UAE distributor terms

Question

I have a proposition from a distributor in Dubai who insists in their proposed contract that on any dispute arising out of or in connection with this agreement, …, shall be referred to and finally resolved by arbitration under the Arbitration Rules of the DIFC-LCIA Arbitration Centre, which Rules are deemed to be incorporated by reference into this Article… The language to be used in the arbitration shall be English.

We normally state… the exclusive jurisdiction of the courts of England and Wales.

Has anybody got experience with these kind of clauses positive or negative they can share with us? We have good references from other British brand owners who already work with this distributor.

Thank you for sharing your advice!

Answer

Hello Dennes,

I recommend looking at the PCA in the Hague, which should provide a more neutral alternative if your distributor in Dubai is against the idea of arbitration in the UK:

https://pca-cpa.org

Answer

Their assets, such as they are, are in Dubai so if you want to sue you are likely to get better access to recovery in Dubai assuming you are successful. Of course, suing is an expensive and risky process that will soak up management time. Unless the existence of the firm is at stake or your potential damages are very large, you may decide just to let it go. Going to court is not amicable resolution.

If you simply want arbitration, it is usually cheaper and less confrontational to specify a Chamber of Commerce such as yours, theirs or the International Chamber of Commerce in Paris. There may be a UAE-UK Chamber of Commerce anyway in which case this is the perfect neutral venue in which to settle an amicable dispute. Regard membership as insurance against legal fees.

In the UAE, you may want to restrict the agent’s scope to the specific Emirate unless they can readily demonstrate countrywide capacity. All the more reason to be in the Chamber of Commerce.

Answer

And really, they are proposing an arbitration centre not a court so amicable dispute resolution is obviously the first step on their minds, not claiming huge damages.

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