How UAE is building an ecosystem for business development? How UAE is building an ecosystem for business development?
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How UAE is building an ecosystem for business development?

How UAE is building an ecosystem for business development?

The slew of developments that we have seen in the UAE on a legislative and regulatory level in various industries are further proof of the government’s support for the business community

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Sachin Kerur, Managing Partner, Middle East, Reed Smith

The UAE has been an international hub for a long time. The UAE government has taken much pride in building an ecosystem for business development and growth unrivaled by most parts of the world by taking advantage of the emirate’s strategic placement in the Middle East and enhancing it with global connectivity, top-of-the-line infrastructure and increasing ease in business setup. 

Despite all of these advantages for business startup and growth, there have been some who have expressed concerns in relation to the adjudication of disputes that inevitably arise during the conduct of any business venture. By and large, as time has passed, these concerns are largely based on perception rather than reality on the ground. 

More and more, we have seen the UAE government putting in place various measures, updates, and legislative reforms. For example, the Dubai government that have reformed the emirate into a pre-eminent jurisdiction for the resolution of disputes. As a default, all businesses have recourse to the Dubai courts; however, depending on the specific industry that a particular business operates in, it is free to opt for a different forum that better complements it. 

For example, we have seen that a great many banking disputes or issues relating to or arising from financial products are best suited for resolution through the Dubai International Financial Centre’s (DIFC) court system. The DIFC courts are a hallmark of Dubai and have grown to be a global benchmark for the proper adjudication of complex and, often, high-value disputes.

The construction industry sets another great example. We have found that the issues that various builders are facing are extremely complex in nature. Often, these sorts of disputes require the support of internationally renowned jurists and experts. As such, arbitration clauses in construction contracts have become the norm. This is because arbitration as a forum empowers the parties to choose arbitrators, who are usually industry-leading experts, to judge their cases.

For a long time, builders in the region were hesitant to go down the arbitration route because of perceived difficulties in obtaining enforcement of arbitral awards in local courts. However, there have been milestone legislative developments over the last four years or so in the UAE to remedy this. The key change was the introduction of the UAE’s standalone Arbitration Law. This new law has created a more streamlined process to enforce arbitral awards, along with introducing a number of changes to bring the UAE in line with global best practices. This is a key development because now, upon winning an arbitration, there is a clearer path to enforcement than ever before. 

To complement the new arbitration law, most recently in 2021, Dubai saw the introduction of the updated rules and framework for both arbitration and conciliation issued by the Dubai International Arbitration Center (DIAC). The changes introduced by the DIAC’s new rules reflect the changes that the global arbitration community has seen over the last 15 or so years to encourage procedural efficiency and greater cost effectiveness.

While arbitration and court litigation have become more streamlined and accessible, adjudication through these formalised systems is very much a nuclear option. It is reasonable to believe that once a business has been forced to seek such an option to resolve its dispute, the chance of recovering the business relationship plummets. In light of this, a welcome development has been the growing popularity of institutional mediation as a form of alternative dispute resolution.

Mediation has deep historical roots in local emirati culture. Accordingly, whilst disputes in the UAE today are often resolved through courts and arbitration, it is certainly not unheard of for multi-million dollar commercial disputes to be settled amicably in the majlis guided by a respected third-party. Formal mediation options for resolving commercial disputes in the UAE have also existed for some time. 

With the introduction of two new laws in 2021, the legal framework for mediation in the UAE has been enhanced to incorporate international standards, sending a strong policy signal that mediation is an important priority. The UAE has also announced that it will be the 56th signatory to the Singapore Convention on Mediation.

It is not just, however, within the context of dispute resolution that the UAE has levelled up. There have been new laws, developments, and regulations to support the UAE in becoming a global standard-bearer on what best practices can look like. With the introduction of the UAE’s blockchain strategy 2021 and Dubai’s separate blockchain strategy as well, we are seeing a large-scale commitment to support startups and businesses operating in the technology space. 

The establishment of the Virtual Asset Regulatory Authority (VARA) is the sign that the UAE is prepared to take bold steps ahead of practically every other country in the world. VARA is the world’s first regulator exclusively devoted towards regulating and controlling virtual assets, this includes crypto assets such as crypto-currencies, as well as Non-Fungible Tokens (NFT’s). 

The UAE is a center for global commerce. The slew of developments that we have seen on a legislative and regulatory level in various industries from tech to commerce to finance to banking to construction and energy are further proof of the government’s support for the business community. Businesses can now feel confident that when they operate in the UAE, they are choosing to invest in a jurisdiction that is supportive of their interests and creating an environment for them to succeed.

Sachin Kerur is the managing partner, Middle East, Reed Smith

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