Middle East Arbitration & Mediation Landscape 2024 – More of the Same, Some of the New?

During 2023, CMS undertook desktop research and qualitative interviews to investigate whether the number of international commercial arbitrations were decreasing globally, in light of news coverage on the topic. This study can be found here. It was found that the number of international arbitrations have in fact increased in recent years, among which there has been an approximate 28% increase from 2021 to 2022 in arbitrations conducted through the Dubai International Arbitration Centre (“DIAC”). This increase was broadly representative of the double-digit growth in case numbers reported across the Middle East region since 2018.

Given this unstinting trend, will 2024 predictably witness a continuing uptick of international arbitrations throughout the Middle East? More specifically, could the DIAC Mediation Rules 2023 (“Mediation Rules”) herald a wind of change whereby more disputants look to mediation as a first means to resolving their controversies?

Background to the Mediation Rules

First issued by the DIAC Board of Directors on 12 July 2023, the Mediation Rules came into effect on 1 October 2023, from which date they shall govern any requests for mediation submitted to the DIAC.

The Mediation Rules follow the DIAC Arbitration Rules 2022, which were introduced on 21 March 2022 - as discussed in our LawNow article here. Within the DIAC Arbitration Rules 2022, Appendix II Article 3 sets out the Conciliation Proceedings process. This includes a provision that any failed conciliation proceedings shall be “without prejudice to the merits of the dispute”.

However, prior to the Mediation Rules coming into force on 1 October 2023, there were no other mediation or conciliation rules to regulate mediation proceedings. Whilst mediation has been usefully utilised for many years in the region, the Mediation Rules’ introduction demonstrate an eagerness to bring more structure to, and for parties to derive more benefits from, such proceedings - particularly in terms of time and cost efficiencies.

Summary of the Mediation Rules

The Mediation Rules govern the entire mediation process, from its conception in commercial contracts to ultimate settlement. With regard to the former, the Mediation Rules provide suggested drafting for parties to consider when entering into contracts in circumstances where they wish to utilise mediation or arbitration, or both. Among others, the Mediation Rules include the following key provisions:

(i)          Parties can refer a dispute to mediation under the Mediation Rules, even if there is no pre-existing agreement to mediate (Article 2.2), although all Parties must agree to mediate for this to proceed (Article 3.4).

(ii)         The Mediation Rules prescribe a form of Application for the commencement of mediation, along with timescales for submissions (Article 3). This details a 15-day period for the Reply from the Responding Party, with a potential 7-day extension period.

(iii)        Parties, and the Mediator, shall agree the fees and expenses of the Mediator at the time of the preliminary meeting (Article 5.1), which includes mandatory deposits from the Parties involved.

(iv)       The Arbitration Court shall appoint the Mediator, although Parties can agree to nominate a Mediator, or co-Mediators in appropriate circumstances, within certain time limits (Articles 6.1 and 6.2) or may object to the Mediator within 5 days of the notification of appointment (Article 6.9).

(v)        A general scheme for the conduct of the mediation, including the forum of any meetings, mediation statements and draft settlement agreements (Article 7).

(vi)       The mediation shall be deemed concluded upon the occurrence of specified circumstances (Article 8), namely:

1. if there is no Reply to the Application in the timeframes;
2. if the Application is withdrawn on the basis that no deposit has been paid within the time limit;
3. where the Mediator concludes that no further mediation attempts will assist;
4. where a Party withdraws from the mediation;
5. where Parties agree to terminate the mediation; or
6. upon execution of a settlement agreement.

Additionally, the Mediation Rules are clear throughout that the mediator and the process shall be impartial, free of conflicts and conducted confidentially; as well as being fair, efficient, and proportionate to the dispute at hand. On the crucial issue of confidentiality, parties will doubtless draw considerable comfort from the default scheme that, should their mediation fail, all documents/information relating to the mediation (including all materials produced for its purpose) shall remain confidential and not be used in any judicial or arbitration proceedings relating to the same dispute (Article 9).

Predictions for 2024

All the prevailing conditions point towards a sustained growth in the number of Middle East arbitral proceedings during the course of 2024. This is on the basis of the ever increasing volume of major energy, resources and infrastructure projects afoot in the region, including a strong pipeline of new projects earmarked for this year (nowhere more-so than Saudi Arabia), coupled with an overwhelming tendency for major project contracts to contain international arbitration agreements.

Nonetheless, we also foresee there being a rise in the number of disputes being referred to mediation within the region following implementation of the Mediation Rules.

Indeed, this would be in broad lockstep with the shift towards mediation-friendly attitudes being adopted in other jurisdictions. Take, for example, a recent decision of the English Court of Appeal (Churchill v Merthyr Tydfil Borough Council [2023] EWCA Civ 1416) that held courts can lawfully stay proceedings for, or order, the parties to engage in non-court dispute resolution so long as it “does not impair the very essence of the claimant’s article 6 rights, in pursuit of a legitimate aim, and in such a  way that it is proportionate to achieving that legitimate aim”. This effectively overturned the appellate court’s own long-standing obiter comments delivered in the seminal judgment Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, which set out that mandatory mediation would constitute a breach of the European Convention of Human Rights.

We can therefore look ahead to the ever-evolving Middle East disputes landscape with some expectations that 2024 will be largely more of the same for arbitration, but with a keen eye on the likelihood that mediation references will also experience their own uptick in the region.