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Editorial

The Egyptian Arbitration Law

April 2007 - Crime. Legal Developments by Kosheri, Rashed & Riad .

More articles by this firm.

THE EGYPTIAN ARBITRATION LAW Egypt introduced its first specific Arbitration Law in 1994 by adopting the UNCITRAL Model Law with very limited modifications. 

This Arbitration Law No. 27 of 1994 - as amended - applies to all arbitrations conducted inside Egypt and to international commercial arbitrations conducted abroad if the parties agree to submit them to the provisions of this Arbitration Law, with the possibility of obtaining assistance from the Judicial Courts to implement any arbitration agreement, to secure the proper functioning of the procedures, as well as for the enforcement of the awards rendered there-under.  As for the awards rendered abroad, they are enforceable under the New York Convention of 1958 to which Egypt adhered since 1958 and which applies in its entirety without exceptions. In this respect, it is should be noted that the request for enforcement of Arbitral Awards rendered in Egypt becomes admissible only after the expiration of the period required for lodging an annulment plea; i.e.: that the requesting party has to wait 90 days before submitting the request for enforcement in front of the competent Court which is in principle the Cairo Court of Appeal (the relevant Articles of the Arbitration Law are annexed to this Article).  COURTS DECISIONS ON ARBITRATION  The following Courts judgments are relevant in respect of legal actions for annulment of Arbitral Awards, that were brought before Egyptian Courts: 1-     The Cairo Court of Appeal's Decision on March 19, 1997 in the Commercial Case No. 64 of the 113th judicial year: The Court of Appeal rendered an important judgment in this Case concerning the legality of arbitration in disputes relating to Egyptian Administrative Contracts, and the Court indicated that the agreement to refer disputes relating to administrative contracts to arbitration was perfectly legal for the following reasons: Â·                    Article 1 of the Arbitration Law provides that it applies to "all arbitrations between Public Law or Private Law persons whatever the nature of the legal relationship around which the dispute revolves ..." and in view of the fact that this text clearly allows for an agreement to arbitrate, even when one of the parties is a governmental entity and whatever is the nature of the dispute.  Therefore, there is no basis for the claim of nullity of the Arbitration Clauses in administrative contracts. The Court added here that this is also confirmed by review of the explanatory note of the Arbitration Law, the report of the concerned committee of the Egyptian People's Assembly, and by the discussions relating to the Arbitration Law, all of which confirm that arbitration in administrative contracts is legal under Egyptian Law. Â·                    The objection that Article 10 of the Counsel of State's Law No. 47 of 1977 provides that only the Courts of the Counsel of State are competent to judge the disputes relating to administrative contracts, does not stand because this provision aims at regulating the division of competences between the Counsel of State and the normal courts and not at prevention of arbitration in disputes relating to administrative contracts. This is specially so if we take into consideration that Article 58 of the Counsel of States Law provides for the obligation of all Ministries, Public Authorities and Public Departments to obtain the opinion of the competent Advice Department of the Counsel of State before concluding an arbitration agreement or the enforcement of an arbitral award valued at more than 5000 Egyptian Pounds". Â·                    Article 3 of the Law promulgating the Arbitration Law provides that: "any provision contrary to the provision of this law is repealed", and this would include Article 10 of the Counsel of States Law No. 47 of 1977. Â·                    There is no basis for relying on Article 172 of the Egyptian Constitution in order to ascertain that arbitration is not allowed for in administrative contracts, because this Article refers to the Counsel of State in its capacity as a part of the judicial authorities and it aims at dividing the competences between the Counsel of State and the civil courts as aforesaid. In addition, nobody can claim that providing for the competence of the Courts in general to view certain disputes means that arbitration concerning those disputes is prohibited. Â·                    The Court of Appeal also reminded that contrary to the French Civil Law (Article 2060) the Egyptian Civil Law does not contain any Article prohibiting arbitration in relation to governmental entities. The Court of Appeal noted that even French Law allows for International Arbitration in administrative contracts disputes. Â·                    The Court of Appeal reiterated that the Governmental Authority's claim that the Arbitration Clause in an administrative Contract was null and void despite being signed by this same Governmental Authority, is not only illegal, but is equally contrary to the principle of the necessity to execute the obligations in good faith whether in civil or in administrative contracts. Finally, the Court of Appeal added that such claim was also contrary to the agreed upon rules relating to International Commercial Arbitration, that the State or the Governmental Authority can not refrain from applying an Arbitration Clause contained in its own contracts by relying on local legislative constraints and that adoption of the opposite view would also affect the confidence that must prevail in their dealings with other parties and also negatively affect needed foreign investments. Due to the importance of the issue of the arbitrability of administrative contracts, the legislator intervened and passed Law No. 9 of 1997 which provided that the concerned minister or whoever may replace him has to approve the arbitration agreement in administrative contracts related to his ministry.      2-     The Cairo Court of appeal’s Decision on December 31, 1997 in the Case No. 62 of the 113 Judicial Year: The Court of Appeal rendered a judgment which indicated -inter alia- that Article 23 of the Arbitration Law provided that: "the Arbitral Clause is deemed to be an agreement that is independent from the other conditions of the contracts and that nullity, rescission or termination of the contract shall not affect the arbitral clause therein provided such clause is valid per se" and the Court decided therefore in the Case under review that nullity, rescission or termination of the Contract does not have any effect on the Arbitral Clause under consideration. 3-    The Egyptian Court of Cassation rendered an important judgment on March 1, 1999 in Recourse no 10350 of the 65th judicial year, which mentioned that the Egyptian law on procedures – in its chapter relating to the execution of foreign judgments, orders and official documents – provides that foreign treaties between Egypt and foreign states concerning the execution of foreign judgments, orders and official documents shall have to apply, and as Egypt has adhered to the 1958 Convention on the Recognition and enforcement of foreign Arbitral Awards, therefore, this Convention legally becomes one of the laws of the state and is applicable even if it contradicts the Egyptian law on Arbitration in civil and Commercial Matters. 4-     The Cairo Court of Appeal's Decision on May 5, 1999 in the Case No. 41 of the 114 Judicial year: One of the reasons for the appeal in this case was that the arbitration award subject of the appeal was null and void because it allowed for an interest over the maximum ceiling imposed by Law - as maximum rate of public order in accordance to Egyptian Law -. The Court of Appeal mentioned in this Case, that Article 39 (4) of the Arbitration Law provides that:                 "The Arbitral Panel may, if it has been expressly empowered to act as an "amiable compositeur" by agreement between the two parties to the arbitration, adjudicate the merits of the dispute according to the Rules of Justice and Equity without being bound by the provisions of Law."  And the Court of Appeal added that in view of the above there is no contradiction to public order -in this case- if the arbitral panel decides that the interest rate mentioned in its judgment- is consistent with the rules of justice and equity, even if this interest rate is over the maximum allowed for by Law, because this judgment is based upon the agreement of the Parties to apply the Rules of Justice and Equity and not the provisions of the Law. 5-       The Cairo Court of Appeal rendered a judgment on July 20, 1999 in the Appeal no 7 of the 116th judicial year, Arbitration which mentioned that the standards of motivation in arbitral judgments are totally different from those of the judicial courts’ judgments, for the following reasons: Â·                    The judicial courts are constituted of judges contrary to the arbitral tribunals which may include non lawyers arbitrators. Therefore, it would be difficult to apply to their judgments the standards of motivation applied to the judgments of the judicial courts.  Â·                    The Egyptian Arbitration Law allows the parties of the arbitration to agree that the arbitral judgments be passed without need for their motivation, which is contrary to the judicial courts’ judgments which have to be motivated. Â·                    The Arbitration Law provides that the arbitral judgment has to contain certain data including the motivation if mentioning them is necessary, and this means that the legislator’s intention is to limit this motivation to the necessary minimum, whilst the rule is that the judicial judgments are null and void if they are not fully motivated. Â·                    The arbitral judgments are not subject to appeal contrary to the judicial judgments6-     The Cairo Court of Appeal’s Decision of December 24, 2000 in the Case No. 59 of the 117th Judicial Year:        The judgment rendered in this Case confirmed that, according to the Arbitration Law no. 27 of 1994, the parties of the arbitration have to conduct it in the Arabic language unless the parties agree otherwise or unless the Arbitral panel decides otherwise. 7-     The Cairo Court in Appeal’s decision of March 12, 2001 in the Case No. 49 of the 117th judicial year. The judgment of this Case provided that the Arbitrator has to ensure respect of the basic guarantees of litigation which are a necessary precondition of good justice.  8-     The Cairo Court in Appeal’s decision on February 5, 2002 in the case no. 39 of the 117th judicial year. The Judgment of this Case emphasized that Arbitration in a summary dispute is not allowed, because the Arbitration must put a final end to the dispute in such a manner as to ensure that it may not be subject to further review before the Courts or before an Arbitral panel.  9-     The Cairo Court of Appeal rendered a judgment on February 26, 2003 in the recourse no. 23 of the 119th judgment year, which stated that the Egyptian judiciary has no jurisdiction to view the actions for nullity of foreign arbitral judgments as long as the parties have not agreed to subject the arbitration to the Egyptian Arbitration in civil and commercial matters law no. 27 of 1994. In other words, if the parties agree to hold the arbitration outside Egypt – without subjecting it to the Egyptian Arbitration law – then this would result in subjecting the arbitration to the law of another state in accordance to its procedures or to the procedures they agree to apply.  The judgment added that Article 3 of the 1958 New York Convention on the Recognition and enforcement of Foreign Arbitral judgments – which Egypt has adhered to- has obliged the adhering States to recognize the arbitral judgments that are rendered outside their territory and to execute them in accordance to the rules of procedures applicable in their territory.  Article 5/1/5 of this Convention prohibits the refusal to recognize or to execute the above mentioned arbitral judgments except in certain specific cases. Hence, this Convention linked the foreign arbitral judgments to the legal system of the state where they are rendered and approved the rule of the exclusive jurisdiction of the Courts of this State to view the actions for nullity of those judgments.Therefore, the Courts of the other states may not reconsider such judgments from the angle of their correctness or nullity, and all that it can do – if recognition of the foreign judgment or its execution is requested – is to refuse it on the basis of its own law or on the basis of the New York Convention as the case may be, without such a refusal having any effect on the value of the judgment subject of the request.        10-      The Cairo Court of Appeal’s decision of March 20, 2003 in the Case No 111 of the 118th judicial year.                        The court decided to annul an arbitral judgment which applied the Civil Code to a dispute concerning banking operations instead of the relevant Banking Law. In other words, the court believes that the misapplication of the particular governing law is a valid reason for annulment of an arbitrational award.  11-   The Cairo Court of Appeal rendered a judgment on July 27, 2003 in the recourse no. 12 of the 120th judicial year, which mentioned that arbitration is an exceptional way of solving disputes, that the agreement of the parties to resort to arbitration is the basis of the authority of the arbitrators to decide on the disputes, therefore, the arbitration agreement has to be restrictively interpreted in relation of the disputes subject of the arbitration, and one of the results of this restrictive interpretation is that the arbitration agreement that limits the authority of the arbitrators to decide upon the disputes relating to the interpretation or to the execution of a Contract, does not allow the arbitrators to decide on disputes that are based upon the extra contractual responsibility (i.e. tort) or on the nullity of the Contract or on its termination. 12-   The Cairo Court of Appeal rendered a judgment on the May 26, 2004 in the recourse no. 66 of the 120th judicial year, which stated that the action for the nullity of the arbitral judgment is not an appeal, therefore, it does not allow for review of the substance of the dispute. In other words, the judge in the nullity case may not review the arbitral judgment in order to evaluate whether it is opportune, or whether the appreciation of the arbitrators was right, or whether they were right or wrong in understanding the facts and their results or in their interpretation and application of the law, because all of this is part of the competence of the judge of the appeal. It is enough – unless the parties decide otherwise- that the arbitral judgment contains its motives, meaning that it answers the claims of parties and their main pleas, and thereafter the content of this answer, or whether it is opportune or right is not important in law or fact, because – as aforesaid– the action for nullity is not a recourse for appeal, and the contradictions in the motives of the arbitral judgments are not a case for its nullity, and is not equivalent with the inexistence of motives in the arbitral judgment. 13- On June 26, 2005 the North Cairo Court of First instance decided to terminate the tasks of an arbitrator in accordance to Article 20 of the Egyptian law on Arbitration in Civil and Commercial matters, on the basis that the arbitrator who was appointed by the respondent in the arbitration ceased fulfilling his tasks without an acceptable excuse, which is contrary to the need for expediency in rendering judgments in Arbitral cases.    14-   The issue of the judicial control of the constitutionality of Laws and Regulations is exclusively entrusted in Egypt to its Supreme Constitutional Court.        This Court passed a judgment on November 6, 1999 in the Case No. 84 of the 19 Judicial Year, which directly bears on the subject of the Constitutionality of Article 19 of the Arbitration Law which provides in its Sub-clause 1 that the arbitral panel decides on the request for its own challenge. The Plaintiff in this Case had previously requested the challenge of an arbitral panel, which was determining a dispute in which the plaintiff was a party and the arbitral panel has rejected his request.  The Plaintiff then brought the Case before the Supreme Constitutional Court and alleged that allowing the arbitral panel to decide upon challenge of its members contravenes the necessity of neutrality that is guaranteed by the Constitution for those engaged in the judiciary activity. Therefore, it is contrary to the basic principle of equality before the Law provided in the Constitution. The Supreme Constitutional Court in this Case mentioned the judicial nature of arbitration that is based upon a voluntary agreement between its parties and which results in negation of the right of the judiciary to review the disputes subject to arbitration. The Supreme Constitutional Court reminded that the right to challenge the arbitrator is linked to the basic rights of litigation that are necessary for all judicial actions and is also closely linked to the right to litigate provided in the Constitution, that necessitates independence and impartiality, in the authority that dispenses justice. The Supreme Constitutional Court then stressed that Article 69 of the Constitution guarantees the right of defense as a cornerstone of the rule of Law and that subjection of the State to the Law means that its legislation may not encroach upon the rights and guarantees which are considered in democratic states as the basis for the existence of the rule of Law. The Supreme Constitutional Court finally stated that the Article subject of the recourse allowed the arbitral panel the right to decide upon its own challenge, that this is contrary to the values of justice and to the principle of impartiality of the judicial act in favor of one category of litigants and to the detriment of another and is therefore unconstitutional for contravening articles 40, 65, 67, 68 and 79 of the Constitution which guarantee equality before the Law, subjection of the State to the Law, the right of defense and the right of litigation. Finally, the Supreme Constitutional Court has constantly ruled that the right of the parties to go to arbitration is totally left to their will.  Furthermore, the Court ruled several times – the most recent decision was on May 11, 2003 – that any legislative Article that makes mandatory on the parties to go to arbitration is unconstitutional.  Needless to say, the Cairo Court of Appeal followed the mentioned judgments in its decision of the March 20, 2003 in the Case No. 72 for the 118th judicial year. The above are some of the important decisions rendered by Egyptian Courts with regard to the Arbitration Law, which we hope, will help understand the evolution that is taking place in Egypt in the field of Arbitration.


ANNEX (1) TRANSLATED BY KOSHERI, RASHED & RIAD  Law No. 27 for 1994 as amended Promulgating the Law concerningArbitration in Civil and

Commercial Matters

 Articles 52 to 58  *     Part VINullity of the Arbitral Award  Article (52) 1.     Arbitral awards rendered in accordance with the provisions of the present Law may not be challenged by any of the means of recourse provided for in the Code of Civil and Commercial Procedures. 2.     An action for the nullity of the arbitration award may be instituted in accordance with the provisions of t[1]he following two articles.


Article (53) 1.     An action for the nullity of the arbitral award cannot be admitted except for the following causes:         a)             If there is no arbitration agreement, if it was void, voidable or its duration had elapsed;         b)             If either party to the arbitration agreement was at the time of the conclusion of the arbitration agreement fully or partially incapacitated according to the law governing its legal capacity;         c)             If either party to arbitration was unable to submit its defense as a result of not being duly notified of the appointment of an arbitrator, of the arbitral proceedings, or for any other reason beyond its control;         d)             If the arbitral award excluded the application of the Law agreed upon by the parties to govern the subject matter in dispute;         e)             If the composition of the arbitral panel or the appointment of the arbitrators had been undertaken in violation of the Law or contrary to the parties' agreement;         f)              If the arbitral award dealt with matters not falling within the scope of the arbitration agreement or exceeding the limits of this agreement.  However, in the case when matters falling within the scope of the arbitration can be separated from the part of the award, which contains matters not included within the scope of the arbitration, the nullity affects exclusively the latter parts only;         g)             If the arbitral award itself or the arbitration procedures affecting the award contain a legal violation that causes nullity. 2.     The court adjudicating the action for nullity; shall ipso jure annul the arbitral award if it contains violation of the public order in the Arab Republic of Egypt. Article (54)  1.     The action for nullity of the arbitral award must be brought within the ninety days following the date the notification of the arbitral award to the party against whom it was rendered. The admissibility of the action for annulment shall not be prevented by the applicant's renouncement of its right to raise it prior to the making of the arbitral award. 2.     Jurisdiction with regard to an action for the nullity of awards rendered in international commercial arbitrations lies with the court referred to in Article (9) of the present Law.  In cases not related to international commercial arbitration, jurisdiction lies with the court of appeal having competence over the tribunal that would have been initially competent to adjudicate the dispute.  Part VIIRecognition and Enforcement ofArbitral Awards Article (55) Arbitral awards rendered in accordance with the provisions of the present Law have the authority of the res judicata and shall be enforceable in conformity with the provisions of the present Law. Article (56) Jurisdiction to issue an enforcement order of arbitral awards lies with the President of the court referred to in Article (9) of the present Law or with the member of said court who has been mandated for this purpose by delegation from said President.  The application for enforcement of the arbitral award shall be accompanied by the following: 1.     The original award or a signed copy thereof. 2.     A copy of the arbitration agreement. 3.     An Arabic translation of the award, certified by a competent organism, in case the award was not rendered in Arabic. 4.     A copy of the procès-verbal attesting the deposit of the award pursuant to Article (47) of the present Law.  Article (57)  The filing of an action for nullity does not suspend the enforcement of the arbitral award.  Nevertheless, the court may order said suspension if the applicant requests it in his application and such request is based upon serious grounds.  The court shall rule on the request for suspension of the enforcement within sixty days from the date of the first hearing fixed in relation thereto.  If suspension is ordered, the court may require providing a given security or monetary guarantee.  When the court orders a suspension of enforcement, it must rule on the action for nullity within six months from the date when the suspension order was rendered.   Article (58) 1.     Application for the enforcement of an arbitral award shall not be admissible before the expiration of the period during which the action for nullity should be filed in the court registry. 2.     The application to obtain leave for enforcement of the arbitral award according to the present Law shall not be granted except after having ascertained the following:         a)             That it does not contradict a judgment previously rendered by the Egyptian Courts on the subject matter in dispute;       b)             That it does not violate the public policy in the Arab Republic of Egypt; and       

    c)             That it was properly notified to the party against whom it was rendered.

 3.     The order granting leave for enforcement is not subject to any recourse.  However, the order refusing to grant enforcement may be subject to a petition lodged, within thirty days from the date thereof, before the competent court referred to in Article 9 of the present Law.     

KOSHERI, RASHED & RIAD LEGAL CONSULTANTS & ATTORNEYS AT LAW 16, Maamal El Sokkar St., Garden City, Cairo 11451, Egypt            TELEPHONE: + (20 2) 7954795 (10 lines), 7959228, 7952096            FAX: + (20 2) 7958521            E-mail: samiakr@link.net                        mailbox@krr-law.com            Web site: www.krr-law.com     

The Egyptian Arbitration Law

  By Dr. Tarek Fouad RiadHarvard Law School LL.M. (1982), S.J.D. (1985)

Managing Partner of Kosheri, Rashed & Riad

Professor of Business Law at the German University in Cairo

& Deputy Director of Center René-Jean Dupuy

For Law and Development Special legal counsel to the speaker ofThe Egyptian People's Assembly E-mail: Samiakr@link.netmailbox@krr-law.comtarek.riad@krr-law.com  Website : www.krr-law.com  

     * Translated from the Arabic Official Text.