The Sudanese Arbitration Act 2016 (the “Arbitration Act”) is applicable to both international and domestic arbitration. Generally speaking, international arbitration is prevalent when one party or both parties to the arbitration are foreigners. The main business areas where international arbitration is prevalent are oil, infrastructure, mining and construction.
However, it should be noted that Sudan was subject to USA and other sanctions from 1993, as a result of which there was a sharp drop in the number of foreign investors investing in the country, with the exception of the above industries, and hence there was a limited number of international arbitration cases. These sanctions were lifted recently, and there is potential for an increased number of foreign investors coming to the country.
Domestic parties prefer litigation as method of dispute resolution; however, arbitration is chosen for dispute resolution in contracts between sophisticated local businesses when the contract value is relatively high. An area where there is significant referral to domestic arbitration is banking, due to the fact that there is legislation which makes it mandatory to refer disputes regarding assets mortgaged to banks to arbitration (The Sale of Assets Mortgaged to Banks Act 1990).
International arbitration is used mainly as the chosen means of dispute resolution by the parties in their contracts, when referred to arbitration by a court upon agreement of the parties to a dispute, as well as the method of dispute resolution or for enforcement of foreign arbitral awards.
Due to restrictions associated with the COVID-19 pandemic, especially travel restrictions, there was drop in arbitration-related activities. Also there was a change in communications regarding arbitration as there was more resort to virtual communication.
As already mentioned, the industries which witness international arbitration cases more than others are oil, infrastructure, mining and construction. The reason is that the contracts in these industries are mainly with foreign companies which prefer to resort to international arbitration for dispute resolution. The majority of these contracts being with the government, foreign companies prefer international arbitration for reasons such as the negative perception by multinationals towards local courts in developing countries including delays in dispute resolution, the perception that international arbitrations are conducted in an impartial and neutral manner, and the fact that foreign arbitration awards are enforceable by Sudanese courts.
It would not be easy to detect whether there has been an increase or decrease of international arbitration cases in 2020–21 as a result of the COVID-19 pandemic, due to the limited number of international arbitration cases and the relatively long time the parties take before reaching the point of resorting to arbitration.
The arbitral institutions most used for international arbitration in Sudan are the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA) and UNCITRAL. Recently, the Dubai International Arbitration Centre has been used, though in a limited manner.
In Sudan there are no recognised institutions for international arbitration, and only a few small centres for domestic arbitration.
However, theoretically a window for a wider range of international arbitration institutions is available for foreign investors in Sudan whether under various investment protection treaties to which Sudan is party, or under the Investment Act 2021, which gives the foreign investor the option to refer any dispute regarding its investment in Sudan to a specialised court or to resort to whichever is applicable from the following investment agreements (to all of which Sudan is party): (i) the Unified Agreement for the Investment of Arab Capital in Arab States 1980; (ii) the Agreement for Settlement of Investment Disputes among Arab States 1974; (iii) the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965; (iv) the General Agreement for Economic, Technical and Commercial Co-operation among Member States of the Organization of the Islamic Conference 1977; or indeed to any other relevant agreement to which Sudan is party.
For international arbitrations the court designated to hear disputes related to arbitration is the Khartoum General Court unless the parties agree on another General Court in Sudan as the court to hear the dispute, and for domestic arbitrations it is the competent court (which is the court which would have jurisdiction over the dispute if it had not been referred to arbitration). However, for a dispute regarding the annulment (setting aside) of an arbitration award, the Court of Appeal is designated to hear the case.
Law Governing Arbitration
The national legislation which governs international arbitration is the Arbitration Act 2016. The same legislation governs domestic arbitration as well. Section 7 of the Arbitration Act provides that an arbitration is categorised as “international” if: (i) the main centres of the businesses of the parties to the arbitration are in two different countries; and(ii) the subject matter of the arbitration is related to more than one country.
Divergence from UNCITRAL Model Law
Broadly speaking, it can be said that there are several areas where the Arbitration Act diverges from the UNCITRAL Model Law. The main areas of divergence are as follows.
There have been no significant changes to the national arbitration law in the past year. From our private contacts, we learned that there are ongoing discussions over changes to the law such that the arbitration law would be more in line with the UNCITRAL Model Law.
For any arbitration agreement to be enforceable in Sudan, it must satisfy the basic requirements for enforceability of contracts, which are provided for in the Civil Transactions Act 1984, namely capacity of the parties to contract, validity of the contract, and compliance with any form required by law.
Under Section 42 of the Arbitration Act, causes for annulment of an arbitration award include, inter alia, if the arbitration agreement was (i) non-existent, (ii) void, or (iii) voidable, (iv) its term has expired, or (v) a party was under incapacity under the law governing such party’s capacity.
Section 8 of the Arbitration Act requires that an arbitration agreement must be in writing, otherwise it will be considered void. Correspondence between the parties through various communication means would be considered as writing. Under Section 10 (1) agreement among parties to a dispute before a court to refer their dispute to arbitration would be considered as an agreement made in writing.
In Mohamed Abdalla Mohamed Effendi v Terhaga Engineering Trading Limited, SC/CA/5/2003, the Supreme Court ruled that an agreement to arbitrate must be clear and unambiguous, and may not be inferred from reading between the lines; accordingly, an agreement to appoint an expert to examine accounts would not be considered an agreement to refer to arbitration.
The Arbitration Act limits arbitration to civil transactions, whether contractual or otherwise; however, it excludes any matter regarding which no conciliation (sulh) can be made. In Sudanese law (the Civil Transactions Act 1984), conciliation is defined as a contract whereby a dispute is resolved and litigation ceases between the contracting parties in a mutual manner. Under Islamic Shari’a, which must be respected in all legal aspects, there are certain matters which cannot be the subject of conciliation, such as personal status matters.
Another matter which the Supreme Court (in Flatco International Engineering v Amer Mohamed Ibrahim, SC/CA/645/2009) ruled as not referable to arbitration is a dispute regarding an employment contract between an employer and an individual employee, as distinct from a collective agreement, which the Sudanese labour law has permitted to be referred to arbitration.
Sudanese courts respect the law governing the arbitration agreement. The courts enforce arbitration agreements, which are usually enforced once an application for enforcement has been made and the court is satisfied that there was ground for enforcement.
In Sas Building and Construction Company v Abdelfatah Abdelmo’ati Mohamed, SC/CA/1053/2008, the court referred the parties to arbitration because there was an arbitration clause in the contract between the parties. An arbitration agreement was prepared by the arbitrators; however, it was not signed by one of the parties. The award was challenged on the basis, inter alia, that it was not made within three months as stipulated in the arbitration agreement. The court took the view that even if an arbitration agreement becomes void due to the tribunal’s failure to deliver an award within the agreed time frame, non-validity would not extend to the arbitration clause which did not fix a time frame for delivery of award, and hence the six months’ term in the law would prevail, and as the award was delivered within the term fixed by law, the award shall stand. On the same basis, if an arbitration clause under a contract is invalid because it did not set out the matters which would be the subject of arbitration, such matters can be determined later by the parties’ agreement.
An arbitration clause will be considered valid even if the rest of the contract in which it is contained is invalid. The courts apply the rule of separability to arbitration clauses contained in invalid agreements.
Section 6 (2) of the Arbitration Act provides that an arbitration clause shall be considered an agreement independent from the other terms of the contract, and the invalidity or termination of the contract shall not have any effect on the arbitration clause in the contract.
The parties are free to appoint the arbitrators. However, under Section 12 of the Arbitration Act, the number of arbitrators shall be either one or a higher odd number; if the parties fail to agree, their number shall be three.
If the parties’ chosen method of selecting arbitrators fails, Section 14 of the Arbitration Act provides that in the case of an arbitration with more than one arbitrator each party shall appoint a similar number of arbitrators, and the arbitrators shall agree on the chairman or on how to appoint the chairman. If a party refuses or fails to appoint, or if the arbitrators fail to agree on a chairman, such appointment shall be made by the competent court at the request of a party, and its decision shall be final. In the case of an arbitration with one arbitrator, the parties shall choose him or agree on the mechanism for his appointment, otherwise the competent court shall appoint him at the request of a party.
Section 14 (2) of the Arbitration Act provides that if a party fails to appoint an arbitrator, or if the arbitrators appointed by the parties fail to appoint a chairman, such appointment shall be made by the competent court upon the application of a party, and the court’s decision shall be final. There are no limitations on the competent court’s power to appoint.
Under Section 16 of the Arbitration Act, a party may challenge an arbitrator if: (i) there arise circumstances which give rise to serious doubts regarding his impartiality or independence; (ii) the arbitrator becomes incapable of conducting arbitration proceedings, or he refrains from or discontinues from conducting the proceedings in such a manner as to cause unjustifiable delay in the proceedings and the parties cannot agree on removing him. Subject to the above, a party may not challenge an arbitrator appointed by it or in whose appointment it has participated, except for reasons it becomes aware of after the appointment was made.
Section 15 of the Arbitration Act requires an arbitrator: (i) to agree to act as arbitrator in writing; (ii) to disclose, in writing, any interest he may have or any circumstance which may raise doubts as to his impartiality and independence, such disclosure to be made at the time of appointment or at any later time.
In Sudan Cotton Company v Metcot International Trade Limited 674/2014, one of the reasons why the arbitration award was set aside was the fact that one of the arbitrators had acted as lawyer of a party and as such had given advice on the subject matter of the dispute.
As discussed in 3.2 Arbitrability, any matter regarding which no conciliation (sulh) can be made is excluded from arbitration. Based on court precedents, an employment contract (as distinct from a collective labour agreement) may not be referred to arbitration.
Section 6 (1) (b) of the Arbitration Act provides that the arbitral tribunal shall rule on any challenge as regards the tribunal’s jurisdiction; hence, Sudanese law recognises the principle of competence-competence.
The Arbitration Act is silent regarding any reference to courts on the decision of an arbitral tribunal under Section 6, which provides that in case a party challenges the tribunal’s jurisdiction on the basis that the arbitration agreement does not exist, is void or does not cover the subject of the dispute, the arbitral tribunal shall make a ruling on jurisdiction before hearing the case.
The author is not aware of any case where Sudanese courts have reviewed a negative ruling on jurisdiction by an arbitral tribunal.
As explained, because the parties may not challenge the decision of an arbitral tribunal on its jurisdiction before the courts, there is no time limit for such action.
Generally speaking, it can be said that the standard of judicial review is deferential. Sudanese courts generally support arbitration proceedings; only in the case of setting aside an arbitration award may a party refer the dispute to the competent court.
Sudanese courts are directed to suspend proceedings if brought in breach of an arbitration agreement. Section 9 of the Arbitration Act provides that the court before which a dispute has been brought regarding which there is an arbitration agreement must dismiss the case for lack of jurisdiction if the respondent challenges the court's jurisdiction before or at the time of making its response to the statement of claim, otherwise the respondent shall be considered as having waived its right to challenge based on the arbitration clause.
There is no express provision in Sudanese law which allows an arbitral tribunal to assume jurisdiction over individuals or entities that are neither party to an arbitration agreement nor signatories to a contract containing an arbitration agreement.
An arbitral tribunal is permitted to award preliminary or interim relief, and such relief is binding. If the relief is required prior to the arbitrators’ appointment, it can be sought from the competent court. Section 11 of the Arbitration Act provides that any of the parties may request interim relief from the competent court before the tribunal is formed or from the tribunal after its formation. The competent court or the arbitral tribunal, as the case may be, shall make its orders pursuant to the interim relief provisions in the Civil Procedures Act 1983, and its decision shall be final. Such orders shall be enforced by the competent court pursuant to the provisions of the Civil Procedures Act 1983, and its enforcement order shall be final.
The types of preliminary measures which a court, or an arbitral tribunal, can grant are as outlined in the Civil Procedures Act 1983, Sections 139 to 156 (inclusive). These measures include: (i) power to arrest the respondent if there are grounds to suspect that he is about to leave Sudan, or dispose of or remove his property, pending his provision of a deposit or guarantee; (ii) power to attach property; (ii) injunction against waste, damage or alienation of property in dispute; (iii) injunction against breach of contract or cause of injury; and (iv) appointment of receiver for the property in dispute.
An injunction directed against a company shall be binding also on all its members and officials for whose personal acts the injunction is intended.
Relief in Aid of Foreign Arbitration
As regards whether the courts in Sudan can grant interim relief in aid of foreign-seated arbitrations, there is at least one precedent, albeit before the current Arbitration Act and its predecessor the Arbitration Act 2005, where the Court of Appeal ordered the freezing of certain payments due to a foreign entity with no domicile or residence in Sudan, pending the outcome of a foreign-seated arbitration (Mo Myson Group of Companies v Domen Anderman Reven, CA/CA/276/1981). In this case the court both exercised jurisdiction and referred the case to international arbitration despite the objection of the respondent that the court lacked jurisdiction in light of the governing law clause which provided for a foreign law as the governing law, and took the interim measure of freezing money.
There are no rules regarding emergency arbitrators in Sudanese law.
The law allows the courts and/or the arbitral tribunal to order security for costs. Section 155 of the Civil Procedures Act 1983 provides that the court may prescribe not to issue the warrant/order requested unless the claimant pays into court such amount of money as the court may deem sufficient to cover the cost.
Under Section 21 of the Arbitration Act, the arbitral tribunal is directed to apply the substantive and procedural laws as agreed by the parties in the arbitration agreement or arbitration clause. In the absence of such agreement, the arbitral tribunal shall apply the procedural and substantial rules which it deems suitable in the law which is most related to the subject matter of the arbitration, provided the parties are treated on an equal footing.
Certain procedural steps are required by law under the Arbitration Act.
The powers and duties which the Sudanese law imposes upon arbitrators are as follows.
There are no specific qualifications or other requirements in order for a legal representative to appear in arbitral proceedings.
Legal representation before courts is regulated by the Advocacy Act 1983. The law requires certain qualifications including a degree in law and undergoing professional training for the granting of an advocacy licence. A licensed advocate must be Sudanese; exceptionally, a foreign lawyer may be licensed on the basis of reciprocity and he can appear with a domestic advocate. These rules are applicable to domestic court proceedings.
There are no specific rules regarding collection and submission of evidence at the pleading stage and at the hearing, such as discovery, disclosure, privilege, use of witness statements and cross-examination. However, in theory all these evidential approaches may be used.
The main legislation regarding rules of evidence applicable in Sudan is the Evidence Act 1994. However, this Act expressly provides that it is not applicable in cases of arbitration or conciliation unless the parties agree for it to be applicable.
There are no specific legislative provisions regarding rules of evidence applicable to arbitral proceedings in the absence of the parties’ agreement to apply the Sudanese domestic evidence rules. This is left to the arbitral tribunal under Section 21 of the Arbitration Act, which provides that in case the parties have not agreed on the substantial or procedural laws governing the arbitration, the arbitral tribunal shall determine such laws.
Section 28 of the Arbitration Act provides that a party may request the arbitral tribunal to summon any witness to be heard or any third party to present evidence. The arbitral tribunal, if it considers it necessary, shall refer such request to the competent court, which shall enforce such request within the limits of its own jurisdiction.
The law is silent regarding whether the arbitral tribunal can take such action on its own motion without the request of a party.
There are no specific rules regarding confidentiality of arbitral proceedings or their constituent parts. However, in practice, the arbitral proceedings and their constituent parts, such as pleadings, documents and the award, are usually kept confidential. A case where parts of such proceedings may become public is where a challenge arises before the courts regarding any aspect of the arbitration, and the ruling of the court is published.
Legal Requirements for an Award
Section 34 of the Arbitration Act provides the requirements for an arbitral award. The arbitral award must be (i) in writing, (ii) reasoned, (iii) dated, and (iv) signed by the arbitrators or the majority of the arbitral tribunal, and (v) the dissenting opinion, if any, shall be recorded in a separate document.
Under Section 33 of the Arbitration Act, the award shall be delivered during the time frame agreed by the parties, and within six months if no such agreement exists. However, if no award is delivered within the time frames stated above, the parties may agree on a time extension, and in the case of disagreement between the parties the extension can be determined by the arbitral tribunal, which decision shall be final. Section 35 (d) of the Arbitration Act provides that arbitration proceedings terminate, inter alia, upon the expiry of the time fixed for the arbitration.
In Sudan Cotton Company v Metcot International Trade Company Limited 674/2014, the Supreme Court decided to set aside the arbitration award for several reasons including, inter alia, that the award was delivered after the expiry of the time fixed by law (six months) in the absence of parties’ agreement on a time frame for the proceedings.
Generally speaking, there are no legal provisions limiting the types of remedies an arbitral tribunal may award. Under Section 31 of the Arbitration Act, the arbitral tribunal shall take into consideration the terms of the contract, the subject of the dispute and the customs prevailing in the relevant industry. A reason for which an arbitral award may be set aside in Section 42 is if the award disregards the applicable law under the arbitration agreement or if it includes points not within the arbitration agreement. We have already seen that Section 25 of the Arbitration Act requires that the parties’ submissions shall include their respective claims. Accordingly, it may be said that the remedies awarded should fall within one or more of the following: (i) the parties’ claims; (ii) the contract, the subject of the arbitration and the arbitration agreement; (iii) the law applicable to the arbitration; (iv) the customs prevailing in the relevant industry.
In Sudan, interest would be considered illegal and unenforceable, because Section 110 of the Civil Procedures Act 1983 provides that a court in Sudan shall under no circumstance whatsoever make a decree ordering payment of interest on the principal sum adjudged, and also because the dominant view in Islamic legal literature is that any interest would be considered as usury (riba) disallowed under Islamic Shari'a rules, and it is our view that a Sudanese court would follow such view because Sudanese courts are directed to follow Islamic Shari'a. Further, there is at least one Sudanese precedent where the Supreme Court rejected a claim for payment of interest due to late payment under a contract, holding that pursuant to Section 110 of the Civil Procedures Act 1983 payment of interest shall not be made under any circumstance whatsoever, and that this rule is a matter of public order. Invalidity would be limited to the interest only, and would not extend to the principal debt. A recent legislation introduced in May 2021 has excluded “financial and banking business adopting the conventional system” from this ban. Accordingly, if an award contains payment of interest, Sudanese courts would not enforce the part of the award on interest, except if the underlying transaction that is the subject of arbitration is regarding financial or banking business adopting the conventional, as opposed to Islamic, system of finance.
As regards legal costs, the general rule under the Civil Procedures Act 1983 is that the cost shall be borne by the party against whom the judgment is made, unless the court decides otherwise. In practice, in arbitration cases a “costs follow the event” approach is followed.
An arbitration award is final, binding and shall be executed automatically or upon written application to the competent court (Section 41 of the Arbitration Act).
The only ground to appeal an arbitration award to courts is under Section 42 of the Arbitration Act and only on the ground of annulment (setting aside) of the award for one of the following reasons, namely:
Application for nullity shall be made to the court of appeal, which may annul an award on its own motion if the award is contrary to public order in Sudan. Application shall be made within two weeks from the date when the applicant became aware of the award, or the date when the award was declared if the applicant was given proper notice but failed to appear.
The general rule followed by Sudanese courts is that the parties cannot bar a court from exercising its jurisdiction, such exercise being a matter of public policy. Accordingly, despite the fact that the law is silent as regards whether the parties can agree to exclude or expand the scope of appeal or challenge an award, in light of the above general rule, the courts would not allow such exclusion or expansion.
If an arbitration award is set aside, the dispute may be referred to the competent court at the request of a party (Section 45 of the Arbitration Act).
In 2018, Sudan acceded to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and thus became the 159th Contracting State to this Convention. On 26 March 2018, Sudan deposited its instrument of accession to the Convention with the UN Secretary General, and in accordance with Article XII (2) of the Convention, the Convention entered into force in Sudan on 24 June 2018.
Under Section 41 of the Arbitration Act, an arbitration award shall be enforced by the competent court if not complied with voluntarily.
Section 47 of the Arbitration Act sets out the requirements for enforcing an arbitration award as follows.
If an award has been set aside by the courts in the seat of arbitration, it cannot be enforced in the courts of Sudan, because one of the conditions for enforcement of foreign arbitration awards under Section 48 of the Arbitration Act is that the award must become final in accordance with the laws of the seat of arbitration. No application for enforcement would be accepted by the court pending a resolution of the proceedings at the seat of arbitration.
Enforcement against the Government
The Civil Procedures Act 1983 provides that no court proceedings against any governmental agency may commence except after giving two months’ notice to the Minister of Justice, unless the Minister of Justice gives permission to start proceedings before the expiry of the two-month period. In Sudanese Telecommunications Company v The Postal and Telegram Public Corporation, SC/CA/382/2002, the Supreme Court held that no arbitration award against a government agency may be filed with a court for enforcement except after complying with the above requirement of giving notice to the Minister of Justice.
Sovereign immunity is regulated under the Privileges and Immunities Act 1956, which provides for privileges and immunities of diplomatic missions and members thereof, including immunity against civil and criminal cases. Sudan is a signatory to the Vienna Convention on Diplomatic Relations, and generally speaking the Sudanese courts would recognise the doctrine of sovereign and diplomatic immunity as a principle of public international law. However, as international arbitration normally regards commercial matters, which are not included within the scope of immunities in international law, there would be no room for a state or state entity to successfully raise a defence of sovereign immunity at the enforcement stage, unless the award is against a diplomatic mission based in Sudan and not the state itself.
Generally speaking, the general approach of the Sudanese courts towards the recognition and enforcement of arbitration awards is positive. A main ground for refusing enforcement is the public policy ground. As we have already seen in 12.2 Enforcement Procedure, under Section 47 of the Arbitration Act, one of the conditions for enforcement of an international arbitration award in Sudan is that the award shall not contain any matter which is contrary to public order in Sudan. The standard applied as regards refusing enforcement of an award is domestic public policy.
In Sudan Cotton Company v Metcot International Trade Company Limited 674/2014, the court decided to set aside the arbitration award for several reasons including that the subject matter of the arbitration was at the time of the proceedings under criminal investigation, and as such the arbitration proceedings were in violation of public order, because the criminal law system is designed for the purpose of protecting the interests of society at large, whereas civil proceedings are for the protection of the private interests of individuals.
Section 49 of the Arbitration Act provides that an order by the competent court for enforcement of an arbitration award is not appealable. However, the Supreme Court did allow an appeal because the competent court interfered in the arbitral award by deducting tax from the amount awarded (Sas Building and Construction Limited v Zhang Construction Limited, SC/CA/2032/2016).
The Arbitration Act does not provide for class-action arbitration or group arbitration.
Under the Sudanese Labour Act 1997, a dispute between an employer and all or a group of its employees (ie, collective agreement) shall be referred to arbitration if such dispute could not be resolved through negotiation or conciliation. This is a special arbitration regime for which the Labour Act 1997 sets specific rules.
There are no specific ethical codes or other professional standards applicable to arbitrators, other than the general rules in the Arbitration Act regarding impartiality, independence and duty of disclosure of interest. As regards counsel, the Advocacy Act 1983 sets certain rules including: to exert maximum effort for the client’s interest; to be bound by the rule of confidentiality; not to provide legal service to the client’s opponent; not to buy the disputed rights directly or indirectly; the fees not to be a percentage or part of the disputed right or the outcome of the case; and return of documents, files and property to the client upon termination of the engagement.
In Sudan, there are no specific rules or restrictions on third-party funding. As regards counsel, we have seen that the Advocacy Act 1983 prohibits that the legal fee be agreed as a percentage or part of the disputed right or related to the outcome of the case.
The Arbitration Act is silent regarding consolidation of separate arbitration proceedings. However, in theory, it can be argued that consolidation should be possible if the parties so agree and no third party’s interest is affected as a result.
There is no provision in Sudan law as to third parties being bound by an arbitration agreement or award, or for the courts to bind foreign third parties.
Historically, arbitration in Sudan used to be regulated by a few sections of the Civil Procedures Act 1983 and its predecessors. The first legislation governing arbitration, whether domestic or international, was the Arbitration Act 2005, which was repealed and replaced by the current Arbitration Act 2016.
Under the Sudanese Arbitration Act 2016, an arbitration is considered “international” if: (i) the main centres of the businesses of the parties to the arbitration are in two different countries; (ii) the subject matter of the arbitration is related to more than one country.
So far, there have been relatively few international arbitration cases in Sudan. This is due to the fact that Sudan was under severe US and other sanctions, and thus isolated to a large extent from international trade activities, and international investors were, to a large extent, blocked from investing in the country with the exception of limited investments by Chinese, Malaysian and Indian companies in the oil industry, and Turkish and Gulf companies in construction, agriculture and other sectors. Most international arbitration cases were related to governmental contracts in the few business areas where international companies had such contracts with governmental entities, such as oil, infrastructure, mining and construction.
Currently, Sudan is undergoing major transformation both economically and politically. In 2019, following a popular uprising, a transitional government succeeded President Omar Al-Bashir's regime, which was the cause of the sanctions and international isolation. The current transitional government has ambitious plans for economic reform and restoring peace after many years of civil war. Recently, US Treasury OFAC sanctions were lifted and Sudan’s name was lifted from the US State Sponsor of Terrorism status list. The transitional government’s efforts to secure debt relief for Sudan through the HIPC initiative proved to be successful; recently the World Bank’s International Development Association (IDA) and the International Monetary Fund (IMF) have determined that Sudan has taken the necessary steps to begin receiving debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. Sudan is the 38th country to reach this milestone, known as the HIPC Decision Point. Sudan’s external public debt will be dramatically reduced/cancelled, and the door is open to enable the country have access to financial resources.
These are welcome developments in a country suffering from acute economic problems, underinvestment and huge external debts.
As part of the transitional government’s legal and regulatory reform, it has introduced certain legislation such as:
Current Arbitration Law
The main legislation governing arbitration (both domestic and international) in Sudan is the Arbitration Act 2016 (the “Arbitration Act”). This Act was the focus of controversy among Sudanese lawyers upon its inception, and the controversy is still going on. The main criticism of the Act is that it is not in line with the UNCITRAL Model Law on International Commercial Arbitration, and thus foreign investors would not look upon it favourably.
Another point of criticism is that it has left the door open for prolonged appeals in the event of a challenge to an international arbitration award. The Act provides for certain grounds to apply for setting aside an arbitration award (what is called in Sudan an action of annulment). Under the previous law (the Arbitration Act 2005) such an application was a one-step procedure: once the competent court had decided on the application, its decision was final. In Faisal Islamic Bank v Othman Ismael Mousa (SC/CA/86/2007; REV/21/2008), the Supreme Court held that an annulment case under the Arbitration Act 2005 was not intended to be subject to the applicable appeal rules under the civil procedures law, because an aim of arbitration proceedings is to shorten the time and scope of disputes.
Under the current Act, application for annulment shall be submitted to the Court of Appeal; however, a newly introduced provision allows for appeal against the decision of the Court of Appeal. Appeals from the Court of Appeal are submitted to the Supreme Court. Decisions of the Supreme Court are open to further appeal by way of an application to review on grounds of violation of Islamic law. Theoretically, a further appeal to the Constitutional Court on grounds of violation of constitutional rights may be made. These appeals can be used tactically to delay execution of arbitration awards.
A counterargument against this criticism could be that opening the door for multiple appeals is important to ensure justice, by allowing higher courts to oversee the rulings of lower courts.
Yet another point of criticism of the Arbitration Act is that it sets fixed figures as arbitrators’ fees in case such fees had not been determined under the arbitration agreement/clause. The fees in the form of a scale based on the amount disputed are in a schedule attached to the Arbitration Act. With the ongoing deterioration of the Sudanese currency against other currencies, the figures in the schedule are very low and would discourage experienced arbitrators from participating in an arbitration where the arbitrators’ fees are based on the schedule.
Interest as Part of Award
Another point which raises concern when a foreign arbitration award is sought to be enforced in Sudan is that any fixed-rate interest ruled as part of the award would be considered illegal and unenforceable in Sudan, because Section 110 of the Civil Procedures Act 1983 provides that a court in Sudan shall under no circumstance whatsoever make a decree ordering payment of interest on the principal sum adjudged, and also because the dominant view in Islamic law literature is that interest would be considered as usury (riba) disallowed under Islamic Shari'a rules, which Sudanese courts are directed to follow. Invalidity would be limited to the interest only, and would not extend to the principal debt.
However, under the recent legislation referred to above which is designed to make conventional banking permissible side by side with Islamic banking (which was, prior to this legislation, the only banking system permissible in Sudan), Section 110 has been amended to exclude “financial and banking business in accordance with the conventional system” from the application of this section. It could be argued that such exclusion shall extend to cases of enforcement of arbitration (or at least international arbitration) awards in Sudan, so as to make it permissible to enforce arbitration awards including interest. However, one would expect counterarguments on the basis that allowing interest would constitute violation of Islamic law, which is considered a primary source of law in the country, and that it was not a wise step by the transitional government to open the door for exclusions in the first place.
Potential Trends in International Arbitration
If the efforts of the government succeed, whether as regards economic reform, regulatory reform or political stabilisation of the country, the expectation is that the country will witness a gradual inflow of international investors. Sudan is rich in natural resources, and the potential is high for foreign investments in certain areas such as agriculture, livestock, tourism, mining, and oil and gas. Also, the country is in dire need of developing its poor infrastructure, its banking and financial service sector, and other areas of economic activities, all of which could be targets for foreign investment. The above laws are mainly designed to encourage inflow of foreign investments into these and other industries.
Typically, contracts with foreign investors provide for dispute resolution through international arbitration. The Investment Act provides for settlement of disputes involving foreign investors under one of a host of international and regional treaties to which Sudan is signatory. The Act provides that in the case of a dispute regarding an investment, such dispute shall be referred to a specialised court unless the parties agree to refer it to arbitration or reconciliation, except disputes governed by one of the following treaties to which Sudan is signatory, namely: (i) the Unified Agreement for the Investment of Arab Capital in Arab States 1980, (ii) the Agreement for Settlement of Investment Disputes among Arab States 1974, (iii) the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965, (iv) the General Agreement for Economic, Technical and Commercial Co-operation among Member States of the Organization of the Islamic Conference 1977, and (v) any other agreement to which Sudan is party.
Recently Sudan acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 and thus became the 159th Contracting State to this Convention. Also Sudan is Contracting Party to the Riyadh Arab Agreement for Judicial Cooperation 1983, which regulates recognition and enforcement of arbitration awards and court judgments among Contracting Parties. This Convention is signed by 18 Arab countries.
Local Law: a Case for Reform?
The fact that Sudan is party to these international and regional agreements, all of which adopt international arbitration as the main mechanism for resolution of disputes involving foreign investors whether as regards arbitration proceedings or enforcement of international arbitral awards, is a welcome development. However, a question which may be asked is: are the rules of Sudanese domestic arbitration law sufficient to give the foreign investor the comfort he or she is seeking when planning to invest in Sudan?
It can be argued that there are certain areas where the Sudanese domestic arbitration law is less favourable to foreign investors compared with the UNCITRAL Model Law, such as the limited scope and maybe uncertainty regarding preliminary measures before Sudanese courts in arbitrations conducted outside Sudan, the wider scope of intervention by local courts in arbitration proceedings under the domestic law, the local law’s requirement to suspend proceedings pending resolution of a challenge to an arbitrator, and to decide on a case of challenge of jurisdiction as a preliminary question. These and other points are in addition to the points already discussed regarding compromising the finality of arbitral awards in the case of several-stage appeals in an annulment case, and the non-enforceability of interest if made as part of an arbitration award.
Based on the above points, it can be argued that the Sudanese arbitration law should be reformed so as to remove these contradictions with the Model Law. On the other hand, I have seen an argument that it is advisable not to, in all cases, just follow the Model Law and similar model laws recommended by international agencies, because these model laws are designed primarily in a manner favourable to the protection of the interests of multinational corporations, ignoring the interests of developing countries such as Sudan.
In order to decide which argument to follow, policymakers in Sudan need to find a balance between encouraging foreign investors to invest in the country even at the expense of damaging certain elements of national interest (supposing the counterargument is correct) and sticking to safeguarding the country’s interest at the expense of discouraging foreign investors from coming to the country.
As regards multiplicity of appeals, there is a good ground to argue in favour of going back to the rule under the old law, which allowed for a one-stage application for annulment cases. Again here, a balance needs to be found between the aim of the parties to arbitration in seeking speedy resolution of their disputes and ensuring justice by allowing several levels of appeal in cases seeking the setting aside of arbitration awards.
As regards making interest enforceable, namely the fact that the current government has taken a liberal approach by excluding banking and financial services from the prohibition of interest, it can be argued that such exclusion shall be extended to foreign arbitration awards sought to be enforced in Sudan. Here the balance to be struck is between favourable treatment of foreign investors, who would expect to be allowed a mechanism for calculating compensation for breach of contract or delay in performance or payment through interest, and sticking to rules on the basis of being in line with the teachings of Islamic law.
As regards arbitrators’ fees fixed in a schedule to the Arbitration Act, the schedule can simply be deleted, and the fees left to agreement between the arbitrators and the parties to the arbitration.