Arbitration is commonly used as a method for resolving commercial disputes arising between private parties in Egypt. Contracting parties tend to insert an arbitration clause in their commercial contracts to guarantee a faster process for the resolution of any potential disputes that may arise. Usually, in most of the contracts, commercial transactions or projects of high value, whether being concluded between domestic parties or with a foreign party, an arbitration clause is automatically included.
However, in administrative contracts, arbitration agreements must be approved by the competent minister, or whoever assumes his/her authority with respect to public entities, and delegation in this regard is prohibited (Article 1 of the EAL and State Council, Challenge No 8256 of JY 56, Hearing session dated 5 March 2016).
Moreover, Decree No 2592 of 2020 binds ministries, public entities, state-owned companies and companies in which the state participates in any form not to conclude any contracts with foreign investors or enter into contracts including an arbitration clause, and/or amending these contracts without having them first reviewed by the High Committee for Arbitration and International Disputes. The Committee, which is reconstituted occasionally, is entrusted with reviewing and opining on pending international arbitration cases in both commercial and investment cases involving the state, its organs and state-controlled entities.
As to investment disputes, arbitration remain a favourable dispute resolution mechanism, as most of Egypt’s Bilateral Investment Treaties (BITs) provide for arbitration as the available dispute settlement mechanism. Since the Egyptian Revolution in 2011, a considerable number of investment cases have been brought against Egypt (25 ICSID cases until June 2021). This led to the enactment of a new Investment Law No 72 of 2017 (the "Investment Law") repealing and replacing the previous Law No 8 of 1997 and imposing a rigid mechanism of dispute avoidance and amicable settlement to minimise the financial burden of investment arbitration. The Investment Law reserves the parties’ right to resort to litigation under Article 82 and provides under Article 90 that disputes shall be settled in the manner agreed with the investor or pursuant to the provisions of the Egyptian Arbitration Law; it also refers to ad hoc and institutional arbitration as available options.
Whilst remaining a favourable dispute resolution mechanism in commercial matters, resorting to arbitration in investment disputes is subject to the prior review and opinion of the High Committee for Arbitration and International Disputes. The Egyptian state’s intention regarding investment disputes is to set a dispute avoidance and amicable settlement mechanism rather than resorting to arbitration or litigation.
The COVID-19 pandemic has indeed impacted the use of international arbitration and the conduct of arbitral proceedings in Egypt. At the beginning of the COVID-19 pandemic, owing to the lockdown measures taken by the Egyptian state, physical hearings were postponed and changes to procedural timetables took place, to the extent warranted by the circumstances. This has accelerated and enhanced the access to and use of information and communication technologies, especially with respect to the conduct of virtual hearings and remote witness examination.
There have not been any changes to arbitration legislation; however, the leading arbitral institution (the Cairo Regional Centre for International Commercial Arbitration, hereinafter the CRCICA) has adopted some precautionary measures and adapted some of its services by encouraging users to file submissions online and hold hearings virtually via videoconference. The holding of physical hearings at the CRCICA was suspended during the period of closure of its premises, then, when the Centre re-opened, physical hearings were held at its premises, only when needed, taking all precautionary measures to protect the health and well-being of participants (limited number of attendees in the hearing room, physical distancing, wearing of masks and carrying out of temperature checks).
Moreover, the Egyptian Court of Cassation expressly acknowledged the increased use of virtual hearings in arbitrations across the globe by incorporating an express reference to "virtual hearings" in English language in its judgment. By doing so, the Court offers reassuring indications to arbitration users in Egypt that virtual hearings are not against Egyptian law (Court of Cassation, Economic and Commercial Circuit, Challenge No 18309 of JY 89, Hearing session dated 27 October 2020).
In 2020-21, the industry that has been experiencing significant arbitration activity in Egypt is the construction sector, where disputes arise out of or in connection with ongoing construction projects and works taking place all over Egypt. This results from the increased construction activity in Egypt and new infrastructure projects undertaken to build new compounds, factories and facilities in the new cities. In this respect, the CRCICA statistics for 2020 confirm that construction disputes represent the most active sector of disputes brought before the Centre. There are also disputes in relation to the tourism and hospitality sector brought about by the impact of COVID-19 pandemic on tourism in Egypt, which suffered considerable financial losses due to governmental restrictions in relation to the partial operation of hotels and their staff. Arbitrations also continue to be conducted in other industries, such as energy, telecommunications, infrastructure and real estate development, etc.
The most used and leading arbitral institution in Egypt is the CRCICA, which is an independent non-profit international organisation established in 1979 under the auspices of the Asian African Legal Consultative Organisation. The CRCICA administers domestic and international arbitration disputes and also offers alternative dispute resolution mechanisms, such as mediation, conciliation and mini-trials. The CRCICA also has its own sets of arbitration rules (2011) and mediation rules (2013) in Arabic, English and French languages. Furthermore, the CRCICA usually organises conferences and workshops led by renowned international arbitration practitioners from Egypt and abroad.
There are also more recent and specialised arbitral institutions, such as the Egyptian Settlement and Arbitration Centre for Sports established in 2017 by the Egyptian Olympic Committee. Moreover in 2019, Presidential Decree No 335 of 2019 provided for the establishment of a new specialised arbitral institution: the Egyptian Centre for Voluntary Arbitration and Settlement of Non-Banking Financial Disputes, which is an independent body established within the Financial Regulatory Authority (FRA) in Egypt. On 10 December 2020, the statutes of the Centre as well as its arbitration and mediation rules were issued by virtue of Prime Ministerial Decree No 2597 of 2020.
There are no specific courts per se designated to hear disputes related to arbitration. However, there are specialised circuits for hearing arbitration-related matters within the competent national courts, where judges in said circuits are experienced in arbitration-related matters. In this regard, Article 9 of the Egyptian Arbitration Law provides that the competent court is that having original jurisdiction over the dispute, and in relation to international arbitration, whether conducted in Egypt or abroad, the Cairo Court of Appeal is the competent court, unless the parties agree on another appellate court.
Arbitration in Egypt is governed by a specific legislation enacted by Law No 27 of 1994 on Arbitration in Civil and Commercial Matters (the "Egyptian Arbitration Law" or EAL), replacing the provisions pertaining to arbitration that were previously included in the Egyptian Code of Civil and Commercial Procedures. The EAL is based on the 1985 UNCITRAL Model Law but diverges therefrom on the following points.
There have not been any significant changes to the EAL or pending legislation that may change the arbitration landscape in Egypt in the past year. However, there are ongoing discussions for possible amendments to the EAL, but it remains unclear when such amendments will be considered.
The legal requirements for an arbitration agreement to be enforceable under the EAL consist of the following.
The general approach used in Egypt to determine the arbitrability of a dispute is whether the subject matter of the dispute is capable of compromise. Article 11 of the EAL expressly states that matters not capable of compromise are inarbitrable, and these mainly include criminal matters, personal status or family relations, and/or rights in rem over immovables, such as registration of real estate mortgages. Furthermore, Article 2 of the EAL provides that the right subject to arbitration must be of an economic nature whether it is contractual or non-contractual.
The approach adopted by Egyptian courts with respect to determining the law governing the arbitration agreement consists of applying the law of the seat as chosen by the parties, provided that the provisions of said law are not contradictory to Egyptian public policy rules (Court of Cassation, Challenge No 453 of JY 42, Hearing session dated 9 February 1981; and Challenge No 1259 of JY 49, Hearing session dated 13 June 1983).
With respect to enforcement of arbitration agreements by Egyptian courts, please see 3.1 Enforceability. Arbitration agreements fulfilling the above-referenced legal requirements are usually enforced by Egyptian courts, when the matter is brought by a party before the competent court.
In this respect, the Court of Cassation held that the arbitration agreement is a contract with all the conditions and pillars of contracts at large, which must be respected by the parties to that contract, such that in its presence each party has an obligation to refrain from filing an action before the judiciary on any dispute subject to the contract, including the arbitration agreement, and the court before which the action is filed shall declare the case inadmissible (Court of Cassation, Challenge No 3449 of JY 78, Hearing session dated 11 February 2020).
Also see 5.2 Challenges to Jurisdiction.
The EAL recognises the rule of separability of the arbitration clause from the contract in which it is contained as per Article 23. The EAL treats the arbitration clause as an independent agreement separate from the other provisions of the contract, such that it is not affected by the invalidity, termination or rescission of the contract, provided that the arbitration clause itself is valid.
Generally, the parties are free to select the arbitrators of their choice to decide over their dispute. The EAL does not impose limits as to the parties’ autonomy in the selection of arbitrators in relation to their gender, nationality, education, ethnicity or religious belief, other than attaining the age of majority and disposing of all of his/her civil rights (Article 16 of the EAL). With respect to the appointment of judges to sit as arbitrators, judges are required to obtain the permission of the Supreme Judicial Council. The absence of obtaining such authorisation does not affect the validity of the arbitral award (Court of Cassation, commercial circuit, Challenge No 9968 of JY 81, Hearing session dated 9 January 2018).
Generally, in institutional arbitration, the procedural rules of the institution provide for the method of appointment of arbitrators. However, in ad hoc arbitration, and absent the parties’ choice of the method of appointment of arbitrators, the EAL provides for a default procedure in its Article 17, differentiating between the appointment of a sole arbitrator and a panel of arbitrators. In the event of appointment of a sole arbitrator, the competent court undertakes the appointment of the arbitrator upon the request of either party. However, if the arbitral tribunal consists of three arbitrators, each party shall appoint an arbitrator, then both arbitrators shall appoint the chairman. The competent court may intervene, upon the request of a party, to appoint any arbitrator in case of failure of his/her appointment by a party or failure of the appointment of the chairman by the co-arbitrators within 30 days from the request to appoint the arbitrator. The same procedure applies to arbitral tribunals composed of more than three arbitrators.
Moreover, the number of arbitrators must be an odd number subject to penalty of nullity of the arbitration (Article 15 of the EAL).
The EAL does not address issues pertaining to multi-party arbitrations, hence there are no provisions specifying a default procedure for the appointment of arbitrators applicable to multi-party arbitrations.
Egyptian courts can intervene in the selection of arbitrators only upon a party’s request to do so, as explained in 4.2 Default Procedures.
Furthermore, when appointing an arbitrator, the competent court shall observe the conditions required by the law (see 4.1 Limits on Selection) and those agreed upon by the parties. The court’s decision is final and is not subject to an appeal (Article 17 of the EAL).
However, the Court of Cassation held that decisions that are not subject to appeal are affirmative appointing decisions and that refusal appointing decisions are subject to appeal (Court of Cassation, Challenge No 5211 of JY 78, Hearing session dated 18 February 2015). Furthermore, the Court of Cassation held that appeal is also admissible in cases of breach of the law, breach of the parties’ agreement, or breach of the rules of attribution of jurisdiction by the court decision (Court of Cassation, Challenge No 12459 of JY 85, Hearing session dated 10 June 2016).
The EAL provides for particular provisions governing the challenge or removal of arbitrators. In this respect, an arbitrator may only be challenged if there exist circumstances that give rise to serious doubts on his/her impartiality or independence (Article 18 of the EAL).
In this regard, in ad hoc arbitration, Article 19 of the EAL provides for the procedure of challenging arbitrators. The challenge request must be submitted to the arbitral tribunal in writing and incorporating the reasons for such challenge within 15 days from the date of knowledge of the circumstances giving rise to serious doubts as to the arbitrator’s impartiality or independence, and if the arbitrator does not withdraw from his/her office within 15 days, the challenge request shall be forwarded to the competent court which decides on the matter and renders a final decision that is subject to no appeal. An arbitrator can only be challenged once by a party in the same proceedings. The challenge request does not suspend the arbitral proceedings, but if the challenge request is successful, it results in the annulment of the prior arbitral proceedings conducted by the challenged arbitrator, including the arbitral award.
Furthermore, Article 20 of the EAL enables the competent court, upon the request of a party, to end the mandate of an arbitrator who fails to perform his/her mission or duties or who interrupts the performance thereof causing undue delay in the arbitral proceedings. In this respect, the Cairo Court of Appeal ended the chairman’s mandate for his inability to manage the procedural hearing and for suspending the proceedings in the warranted circumstances (Cairo Court of Appeal, 50th Commercial Circuit, Challenge No 3 of JY 132, Hearing session dated 30 January 2019).
Under Article 16 of the EAL, an arbitrator shall accept his/her mission in writing, and shall disclose any circumstances that are likely to cast doubts as to his/her independence or impartiality at the time of accepting his/her mission. In the same vein, Article 11 of the CRCICA Arbitration Rules binds an arbitrator to disclose in writing at the time of accepting his/her mission any circumstances likely to give rise to justifiable doubts as to his/her independence or impartiality from the time of his/her appointment and throughout the proceedings. Arbitrators shall also avoid ex parte communications with any party.
Egyptian courts’ judgments have set the definitions of the duties of independence and impartiality of arbitrators. In this respect, the Cairo Court of Appeal held in pertinent part: “The independence of the arbitrator is the absence of his connection to or dependency on the parties to the dispute, the state or the third party, and the absence of any financial or psychological relation that is contradictory to his independence, whereas such [circumstances] constitute a definite danger resulting in the inclination to one of the parties of the arbitration.” (Cairo Court of Appeal, 91 Commercial Circuit, Appeal No 1 of JY 120, Hearing session dated 29 April 2003.)
“Impartialité is any psychological or mental inclination of the arbitrator towards or against any of the parties to the dispute, a third party, or the state, which is likely to result in the arbitrator’s inability to rule without inclination towards or against any of the parties mentioned above.” (Cairo Court of Appeal, 91 Commercial Circuit, Appeal No78 of JY 120, Hearing session dated 30 March 2004.)
These definitions have been upheld in many other judgments and most recently in a judgment of the Cairo Court of Appeal in Challenge No 42 of JY 136, Hearing session dated 8 March 2021.
Moreover, in an interesting decision, the Cairo Court of Appeal annulled an arbitral award for breach of the duty of disclosure resulting from the non-disclosure of an existing relationship between a co-arbitrator and the chairman, which creates doubts as to their impartiality and independence (Cairo Court of Appeal, 18th Commercial Circuit, Challenge No 92 of JY 135, Hearing session dated 12 January 2019).
Matters excluded from arbitration under the EAL are matters that are not capable of compromise. Please see 3.2 Arbitrability.
Article 22 of the EAL acknowledges the principle of competence-competence granting arbitral tribunals the authority to decide over any jurisdiction-related claims, including the existence, validity and scope of the arbitration agreement.
However, in practice, there are instances where Egyptian courts, in relation to administrative contracts and beyond, have decided on the existence and validity of an arbitration agreement prior to or while arbitral proceedings were still pending and irrespective of the arbitral tribunal’s jurisdiction.
Egyptian courts can only intervene to address issues of jurisdiction of an arbitral tribunal when requested by a party to do so and provided that the other party does not object to such intervention. In this respect, according to Article 13 of the EAL, Egyptian courts are under an obligation to declare inadmissible any claim pertaining to a dispute subject to an arbitration agreement only when the defendant raises an objection at the commencement of the proceedings. The court cannot declare the inadmissibility ex officio. In absence of an objection by the defendant before the competent court, parallel proceedings will be conducted before the arbitral tribunal and the competent court to decide on the matter, and if the two decisions are contradictory, the winning party may elevate the conflict to the Supreme Constitutional Court.
Furthermore, Egyptian courts may also address issues of jurisdiction in the event of a nullity action of an arbitral award based on the ground of non-existence of the arbitration agreement or the lack of jurisdiction of the arbitral tribunal as to all or part of the disputed matters. Please see 11.1 Grounds for Appeal.
Decisions on jurisdiction rendered by arbitral tribunals cannot be challenged before the competent court prior to the rendering of the final award on the merits within the course of a nullity action (Article 22 of the EAL).
As stated above in 5.3 Circumstances for Court Intervention, the parties have the right to go to court to challenge the jurisdiction of the arbitral tribunal only after the rendering of the final award within 90 days of the date of notification of the award to the party against whom it was made, ie, the time limit for initiating a nullity action.
With regard to questions of admissibility and jurisdiction, Egyptian courts exercise a de novo review. In this respect, courts normally assess the parties’ arguments on law and on fact to determine the existence, validity and scope of the arbitration agreement in order to decide on the party’s objection as to the tribunal’s jurisdiction.
If a party commences court proceedings in breach of an arbitration agreement, national courts shall hold this action inadmissible only if the defendant raises an objection pertaining to the existence of an arbitration agreement at the commencement of these proceedings prior to submitting any defence on the substance. Accordingly, the court is not under an obligation to reject the case ex officio, such that in absence of an objection raised by the defendant, the court will continue examining the action brought before it in breach of the arbitration agreement, and this shall not prevent parallel arbitral proceedings from being commenced or continued (Article 13 of the EAL).
The EAL does not expressly regulate the extension of the arbitration agreement to third parties or non-signatories of the contract containing the arbitration agreement. However, the Egyptian courts addressed the issue of extension of the arbitration agreement under several doctrines; they are becoming more flexible in considering such extension and usually defer to the arbitral tribunal’s findings in this regard.
In this respect, in application of the doctrine of group of companies, the Court of Cassation ruled that the extension of the arbitration agreement is subject to the company’s active contribution in the performance of the contract causing a confusion between the intents of the two relevant companies, ie, the signatory and the non-signatory company forming part of the group (Court of Cassation, Challenge No 4729 of JY 72, Hearing session dated 22 June 2004).
Furthermore, the Court of Cassation held that an arbitration agreement cannot exist without the consent of the parties, however, it may extend to third parties and to other contracts connected to the principal contract on the basis of several doctrines which include the following: group of companies, group of contracts, universal succession, mergers or assignment if their conditions are met (Court of Cassation, Challenges Nos 2698, 3100 and 3299 of JY 86, Hearing session dated 13 March 2018).
The doctrines of extension of the arbitration agreement apply to both domestic and foreign third parties.
An arbitral tribunal may award interim relief or conservatory measures only if the parties to arbitration have conferred such power to the tribunal (Article 24 of the EAL). Such power could be conferred to an arbitral tribunal by the choice of the parties to apply institutional arbitration rules providing for such default power.
Furthermore, Article 42 of the EAL provides that arbitral tribunals may issue interim or partial awards. In this respect, interim relief rendered in the form of an award is subject to the ordinary procedures for enforcement and recognition of arbitral awards. Nevertheless, interim awards do not have a res judicata effect.
As to the types of relief that can be awarded, the EAL does not provide for a specific list. Therefore, it is generally accepted that arbitrators have the discretion to order any type of interim relief or conservatory measures provided that such relief/measure is warranted and available under the applicable law.
Article 14 of the EAL expressly allows courts to order interim relief or conservatory measures, upon the request of a party, before or during the arbitration proceedings.
Furthermore, Egyptian courts may grant interim relief to a foreign-seated arbitration, if the parties agreed to apply the provisions of the EAL to their arbitration.
The types of preliminary or interim relief that may be granted by Egyptian courts are subject to the provisions of the Egyptian Code of Civil and Commercial Procedures. The general requirements for issuing an interim order are as follows:
The EAL does not address the use of emergency arbitrators.
The EAL allows arbitral tribunals to request adequate security to cover the costs of ordered interim relief (Article 24 of the EAL). In the same vein, courts are free to order security for costs to ensure the implementation of interim orders or conservatory measures.
Article 25 of the EAL provides that the parties are free to determine the rules governing the procedure of their arbitration, including submitting the arbitral proceedings to institutional arbitration rules of any arbitral institution, in Egypt or abroad. In the absence of an agreement by the parties, the arbitral tribunal may, subject to the mandatory provisions of the EAL, adopt the rules it considers appropriate to govern the procedure.
The EAL does not provide for any particular mandatory procedural steps as long as public policy is preserved. The parties shall be treated with equality and shall be given an equal and full opportunity to present their case (Article 26 of the EAL).
The EAL provides for procedural steps which generally pertain to the below-mentioned steps.
Arbitral proceedings commence on the day the respondent receives the request for arbitration, unless otherwise agreed by the parties (Article 27 of the EAL).
The parties are invited to exchange written submissions with supporting evidence, ie, a statement of claim and a statement of defence (and counterclaim if desired), within the period of time agreed by the parties (Article 30 of the EAL). Either party may amend or supplement its submission or supporting evidence (Article 32 of the EAL).
The arbitral tribunal may hold a hearing or decide on a document-only basis, unless otherwise agreed between the parties. Also, the parties must be notified of the hearing dates sufficiently in advance and the minutes of the hearing shall be recorded in a procès-verbal. The hearing of witnesses and experts shall be conducted without taking an oath (Article 33 of the EAL).
Unless otherwise agreed by the parties, if the claimant fails to submit his or her written submission without showing sufficient cause, the tribunal shall terminate the proceedings, but if the respondent fails to submit its statement of defence, the tribunal shall continue the proceedings without treating such failure as an admission by the respondent of the claimant’s allegations (Article 34 of the EAL).
If a party fails to appear before the tribunal or fails to submit a document required therefrom, the tribunal may continue the proceedings and decide upon the elements of evidence before it (Article 35 of the EAL).
The arbitral tribunal may appoint one or more experts, which may be heard and examined by the tribunal and the parties (Article 36 of the EAL).
The arbitral tribunal shall issue an award terminating the dispute within the period agreed by the parties, or in the absence of an agreement between the parties, within 12 months from the beginning of the proceedings, which may be extended for six months, unless otherwise agreed by the parties (Article 45 of the EAL).
Arbitrators shall exercise their mission in compliance with the duties of impartiality and independence (see 4.5 Arbitrator Requirements).
As to the powers attributed to arbitrators, these mainly include the following:
However, an arbitral tribunal cannot make a determination with respect to a challenge for forgery of a submitted document; this falls within the competence of national courts, which shall conduct criminal proceedings (Article 46 of the EAL).
Also see 10.2 Types of Remedies.
At the outset, Article 3 of the Egyptian Advocacy Law No 17 of 1983 expressly stipulates that advocacy work is exclusively reserved to lawyers admitted to the Egyptian Bar Association, such that non-lawyers cannot exercise any advocacy-related work, which includes representing parties before arbitral tribunals.
Nevertheless, in a recent decision issued by the Egyptian Court of Cassation on 27 October 2020, the Court held that there are no limitations or restrictions on party representation in arbitrations seated in Egypt. The Court of Cassation recognised that the parties to an arbitration, be it domestic or international, may be represented by any person of their choice, irrespective of their nationality or qualification (Court of Cassation, Economic and Commercial Circuit, Challenge No 18309 of JY 89, Hearing session dated 27 October 2020).
The EAL does not specifically address the manner of collection and submission of evidence. The parties normally adduce evidence in support of their written submissions. The applicable rules are those provided under the Egyptian Evidence Law No 25 of 1968.
Generally, arbitral tribunals enjoy the power to admit, assess and weigh evidence on record. For example, an arbitral tribunal may undertake any evidentiary procedure it deems appropriate, or reverse a procedure it had previously ordered, and accept or deny a party’s request for an order on evidentiary procedures without prejudice to the party’s rights of defence. The evidence that may be admitted before arbitral tribunals in Egypt are: documentary evidence, witness statements, expert reports, and/or site inspection as ordered by an arbitral tribunal. Fact witnesses and technical experts may be examined and cross-examined during hearings. However, witness testimony cannot be taken under oath.
It is common for arbitral tribunals to apply the IBA Rules on the Taking of Evidence in International Commercial Arbitration, subject to the parties’ agreement and in the manner and extent agreed upon by the parties.
With respect to document disclosure, the common law practice of discovery is neither recognised nor applicable in Egypt. Article 20 of the Egyptian Evidence Law No 25 of 1968 provides for limited requests for production of documents at the possession of a party in exceptional cases, which consist of the following:
Furthermore, Article 21 of the Evidence Law provides for the following requirements to be included in a request for document production:
The rules of evidence that apply to arbitral proceedings seated in Egypt are the same rules as those which apply to domestic matters, ie, the provisions of the Egyptian Evidence Law No 25 of 1968 (see 8.1 Collection and Submission of Evidence).
Arbitral tribunals do not possess the coercive and executive powers enjoyed by courts and may only draw negative inferences as a result of a party’s non-compliance with the tribunal’s orders, especially if no reasonable justification is provided.
Arbitral tribunals may seek the competent court’s assistance with respect to the following:
Arbitral proceedings are generally confidential. Article 44 of the EAL provides that arbitral awards cannot be published, in whole or in part, unless agreed by the parties. There is an implied duty of confidentiality with respect to pleadings and documents pertaining to arbitration. However, the confidentiality of the award may be breached by initiating arbitration-related court proceedings, ie, requests for enforcement or nullity action, which like other court proceedings would form part of the public domain.
Article 43 of the EAL provides for the legal requirements for validity of arbitral awards, which include the following:
As to the time limits for issuing an award, Article 45 of the EAL provides that in absence of an agreement between the parties on a specific period, the award must be issued within 12 months from the beginning of the proceedings, and such period may be extended for six months, unless otherwise agreed by the parties. The sanction of a delay entitles any of the parties to request from the competent court an additional extension or an order to terminate the arbitration proceedings.
There are no specific limits on the types of remedies awarded by arbitral tribunals other than issues relating to public policy. Arbitrators generally have a broad authority to order any declaratory relief, specific performance, monetary compensation, and to award interest and costs. However, arbitral tribunals are generally not entitled to award punitive damages.
Parties are generally entitled to recover interest and legal costs, however, there are no specific provisions addressing the same under the EAL.
With respect to interest, Egyptian courts strictly adhere to the cap of 7% per annum imposed by the Court of Cassation, which is considered a rule of public policy for the purpose of enforcement and annulment of arbitral awards, even if the parties had agreed on a higher rate (in such case, the interest rate will be reduced to the 7% cap) (Court of Cassation, Challenge No 3778 of JY 64, Hearing session dated 17 February 2004).
However, there exists an exception with regard to banking transactions that are exempted from the 7% cap and public policy should not be contravened. In this regard, interest may be payable at the rate set by the Central Bank of Egypt (CBE) which in fact may exceed 7% at the CBE’s annual decision. This rate would apply in relation to (i) commercial loans; and (ii) amounts/expenses pertinent to the trader’s trade (Article 50 of the Egyptian Commercial Code). Furthermore, compound interest is perceived contrary to public policy, unless a clear and unequivocal trade usage on compounding interest exists in the pertinent transaction.
As to the recovery of incurred legal costs, arbitral tribunals enjoy a broad discretion in allocating costs. The costs sharing approach is not uncommon, however, arbitral tribunals tend to apply international norms of costs allocation and the general practice is that costs follow the event.
Arbitral awards are not subject to appeal before Egyptian courts (Article 52 of the EAL), they can only be challenged by initiating a nullity action/setting aside of the award within 90 days from the date of notification of the award to the party against whom it was rendered (Article 54 of the EAL).
Article 53 of the EAL expressly provides an exhaustive list of grounds for setting aside an arbitral award:
In this respect, a nullity action is a contradictory procedure subject to the same rules for bringing a legal action before a court.
The parties cannot agree to exclude or expand the scope of challenge of an arbitral award as Article 53 of the EAL strictly provides for an exhaustive list as to the grounds of annulment of an arbitral award. However, the parties may waive their right to recourse to annulment, only after and not prior to the issuance of the arbitral award (Article 54 of the EAL).
Moreover, it shall be noted that pleas pertaining to the violation of the arbitration agreement or to a non-mandatory provision of the EAL must be raised earlier during the arbitral proceedings (Article 8 of the EAL) in order to be admissible as a ground for annulment at the time of bringing the nullity action.
Courts' judicial review of nullity actions consists of a control of the legality of the award. A nullity action is not an appeal of the award, hence Egyptian courts are restricted from operating a de novo review of the merits of the case.
Egypt ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards on 9 March 1959 and it entered into force as part of the Egyptian legal system on 7 June 1959 without any reservations or declarations.
Egypt also ratified the 1952 Convention of the Arab League on the Enforcement of Judgments and Arbitral Awards on 28 August 1954, and signed the 1983 Riyadh Arab Agreement for Judicial Cooperation in 2014. There are also several bilateral treaties on judicial co-operation that refer to mutual co-operation in the recognition and enforcement of arbitral awards, concluded by Egypt with Tunisia (1976); Italy (1978); France (1982); Jordan (1987); Morocco (1989); Bahrain (1989); Libya (1993); China (1994); Hungary (1996); Syria (1998); United Arab Emirates (2000); Oman (2002); and Kuwait (2017).
Article 56 of the EAL provides for the procedure for enforcing a domestic arbitral award or a foreign arbitral award subject to the application of the EAL provisions by agreement of the parties in Egypt.
In this respect, a party seeking to enforce an arbitral award shall submit before the president of the competent court an application/request for enforcement to obtain the exequatur, ie, affixing of the execution formula on the award, accompanied by the following:
Furthermore, pursuant to Article 58 of the EAL, the application for enforcement will not be admissible prior to the expiry of the 90-day period for initiating a nullity action and it shall not be granted unless the following are ascertained:
Orders granting or refusing exequatur may be challenged before the competent court within 30 days from the date of issuance of such orders.
Moreover, Article 57 of the EAL provides that, in principle, a nullity action does not suspend the enforcement of the arbitral award. Nevertheless, the court may order said suspension if requested by the applicant upon serious grounds.
As to the enforcement of foreign arbitral awards, the default applicable provisions are Articles 296-9 of the Code of Civil and Commercial Procedures which apply to foreign judgments, without prejudice to the provisions of treaties concluded between Egypt and any foreign state. Accordingly, Article 299 extends the application of Article 298 of the CCCP to foreign arbitral awards which provides that enforcement will be granted if the following conditions are satisfied:
However, Egyptian courts have extended the application of the EAL provisions to the enforcement of foreign arbitral awards, which provide for less onerous conditions, based on Article III of the New York Convention.
Egyptian courts have not directly addressed the issue of enforcing an award that has been set aside in the seat of arbitration and the EAL is silent in this regard.
State entities may successfully raise a defence of sovereign immunity at the enforcement stage, only if enforcement is sought against publicly owned assets that are not subject to enforcement, such as a public utility or public interest funds.
Egyptian courts are generally pro-enforcement with respect to arbitral awards rendered in non-administrative disputes, as they strictly observe the annulment grounds and normally the public policy ground is narrowly construed.
The approach taken by Egyptian courts with respect to the contravention of the public policy ground for annulment of an arbitral award is discussed below by means of some examples.
The definition of public policy set by the Court of Cassation consists in the contravention of the social, political, economic and ethical principles in Egypt, which are related to the nation’s higher interests (Court of Cassation, Challenge No 385 of JY 44, Hearing session dated 24 April 1980). This approach adopted by the Court consists of an “objective” notion of public policy, such that the judge must define public policy based on objective criteria, reflecting general trends of the Egyptian community at a given time (Court of Cassation, Challenge No 10132 of JY 78, Hearing session dated 11 May 2010 and Challenge No 12790 of JY 75, Hearing session dated 22 March 2011).
There is also a distinction between procedural public policy, which relates to the violation of provisions of the law regulating the arbitral process and substantive public policy, which deals with violations of public policy through the process of deciding on the merits of the dispute (Court of Cassation, Challenge No 10132 of JY 78, Hearing session dated 11 May 2010 and Challenge No 12790 of JY 75, Hearing session dated 22 March 2011).
Moreover, the Court of Cassation held that the breach of a mandatory rule does not ex officio or ipso facto qualify as a ground for annulment of an award for a violation of public policy (Court of Cassation, Challenge No 12790 of JY 75, Hearing session dated 22 March 2011).
The EAL does not provide for class-action or group arbitration.
The EAL does not provide for specific ethical codes that apply to counsel and/or arbitrators. However, lawyers are subject to the ethical rules provided under the Advocacy Law No 17 of 1983. Nevertheless, arbitrators and counsel adhere to acceptable professional standards prevailing in practice, unless they are bound by other specific prevailing standards in their own jurisdiction.
The EAL does not address the issue of third-party funding. However, third-party funding may be prohibited in case the funding arrangement is considered as a gambling contract (which is contrary to sharia) and/or if there is counsel funding in the form of champerty.
The EAL does not address the issue of consolidation of separate arbitral proceedings, however, nothing prohibits the parties from agreeing to consolidate separate proceedings, whether directly or indirectly by agreeing to apply institutional arbitration rules permitting so. It is worth noting that the CRCICA Arbitration Rules do not contain any provisions relating to the consolidation of arbitrations, however there are ongoing discussions for the amendment of its rules, to introduce new provisions in relation to multiparty arbitration, multi-contract arbitration and consolidation of arbitral proceedings, as well as expedited procedure rules.
Third parties can be bound by an arbitration agreement in the case of an extension of said arbitration agreement, as explained above in 5.7 Third Parties.
As to arbitral awards, third parties cannot be bound by an award pertaining to a dispute in which they were not a party.
Overview on Egypt
Egypt is located in the heart of the MENA region, attracting foreign direct investment due to its strategic geographical placement, but also due to the available investment opportunities for doing business in many sectors, including but not limited to, construction, transportation, energy and tourism.
A decade "post-revolution" and a year "post-pandemic" have led to a lot of changes witnessed by the executive power, legislative power and the judiciary. The political environment heavily impacted the legal environment.
Here is a snapshot of the Egyptian legal system. Egypt is a civil law jurisdiction, based on a well-established system of codified laws. Arabic is the official language, but English is commonly used in business transactions. The supreme law is the Egyptian Constitution which warrants the fundamental principles of legislation of the Arab Republic of Egypt. Many other specialised codes exist, among which the most important ones are the following:
The major financial authorities/actors in Egypt are: the General Authority for Investments and Free Zones (GAFI); the Financial Regulatory Authority (FRA); the Central Bank of Egypt (CBE); and the Egyptian Stock Exchange (EGX).
As to the courts system, distinction shall be made between the administrative judicial order (administrative courts within the State Council vested with the power to decide over administrative disputes pertaining to administrative contracts and administrative decrees issued by government officials or public law entities), and the ordinary judicial order which is divided into three degrees (the court of cassation, which sits as the apex of the judiciary, courts of appeal and courts of first instance).
There exist specialised courts, such as economic courts, that were established by virtue of Law No 120 of 2008.
Egypt has also signed and ratified many multilateral conventions and bilateral treaties with respect to the promotion of investment and judicial cooperation. Egypt is a party to 100+ Bilateral Investment Treaties (BITs) and is usually pro-active in adhering to regional and international multilateral conventions, such as:
On 15 August 2021, Law No 137 of 2021 amending Law No 48 of 1979 of the Supreme Constitutional Court was passed and published in the Egyptian official Gazette extending the scope of the Supreme Constitutional Court’s control and vesting it with new powers to review the constitutionality of (i) decisions rendered by international organisations and bodies and (ii) foreign court judgments which enforcement is sought against the Egyptian State.
In light of these new powers, the Prime Minister may request the Supreme Constitutional Court to disregard any decision/judgment rendered by an international organisation/body or a foreign court, and the obligations deriving therefrom, when enforcement is sought against the State. The request shall indicate the alleged violated constitutional provision or constitutional court judgment and the nature of said violation. The Court shall promptly rule over said request.
The adoption of these amendments came as a surprise and have spurred a lot of debate over their impact on investing in Egypt and the State's international obligations under the treaties which the State is party to. It remains to be seen whether and to what extent such new powers will be exercised by the Supreme Constitutional Court and in what context.
Moreover, it is worth noting that an earlier draft of Law No 137 of 2021 had also included review of arbitral awards among the new powers vested in the Supreme Constitutional Court. However, this was later excluded, such that the Supreme Constitutional Court will not have jurisdiction to review arbitral awards which remain subject to the traditional review regimes under the Egyptian Arbitral Law No 27 of 1994 and any pertinent applicable international treaties.
Surely the Egyptian State is desirous to attract foreign investment, but this new Law comes at a time when investors were expecting further assurances and protections. Thus, the ramifications of this new Law remain, at the present time, uncertain and unknown.
The Arbitration Legal Framework
Egypt remains a central hub for arbitration practice in the MENA region. The Egyptian legal system constitutes the basis of the region’s respective legal systems. In the same vein, Egyptian court practice and scholarly writings remain a main source of influence over arbitration practice in the region at large.
The Egyptian Arbitration Law No 27 of 1994 (EAL) is principally derived from the UNCITRAL Model Law (1985) with some variations. The EAL addresses all principal aspects of the arbitral proceedings, including the arbitration agreement, issues of arbitrability, the composition of the arbitral tribunal, the challenge of arbitrators, the conduct of the proceedings, the intervention and assistance by national courts throughout the proceedings, the applicable law(s) and the rules pertaining to the award, its annulment and enforcement. The EAL offers a certain flexibility with respect to the choice of procedural rules and warrants fundamental principles, such as treating the parties to an arbitration with equality. The EAL also recognises well-established principles such as the principle of competence-competence and the principle of separability of the arbitration agreement from the main contract.
Egyptian courts are generally viewed as arbitration friendly and are cautious to implement international arbitration trends within the Egyptian legal system. Despite the non-existence of specific courts designated to hear arbitration-related disputes, there have been designated specialised circuits within the competent national courts dealing with arbitration-related matters, where sitting judges are familiar with arbitration matters. The competent national court with respect to matters pertinent to international commercial arbitrations is the Cairo Court of Appeal, unless the parties agree on another appellate court.
There are specific issues worth highlighting with respect to arbitration in administrative contracts. At the outset, the EAL expressly provides that an arbitration agreement included in an administrative contract must be approved by the competent minister, or whoever assumes his/her authority with respect to public entities, and delegation in this regard is prohibited. Such requirement is a matter of public policy and, in the absence of the approval of the competent minister or whoever assumes his/her authority with respect to public entities, the arbitration agreement would be null and void.
Moreover, as of December 2020, Decree No 2592 of 2020 binds ministries, public entities, state-owned companies and companies in which the state participates in any form not to conclude any contracts with foreign investors or enter into contracts including an arbitration clause, and/or amending these contracts without having this first reviewed by the High Committee for Arbitration and International Disputes. The Committee, which is reconstituted every now and then, is entrusted with reviewing and opining on pending international arbitration cases in both commercial and investment cases involving the state, its organs and state-controlled entities. The Decree does not present an obstacle to investor-state arbitration involving Egypt, as it makes express reference to the prevalence of the provisions of the Investment Law, and does not impact any of the valid BITs or multilateral treaties concluded by Egypt.
Arbitral Institutions in Egypt
The leading arbitral institution in Egypt is the Cairo Regional Centre for International Commercial Arbitration (CRCICA), which is an independent non-profit international organisation established in 1979 under the auspices of the Asian African Legal Consultative Organisation. The CRCICA offers other alternative dispute resolution services such as mediation, conciliation and mini-trials. The CRCICA has its own set of arbitration rules (2011) and medication rules (2013) available in three languages: Arabic, English and French. The CRCICA also has many partnerships with other reputable institutions and constantly organises conferences, seminars ‒ and now webinars ‒, and workshops in relation to all services provided by the Centre.
Most recently, as of 1 August 2021, the CRCICA adopted its Dispute Board Rules offering the international business and construction community a cost-effective and impartial dispute resolution method. These rules have been drafted through the guidance of existing institutional rules by renowned experts in the field and are available in English and Arabic languages.
There exist other specialised arbitral institutions such as the Egyptian Settlement and Arbitration Centre for Sports established in 2017 by the Egyptian Olympic Committee; and the Egyptian Centre for Voluntary Arbitration and Settlement of Non-Banking Financial Disputes, whereby Presidential Decree No 335 of 2019 provided for its establishment as an independent body within the FRA in Egypt. On 10 December 2020, the statutes of the Centre, as well as its arbitration and mediation rules, were issued by virtue of Prime Ministerial Decree No 2597 of 2020.
Recent Developments in Arbitration Jurisprudence
Egyptian judges are following trends in international arbitration and incorporating them to the extent possible within the Egyptian legal system. Below are few examples of the Court of Cassation's judgments.
Tendency towards Dispute Avoidance Rather than Dispute Settlement
The Investment Law in Egypt has undergone considerable change and constant development since the enactment of the first Investment Law No 65 of 1971 until the enactment of the current Investment Law No 72 of 2017. The current Investment Law is a result of many lessons learnt throughout the past four decades, whereby Egypt has entered into a considerable number of investment arbitration disputes, be it ICSID arbitration (37 cases against Egypt until June 2021), or other institutional arbitration, or ad hoc arbitration.
The Egyptian legislator has observed all provisions in relation to dispute settlement and has gathered the best practices to ensure a favourable investment climate to investors by granting them preferential treatments. Instead of wasting time and spending colossal sums in arbitrating, the Egyptian state prefers to adopt a dispute-avoidance and amicable-settlement mechanism.
This has been reflected in the provisions of the current Investment Law, such that the reference to ICSID arbitration or any other arbitral institution has been removed, and replaced by the reference to the Egyptian Arbitration and Mediation Centre, which is yet to be established as provided under the Law.
The Investment Law encourages amicable settlement of any dispute through negotiations between the parties at any time, but also reserves the parties’ right to litigation. It allows disputes to be settled in the manner agreed with the investor or pursuant to the provisions of the EAL, and also refers to ad hoc and institutional arbitration as available options. Three committees have been established, namely:
The Impact of the COVID-19 Pandemic
Like any other jurisdiction, the COVID-19 pandemic has accelerated the access to and use of information and communication technologies, in both arbitration and litigation. With respect to arbitration, parties were encouraged to conduct virtual hearings and proceed with cross-examination via videoconferencing tools and platforms. This led to the postponement of some hearings, changes to procedural timetables and delays in the issuance of arbitral awards. However, it was observed that the costs of arbitration have been reduced to some extent, owing to the absence of travel costs, the booking of hearing rooms, as well as expenses in relation to binding and printing of hearing bundles. There were definitely some difficulties at the beginning of the pandemic resulting from the complete shift to online, such as poor internet connection, enabling and disabling the camera and microphone, finding the online platforms, time zone differences etc.
Now, things are much smoother and parties are more used to online platforms, whether used to conduct virtual hearings or attend webinars.
The COVID-19 pandemic has accelerated the Egyptian government's plan to digitalise its services generally, within the legal system and beyond, by gradually offering more online services to the public. There are ongoing discussions between dispute resolution practitioners and the Ministry of Justice as to a possible reform in relation to the digitalisation of judicial proceedings.