New UAE Penal Law Allowing for the Imprisonment of Biased Arbitrators Leads to Widespread Concern and Uncertainty in International Arbitration Community
By Michael P. Cotton, K&L Gates, Pittsburgh
Through a recent amendment to Article 257 of the UAE Penal Code, any arbitrators, experts, or translators who issue biased decisions or opinions in UAE arbitration proceedings may now be subject to criminal liability. The new law has led to widespread concern and uncertainty in the international arbitration community.
Prior State of the Law
Prior to the amendment, Article 257 only imposed criminal liability for bias upon experts or translators appointed by the courts. Most institutional arbitration rules already set out procedural requirements for arbitrator impartiality. For example, Article 9.8 of the Dubai International Centre Rules imposes a continuing duty upon arbitrators to disclose any circumstances that are likely to give rise to conflicts of interest or bias, and Article 114 of the UAE Civil Procedure Code prohibits certain classes of people (e.g., spouse, agent, trustee, beneficiary, advisor, or former arbitrator of one of the parties) from acting as an arbitrator in a dispute.
Current State of the Law
Now, losing parties have the option of filing criminal complaints against any arbitrators, experts, or translators who appear to exhibit bias — whether appointed by the courts or administrative body or selected by the parties. Effective October 29, 2016, UAE Federal Decree Law No. 7 of 2016 amended Article 257 of the 1987 Federal Penal Code No. 3 to state:
Anyone who issues a decision, expresses an opinion, submits a report, presents a case or proves an incident in favor of or against a person, in contravention of the requirements of the duty of neutrality and integrity, while acting in his capacity as an arbitrator, expert, translator or fact finder appointed by an administrative or judicial authority or selected by the parties, shall be punished by temporary imprisonment.
Article 68 of the Penal Code defines “temporary imprisonment” as a term of imprisonment lasting three to fifteen years. The new law applies throughout the UAE, including popular arbitration centers of Dubai and Abu Dhabi.
The law’s language is as vague as it is broad. The words “integrity” and “neutrality” are not defined in UAE criminal law. Likewise, the law’s application is not limited to instances of intentional or conscious bias.
Causes for Concern
Due to its broad language, arbitrators have voiced concern regarding the potential use of Article 257 complaints to delay proceedings and/or improperly influence arbitrators’ decisions. The possibility of criminal investigations under the amended law has already scared some arbitrators away from UAE proceedings. Among other things, such fears include passport confiscation during investigations and lasting damage to reputations even where underlying claims are found to be spurious. A number of arbitrators hearing cases seated in the UAE are reported to have already resigned from tribunals and/or rejected appointments in future cases.
Under Articles 275 and 276 of the UAE Penal Code, false reporting of a crime is punishable by a fine and/or imprisonment. Whether the filing of frivolous Article 257 complaints will be sufficiently deterred by Articles 275 and 276 is yet to be seen. Equally uncertain is the length of time this amendment will remain in effect. Several UAE-based arbitrators and practitioners are reported to have already asked the UAE Cabinet of Ministers to review Article 257 in consideration of further amendment or repeal.
Notwithstanding the fluidity of the situation, international companies should be aware of the increased potential for delays in UAE arbitration proceedings caused by Article 257. This issue will be watched closely for new developments.