It is a truism that turbulent economic conditions can provide a fertile ground for disputes. As the world’s economy moved into, and then slowly out of, recession, the Middle East was far from immune. A growth in disputes brings with it a number of challenges and where, as has been the case in this region, there are significant numbers of international companies and investors involved, those challenges can be considerable. The Middle East has risen to meet those challenges by embracing alternative dispute resolution techniques outside the formal local court process.

The most significant beneficiary of the increase in international disputes in the Middle East has been arbitration. However, mediation, which in some ways one would have expected to be popular here, is yet to make a major impact on dispute resolution in the region. In this article, we investigate the certain practical, legal and cultural barriers to mediation which have existed, and how this could change.

The success of arbitration

Arbitration in the Middle East is here to stay. It is written into virtually every contract with an international element, save where offshore court litigation makes sense or where standard form contracts are not reviewed prior to execution.

The Middle East’s first experience with arbitration (in the middle of the last century) was very negative. Its second experience was predominantly in the context of construction and real estate disputes, and constituted an unprecedented explosion of disputes. Numerous arbitral institutions had been established, or re-launched, in the Middle East in the years prior to the global financial crisis, and during that period the number of arbitrations reported by those centres (in particular the Dubai International Arbitration Center (DIAC)) increased to extraordinary levels. In part, that was because DIAC clauses were written into standard form contracts for the purchase of real estate.

Apr-Jun 2015 issue

DLA Piper