CIArb News

The State of Play of Arbitration in the MENA Region

09 Nov 2023

The MENA region is known for its unique specificities in all respects. Stretching from the Atlantic Ocean in the west to the Arabian Sea in the east and from the Mediterranean Sea in the north to the Indian Ocean in the southeast, MENA encompasses Arab, African and Asian jurisdictions, and its diverse legal traditions and cultures influence the region’s international arbitration landscape heavily.

Apart from the relative volatility of the region, MENA is home to constant developments on the legal and judicial fronts. The region is also vibrant with respect to international arbitration, where MENA jurisdictions are parties to numerous multilateral investment and commercial arbitration regional treaties, including, to name a few: the Unified Agreement for the Investment of Arab Capital in the Arab States; the Agreement on Promotion, Protection and Guarantee of Investments Among Member States of the Organisation of the Islamic Conference; and the Riyadh Arab Agreement for Judicial Cooperation.

With respect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (“NYC”), Iraq’s accession on 4 March 2021[1] marks an important milestone, as most countries in the MENA region (except for Libya, Somalia, and Yemen) are parties to the NYC. It is noteworthy that:

  1. Arab countries which acceded to the NYC under both the reciprocity and commerciality reservations are Algeria, Bahrain, Djibouti, Iraq, and Tunisia;
  2. Arab countries which acceded to the NYC under the reciprocity reservation only are Kuwait, Lebanon, Morocco, and Saudi Arabia; and
  3. Arab Countries that acceded to the NYC with no reservations are Comoros, Egypt, Jordan, Mauritania, Oman, Qatar, Sudan, Syria, Palestine, and UAE.

Furthermore, save for Libya, most countries in MENA are contracting states to the Washington Convention of 1965, which created the International Centre for Settlement of Investment Disputes (ICSID).

Overall, and throughout the MENA region, arbitration remains the preferred means for resolving commercial and investment disputes, especially for private sector players and foreign investors. However, arbitration in transactions and disputes involving states, state organs and/or state-owned enterprises is usually subject to varying restrictions and challenges that are jurisdiction-specific.

It is in this spirit that the present overview aims to shed light on some of the recent legislative and judicial trends that reflect the state of play in one of the most important regions in the world.  

1. Legislative Highlights

UAE’s Arbitration Law Amendments

Most recently, the UAE amended its Arbitration Law (Law No. 6 of 2018) through Law No. 15 of 2023, effective since September 2023. These changes aim to bolster the UAE’s position as a global arbitration hub, focusing on Articles 10, 23, 28, 33 and adding a new Article 10 (bis).

Most significantly, the amendments to Article 10 address the requisite criteria arbitrators should meet, focusing on the notions of independence, neutrality and impartiality of arbitrators, adding an express description of the direct relationship prohibited between an arbitrator and the parties to the arbitration. Also, the amendments address the prohibition of arbitrator appointment of members of an arbitral institution’s board of trustees and administrative apparatus, extending such prohibition to members of the executive management of an arbitral institution. This is subject, however, to regulated exceptions set out in Article 10 (bis) allowing for arbitrator appointment of members of the board of directors or board of trustees, and the likes in supervisory bodies of arbitral institutions entrusted with administering the arbitral proceedings “in the state”.[2]

Notably, the newly added Article 10 (bis) stipulates in paragraph (2) that Top of Formnon-compliance shall result in the annulment of the arbitral award and creates a right for the parties to pursue a claim for “any civil damages” against the respective arbitral institution according to the laws in force “in the state”.

In terms of administering arbitral proceedings, Article 28 was amended to empower parties to choose the format of the proceedings (physically/virtually) through means of modern technology or “in technical media/mediums” in a connotation for the “metaverse” as potentially being the next evolutionary phase of the online world. Moreover, the amendments include an “obligation” on arbitral institutions to avail the necessary means of technology and technical media “[…] according to the technical standards and parameters applicable in the State”. In addition, the amended Article 33 extended the confidentiality of arbitration to the proceedings in their entirety.

Saudi Arabia’s New Civil Code

In Saudi Arabia, which had already enacted its modern arbitration law in 2012 and its arbitration executive regulations in 2017, the most recent legislative change is the enactment of the Saudi Civil Code through Royal Decree No. 191 of 1444H in June 2023, which signifies a historic legal transformation. It takes effect on 16 December 2023, in line with Saudi Arabia’s Vision 2030, fostering investment, economic growth, and legal development across the MENA region for a more interconnected future.

The Saudi Civil Code represents a colossal legislative development, marking a significant transformation in Saudi Arabia’s legal landscape. Before this law, contractual relationships were primarily guided by uncodified principles of Islamic Shariah, derived from the Quran, Hadiths and other sources of Islamic Shariah rules. This new Saudi Civil Code will no doubt assist arbitral tribunals when ascertaining substantive principles of Saudi law insofar as the latter is the lex causae governing the merits of the parties’ dispute.

Libya’s New Arbitration Law

Libya’s new Commercial Arbitration Law No. 10 of 2023, published in July 2023, represents a significant legal milestone in Libya’s history. It aims to align with international best practices, foster economic growth and induce trust in the judicial system. Of particular note is its pioneering approach to online arbitration in Chapter 8, marking an important innovation in the Arab world’s dispute resolution landscape.[3]

Morocco’s New Arbitration Law

Morocco’s new Arbitration and Mediation Code promulgated by Law No. 95-17, published in the Official Gazette on 13 June 2022, marks another significant step towards a more modern legal framework aligned with international standards. This legislation aims to attract new investments and enhance Morocco’s appeal to international businesses.[4] The Moroccan Code of Civil Procedure of 1974 continues to apply to arbitration agreements and arbitral proceedings existing to the date of enactment of the new Arbitration Act [Article 103]. 

A standout feature is Article 3(2), which redefines a written arbitration agreement, allowing it to be established through a party’s submission uncontested by the other party. Article 64(2) is equally noteworthy and unique, as it seeks to discourage frivolous setting-aside applications by permitting the Court of Appeal to order the applicant to pay compensation to the other party, not less than 25% of the awarded amount, if the application proves to be unequivocally abusive.

Egypt’s update to the rules in place for agreeing to arbitrate or arbitrating with entities involving any “element” of the “State.”

Prime Ministerial Decree No. 3218 of 2022 was issued to expand further the powers of the “High Committee for Arbitration and International Disputes” (the “Committee”) presided by the Prime Minister, which was established by PM Decree No. 1062 of 2019, as amended by PM Decree No. 2592 of 2020.[5] In addition to its already broad scope, this Committee is now responsible for reviewing, drafting and approving any contracts with a foreign investor, or any contracts including an arbitration agreement, or any amendments to such contract, or any procedure entailing termination or rescission of such contracts.

The entities addressed by the said decree are “administrative authorities, inter alia, Ministries, Public Authorities, Governmental Bodies and affiliated entities, corporations affiliated to the State or where the State is a shareholder in any manner”. The Committee is granted broad powers to intervene in how the said entities may prosecute arbitral proceedings or settle the underlying disputes, where these entities are prohibited from taking any step without referring to the Committee.[6]

2. Recent Judicial Rulings and Trends

Egypt

The Egyptian Court of Cassation upheld an arbitral award applying the CRCICA rules for arbitrator challenges. The appellant sought annulment, contending that the competent court should have adjudicated the challenge instead of the arbitral institution. The Court dismissed this argument, stating that adherence to the applicable institutional rules did not violate public policy as long as the institution observed the adversarial principles and the right to defence.[7]

In another recent case, the Court of Cassation has, for the first time ever, annulled an ICC arbitral award, which was deemed by the Supreme Court to have violated Egyptian public policy by deciding on the validity of an administrative decision. This was perceived as an encroachment on the jurisdiction of administrative judiciary of the State Council (Conseil d’Etat),[8] which is exclusively entrusted with the competence to consider the validity of administrative decisions/decrees.  

In the widely published Al Kharafi v. Libya case, the Egyptian Court of Cassation finally reversed the Cairo Court of Appeal’s decision and upheld the arbitral award. The Court clarified that a nullity action is not an appeal, and annulment courts cannot conduct a de novo review of the merits. Hence, errors in the tribunal’s assessment do not justify annulment.[9]

Kuwait

In 2021, the Kuwaiti Court of Cassation ruled that a ‘back-to-back’ low-tier subcontract did not automatically incorporate disputes arising thereunder in the main subcontract’s arbitration agreement. The Court stressed that extending the arbitration agreement to the low-tier subcontract needed explicit consent from the parties.[10]

UAE

In January 2022, the Abu Dhabi Court of Cassation annulled an arbitral award because the arbitrator did not disclose a conflict of interest. This arbitrator had accepted the appointment without revealing their previous employment with the claimant’s legal representative’s firm.[11]

3. Arbitration Seats in the Arab World

In the 2020 ICC Dispute Resolution Statistics, Dubai, UAE, was the sixth most chosen seat within the MENA, selected 20 times by the parties and fixed seven times by the ICC Court.[12] Meanwhile, Doha, Qatar, ranked seventh among the top choices and was selected 17 times by the parties and fixed five times by the ICC Court, making it the second preferred seat in the MENA.[13] In 2022, the UAE was selected as a seat in no less than 21 cases, and Qatar was selected as a seat in no less than 11 cases.

Notably, in 2022, parties to six LCIA arbitrations selected Qatar as both the seat and applicable law, while the UAE was chosen as seat twice in LCIA arbitrations.[14]

It should also be noted that not all cases involving Arab parties are seated in the MENA region. There are numerous cases involving Arab parties from some Arab jurisdictions like Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, and the United Arab Emirates, which involve proceedings seated abroad, including in Paris, London, Geneva and Singapore.

By and large, the MENA region remains a very busy hub for international arbitration, and this is destined to continue and grow given the ongoing giga projects in the construction, energy, sports and entertainment sectors. This, for example, includes the Neom and Red Sea Global projects in Saudi Arabia, Lusail City in Qatar, the Administrative Capital in Egypt, the Palm Jebel Ali, the new floating vertical city and the World Islands in the UAE, to name a few.

About the author:  Prof. Dr. Mohamed S. Abdel Wahab C.Arb FCIArb is recognised as a world leader in dispute resolution. He is an arbitrator and arbitration practitioner with considerable expertise and experience in international investment and international commercial arbitration, Islamic Sharīʿah, construction, oil & gas, telecommunications, finance and online dispute resolution.   He is the Founding Partner and Head of Arbitration Group, Zulficar and Partners, and Professor of International Arbitration, Private International Law and English Contract Law at Cairo University. Mohamed is the course director of Ciarb’s Diploma in International Commercial Arbitration and Ciarb’s Deputy President.

[1] See https://www.newyorkconvention.org/news/iraq+accedes+to+the+new+york+convention last visited 21 October 2023.

[2] The conditions require that:
(i) The rules of the institution do not prohibit such appointment;
(ii) The relevant institution has a governance system in place to ensure the separation of duties and impartiality, and to prevent conflicts of interest;
(iii) The arbitrator is not a sole arbitrator or a president of the arbitral tribunal;
(iv) The parties acknowledge in writing their knowledge of the arbitrator’s position and raise no objections to the appointment;
(v) The relevant institution has a reporting system in place for any wrongdoing of the arbitrators;
(vi) The number of cases on which the arbitrator is appointed does not exceed five cases per year;
(vii) The arbitrator shall submit a letter of undertaking not to exploit their capacity in a manner that may create a conflict of interest, and to refrain from influencing the proceedings (such as through voting or deliberations); and (viii) Other conditions set by the arbitral institution are satisfied. (Article 10 bis of the UAE 2018 Federal Arbitration Law (as amended))

[3] See Articles 65-83 of Law No. 10 of 2023, which pertain to online arbitration. It is also worth noting that Chapter 9 of said law regulates the rules or requirements for establishing arbitral institutions in Libya.    

[4] See Ali Bougrine, Clémence Lemétais d’Ormesson and Fabien Gagnerot, “Morocco”, in GAR’s Middle Eastern and African Arbitration Review 2023, p. 176. 

[5] Prior to PM Decree No. 2592 of 2020, the name of that committee was the “High Committee for Studying and Opining on International Arbitration Cases.” 

[6] Pursuant to Article 2 of PM Decree No. 1062 of 2019 (as amended), the Committee has, inter alia, the following powers: (i) Approve expert firms and arbitrators adequate to the nature of each dispute; (ii) Approve law firms to be engaged to defend the Egyptian State; (iii) Provide advice and opinion on the pleadings submitted in all arbitration cases; (iv) Assess the status of arbitration cases and the expected position as to the awards rendered therein; (v) Determine the vision on how solid and appropriate the defense and documents submitted are, and propose any additions or changes the Committee sees to improve the Egyptian position; (vi) Provide all legal assistance which may be needed by the State Lawsuit Authority or the law firms engaged for the defense before arbitral tribunals; (vii) Approve the fees and expenses and other costs and financials necessary to face international arbitration disputes; and (viii) Propose amicable settlement with other parties if necessary.

[7] See Egyptian Court of Cassation, Challenge No. 1681 of JY 91, hearing session dated 16 February 2022.

[8] See Damietta Port Authority v. DIPCO, Egyptian Court of Cassation, Challenges Nos. 1964 & 1968 of JY 91, hearing session dated 8 July 2021.

[9] See Egyptian Court of Cassation, Challenge No. 12262 of JY 90, hearing session dated 24 June 2021. It is worth noting that prior to the Court of Cassation’s decision, the Cairo Court of Appeal decided to set aside the arbitral award for breach of the public policy rule of proportionality in the assessment of damages. The Cairo Court of Appeal considered that the arbitral tribunal awarded an exorbitant compensation that is exaggerated beyond the actual harm sustained by Al Kharafi (See Cairo Court of Appeal, Appeal No. 39 of JY 130, hearing session dated 3 June 2020).

[10] See Kuwaiti Court of Cassation, Challenges No. 3784, 3980 of 2019 Commercial Circuit No. 4, dated 27 May 2021, cited in Ahmed Barakat, Ibrahim Sattout and Adnan Jaafar, “Kuwait”, in GAR’s Middle Eastern and African Arbitration Review 2023, p. 152. 

[11] See Joanne Strain and Parnika Chaturvedi, “United Arab Emirates”, in GAR’s Middle Eastern and African Arbitration Review 2023, p. 255. 

[12] See 2020 ICC Dispute Resolution Statistics published in 2021, p. 16, available at https://jusmundi.com/en/document/pdf/publication/en-2020-icc-dispute-resolution-statistics.

[13] See 2020 ICC Dispute Resolution Statistics published in 2021, p. 30, available at https://jusmundi.com/en/document/pdf/publication/en-2020-icc-dispute-resolution-statistics.

[14] See LCIA Annual Casework Report 2022, p. 17, available at https://www.lcia.org/News/lcia-news-annual-report-on-2022-updates-on-the-lcia-court-and.aspx

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