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Author: Nazir Ikhlayel
SJD Candidate, Indiana University Maurer School of Law
Abstract
The article discusses the rise of arbitration as the primary method for resolving disputes in Qatar and Egypt amid their significant economic growth over the past decade. With numerous construction contracts in the region, arbitration has emerged as the preferred Alternative Dispute Resolution (ADR) method due to its efficiency and flexibility. Qatar and Egypt, both major economic forces, face challenges in their national judiciary’s capacity to handle construction disputes effectively. Arbitration offers advantages such as speed, flexibility, and the ability to choose governing laws, making it increasingly popular.
Practical significance
The article’s analysis of the regulatory frameworks and key institutions involved in arbitration provides practical insights for legal practitioners, policymakers, and stakeholders involved in international business transactions and investment activities within these regions.
Introduction
Over the past ten years, Qatar and Egypt have experienced exponential economic growth. Many construction contracts are being signed in the region. As contract implementation has created many disputes, arbitration has become the primary Alternative Dispute Resolution (ADR) method.
In the Middle East, Egypt and Qatar are the two major economic forces: the value of Qatar’s projects is estimated to be 136 billion dollars due to hosting the 2022 FIFA world cup.[1] Qatar is also the world’s second-largest exporter of liquefied natural gas.[2] Furthermore, Egypt ranks at the top in the Arab world concerning number and growth in population. Also, the country intends to submit an official request to FIFA to host the World Cup in 2030. In addition, the Egyptian has allocated over 5.2 billion dollars to implement national development plans, including establishing entire cities, such as the administrative capital city.[3] Finally, Egypt is considered a source of legal inspiration for many legal systems in the Middle East.[4]
Unfortunately, the national judiciary in these two countries doesn’t have the capacity or speed to deal with construction disputes due to the number of conflicts and jurisdictions involved. Considering arbitration’s advantage in maintaining the pace of economic development, it has become the major ADR method. For instance, nearly 80% of international trade contracts now include an arbitration clause.[5]In addition, there are several advantages of arbitration, such as speed, flexibility, capacity to choose the governing law of contracts, the benefit of avoiding conflict of law, the inability to appeal, and the confidentiality of the procedure.
Considering the economic momentum of Qatar and Egypt and the phenomena of setting arbitration as the main alternative dispute resolution, I will explore the legal landscape of these two countries’ arbitration systems. I will provide an overview of the Egyptian and Qatar arbitration systems, identify the existing problems and propose possible solutions.
Arbitration is a written agreement, can take two forms, the arbitration clause, and the submission.[6] The arbitration clause is the most common and important source of commercial arbitration, both domestic and international. The contents of the clause can contemplate two types of arbitration: Institutional Arbitration (IA)[7] and Ad hoc arbitration. An institution conducts institutional Arbitration (IA) specialized in arbitration procedures, its own rules for managing arbitration, list of specialized arbitrators characterized by organization, archiving, and administrative support. The disadvantage of IA is that the procedures may be lengthy and costly. Examples of IA include The Qatar International Centre for Conciliation and Arbitration (QICCA,) The Cairo Regional Centre for International Commercial Arbitration (CRCICA,)[8] and The International Centre for Settlement of Investment Disputes (ICSID.) As for ad hoc arbitration[9], the parties choose the rules, procedures, venue, arbitrators, and everything related to the arbitration process. This type of arbitration is simple, speedy, and less costly. According to the Arbitration Codes in Egypt and Qatar,[10] the arbitrators must be registered in the Justice Ministry list and conform to the conditions.
An Overview of the Egyptian and Qatari Arbitration Regulation
Egypt’s arbitration provisions and procedures were mainly regulated by the Civil and Commercial Procedures Law 13 of 1968. In response to the economic developments and encouragement of investment, the new Arbitration Law No. 27 of 1994 was issued, inspired by the Model Law or The United Nations Commission on International Trade Law (UNCITRAL). At the same time, Egypt has taken action to keep pace with Western legislation[11] and joined the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Egypt is among the top 10 signatories of Bilateral Investment Treaties (BITs).[12] In 1979, Egypt established CRCICA.[13] Later, CRCICA was recognized as a center for international arbitration with sufficient privileges based on the agreement signed between the Asian African Legal Consultative Organization (AALCO) and the Egyptian government in 1987. To guarantee the parties’ rights to the construction count and proportion to the FIDIC contracts, Egyptians attempt to issue the balanced contract or the “Egyptian FIDIC contract.”[14]
Egyptian and foreign investors see arbitration as a protection mechanism for their rights and investments from the Egyptian Army (EA), which is considered a competitor in all Egyptian economic sectors. EA corporations systematically control the construction and steel sectors because their privileges, such as free taxes, have real power over other authorities, etc. As a result, the investors prefer the arbitration clauses to protect them from resorting to Egyptian law and judiciary to void any possibility of favoritism, as the Military Council maintains control over the judiciary system. Despite the significant Egyptian role in arbitration regulation in the Arab countries, it is difficult for Egypt to serve as an international arbitration hub for arbitration like UAE or Qatar due to “political instability, popular uprisings, deteriorating infrastructure, corruption, and poverty that persist in Egypt.”[15]
Compared to Egypt, Qatar updated its legalization of arbitration relatively late. The Civil Commercial Procedural Code (13) of 1990 (chapter 3) used to be the only code regulating Qatar’s arbitration process.[16] In 2003, Qatar took a step forward by joining the New York Convention and UNCITRAL.[17] The Qatar Chamber of Commerce and Industry (QCCI) established the Qatar International Center for Arbitration (QICA) based on Decision No. 5/8 of 2006.[18] Inspired by UNCITRA,[19] the QICA further published its arbitration rules as the government issued the Arbitration Code (2) of 2017.[20] The Qatar International Court and Dispute Resolution Centre (QICDRC) was established by QFC Law No. 2 of 2009; it includes two jurisdictions: The Qatar International Court (QIC) and The Qatar Financial Centre Regulatory Tribunal (QFC). The goals here are to keep pace with economic inflation[21] and serve as a reliable arbitrator on the international stages.[22] “QICDRC goes even further in its enforcement powers” [23] and is so successful it ranks sixth in the world regarding the dispute parties choosing the Qatari arbitration law.[24]
Arbitration enjoys a unique advantage in Qatar. Although, as mentioned, many disputes arose in the construction sector due to the reconstruction operations preparing for the World Cup. Some investment corporations avoid referring the dispute to the judiciary, and, in general, foreign and multi-nationality investment companies prefer choosing the law that suits their interests.
Problems with the Egyptian and Qatari Arbitration Regulation
The main dilemmas faced in arbitration in Egypt and Qatar are alike. First the ambiguity of the arbitration clause.[25] More specifically, if the parties refer the dispute to Ad hoc, both parties will choose the rules, arbitrators, procedures, place, law, etc. In contrast, the IA has arbitration clause modules[26] where there is the possibility of avoiding unclear arbitration clauses. For instance, CRCICA adopts the following standard arbitration clause:
“Any dispute, controversy or claim arising out of or relating to this contract, its interpretation, execution, the termination or invalidity thereof, shall be settled by arbitration per the Rules of Arbitration of the Cairo Regional Centre for International Commercial Arbitration.”[27]
Secondly, the arbitral clause dilemma arises in a group of contracts or complex contracts when mentioning the arbitral clause in the main contract without including the sub-contracts. This leads to a confusing impact on third parties (non-signatories) and raises questions about the possibility of joinder and consolidation. Thirdly, the approval mechanism of the list of arbitrators in each country by the Ministry of Justice, especially in Egypt.[28] Here, the Ministry should not grant arbitrator status except based on actual experience and qualifications. “Rather, its main goal is to achieve financial profit by holding low-level courses that do not optimally qualify the trainers.”
Conclusion
In conclusion, Egyptian arbitration legislation at the local and international level has made a great effort by ratifying most of the international arbitration agreements. Political and economic instability is fundamental reasons investors choose arbitration to guarantee their rights. Qatar has created a complete legal system regarding arbitration, and the country seems to be ahead in the race regarding its socio-economic and legal status appeal. Qatar’s arbitration center is currently one of the most important international arbitration centers in the world, besides Paris, London, New York, and Singapore.[29]
In general, whether in Qatar or Egypt, the option of arbitration for resolving disputes could significantly enhance the economy. This is particularly true for construction disputes, which often hinder project progress until a final decision is reached—a process that can take years within the court system. Arbitration offers a faster resolution, circumventing complex court procedures and allowing parties to select the rules governing their disputes based on their interests. Moreover, it alleviates the burden on the judiciary, particularly in smaller judicial systems compared to the huge number of cases, a situation applicable to Qatar.
[1] Piotrowski, P. and Sial, H., 2022. Qatar – An Opportunity for Operation and Maintenance PPPs. Klgates.com. [Accessed 14 January 2022].
[2] U.S Energy Information Administration, Qatar-International energy data and analysis 9 (2015), https://www.eia.gov/international/content/analysis/countries_long/Qatar/qatar.pdf.
[3] Laura Wood, Egypt Construction Market Report 2021: Key Trends and Opportunities (2021).
[4] This includes the Qatari Civil Code of 1971, which was inspired and influenced by the Egyptian Civil Code of 1949.
[5] Ibrahim Al-Rubaie & Maher Al-Khilani, Altahkim Damana Ejirayiyat Litaswiat Munazaeat Alaistithmar, file:///C:/Users/naz19/Downloads/33972145.pdf.
[6] Thomas E. Charbonneau, Arbitration, 11 (2d ed. 2007) “The submission is an arbitration agreement in which the parties agree that an existing dispute will be submitted to arbitration”
[7] Maita, Aida, “Development of a Commercial Arbitration Hub in the Middle East: Case Study -The State of Qatar” p.192 (2013). https://digitalcommons.law.ggu.edu/theses/36, (last visited Jan 14, 2022)
[8] Id. at 235.
[9] Id. at 191.
[10] Law Code No.2 of 2017 (Arbitration Law) art.37 Almeezan, 13 March 2017 (Qatar).
[11] Gary B. Born, International Commercial Arbitration. P. 103 (3rd ed. 2021)
[12] Ahmed Bakry, An Overview of the Status of Egypt in ICSID Arbitrations (2020), (last visited Jan 14, 2022).
[13] Maita, Aida, “Development of a Commercial Arbitration Hub in the Middle East: Case Study -The State of Qatar” p. 235 (2013)
[14] See the Interview: Hani Dahi, Engineering Egyptian association.
[15] Maita, Aida, “Development of a Commercial Arbitration Hub in the Middle East: Case Study -The State of Qatar” p.240 (2013). https://digitalcommons.law.ggu.edu/theses/36, (last visited Jan 14, 2022)
[16] Amir Ibrahim, International journal of Arab Arbitration, p.16 (Vol 8 20016)
[17] Status: Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the “New York Convention”) | United Nations Commission on International Trade Law, https://uncitral.un.org/en/texts/arbitration/conventions/foreign_arbitral_awards/status2 (last visited Jan 14, 2022).
[18] Latham & Watkins LLP – Ferris Nesheiwat, New rules issued by Qatar International Center for Arbitration, Lexology (2012)
[19] ABDUL HAMID EL-AHDAB, ARBITRATION WITH THE ARAB COUNTRIES 573 (3rd edition ed. 2011).
[20] Law Code No.2 of 2017 (Arbitration Law) Almeezan, 13 March 2017 (Qatar).
[21]Law No. 2 of 2009 (Amending Certain Provisions of the Qatar Financial Centre (QFC) Law as Promulgated by Law No. 7 of 2005) Almeezan, 23 April 2009 (Qatar)
[22] Arabian Business, Robert Musgrove interview: Rule of law – Arabian Business (2012), https://www.arabianbusiness.com/politics-economics/robert-musgrove-interview-rule-of-law-475243 (last visited Jan 14, 2022).
[23] Id.
[24] QICCA, https://qicca.org/ (last visited Jan 14, 2022).
[25] Heba Salem, Alshurut Altahkimiah w Euyub Siaghatiha, (Arbitration Terms and Their Drafting Defects), Arab Arbitration JOURNAL ED. 24, https://crcica.org/newsletters/nl032015/auia_vol24_ar08_pathological_arbitration.pdf.183 (last visited Jan 14, 2022)
[26] Jan Paulsson, Nigel Redwing & Lucy Reed, The Freshfields Guide to Arbitration Clauses in International Contracts, 122 (3rd edition 2010)
[27] The Cairo Regional Centre for International Commercial & Arbitration, CRCICA Arbitration Rules 47–48, (March 2011) https://crcica.org/FilesEnglish/ArbitrationModelClauses_2016-11-01_00-48-4-195627.pdf.
[28] Maita, Aida, “Development of a Commercial Arbitration Hub in the Middle East: Case Study -The State of Qatar” p.304 (2013). https://digitalcommons.law.ggu.edu/theses/36, (last visited Jan 14, 2022)
[29] Maita, Aida, “Development of a Commercial Arbitration Hub in the Middle East: Case Study -The State of Qatar” p.311 (2013). https://digitalcommons.law.ggu.edu/theses/36, (last visited Jan 14, 2022)
