Contributed By Shalakany Law Office
International arbitration is quite prevalent as a dispute resolution method in Egypt. Many foreign investors and multinational corporations prefer arbitration as their dispute resolution method as opposed to resorting to the Egyptian courts. Sophisticated local corporations also prefer arbitration to litigation.
Currently, there is a significant movement by the government of Egypt sincerely to settle arbitration cases between it and investors in Egypt. This is a good trend.
In general, construction disputes comprise the majority of international commercial arbitrations in Egypt. This remains true for 2017/2018.
The Cairo Regional Centre for International Commercial Arbitration (CRCICA) is the most used arbitral institution in Egypt. However, clients do also use DIAC, ICC and LCIA.
Law No 27 of 1994, the Egyptian Arbitration Law, governs arbitrations in Egypt. It is based on the UNCITRAL Model Law.
Arbitration legislation has not changed in the recent past and there is no discussion in parliament to amend the current law.
In order for an arbitration agreement to be valid under Egyptian law, the parties that concluded the agreement must have the necessary legal capacity to dispose of their rights as per Article 11 of the Egyptian Arbitration Law. The dispute(s) referred to arbitration by virtue of an arbitration agreement must be arbitrable (i.e. must be a matter(s) that can be subject to reconciliation and settlement).
Moreover, the arbitration agreement must be in writing, as stated in Article 12 of the Egyptian Arbitration Law. An oral agreement will not suffice. However, the arbitration agreement need not be in the same document and signed by both parties; consent can be shown to have materialised in an exchange of letters, emails and the like.
Furthermore, Egyptian law requires that the wording of the arbitration agreement be clear and decisive as to the consent of both parties to refer disputes to arbitration.
Finally, concerning administrative contracts, the law requires that the competent minister approves the arbitration agreement whether it is inserted as an arbitration clause in a contract or concluded as a submission clause. And, in various decisions, administrative courts have refused to acknowledge those arbitration agreements that have not been explicitly approved by the competent minister.
Egyptian legislation is quite clear that, with respect to arbitrability, only matters or issues that can be the subject of a settlement or reconciliation can be referred to arbitration (see Article 11 of the Egyptian Arbitration Law). According to the provisions of the Egyptian Civil Code, issues that relate to personal status and public order cannot be subject to a settlement or reconciliation and, consequently, these issues are not arbitrable under Egyptian law (see Article 551 of the Egyptian Civil Code, Law No 131 of 1948).
It can be said that Egyptian courts have adopted a reasonable approach towards the enforcement of arbitration agreements. In various cases, it has been shown that if a respondent/defendant invokes an arbitration agreement the court accepts its plea, provided that such a plea has been submitted before addressing the merits of the dispute. In such cases, courts reject the case filed before it on the grounds of the existence of an arbitration agreement.
Notwithstanding the above, it is to be noted that the situation is slightly different when it comes to administrative contracts. This relates to the aforementioned requirement of the approval of the competent minister. While some, if not many, arbitral awards rendered in institutional and ad hoc arbitrations have concluded that the requirement of the competent minister’s approval burdens only the contracting administrative entity and not the other party contracting with it, administrative courts have concluded that this requirement burdens both parties. Thus, when this requirement is not satisfied in a given case, the court does not acknowledge the arbitration agreement and proceeds with hearing and deciding the case filed before it.
An arbitral award may be considered valid even if the rest of the contract is found to be invalid. This is a direct result of the adoption by Egyptian legislation of the principle of the independence and separability of the arbitration agreement. While an arbitration agreement can take the form of a clause in a contract, it is legally deemed to be an independent contract that stands on its own. Thus, the invalidity of the contract does not necessarily mean or result in the invalidity of the arbitration agreement.
There are no other requirements than the neutrality and impartiality requirements which must be satisfied by any arbitrator as far as any limits are concerned on the parties’ autonomy in selecting arbitrators in Egypt.
Whether or not there is a default procedure when the parties’ chosen method for selecting arbitrators has failed depends on whether the arbitration which is agreed upon is an institutional or ad hoc arbitration. In an institutional arbitration, the arbitration rules of the institution normally provide the solution that must be followed absent an agreement to a different process by the parties. In an ad hoc arbitration, however, the appointing authority is the one that intervenes, subject to a request by the interested party, to remedy the situation and appoints, for example, an arbitrator on behalf of the non-responsive party.
If the institution’s rules are silent on this issue, which is unlikely, a default rule can be found in Article 17 of the Egyptian Arbitration Law.
Parties are free to nominate the arbitrators they want. However, if one of the parties has doubts as to the impartiality and neutrality of the arbitrator appointed by the other party, the former has the right to submit a challenge to this arbitrator. If the challenge is successful, the other party will have to nominate a different arbitrator.
Provisions for the procedures to follow in the case of challenges or the removal of arbitrators can be found in Articles 18 and 19 of the Egyptian Arbitration Law. Parties must refer recusal requests to the Egyptian courts.
Under Egyptian law as well as under the CRCICA’s Arbitration Rules, an appointed arbitrator must disclose any circumstances that may tarnish or reflect some doubt as to his or her impartiality and neutrality. Normally, a declaration of independence, impartiality and neutrality is filled out and submitted by each appointed arbitrator.
Only civil matters that could normally be settled between the parties are arbitrable in Egypt. Criminal matters are not arbitrable.
An arbitral tribunal may rule on a party’s challenge to the tribunal’s own jurisdiction as Egypt does recognise the concept of competence-competence.
Generally, courts cannot decide on the issue of jurisdiction of an arbitral tribunal. They may, however, nullify any award resulting from the tribunal if it is clear that there was no jurisdiction for the Tribunal to issue the award (ie the subject matter was not arbitrable or the arbitration clause did not exist).
Parties have the right to go to court to challenge the jurisdiction of the arbitral tribunal only after an award has been rendered.
Judicial review of awards issued in Egypt is generally deferential. The courts will not second-guess a tribunal’s finding unless it clearly contradicts public policy and/or is based on clearly incorrect facts.
If a party commences court proceedings in breach of an arbitration agreement, the defendant must issue a defence of non-jurisdiction for the courts. If the defendant does so, then the courts generally dismiss the case. If the defendant does not do so, then the arbitration clause is automatically waived.
Arbitral tribunals in Egypt cannot assume jurisdiction over parties that have not agreed to arbitration in a written format. However, the parties are free to agree to arbitration before and/or after the dispute.
As a matter of Egyptian law, an arbitral tribunal has the power to order provisional and interim measures during the course of an arbitral proceeding (see Articles 24.1 and 42 of the Egyptian Arbitration Law). The power of a tribunal to order interim/interlocutory relief is conditional on the parties’ agreement to grant the tribunal such power.
It should be noted in this regard that a distinction must be made between whether the arbitration is ad hoc or institutional. In institutional arbitrations, the rules of the institution to which the arbitration is submitted will determine whether the tribunal has the power to order interim/interlocutory relief or not.
There are no particular types of interim/interlocutory measures stated in the Egyptian Arbitration Law; however, generally, interim/interlocutory measures include security on costs and provisional attachments among other measures that are available.
As a matter of Egyptian law, national courts are considered to have default jurisdiction over disputes. Submitting a dispute to arbitration does not completely block court jurisdiction.
Article 14 of the Egyptian Arbitration Law creates a state of mutual cohabitation between state courts and arbitral tribunals by stating: “Upon request of either party to the arbitration, the court referred to in Article 9 may order the taking of an interim or conservatory measure, whether before the commencement of the arbitral proceedings or during said proceedings.”
State courts are therefore the default fora of ordering interim/interlocutory relief.
Security for costs is allowed under Egyptian law. Article 24.1 of the Egyptian Arbitration Law gives an arbitral tribunal the right to order security for costs if the parties agree to give the tribunal such power. In institutional arbitration, however, the institutional rules will determine whether a tribunal has the power to order security for costs or not.
The Egyptian Arbitration Law governs arbitration procedure in Egypt.
No specific procedural steps are required. Like any other arbitration rules and laws, the parties subject to a potential dispute must either have an arbitration clause or a compromise, ie an arbitration agreement, in place before resorting to arbitration. Furthermore, similar to any other arbitration law, an arbitration is commenced by filing a notice of arbitration.
The law prohibits, as opposed to a particularity, a party that has an arbitration clause in place from resorting to the courts. If a claimant that has an arbitration clause in place resorts to the national courts, this would be considered to be a waiver of the arbitration clause.
Arbitrators under the law enjoy the powers to investigate and review disputes. Arbitrators can examine witnesses and experts, and issue enforceable interlocutory awards. Finally, arbitrators are akin to judges in the power granted to them in issuing enforceable awards.
Other than the general duties of neutrality and impartiality, no other specific duties are imposed on arbitrators.
In order to appear before national courts, a counsel must have already acquired an accredited law degree. In addition to the law degree, a counsel appearing before state courts needs to be a member of the Egyptian Bar Association in order to appear before national courts validly.
In arbitration and before arbitral tribunals, no requirements or qualifications are needed.
In Egypt, production of documents is common. Discovery in the common-law sense is not. Parties do not generally have an obligation to voluntarily disclose documents. Privilege does not exist in Egypt in the common law sense. Witness statements are often given and cross-examination is the norm when there is a factual or expert witness.
There are no arbitration-specific rules of evidence. The Egyptian Evidentiary Law applies. Tribunals often also use the IBA Guidelines on the Taking of Evidence.
Theoretically, arbitral tribunals are given the power to issue interim orders that are enforceable awards in Egypt. This would allow them to compel the parties to the arbitration clause to act in a certain way but would not allow them to compel non-parties. In practice, these orders would need to follow a lengthy process to be enforceable in Egypt and would therefore have no teeth. As such, while this power does exist in legislation it is not used in practice.
While the Egyptian Arbitration Law is silent on this issue, the Arbitration Rules of the CRCICA provide that, in the absence of an agreement to the contrary by the parties to the dispute, the parties, the CRCICA, the arbitrators and any tribunal-appointed experts have an obligation to keep confidential all awards and decisions as well as all materials submitted by the parties in the arbitral proceedings not otherwise in the public domain.
Under Egyptian law, an arbitral award must be rendered in writing and it must be signed by, at least, the majority of the arbitrators. The law further requires that an award includes certain information, such as the names of the parties and the arbitration agreement.
There are no limits on the tribunal’s powers to award remedies under Egyptian law.
Parties are entitled to recover interest and legal costs. With respect to interest, these are subject to a mandatory cap set out in the Egyptian Civil Code (see Articles 226 and 227 of the Egyptian Civil Code). Concerning legal costs, these are normally borne by the losing party. However, tribunals have a discretionary power in this regard.
The Egyptian Arbitration Law has adopted the principle of Finality of Arbitral Awards. Arbitral awards issued under Egyptian law are therefore final, binding and not subject to appeal.
The Egyptian Arbitration Law, however, gives parties to an arbitration the right to file an action to vacate or set aside arbitral awards. The scope and grounds of such an action are bound by certain conditions and circumstances that are specifically set out in Article 53 of the Law.
The procedures to initiate an action to set aside an arbitral award are: (a) presence of an arbitral award; (b) filing a claim before the competent national court within 90 days from the date the award is issued; and (c) a statement of case with the legal and factual reasons that qualify the award to be set aside.
The scope of the action to vacate an arbitral award is of a mandatory nature and therefore it can neither be broadened nor narrowed.
The standard of review does not need to specifically meet any of the appeal standards of judicial reviews on merits, as an action to vacate or set aside an arbitral award is not an appeal but rather a challenge to the legality of the award, the procedure, and the conformity of the award with Egyptian public policy and public order.
An action to set aside an arbitral award is an action with a specific standard of review, bound by law. The boundaries made by law would make the standard of review in an action filed to vacate an arbitral award a combination of the Completely Erroneous standard and the Review for Error of Law standard.
The specific reasons for vacating an arbitral award under the Egyptian Arbitration Law are: “a) If there is no arbitration agreement, if it was void, voidable or its duration had elapsed; b) If either party to the arbitration agreement was at the time of the conclusion of the arbitration agreement fully or partially incapacitated according to the law governing its legal capacity; c) If either party to the arbitration was unable to present its case as a result of not being given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or for any other reason beyond its control; d) If the arbitral award failed to apply the law agreed upon by the parties to govern the subject matter in dispute; e) If the composition of the arbitral tribunal or the appointment of the arbitrators was in conflict with this Law or the parties’ agreement; f) If the arbitral award dealt with matters not falling within the scope of the arbitration agreement or exceeding the limits of this agreement. However, in the case when matters falling within the scope of the arbitration can be separated from the part of the award which contains matters not included within the scope of the arbitration, the nullity affects exclusively the latter parts only; g) If the arbitral award itself or the arbitration procedures affecting the award contain a legal violation that causes nullity, and finally that the court adjudicating the action for annulment shall ipso jure annul the arbitral award if it is in conflict with the public policy in the Arab Republic of Egypt” (from Article 53 of the Egyptian Arbitration Law).
The presence of one, multiple or the totality of such events may lead to an award being vacated.
Egypt is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards without reservations (Presidential Decree dated 2 February 1959).
In order for an award to be enforceable, it must first be attested and granted an exequatur. The procedures for obtaining an exequatur are commenced by filing an application before the competent national state court. The application to obtain an exequatur shall include the following attached thereto: “(1) The original award or a signed copy thereof; (2) A copy of the arbitration agreement; (3) An Arabic translation of the award, certified by the overseeing institution, in case the award was not made in Arabic; and (4) A copy of the procès-verbal attesting the deposit of the award pursuant to Article 47 of this Law” (Article 56 of the Egyptian Arbitration Law). This is a mandatory procedural step, whereby the award is deposited at the Arbitration Office at the Egyptian Ministry of Justice.
The standards for enforcing arbitral awards are: “(a) That it does not contradict a judgment previously rendered by Egyptian Courts on the subject matter in dispute; (b) That it does not violate public policy in the Arab Republic of Egypt; and (c) That it was properly notified to the party against whom it was rendered” (see Article 58 of the Egyptian Arbitration Law).
It is not common for Egyptian courts to vacate arbitral awards on public policy grounds. The public policy standard applied in actions filed to set aside arbitral awards has a high threshold.
Egyptian courts have consistently held that “in order for an award to be in violation of public policy the award has to contradict the social, political and moral values of the state and not just be in mere contradiction to a mandatory rule” (see Egyptian Cour de Cassation hearing dated 13/6/1981 and Cairo Court of Appeals, Commercial Circuit No 91, in challenges No 108 and 111 of the Year 121 J. arbitration challenges, hearing dated 30/5/2005).