Briefing

UAE insurance dispute resolution and arbitration – An update

Background

In a previous update, we considered the position of arbitration agreements under the onshore (federal) UAE regime, following the issuing of the 2018 UAE Arbitration Law.

In summary, we identified possible risks to parties in seeking to refer insurance-related disputes to arbitration arising out of: (i) uncertainty as to whether certain formalities for incorporation of arbitration agreements into insurance policies, as set out in the UAE Civil Code 1985 and UAE Code of Conduct for Insurers¹, still applied following the repealing language in the UAE Arbitration Law; and (ii) the further uncertainty created by the requirements of the formalities set out in the UAE Arbitration Law deviating from market practice e.g. it is not market practice for insureds to sign insurance policies, which is relevant to determining a party’s authority to enter into arbitration agreements.

At the time of our previous article, the onshore UAE Insurance Authority had also just issued the required regulations for the Insurance Disputes Committees (IDCs) to begin hearing disputes, essentially taking the role of a new first instance forum. A key question was how the IDCs would deal with the difficult issue of arbitration agreements in insurance contracts.

Update

Six years on, the Insurance Authority has been merged back into the UAE Central Bank, a new onshore UAE Insurance Law was issued and repealed², and a new UAE Civil Code 2025 is about to come into force³.

Following the reintegration of the Insurance Authority with the UAE Central Bank, a separate Ombudsman Unit (Sanadak) was created to address financial and insurance complaints and began work in March 2024. Sanadak contains its own Insurance Dispute Resolution Committee to which initial appeals can be made. As at the date of writing, decisions relating to sums above AED100,000⁴ are then appealable by either party directly to the onshore Court of Appeal.

The continuing development of specialist insurance dispute resolution bodies in the onshore UAE should be viewed as encouraging; policyholders and insurers should take increased confidence from the clear acknowledgment that technical insurance disputes require technical knowledge to resolve. However, jurisdictional issues relating to arbitration agreements in insurance contracts are still very much live.

As a matter of practice, where disputes are referred for resolution via the onshore UAE system, it is not uncommon for the first instance forum to decline to exercise jurisdiction where an arbitration agreement appears in the relevant contract. However, where the validity is uncertain, this can often result in multiple appeals. Discontinuing onshore proceedings in favour of arbitration proceedings is not straightforward, particularly if the counterparty is appealing. This can cause problems for parties. At its simplest, this can result in increased time and costs spent in arguing the position before the higher courts.

More problematic are situations where a claiming party is unable to enforce an arbitral award due to the arbitration agreement later being found to be invalid/void. The position becomes even more complicated where limitation period expiry dates are a factor or where parallel proceedings are commenced.

The issuing of the new UAE Civil Code 2025 should put to rest the debate as to whether the 2018 UAE Arbitration Law has removed the insurance-specific formalities for incorporation; the UAE Civil Code 2025 restates these provisions of law. However, tension remains between the application of the UAE Commercial Law, which provides that all insurance is commercial business and therefore that the terms of the contract prevail, and the UAE Civil Code (either version) which sets out additional requirements. As a matter of onshore practice, the position has historically been that the provisions of the Civil Code are more strictly applied in cases of consumer insurance, or where commercial insureds have reduced bargaining power, or contracts are not bespoke. This, however, is not consistently the case.

Practical solutions

As a matter of best practice, parties should seek to avoid these issues at the contract drafting stage.

One way to do this would be to expressly incorporate a choice of seat or a governing law for the arbitration clause where these issues do not arise (e.g. the DIFC or ADGM).

Arbitration clauses are distinct agreements from the underlying contract (policy) and can have their own governing law, which does not have to be the same as the governing law for the policy itself. If the parties wanted to ensure a valid arbitration agreement but have onshore/federal law apply to the underlying contract (policy), it would be perfectly possible to provide that the arbitration agreement is governed by (for example) DIFC law, or that any arbitration is to be seated in the DIFC, but that the policy itself is governed by onshore/federal UAE law, excluding the laws of the DIFC/ADGM/other freezones.

To achieve contract certainty, parties should take care to specify exactly which law or seat they are intending to refer to (e.g. “the DIFC” or “onshore Dubai, excluding the DIFC” rather than “UAE” or “Dubai”). Using non-specific language, or not identifying the relevant seat/applicable law(s) at all, can cause significant issues once a dispute arises, all of which increases cost and management time.

Alternatively, parties who wish their disputes to remain in the onshore UAE should seek to ensure that their contracts comply with the formalities required by the UAE Arbitration Law and the UAE Civil Code (1985/2025 as appropriate).

If you have any questions relating to any of the issues raised in this article please reach out to the authors of this article, or your usual HFW contact, and we would be glad to assist.

For further recent HFW updates on arbitration matters in the UAE, please see the article issued by our construction team, which considers another drafting issue that we also see in insurance policies (Dubai Court of Cassation Judgment – No. 735 of 2024 (29 October 2024) – Unilateral Arbitration Clause – HFW).

Footnotes

Now the Code of Conduct Code of Conduct for Insurers and Insurance-Related Professions.
Federal Decree-Law No. 48/2023, which came into force in November 2023, and was repealed by Federal Decree-Law No. 6/2025.
On 1 June 2026.
Originally AED50,000.