International arbitration in the Maldives is governed by the Maldives Arbitration Act No. 10/2013 (the “Arbitration Act”), whose key features are discussed below.
Scope of Application of the Arbitration Act
The Arbitration Act applies when the seat of an arbitration is the Maldives (Section 4(a) of the Arbitration Act), except for Section 15 (stay of court proceedings in favor of arbitration), Section 40 (recognition and enforcement of interim measures) and Section 43 (grounds for refusing recognition and enforcement of interim measures), which apply even if the seat of arbitration is not the Maldives (Section 4(b) of the Arbitration Act).
The Arbitration Act comprises 89 Sections (Articles), divided into 12 Chapters, as follows:
- Chapter 1: Preamble (Sections 1-5);
- Chapter 2: Definitions of Terms (Sections 6-11);
- Chapter 3: Arbitration Agreement (Sections 12-15);
- Chapter 4: Arbitral Tribunal (Sections 16-28);
- Chapter 5: Jurisdiction of the Arbitral Tribunal (Sections 29-32);
- Chapter 6: Power to Order Interim Measures and Preliminary Orders (Sections 33-45);
- Chapter 7: Arbitral Proceedings (Sections 46-61);
- Chapter 8: Making of Award and Termination of Proceedings (Sections 62-67);
- Chapter 9: Application for Setting Aside (Sections 68-71);
- Chapter 10: Recognition and Enforcement of Awards (Sections 72-74);
- Chapter 11: Establishment of the Arbitration Centre (Sections 75-82);
- Chapter 12: General Provisions (Sections 83-89).
The Arbitration Act aligns with “the model principles of [the] United Nations Commission on International Trade Law (UNCITRAL)” (Section 2(f) (Objectives) of the Arbitration Act), i.e., the 2006 UNCITRAL Model Law on International Commercial Arbitration (“2006 UNCITRAL Model Law”).
Arbitration Agreement
The arbitration agreement shall be “in writing” (Section 13(a) of the Arbitration Act).
An arbitration agreement is in writing (1.) if its content is in written form or (2.) if concluded orally or by other means, if there is a written record of an agreement or if a record exists in a form that is acceptable as evidence (Section 13(b) of the Arbitration Act).
Section 89(g) (Definitions) of the Arbitration Act further specifies, in this respect, that “writing” or “written form” means a record of information in any of the following forms:
- a written or printed document (including charts, plans, graphs and drawings);
- an electronic file;
- photos;
- voice or other type of data recorded on a disc, tape or film;
- picture or other data recorded on a film or in another form.
An arbitration agreement may also be validly concluded, inter alia, via exchange of electronic communication (Section 14 of the Arbitration Act).
Commencement of Arbitration
Section 49 of the Arbitration Act provides that the arbitration commences on the date the request for arbitration is received by the respondent, unless otherwise agreed by the parties.
Number of Arbitrators
Interestingly, the Arbitration Act ties the default number of arbitrators with the amount in dispute. Under Section 16(c) of the Arbitration Act, the default number of arbitrators (absent an agreement of the parties) is three arbitrators for disputes valued at MVR 1.5 million or above and a single arbitrator for disputes of less than MVR 1.5 million. This decreases the cost of arbitration for smaller disputes.
For comparison, the position varies in other leading arbitration laws and rules:
- Under Section 15(3) of the 1996 English Arbitration Act, the default number of arbitrators is a sole arbitrator, regardless of the amount in dispute.
- Under Article 10(2) of the 2006 UNCITRAL Model Law, the default number of arbitrators is three, again regardless of the amount in dispute.
- Under Article 6.1 of the 2018 HKIAC Arbitration Rules, the decision is left to the HKIAC to decide on a sole arbitrator or three arbitrators, “taking into account the circumstances of the case.”
- Under Article 16(2) of the 2023 SCC Arbitration Rules, the decision is also left to the SCC Board, “having regard to the complexity of the case, the amount in dispute and any other relevant circumstances.”
- Under Article 5.8 of the 2020 LCIA Arbitration Rules, the default number of arbitrators is one arbitrator (unless “the LCIA Court determines that in the circumstances a three-member tribunal is appropriate”).
Jurisdiction of Arbitral Tribunal
The Arbitration Act codifies in Section 29 (Competence to Rule on its Own Jurisdiction) the widely accepted principle of competence-competence, pursuant to which the arbitral tribunal has the power to rule on its own jurisdiction, including any objections regarding the existence or validity of the arbitration agreement.
The doctrine of separability is also recognized in Section 30 (Validity of the Arbitration Agreement) of the Arbitration Act, which provides that an arbitration clause is considered independent of the main contract in which it is embedded.
Substantive Governing Law
Section 51 of the Arbitration Act provides that the parties are free to agree on the law governing the substance of the dispute (see also our explanatory note on the different Laws Applicable to an International Arbitration).
The Maldives legal system is based on an admixture of Islamic Law, English common law and customary law (see Attorney General’s website). Also, contract law in the Maldives is governed by the Maldives Law of Contract No. 4/91.
Furthermore, under Article 51(f) of the Arbitration Act, the arbitral tribunal must at all times refer to the agreement between the parties, international best practices and rules relating to the commercial transaction between the parties in all instances and stages of the dispute.
Hearing
Article 55 of the Arbitration Act provides that, unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold hearings and “determine a procedure on how the parties should be given opportunities for oral arguments, presentation of evidence, rebuttals and cross examination of evidence.”
While the Arbitration Act does not explicitly stipulate the possibility of holding virtual hearings, this is certainly feasible. The Arbitration Act was adopted in 2013, i.e., prior to the COVID-19 pandemic, which prompted changes in arbitration laws and rules to explicitly acknowledge virtual hearings (see, e.g., 2023 Amendments to the UAE’s Arbitration Law). Aceris Law has also been involved in oral hearings in a Maldives-seated international arbitration.
Arbitral Award
The formalities of an arbitral award are described in Section 64 of the Arbitration Act. In particular, the final award shall be in writing, signed by the arbitrators, state the decision and reasons upon which it is based, state its date and the place of arbitration, and be delivered to each party. The above formalities are standard in international arbitration.
The Arbitration Act does not seem to set a time limit for issuance of the final award by the arbitral tribunal.
Challenging an Arbitral Award
Under the 2006 UNCITRAL Model Law (Article 34), the (limited) grounds for setting aside an arbitral award mirror the (limited) grounds for refusing recognition and enforcement of an arbitral award under Article V of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) (see our commentary on the Annulment of Arbitral Awards Under the UNCITRAL Model Law). These grounds are:
- Lack of capacity of a party to conclude an arbitration agreement;
- Lack of a valid arbitration agreement;
- Lack of notice of appointment of an arbitrator or of the arbitral proceedings or inability of a party to present its case;
- The award deals with matters not covered by the submission to arbitration;
- The composition of the tribunal or the conduct of the arbitral proceedings was contrary to the agreement of the parties or the applicable rules;
- Non-arbitrability of the subject matter of the dispute;
- Violation of public policy.
Section 69 of the Arbitration Act adopts the above typical grounds for setting aside an award. An annulment ground introduced by the Arbitration Act in Section 69(a)(9) (not found in the UNCITRAL Model Law) is “if the arbitrator is found guilty of corruption or fraud while the proceedings were ongoing.”
For comparison, a similar ground is found in Greece’s new arbitration law adopted in 2023, i.e., an award may be annulled when there is a final and irrevocable decision by a competent criminal court regarding fraud or false testimony or the occurrence of passive bribery of an arbitrator or breach of duty (see also our commentary on Greece’s 2023 Arbitration Law).
A set-aside application must be made within three months from the date the award was issued (Article 70 of the Arbitration Act).
Recognizing and Enforcing an Arbitral Award
The Maldives only recently acceded to the New York Convention, on 17 September 2019, becoming the 161st Contracting State.
Section 74 of the Arbitration Act lists the grounds on which an arbitral award may be refused recognition and enforcement in the Maldives (which mirror the New York Convention grounds and, in turn, the set-aside grounds discussed above). As with the setting aside grounds, a novel ground introduced under Section 74(a)(1.9) of the Arbitration Act is that an award may be refused recognition and enforcement in the Maldives on grounds of corruption or fraud.
The Arbitration Act does not specify a time limit for recognizing and enforcing an arbitral award (see further Limitation Periods for Enforcement of Foreign Arbitration Awards).
Arbitration Costs
Section 84(b) (Cost of Arbitration) of the Arbitration Act provides flexibility to the arbitrators to award the costs of the arbitration as they deem fit, absent an agreement of the parties.
The norm in international commercial arbitration is that costs follow the event, i.e., the loser pays the winning party’s arbitration fees (see further our commentary on Who Pays the Costs of International Arbitration?).
Likewise, in Maldives litigation, courts generally award the costs of the proceedings to the winning party (Section 270 and Section 272 of the Maldives Civil Procedure Code, Law No. 32/2021).
Maldives International Arbitration Centre (MIAC)
Interestingly, the Arbitration Act also establishes the Maldives International Arbitration Centre (“MIAC”), an arbitral institution operating in the Maldives, formed as a separate legal entity (Sections 75-82 of the Arbitration Act).
The MIAC has its own arbitration rules, the 2013 MIAC Arbitration Rules, which largely mirror the Arbitration Act.
The MIAC also has a Primarily List of Arbitrators (i.e., senior members in the field of international arbitration with substantial experience acting as arbitrators) and a Secondary List of Arbitrators (i.e., junior practitioners who may not have had an appointment as arbitrators).
According to Aceris Law’s prior experience with the MIAC, it conducts arbitrations in an efficient and cost-effective manner.
Investment Arbitration in the Maldives
The Maldives is currently not a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention) (see ICSID List of Contacting States).
According to the Investment Arbitration Reporter, there have been at least six reported arbitration cases against the Maldives since 2013.
Conclusion
In conclusion, the Maldives Arbitration Act No. 10/2013 provides a comprehensive and modern framework for international arbitrations aligned with the UNCITRAL Model Law. With its recent accession to the New York Convention in 2019, and the establishment of its own independent international arbitral institution (i.e., the MIAC) in 2013, the Maldives is poised to play a more prominent role in the international arbitration arena, promoting legal certainty and attracting foreign investments.