International Investment Arbitration

Lessons from Developments in the MENA Region

Mohamed A.M. Ismail

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9781409463634
• eBook ISBN: 9781317114062
• Edition: 1
• Topic: Law
• Subtopic: International Trade Law
• Index: Law

Arbitration is the most common mechanism for disputes' settlement in developing countries. Following the move to free market economies, arbitration will play an increasingly fundamental role in order to protect foreign investors in the Middle East and North African Region (MENA). This book examines the pulse and dynamics of international investment arbitration and the new era of mediation in state contracts in the region. The author explores the harmonization of international arbitration and the sensitive issue of le Contrat Administratif in Middle East civil law countries. The volume also discusses the pivotal role of international organizations such as UNCTAD and ICSID in codifying fair and prompt mechanisms for dispute settlement. Using Latin American countries as a prime example of how international legislative instruments serve international investment law principles and comparing Latin American experiences where appropriate, the book demonstrates how lessons can be learned in respect of alternative dispute resolution, international commercial arbitration and investor-states arbitration. It provides suggestions and recommendations for the future and includes useful appendices detailing recent worldwide trends, regional and international instruments in the arbitration world.

Chapter 1
Middle Eastern Legal Systems: An Overview

Introduction

After the First World War and the signing of the Sykes-Picot agreement in 1916 between the United Kingdom and France, the Arab Middle Eastern and North African (MENA) countries were divided into British and French Colonies. This led to the flow of English and French legal culture into the region although Egypt, which had been a British colony since 1882, continued to be influenced by English culture in general. There was minor diversity between other Arab countries, too: for example, the Maghreb countries (Tunisia, Algeria and Morocco) in North Africa were directly influenced by French culture and language whereas the Gulf States completely escaped French influence as they were British colonies. The French influence on the Arab civil codes began to become apparent in the late 1940s and early 1950s. Egypt codified its civil code in 1948 and, later, its code of civil and commercial procedures. Both codes were based on the French Napoleonic Code for, although Egypt was a British colony until 1952, it was greatly influenced by French legal culture. The influence of the French Napoleonic Code then spread from Egypt to all Arab countries which, in turn, codified their civil codes in accordance with the Egyptian experience. Libya, Syria, Lebanon, Sudan, Kuwait, Bahrain, Morocco, Algeria, Tunisia, Iraq, Yemen and other Arab legal systems were directly influenced by the codification, doctrine and practice of the Egyptian Civil Code. At that time, Arab countries did not recognize any other method of dispute settlement except litigation and national courts. Arbitration as a dispute settlement mechanism in international business transactions was neither codified nor recognized in Arab legislations, and the same applied to alternative dispute resolution (ADR) mechanisms. International disputes or investor–state disputes had to be scrutinized by the national courts.

The scope of research in this book covers those Arab Middle Eastern states that currently recognize ADR, commercial arbitration and investment arbitration. Both the international commercial arbitration process and foreign investors are facing various challenges in the Middle East despite the forces of globalization from Anglo-American jurisdictions to the Middle Eastern civil law legal culture.

The rise of arbitration, whether domestic or international, began in the light of the codes of civil and commercial procedures in the Arab region. In Egypt, Syria, Lebanon, Iraq, Libya, Tunisia, Algeria, Morocco, Kuwait, Oman, UAE, Bahrain, Qatar and other Arab countries, codes of civil and commercial procedures played a significant role before these countries codified arbitration acts. Saudi Arabia codified its arbitration act in the early 1980s on the basis of Sharia’a law, and a new Saudi arbitration act was promulgated in 2012. Egypt was the first country to be greatly influenced by the UNCITRAL Model Law of 1985, its arbitration act being promulgated in 1994, before the UNCITRAL Model Law amendments of 2006. Oman promulgated its arbitration act in 1997 and was greatly influenced by the UNCITRAL Model Law and the Egyptian arbitration act of 1994. Jordan promulgated a modernized and liberalized arbitration act in 2001 and, later, Bahrain, Morocco, Libya, Algeria and Sudan followed suit. Some of them were influenced by the UNCITRAL Model Law, and a few countries were influenced by the French arbitration act. Other Arab countries, such as Kuwait and the UAE, incorporated the arbitration legal regime, whether domestic or international, in codes of civil and commercial procedures. A liberal and modern draft of arbitration law has been prepared in the UAE and is on its way to being promulgated.

The institutionalization of the arbitral process in the MENA states began when the Cairo Regional Centre for International Commercial Arbitration (CRCICA) was established in 1979 under the auspices of the Asian-African Legal Consultative Organization (AALCO) and became the leading arbitral institution in the MENA region. Following the CRCICA, many other regional centres were founded in the area, such as the Dubai International Arbitration Centre (DIAC) and the Bahrain Chamber for Dispute Resolution in co-operation with the American Arbitration Association (BCDR-AAA).

It is worth mentioning that, for decades, the CRCICA has played a significant role in codifying the Egyptian arbitration act of 1994, which was followed by other arbitration acts in the MENA region. Before the codification of arbitration legislations in the region, it also played a unique role in the institutionalization of the arbitration process, whether domestic or international. Today, the CRCICA has a reputation in the international arbitration community as an impartial and independent arbitral institution, which is not subject to the influence of any Arab state government. Further, the organization has institutionalized other alternative dispute resolution mechanisms in its rules, which are well recognized in Arab arbitration practice. It also hosts practice and educational branches of international institutions such as the UK Chartered Institute of Arbitrators. Nowadays, DIAC is making a significant contribution to the institutionalization, modernization and liberalization of arbitration in the region, and the BCDR-AAA is playing an increasing part in the ADR and arbitration process. Both institutions are playing a pivotal role as arbitral institutions in the MENA region, particularly in the Gulf States.

In past centuries Arab legislation was based on Sharia’a law or Fiqh. Sharia’a law included a legal and religious framework relating to arbitration, particularly in family law and practice. Historically, the law in most Arab countries has been a combination of Sharia’a law and European laws. The legal and judicial system, particularly in Egypt, was influenced by the combination of Sharia’a law and European laws.1

The legal framework of the arbitration system in Egypt used to be a combination of Sharia’a law and French laws. Later, during Egypt’s First Republic after July 1952, it was influenced by the socialist arbitration system. In the last decade of the twentieth century, particularly after 1994, arbitration law and practice in Egypt were influenced, to a great extent, by the United Nations Commission on International Trade Law (UNCITRAL) Model Law.2

The Middle East: A Special Case in the International Legal Order

It is appropriate at this stage to refer to the leading role of the Ottoman Empire in the MENA region centuries ago, which persisted until the region came under the control of British and French imperialism. The Ottoman Empire ruled the Arab countries through Islamic Sharia’a law, and the legal and judicial systems in those countries applied this law. The main sources of Sharia’a law are the Qur’an and the Sunnah.

The Arab world was divided into British and French colonies during the late nineteenth and early twentieth centuries, as the Ottoman Empire began to decline. This division of the MENA region has diversified its character in many respects. Certainly, the region still retains its Eastern conservative character with regard to family laws, despite the forces of cultural and legal globalization which are reshaping new patterns of dispute resolution that were not previously recognized in the MENA region.3 The Arab judiciary has a unique history, and it used to reject any form of parallel dispute resolution, particularly when states were involved in disputes. New forms of dispute resolution appeared in the second half of the twentieth century as a result of influence by social trends, particularly arbitration in state contracts. Whereas the division of the Middle East into French and British colonies had a minor influence on legal cultures in various Arab countries, France had a considerable influence on the language and some social and cultural habits in the Maghreb countries (Tunisia, Algeria and Morocco). This French cultural influence is not apparent in Egypt and the Gulf States. Nevertheless, the public law systems in all Arab countries, including Egypt, Morocco, Algeria, Libya, Kuwait, Oman and other Arab states are influenced by the French legal system. These countries have written constitutions and were greatly influenced by the French system, not only in terms of civil codes, but also in constitutional law and administrative law. Some countries, such as Egypt and Morocco, have dual judicial systems like the French system – that is, they have ordinary civil, commercial and criminal courts and an independent Conseil d’Etat (State Council) for administrative disputes. Among these administrative disputes are investor–state disputes according to the Contrat Administratif theory and practice.4 Pursuant to the Egyptian constitution the Conseil d’Etat is an independent judicial authority and an essential part of the judicial authority in Egypt. It is widely respected in the regional Arab legal and judicial community as it is one of the guarantors of democracy in Egypt, protecting human rights, liberties and domestic and foreign investments through the state contracts courts circuit. The Administrative Courts in Morocco also play a pivotal role in judicial life as it has been maintaining liberties for decades. Both the Egyptian and Moroccan Administrative Courts were greatly influenced by the French Conseil d’Etat and both play a parallel role in supporting arbitral processes involving states in the MENA region, particularly investor–state arbitration. Despite their differences in terms of cultural influence – the British on Egypt, the French on the three Maghreb countries and, to a lesser extent, the British on the Gulf States – all Arab countries adopted Napoleonic civil codes. Investor–state arbitration is utilized to deal with disputes that have a connection with public and private international law, whether bilateral investment treaties (BITs) or proceedings which come before arbitration or national courts. International arbitration is a method of dispute resolution that involves a complex interconnection of private and public international law.5 It combines both the elements of traditional litigation customarily attributed to Contrat Administratif and private commercial dispute resolution with an international dimension of both private and public international law. Much of this book will focus on processes and systems that are fairly familiar to dispute resolution academics and practitioners.

The MENA region has now begun to recognize international arbitration and other international ADR processes. Initially, this was through the codes of civil and commercial procedures, but in the last two decades, some Arab states have promulgated arbitration acts, although they have not codified ADR mechanisms. ADR mechanisms are currently institutionalized through the regional arbitral institutions which codified ADR techniques through CRCICA and BCDR-AAA rules.

Civil Law Codification and the Influence of the French Civil Napoleonic Codes

Arab civil codes are based on Napoleonic codes. This is related to the historical circumstances that characterized the region’s legal order. After the Arab revolutions in the 1950s and 1960s, a new era of political, constitutional and legal order began. Legal experts from Egypt started to codify civil codes for Arab countries based on the Egyptian legislature and on the French Napoleonic Code. The same applied to the Arab codes of civil and commercial procedures, which spread from the Egyptian legislation to the MENA countries.

Cultural, Economic, Social and Geographical Diversity in the MENA Countries

Egypt’s cultural influence on the Middle East began around 7,000 years ago when Egypt rose to be the leading civilization in the Middle East and the world. In the twentieth century cultural, moral and legal concepts again began to flow from Egypt to the Arab region in a similar fashion to the spread of modern globalization. Lebanon, Syria and the Maghreb countries played a significant part in this process. Experts from Egypt, such as Dr El Sanhory,6 played a leading role in codifying most of the Arab civil codes. In the early 1950s this flow from Egyptian legal culture to the region played a fundamental role in reshaping the region’s legal order after centuries of applying Sharia’a law as the main source of legislation and litigation. After the codification of Arab civil codes, new patterns of international commercial transactions were created in the region. Until the mid-twentieth century, the MENA region did not recognize ADR or arbitration as dispute settlement mechanisms.

Meanwhile, the economic factor favoured the oil- and gas-rich Gulf States. The infrastructure revolution started early in the Gulf countries, during the second half of the twentieth century, after the discovery of huge oil and gas reservoirs in the Gulf. In parallel to the huge infrastructure projects and developments in the Gulf, there was a considerable revolution in all economic sectors, particularly during the last 50 years. Telecommunication, health, education, civil aviation, ports, energy...

Table of contents

• Cover
• Title Page
• Dedication
• Copyright Page
• Table of Contents
• List of Figures
• About the Author
• Foreword
• Preface
• Acknowledgements
• List of Abbreviations and Terms
• 1 Middle Eastern Legal Systems: An Overview
• 2 International Commercial Arbitration in the MENA Region
• 3 Harmonizing International Arbitration and ‘Le Contrat Administratif’ Constraints in the MENA Region with Special Reference to Egypt (Egyptian Case Study)
• 4 International Investment Arbitration in the MENA Region
• 5 Arbitration and Bilateral Investment Treaties (BITs) in the MENA Region
• 6 ICSID Arbitration Practice in the MENA Region
• 7 Conclusions
• Annex I: Arab Arbitration Acts
• Annex II: Arab BITs with the Developed World
• Annex III: ICSID Arbitration Rules
• Bibliography
• Index