets have shown how courts actively shape sophisticated arbitration law law in their own rights. I would like to leave the listeners with confidence in arbitration comes from the combination of good law, good courts, good institution, and good information. Thanks to Reed Smith and a team like yours, Antonia.

Antonia: Thank you so much. And of course, big thanks to yourself and to Noof for participating in the preparation of the report and the analysis that underlies it. I obviously couldn't agree more with the comments you've made, especially on AI. I should say that the report was prepared manually without the use of AI. it is now approximately a year old and at the time in particular the analysis was conducted entirely manually by our many associates and partners across the Reed Smith firm. But of course AI is now coming into place and yes, we need to make sure that any future analysis, as as you say, based on appropriate underlying information and I'm sure we will have more analysis and data coming out in in in due course. With that, I would say thank you there everyone for listening. thank you for joining the Arbitral Insights podcast and I hope you will join again in future. If you do have any questions relating to Bahrain or UAE arbitration, please don't hesitate to get in touch with us. Thank you very much all.

Outro: Arbitral Insights is a Reed Smith production. Our producers are Shannon Ryan, Amanda Saunders, and Mason Kautz. For more information about Reed Smith's global international arbitration practice, email [email protected]. You can find our podcast on all streaming platforms, reedsmith.com, and our social media accounts at Reed Smith LLP.

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