here - Freshfields Bruckhaus Deringer

Asia international dispute resolution webinar
series
International dispute resolution
in the Middle East and North
Africa (MENA)
Presentation by Sami Tannous
Freshfields Bruckhaus Deringer LLP
Dispute resolution in MENA
Introduction
1. General economic trends in MENA
2. Commercial arbitration in MENA
3. Investment arbitration in MENA
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Dispute resolution in MENA
Introduction
1. General economic trends in MENA
-
Recent trends in MENA
-
Forecasts
-
Economic ties between Asia and MENA
2. Commercial arbitration in MENA (risks and improvements)
3. Investment arbitration in MENA (risks and improvements)
2
General economic trends in MENA
Recent trends in foreign direct investment
Levels of foreign direct investment into the GCC (USD in millions)
Saudi Arabia
UAE
Qatar
Oman, Bahrain
Kuwait
Source: United Nations Conference
on Trade and Development
(UNCTAD) Stat
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General economic trends in MENA
Recent trends in foreign direct investment
Levels of foreign direct investment into MENA (USD in millions)
Egypt
Lebanon
Tunisia
Libya
Source: United Nations Conference
on Trade and Development
(UNCTAD) Stat
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General economic trends in MENA
Recent annual average GDP growth (2003-2013) in MENA
14.00
12.00
10.00
8.00
6.00
4.00
Regional
Average
5.67
2.00
0.00
Sources: Standard Chartered, Global Research, Divided, disconnected but growing, 2013
World Bank data: http://data.worldbank.org
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General economic trends in MENA
Large-scale infrastructure projects
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General economic trends in MENA
Forecasts: more large-scale infrastructure projects to come
The Kingdom Tower
Qatar to Bahrain Bridge
Jeddah, Saudi Arabia
Linking Bahrain and Qatar
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General economic trends in MENA
Recent major deals in MENA
• Sumitomo Chemical, South Korean GS Engineering and Construction and Saudi Aramco in a
contract for constructing four petrochemical plants and other facilities in Saudi Arabia US$1.80bn as part of US$3.20bn project for petrochemical complex in Jeddah (2012)
• The Riyadh Subway Construction Project between Samsung C&T, FCC of Spain, Strukton of
the Netherlands, and Freyssinet of Saudi Arabia for the design, construction, and
commission aspects of the project. Overall project worth US$10.8bn (2013)
• Central Bank of Kuwait, China State Construction Engrg. Corp.(Middle East) (L.L.C), overall
project worth US$406m (2013)
• Oil refinery contract from the Iraq government a consortium of South Korean firms, led by
Hyundai Engineering & Construction, overall project worth US$6.04bn (2013)
• Hotel development on the Palm Jumeirah: Skai Holdings, China Estate Construction
Engineering Corporation (CSCEC), overall project worth US$6.04bn (2013)
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General economic trends in MENA
Forecasts
Standard Chartered provides the following projections:
• GCC
- Slower growth, but smarter growth: UAE has projected 3.3% growth in 2014;
Qatar is projected to grow by 4.9%
- Asset bubbles have burst, and unsustainable credit booms have ended
- Elevated oil prices will continue to buoy GCC governments
• MENA
- Political stability required to rekindle tourism sector
- Growth in Jordan and Egypt will be more fragile
- Jordan is attracting capital inflows from the GCC, and there are negotiations
for Jordan to join the GCC
Standard Chartered, Global Research, Divided, disconnected but growing, 2013
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General economic trends in MENA
Asian ties to MENA
- Well known that GCC countries are adopting a “look East” policy
- GCC-Asia trade almost doubled from $480 billion in 2008 to $814 billion in
2012
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Dispute resolution in MENA
Introduction
1. General economic trends in MENA
2. Commercial arbitration in MENA
3. Investment arbitration in MENA
11
Commercial arbitration in MENA
Four key factors
Choose
the
law
Choose
the
seat/place
Choose
the
rules
Choose the
place of
enforcement
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Commercial arbitration in MENA
Choosing the governing law
• Should be internationally respected/understood:
- available jurisprudence
• Should be compatible with:
- contractual expectations of the parties
- procedural regime at the arbitration venue/seat
- mandatory laws of “host” country
• English law is most commonly adopted for major financing or infrastructure
agreements
• But certain government entities mandated to opt for national law
13
Commercial arbitration in MENA
Choose
the
law
Choose
the
seat/place
Choose
the
rules
Choose the
place of
enforcement
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Commercial arbitration in MENA
Choosing the seat/place
• Legal environment: local courts not unduly interfering or restrictive; will
enforce arbitration agreement; and respect finality of awards
• Enforceability of award: signatory of New York Convention to benefit
from reciprocity provisions; a necessary condition – but not a sufficient
one
• Neutrality and convenience: location does not favour either party or
inconvenience one more than the other
• Availability of arbitrators: sufficient pool of experienced, qualified
candidates
• Logistical support: adequate facilities and services for arbitrators,
parties and advisers
• The Good, The Bad and The Ugly Venues: statistical and anecdotal
evidence
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Commercial arbitration in MENA
Choosing the seat/place
Place of Arbitration in ICC Arbitrations
Country
2009
2010
2011
2012
Total
Bahrain
1
2
6
1
10
Egypt
5
2
3
2
12
Jordan
2
-
-
-
2
Kuwait
-
2
-
1
3
Lebanon
-
1
1
1
3
Morocco
-
3
1
1
5
Oman
-
1
-
-
1
Qatar
2
5
3
4
14
UAE
7
12
7
8
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Source: ICC Court Bulletin
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Commercial arbitration in MENA
Influence of the UNCITRAL Model Law across MENA
Legislation based on the UNCITRAL Model Law on International
Commercial Arbitration as adopted in 1985 has been enacted in:
-
Saudi Arabia (Law of Arbitration of 2012)
-
DIFC Arbitration Law (DIFC Law No. 1 of 2008)
-
Bahrain (Bahrain International Commercial Arbitration Law)
-
Egypt (Arbitration Law No. 27 of 1994)
-
Iran (Law on International Commercial Arbitration)
-
Jordan (Commercial Arbitration Law of 2001)
-
Oman (Act on Arbitration in Civil and Commercial Matters of 1997)
-
Tunisia (Law 93-42 of 1993)
-
Turkey (Turkish Law on International Arbitration)
-
United Arab Emirates: draft legislation in circulation since 2008
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Commercial arbitration in MENA
Risk 1: Procedural impediments
Example:
UAE arbitrations are subject to Articles 203-218 of UAE Civil Procedure Code
(the CPC). Article 209 permits vexatious allegations of forgery to halt the
proceedings:
“If during arbitration a primary matter is submitted being beyond the arbitrator’s
jurisdiction or an objection is filed against a forged paper or penal proceedings are
taken[,] the arbitrator shall cease his job until a final judgment has been rendered
therein.”
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Commercial arbitration in MENA
Risk 2: Technical grounds for the annulment of arbitral awards
- Defect in the power of attorney: it is not enough to have a general power of
attorney to agree to arbitration
Court of Cassation, 13 September 2009
- Adequacy of the arbitrator’s signature: signatures must be on both the
reasoning and the dispositive, otherwise the award is considered void
Court of Cassation, 13 January 2008
- Strict adherence to pre-conditions to arbitration
Dubai Court of Cassation, 16 September 2008
- Emphasis on formalism in witness oath-taking
Bechtel Co. Ltd. v. Department of Civil Aviation, Dubai Court of Cassation, 15 May 2004
- Timeliness of the award: the Tribunal is under a duty to render an award
within 6 months (waivable)
Article 210 UAE CCP
Court of Cassation of Bahrain, 17 November 2003
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Commercial arbitration in MENA
Risk 3: Interventionist courts
-
-
Awards that conflict with “public policy” or “public order” of the State may be
annulled
-
UAE Court of Cassation judgment: timely registration of SPAs for off-plan sales
of real estate is a matter of “public order” and is therefore not arbitrable
-
Saudi Arabian courts will require compliance with shari’a law
Possible appeal on the merits of the dispute: Qatari courts set aside a Paris
seated ICC award finding that the tribunal improperly applied Qatari law
International Trading and International Industrial Trading and Investment Company
v. Dyncorp Aerospace Technology et al.
-
Saudi courts used to enjoy the power of a retrial on the merits of the dispute.
Emaar PJSC v. Jadawel
New Saudi Arbitration Law should prevent this from happening again.
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Commercial arbitration in MENA
New Saudi Arabian Arbitration Law - Royal Decree (34/M)
This law represents a significant development in Saudi arbitration law;
resembling the UNCITRAL Model Law in several important ways:
Party autonomy
-
Parties may select an institutional set of rules (such as the ICC or LCIA)
-
Parties have more control over the choice of arbitrators
Efficiency
-
Tribunals may rule on their own jurisdiction
-
Tribunals may continue with arbitral proceedings notwithstanding allegations of
forgery or related criminal proceedings
-
No further need for court approval of arbitration agreement
Enforcement
-
Exhaustive list of grounds for annulment and non-enforcement of awards
-
Review of the merits is excluded
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Commercial arbitration in MENA
Dubai International Financial Centre (DIFC)
An autonomous “offshore” jurisdiction adopting the common law
Independent courts modelled on the English commercial court with expatriate
judges
DIFC Law No. 1 of 2008: adopts the UNCITRAL Model Law
Decree No 16 of 2011 permits easy enforcement of arbitral awards between
“onshore” Dubai and the DIFC
But be clear about the seat: “a seat in Dubai” is not the same as DIFC
Injazat Capital Ltd. v. Denton Wilde Sapte LLP, DIFC Courts [2012]
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Commercial arbitration in MENA
Choose
the
law
Choose
the
seat/place
Choose
the
rules
Choose the
place of
enforcement
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Commercial arbitration in MENA
Choosing the rules
What rules of procedure will govern the dispute and who will administer
the case?
• Tailor-made or ready-to-wear?
• In international arbitration, the parties have the choice to pursue
institutional arbitration or ad hoc arbitration
Institutional arbitration is most commonly adopted in MENA
• ICC, LCIA most commonly used international rules
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Commercial arbitration in MENA
The growth of regional arbitral institutions
- Arbitral institutions now found throughout MENA
- International partnerships between arbitral institutions: DIFC-LCIA, BCDR-AAA
- Certain institutions have modelled rules on established precedents:
DIAC Arbitration Rules 2007 based on ICC Rules
CRCICA (Cairo) Rules based on UNCITRAL Arbitration Rules (2010)
CRCICA
TCCA
CCA/CACI
LAC
AIADR
BCDR-AAA
QICCA
DIAC
ADCCAC
YCCA
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Commercial arbitration in MENA
DIAC: Number of cases registered
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Commercial arbitration in MENA
Choose
the
law
Choose
the
seat/place
Choose
the
rules
Choose the
place of
enforcement
27
Commercial arbitration in MENA
Effective international instruments for the enforcement of foreign
arbitral awards
The GCC Convention on the Execution of Judgments, Delegations and Judicial
Notifications (concluded in 1995)
Global Strategies Group (Middle East) FZE v Aqeeq Aviation Holding Company LLC
(2010): UAE order for service effected in Kuwait
Farooq Al Alawi v Lloyds TSB Bank PLC and Credit Suisse:
first enforcement of foreign judgment by DIFC Courts under the GCC Protocol
Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(1958) – the “New York Convention”
Over 146 signatory States, including every GCC country
The Inter Arab Convention on Judicial Cooperation (1983) – the “Riyadh
Convention”
All Arab League members are signatories, including Iraq, Yemen and Libya
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Commercial arbitration in MENA
Signatories to the New York Convention
TUNISIA
1967
SYRIA
1959
LEBANON
1998
MOROCCO
1959
IRAN
2002
JORDAN
1980
BAHRAIN
KUWAIT
1978
ALGERIA
1989
EGYPT
1959
1988
SAUDI
ARABIA
1994
UAE
2006
QATAR
2003
OMAN
1999
Date of Entry into Force
Only Iraq, Libya and Yemen remain non-signatories
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Dispute resolution in MENA
Introduction
1. General economic trends in MENA
2. Commercial arbitration in MENA
3. Investment arbitration in MENA
30
Investment arbitration in MENA
Investment risks
• Political instability
• Civil unrest
• Unpredictable or rapidly changing laws • Discriminatory judicial or
administrative systems
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Investment arbitration in MENA
Political Risk and ICSID Signatories
KUWAIT
1978
1979
SYRIA
2005
2006
LEBANON
TUNISIA
1965
1966
MAROCCO
2003
2003
ISRAEL
1980
1983
1965
1967
BAHRAIN
1995
1996
ALGERIA
1995
1996
EGYPT
QATAR
SAUDI ARABIA
1972
1972
UAE
1979
1980
2010
2011
1981
1982
JORDAN
OMAN
1972
1972
1995
1995
YEMEN
1997
2004
Iran, Iraq, and Libya, are not signatories to the ICSID Convention
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Investment arbitration in MENA
ICSID claims against MENA States
30
25
20
No of Claims
15
10
5
0
Country
*
Note: Figure refers to ICSID arbitration only. It excludes all arbitrations conducted under UNCITRAL rules
or at other institutions.
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Investment arbitration in MENA
Recall that investments may be structured to benefit from BITs between
two other countries:
Investment in a
MENA state
South Korean company
Netherlands
Investment Protection Treaty with
a MENA State
Dutch B.V.
(special purpose vehicle)
34
Investment arbitration in MENA
MENA BITs
Bahrain
Bilateral Investment Treaty with France
Bilateral Investment Treaty with the Netherlands
Bilateral Investment Treaty with the United Kingdom
35
Investment arbitration in MENA
Necessary due diligence for BITs in MENA
When structuring investments in MENA, consider the following issues:
1. In force?
Many BITs in the region have been signed but are not ratified, calling into
question their effectiveness and a government’s commitment to the BIT
network more generally
2. Availability of international arbitration?
A number of older BITs in the region fail to provide access to international
arbitration, but offer only diplomatic avenues for dispute resolution
Certain BITs offer recourse to quick access to international arbitration
(France-UAE BIT), whereas others mandate a lengthy cooling-off period
or local court proceedings to be pursued first
3. Substantive protections
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Conclusions
MENA economies are varied, and becoming increasingly sophisticated:
- Capable of exceptional growth, with demonstrable resilience
- Large variations between economies in the region
International arbitration in MENA:
- Requires local knowledge and careful foresight
- Is becoming increasingly reliable and efficient as a dispute resolution
mechanism
- Attention must be paid to drafting and procedural details to avoid
unnecessary delay and costs
Local advice can help parties identify:
- Laws that support and uphold the arbitral process
- Experienced judges and arbitrators
- Regional “tips” to avoid procedural traps
37
Questions?
Sami Tannous
Dubai
T +971 4 5099 254
E sami.tannous@
freshfields.com
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This material is for general information only and is not intended to provide
legal advice.
© Freshfields Bruckhaus Deringer LLP 2015
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