Recent amendment to Article 257 of Penal Code
Uncertainties surrounding amendment
What next for UAE arbitration?
In recent years, the United Arab Emirates has been growing in popularity as a regional hub for resolving disputes, in particular through arbitration. This has been supported by the development of offshore free zones – for example, the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), which are modelled on the common law, with their own court systems and modern arbitration laws, and the growth of the DIFC-LCIA Arbitration Centre.
However, a recent unexpected change to the Penal Code(1) which criminalises arbitrators' and experts' violations of their duties of integrity and impartiality has stunned the arbitration community.
The change could have far-reaching implications for existing and future arbitrations in the United Arab Emirates.
Recent amendment to Article 257 of Penal Code
With effect from October 26 2016, Article 257 of the Penal Code was amended by Federal Decree-Law 7/2016 as follows (unofficial translation):
"Any person who issues a decision, gives an opinion, submits a report, addresses a case or proves an incident for the benefit or against a person, failing to maintain the requirements of integrity and impartiality, in his capacity as an arbitrator, expert, translator or fact finder, appointed by administrative or judicial authority or selected by parties, shall be sentenced to temporary imprisonment.
Said categories shall be banned from being re-assigned to such tasks, and shall be subject to the provisions of Article 255 of the present Law."
Pursuant to Articles 28 and 68 of the Penal Code, 'temporary imprisonment' is defined as a term between three and 15 years.
The previous version of Article 257 of the Penal Code read as follows (unofficial translation):
"An expert who is appointed by a judicial authority in a civil or criminal action, and who knowingly asserts a matter contrary to the truth or misconstrues such matter, shall be punished by detention for a period of at least one year, and shall be precluded from being an expert in the future.
The expert shall be sentenced to temporary imprisonment if his mission relates to a felony.
Provisions of the preceding two paragraphs shall apply to a translator who wilfully provides an incorrect translation in a civil or criminal action. Provisions of Article (255) of this Law shall apply to the expert and the translator."
The new Article 257 therefore introduces four key changes:
- The scope of the duties has been extended from one of honesty to one of integrity and impartiality.
- The duties now apply not only to experts appointed by a judicial authority (ie, court-appointed experts in onshore UAE courts), but also to anyone who issues a decision, expresses an opinion, submits a report, presents a case or proves an incident in favour of or against a person. This includes arbitrators and expert witnesses.
- Importantly, the requirement for the offence or violation to be committed 'knowingly' has been removed. Therefore, it appears possible that an offence can be committed unknowingly or without intent.
- The minimum sentence for violations of duty has been increased from one year to three years' imprisonment.
The Penal Code applies throughout the United Arab Emirates, including in the DIFC and the ADGM.
Uncertainties surrounding amendment
The amendment to Article 257 came as a surprise to much of the UAE arbitral community and has already been the subject of much debate. The reasons for the amendment remain unclear.
It is also unclear how the new Article 257 will be interpreted in practice. The serious issues raised by the new law means that urgent clarification is required in respect of at least the following questions:
- How widely or narrowly will the duties of integrity and impartiality be interpreted?
- Who is caught by the law – for example, will it apply to quantity surveyors or engineers issuing a report?
- Does the removal of the term 'knowingly' mean that an offence can still be committed even where there is no subjective intent of bias?
Some commentators have pointed to the fact that the old Article 257 was rarely used in practice and thus suggest that the new Article 257 will be no different. However, until the reasons for the amendment and guidance as to its interpretation are published, there is a legitimate concern regarding its potentially broad scope of application. This is because, historically, aggrieved or recalcitrant parties to arbitrations in the United Arab Emirates have shown themselves willing to file unmeritorious complaints against lawyers or arbitrators in an effort to derail arbitral proceedings.
Moreover, there is a genuine practical risk for anyone on the receiving end of an Article 257 allegation, however unmeritorious it may be. In practice, such a complaint would be made to the police, which could then lead to either temporary confinement or to the recipient of the complaint having to surrender their passport pending an investigation by the public prosecutor, which can take months (and any resulting court process can take years). Such an investigation would, at the very least, place significant pressure on the shoulders of any practitioner involved and could be potentially damaging to his or her reputation, even if the allegations were ultimately shown to be unfounded.
Accordingly, whether the law will be rigorously enforced in practice is of small comfort to practitioners based in the United Arab Emirates and operating as experts or arbitrators.
What next for UAE arbitration?
The lack of clarity surrounding the law and the ensuing risks have already led some arbitrators and experts to decline new appointments and resign from existing UAE-seated arbitrations. This is in spite of the fact that parties to onshore UAE-seated arbitrations may attempt to bring civil claims for compensation pursuant to Article 207(2) of the Federal Code of Civil Procedure against arbitrators resigning "without good reason". The practical effect is that the pool of high-calibre arbitrators and experts from whom parties can choose may become more limited.
Steps are underway to lobby the UAE government to repeal or amend Article 257. Initial indications are that the Dubai and wider UAE authorities have been receptive to calls by the arbitration community to address Article 257 due to the tangible potential impact it may have on arbitration in the United Arab Emirates. This is a positive development. However, for now at least, Article 257 remains in effect and its existence, however short-lived, has cast a shadow over the significant efforts by authorities, practitioners and arbitrators in recent years to promote the United Arab Emirates as a regional hub for resolving disputes.
For further information on this topic please contact Sami Tannous or Antonia Birt at Freshfields Bruckhaus Deringer LLP by telephone (+971 4 5099 100) or email ([email protected] or [email protected]). The Freshfields Bruckhaus Deringer LLP website can be accessed at www.freshfields.com.
Endnotes
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