Statute of Limitations Contract Tunisia - DOC by qru15075

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                          IN THE MIDDLE EAST1

I.       Historical Background

The resolution of disputes through the arbitration or mediation of a chosen third party
has a long history in the Moslem world. Indeed, the schism between the Shiites and
the Sunnis was born from a dispute over who was to rule after the death of the third
Califa, Othman Ben Afan. Mouawiyat, the Governor of Damascus, refused to
recognize Othman Ben Afan’s successor, Ali Ben Abi Taleb as Califa of the Moslems
and fourth successor of the Prophet. A fight between the rival factions ensued and
Ali’s supporters appeared set for victory when suddenly Mouawiyat’s troops
brandished Korans on their lances. At this, Ali sent messengers to determine why he
was doing this and Mouawiyat replied with the suggestion that each party choose a
representative to settle the dispute and make an “award” in compliance with the
Koran. Ali agreed to this suggestion and chose Moosa Al-Ash’ary to represent him
and Mouawiyat chose Amr Ibn Al-Asse to be his arbitrator. The representatives met
and wrote down the points on which each of the parties agreed – the first “arbitration”
agreement! The arbitrators decided among themselves that neither party should
govern and that a new Califa should be chosen. Ali’s representative duly agreed to
nominate a successor, but Mouawiyat’s representative went back on his word and
proclaimed Mouawiyat as Califa2. Betrayed by the wrong application of the
arbitration agreement, the followers of Ali were divided over whether to accept the
“arbitration” and continued the conflict which perpetuated a schism that has lasted to
this day. This may be regarded as the first arbitration for the settlement of a political

It may be appropriate here to provide a brief background on the development of
Islamic jurisprudence or the Islamic Fiqh3. As a religion, Islam organizes and
controls the daily life of a Moslem and so the laws have to be in harmony with the
religion. By way of explanation, Islam regulates the spiritual aspects of daily life and

  For purposes of this discussion I will limit my remarks to practices in the principally Moslem
countries of the Gulf, North Africa and the Levant, recognizing that the term “Middle East” might
encompass additional countries.
  Moosa announced that Ali would not be the new Califa by symbolically removing a ring from his
finger, with the proclamation-“I take out Ali as I take out this ring from my finger. Amr, went back on
his word and symbolically removed a ring only to slip it back on his finger, thereby appointing
Mouawiyat as Califa.
  The term “Fiqh” means, in Arabic, “understanding” and it is the science of Islamic law and legal
theory as well as of practical legal problems. The various sects of Islam differ on what can constitute
the sources of the Fiqh, the most liberal interpretation is that a rule can be considered valid if it is
derived from either the Koran (which is non-negotiable and accepted by the whole of the Moslem
world), the Sunna (the practices of the Prophet (PBUH) and the Hadeeth (the science of the spoken
words of the Prophet (PBUH), the Idjma (consensus of law scholars) or the Qiyas (reasoning by
analogy from the other sources), the Osool (the tools to help jurists to understand the sacred texts and
to determine rules which are not obvious. The Osool has led to the development of the various schools
of interpretation such as the Maleki, the Hanbali, the Hanafi, etc).

those pertaining to dealings with an economic component or value or Mo’amalat. 4
The cardinal principle of Islam, is that prohibition should be clearly mentioned, and if
it is not, then a Moslem may proceed in that venture, with no restrictions except those
prescribed by the Ruler of the Land. The vast body of Islamic teachings do not
prohibit arbitration, therefore, I can say in the affirmative that the Middle East can be
urged to accept modern systems of arbitration and I will later try to demonstrate the
stages at which certain countries have reached in adopting modern international

Since, arbitration in my opinion, is of a procedural nature and not pertaining to the
substantive aspects of a dispute, there are no references to arbitration within the
Islamic system. However, the mediation of disputes between tribal leaders by a
chosen third party became the norm among the Bedouin clans who occupied most of
the area comprising the Middle East. Even domestic disputes between husband and
wife were known to be referred to arbitration, if the couple failed to reach an
agreement. The husband and wife would each choose one arbitrator. However, the
decision of the arbitrators is not final or obligatory on the parties, but was merely a
recommendation for the final judgment to be made by a judge in a court of law.
Traditional arbitration in the Middle East may then be regarded under the principles
of agency law, where the arbitrator acts as the agent of the judge with a limited power
of attorney to decide a dispute. The modern notion of arbitration understood in the
western world, where the judiciary delegates its power to make decisions to private
entities was unknown in the Middle East.

Traditional concepts of arbitration, based on certain scholars’ interpretation of the
Islamic Fiqh, were included in the Majallat,5 the compilation of laws created by the
Ottomans and dispersed throughout the Moslem Middle East in the 19th century. Still
later more modern concepts of arbitration, based upon French concepts, were
incorporated into the commercial codes of Egypt by the famed jurist Abdul Razzah
Al-Sanhoury6 – later to be absorbed by the codes of most of the nations that comprise
the present Middle East.

Accordingly, by the end of World War Two arbitration, while not the principle means
of resolving disputes, was not an unknown concept in the Moslem Middle East and
became one of the principle means of resolving disputes between sovereigns of
member states and Western entities.

  The term “Mo’amalat” translates from the Arabic to mean transactions. This would include buying,
selling, leasing, trading, marriage, etc.
  The Majallat recognized the validity of arbitration agreements subject to four conditions:
          (a)       The dispute must already have arisen and be clearly defined;
          (b)       The parties must have agreed to arbitration by offer and acceptance
                    and made that decision known to the arbitrator;
          (c)       The arbitrator must be appointed by name, and
          (d)       The arbitrator must have the capacity under Islamic law to be a
See, Ali Haidar, Durer al Hukkam Fi Sharh Madjallat Al-Ahkam, Art. 1848.
  Sources of Law in Moslem Jurisprudence, Vol. 1-6, Cairo (1956-1967).

It was this latter development – and the role of international arbitrators in resolving
conflicts dealing with the petroleum industry – that caused arbitration to fall into
disfavor in the Middle East.

Indeed, many of the cases that form the principal pillars of international arbitration
involve the disputes beginning in the 1950s between the newly formed nations of the
Gulf and North Africa and Western oil companies over oil exploration and
exploitation contracts that had been signed years earlier giving such companies virtual
control over the resources of the region.7 In such arbitrations – which were nearly
uniformly decided in favor of the Western interests – arbitrators, rightly or wrongly,
gave scant heed to the dictates of local law and practice, emphasizing instead the strict
application of the principle of pacta sunt servanda, a concept that catered to the
interests of the Western concerns. As a result of these decisions international
arbitration became disfavored among a number of Middle East nations and their
national laws reflected this attitude.

Thus, in 1962, the Saudi Council of Ministers decided to prohibit arbitration in
disputes in which the Kingdom or one of its ministries or agencies was a party.8
Other countries in the region, such as Libya, followed suit shortly thereafter. Algeria,
for its part, issued a memorandum at an OPEC conference accusing arbitration as it
was then practiced by the industrialized nations as being ill-equipped to handle the
legitimate needs of Third World countries, suggesting that such countries may be
forced to create their own systems of dispute resolution or resort to national courts.

However, it quickly became apparent that arbitration in accordance with
internationally acceptable norms is the only method of dispute resolution which is
acceptable in international commerce, and with the emergence of increased commerce
between states in the region and the West, and more recently the Far East, interest in
international arbitration as a means to resolve disputes has increased among Middle
Eastern nations, with a concomitant increase in the number of laws and institutions in
the region dealing with this subject.

In February of 1980 the Regional Centre for International Commercial Arbitration,
the first of a number of regional arbitration centers, was established in Cairo, Egypt.
This was followed by the Arab Centre for Commercial Arbitration in Rabat, Morocco
in 1987, the Bahrain Arbitration Centre in 1993 and the Commercial Arbitration
Centre of the Member States of the Gulf Cooperation Council (GCC) in Bahrain in
1997. One can detect from jurisprudence on the subject in Middle Eastern states and
the emergence of these regional centers a subtle, yet important growth in the
confidence of parties from the region in arbitration at least as a means to handle
international and regional disputes.

  These include Sheikh of Abu Dhabi v. Petroleum Development Co. (Lord Asquith 1951) Ann. Dig.
(1951); Governor of Qatar v. International Marine Oil Company, Ltd. (Sir Alfred Bucknill 1953);
ARAMCO v. Saudi Arabia, 17 ILR 117 (1963); British Petroleum (BP) v. Libya (Gunnar Lagergren
1973) Yearbook Comm. Arb V (1980), 53 ILR 297; Texaco v. Libya (Rene Jean Dupuy 1977),
Yearbook Comm. Arb IV (1979); LIAMCO v. Libya (Sobhi Mahmassani 1977) 62 ILR 140, 20 ILM 1,
Yearbook Comm. Arb. VI (1981); CALASIATIC/TOPCO v. Libya, Journal du droit International
(1977) at 380.
  Decree No. 58 (1963).

Progress in this area, however, has not been uniform and there exists wide
divergences among the various countries in the level of sophistication of their
arbitration laws and practices and their willingness to abide by international norms in
this area. States can be divided into those which have ratified the New York
Convention of 19589 and/or the ICSID Convention10 and those which have not, those
which have incorporated the UNCITRAL Model Law provisions into their laws11 and
those which have not, those which rely primarily upon the principles of Sharia12 and
those which do not, and those who base their domestic arbitration provisions on the
English or French13 tradition and those whose laws are not based upon any particular
tradition.14 And even among states in each one of the above categories there exist
differences in the actual implementation of the rules that appear on paper.
Accordingly, it is impossible to distill anything other than the broadest similarities in
practice among the nations of the Middle East and one must really examine the
practices of each state individually.

II.      States Which Have Ratified the New York Convention of 1958

The first major line of division is between those countries which have ratified (with or
without reservations), the major international conventions on arbitration -- in
particular the New York Convention of 1958, -- and those which have not. Below is
a list of the countries of the Gulf, the Levant and North Africa which have ratified the
New York Convention as well as those which have ratified the ICSID convention and
those which have incorporated the UNCITRAL Model Law on Arbitration into their
domestic arbitration laws.

      State                     New York                    ICSID                Model
                                Convention                                   UNCITRAL Law
      Egypt                         √                          √                  √
      Libya                         X                          X                  X
      UAE                           X                          √                  X
      Bahrain                       √                          √                  √
      Qatar                         √                          X                  X
      Kuwait                        √                          √                  X
      Oman                          √                          √                  √
      Iraq                          X                          X                  X
      Saudi Arabia                  √                          √                  X
      Jordan                        √                          √                  √
      Lebanon                       √                          √                  X
      Mauritania                    √                          √                  X

  Egypt, Bahrain, Qatar, Kuwait, Oman, Saudi Arabia, Jordan, Lebanon, Mauritania, Algeria, Morocco,
Syria and Tunisia.
   Egypt, UAE, Bahrain, Kuwait, Oman, Saudi Arabia, Jordan, Lebanon, Mauritania, Algeria,
Morocco, Sudan, Syria, Tunisia and Yemen.
   Egypt, Bahrain, Oman, Jordan and Tunisia.
   Saudi Arabia
   Libya, Morocco, and Syria were influenced by the old French system; Algeria and Lebanon were
influenced by the more modern French system. Iraq, Jordan and the Sudan were influenced by the old
English system.
   Kuwait, Qatar, UAE and Yemen were influenced by a number of different systems.

     Algeria                            √                          √                         X
     Morocco                            √                          √                         X
     Sudan                              X                          √                         X
     Syria                              √                          √*                        X
     Tunisia                            √                          √                         √
     Yemen                              X                          √                         X

* not yet in force.

Although one might believe that the ratification of the New York Convention might
lead to common practices among contracting states in the Middle East, in fact there
exist many areas of divergence.

We can appreciate these divergences by contrasting, for instance, the arbitration laws
and practices in Saudi Arabia with those of its next door neighbor, Kuwait.

Saudi Arabia has been a member of the New York Convention – under a reservation
of “reciprocity” -- since 1994, and a member of the ICSID convention – although
under a declaration that it reserves the right not to submit to ICSID all questions
pertaining to oil and acts of sovereignty – since 1980. This acceptance of
international treaties advancing the concept of arbitration to handle international
disputes has been a relatively recent phenomenon, for during a number of years
following the Aramco arbitration,15 in which Aramco obtained an award against the
Kingdom from an arbitrator who belittled the legal tradition of the Kingdom,16 Saudi
Arabia was loath to incorporate arbitration clauses in contracts to which government
entities were party – by far the majority of contracts involving the Kingdom. Indeed,
as a direct result of the Aramco decision, on June 25, 1963 the Kingdom issued
Decree No. 58/1963, forbidding state agencies from resorting to arbitration without
the consent of the Council of Ministers. Its attitude has mellowed somewhat recently,
and since ratifying the New York and ICSID conventions a number of international
awards involving Saudi Arabia have been issued.

These recent developments do not mean, however, that one can relax about having an
arbitration clause in a contract with Saudi Arabia or a Saudi Arabian entity. It is one
thing to convince the government to enter into an arbitration agreement in an
investment or commercial contract, it is quite another thing to convince a Saudi court
to enforce that agreement or to enforce the terms of an award that it entered pursuant
to it.

Although there may be little problem enforcing an award against the government of
Saudi Arabia in other signatory countries where the Kingdom has assets, enforcing
one in the Kingdom itself involves avoiding certain pitfalls. Prior to its ratification of
the New York Convention, a Saudi court would only enforce an arbitral award
rendered in a foreign jurisdiction if it was first assimilated into a foreign judgment

  ARAMCO v. The Kingdom of Saudi Arabia, ILR Vol. 27, p. 117 et seq. (1963).
  The tribunal, in deciding to apply “general principles of law” rather than Saudi law to the dispute
held “In view of the insufficiency of Moslem law as interpreted by the school of Imam Ahmad Ben
Hanbal . . . and as the law in force in Saudi Arabia contains no determined rule concerning oil
exploitation . . . it is necessary to resort to the general principles of law . . . .”

(and it was therefore the judgment, not the award, that was being enforced), if the
award was consistent with Saudi public policy, and if the Court was satisfied that the
courts of the issuing country would grant reciprocity to the decisions of Saudi courts.
In at least one recent case a Saudi court refused to enforce a judgment rendered by a
court in the United Kingdom on the grounds that the United Kingdom failed to
enforce Saudi decisions.17 Saudi Arabia’s ratification of the New York Convention –
which rendered it unnecessary to have commercial arbitration awards incorporated
into judgments in the issuing country in order to be enforceable in signatory countries
and also eliminated the reciprocity of judgments problem18-- has removed, at least in
theory,19 what had been a formidable obstacle to the enforcement of awards in the
Kingdom. However, the obstacle posed by the “public policy” exception to
enforcement has remained.

Article V (2) of the New York Convention states that:

         “Recognition and enforcement of an arbitral award may also be refused if
         the competent authority in the country where recognition and enforcement
         is sought finds that: . . . (b) The recognition or enforcement of the award
         would be contrary to the public policy of that country.”

Although the International Law Association Committee on International Arbitration
in its Final Report on Public Policy as a Bar to Enforcement of International Arbitral
Awards strongly suggested that this exception be limited to the application of norms
of international public policy and invoked sparingly, this has not been the position of
Saudi Arabia and the majority of states in the Middle East (with the notable exception
of those which have incorporated the UNCITRAL rules into their domestic
legislation).20 Indeed, the majority of Middle Eastern states have either incorporated
requirements of compliance with domestic public policy or Sharia into their
legislation concerning the enforcement of arbitral awards.

A number of eminent scholars have suggested that awards which contain elements
which are procedurally or substantively against Islamic law as interpreted by the
Hanbali school of Islam in Saudi Arabia will not be recognized or enforced in Saudi
Arabia. In the view of at least one scholar this might mean the rejection of awards

   In a case between the NINIVO Company and the REDEC Company (Case No. 185/2/Q/149),
reported in El-Ahdab, A. Commentary on “Enforcement of Arbitral Awards in the Arab Countries” in
International Handbook on Commercial Arbitration, J. Paulsson (ed.) Suppl. 27 (December/1998).
   It should be noted, however, that both Saudi Arabia and Kuwait have conditioned enforcement of
foreign arbitral awards otherwise qualified under the Convention to those issued in states which grant
reciprocity to awards issued in their countries.
   Since there are no arbitration statutes governing this or any other area of arbitration law in the
Kingdom, it is difficult to say what difference the ratification of the Convention will have on the
application of the domestic statutes of Saudi Arabia, under which the courts have traditionally looked
and required awards to be incorporated into judgments in the issuing country and have examined the
issue of reciprocity of judgments in order to recognize and enforce the contents of an award.
   Even with respect to countries which have incorporated the UNCITRAL Model Law – which
interprets public policy grounds for refusing to recognize or enforce an award to be international norms
of public policy -- into their domestic laws certain countries, such as Egypt, have continued to apply
domestic policy norms and the norms which will be applied by others, particularly when Sharia norms
conflict with international norms, remains unclear.

that include interest.21 Other scholars have suggested that at a minimum it might
mean the rejection of the portion of any award that includes interest.22 It is not clear
what areas of public policy other than the prohibition against interest might also lead
to the rejection of international arbitral awards in the Kingdom under its interpretation
of the public policy exception contained in the Convention.

This, of course, presumes that the judges of the courts in Saudi Arabia even attempt to
apply the rules of the Convention. The Saudi domestic laws on arbitration, in
accordance with the dictates of the Hanbali school of Islam from which all the laws of
the Kingdom are derived, are based directly on what is considered in the Kingdom to
be the Fiqh – jurisprudence regarding the interpretation of the holy mandates of Islam,
and as in other parts of the world, judges in Saudi Arabia are loathe to relinquish their
authority over the interpretation and application of the laws which are entrusted to
them. There are a number of points in which the obligations of Saudi domestic
arbitration law – taken from the Fiqh – differ from modern arbitration practice.23
Although the Hanbali school of Islam recognizes a legal obligation for leaders to
abide by their treaty obligations, there is room for confusion over how far individual
judges will go in recognizing and enforcing awards which are issued in contravention
of local procedures and requirements.

In Kuwait the situation may be equally unclear, albeit for different reasons.

The Kuwaiti mentality towards international arbitration is somewhat different from
that of its neighbor, Saudi Arabia. Kuwait had somewhat better luck in its dispute
with Aminoil over its attempt to nationalize its oil fields in the 1970s than did Saudi
Arabia two decades earlier: an arbitrator decided that it had the right to terminate its
contract with Aminoil (applying French based administrative law doctrines
recognized under the Kuwaiti legal system) although it had to pay fair compensation
to Aminoil for the privilege.24 As a result the Kuwait government was never adverse
to resorting to arbitration to settle international disputes, and for many years included
in its standard contracts a clause calling for arbitration of commercial disputes at the
ICC in Paris.

In addition, the Kuwaiti legal system is one of the more advanced in the Gulf. Like
most of the Gulf states, it is based primarily on civil law concepts and on codes
developed by the eminent jurist Sanhoury in Egypt after the Second World War – but
Kuwait has added a smattering of laws derived from England, and more recently the
United States, to its arsenal, particularly in the commercial area. The majority of
Kuwaitis do not follow the teachings of the Hanbali school of Islam, but rather the
Maleki school, which is considered to be less “conservative” in the interpretation of
certain rules of Islam, and unlike Saudi Arabia, Kuwait adheres to a Constitution and
considers Islamic rules to be a “main” but not only source of the law.25 Kuwait’s

   A H El-Ahdab, in Arbitration with Arab Countries, Kluwer Law International, 1999, pp. 608-609.
   Dr. Mohammed Huchan, supra, at 605-606.
   As an example, under Saudi law, taken from the Fiqh, an acte de compromise is only valid if it is
signed after a dispute has arisen. If this requirement is applied to international awards it would
invalidate the majority of them.
   Aminoil v. Kuwait, 21 ILM 976, 1000 (1982).
   Article 2 of the Kuwait Constitution says that “The State’s religion is Islam and the Islamic doctrine
(Sharia) is a main source of legislation.”

willingness to adapt its laws to the needs of the modern world is reflected in its codes
and legal apparatus in general, its views on international treaties, and its approach to
international arbitration.

Kuwait has been a member of the New York Convention – under the reservation of
reciprocity -- since 1978, and a member of ICSID since 1979.

Unlike Saudi Arabia, Kuwait has been clear in its position that its treaty obligations
take priority over any domestic legislation. Indeed, Kuwait has gone so far as to
ratify the 1969 Vienna Convention on the Law of Treaties, whose Article 27 provides
that parties may not invoke the provisions of their domestic law to render invalid the
application of the terms of a treaty. The supremacy of the treaty obligations of the
New York Convention over Kuwaiti domestic law, moreover, has been recognized by
the Kuwaiti Court of Cassation, which, in a decision issued on November 21, 1988
stated that by ratifying the Convention, Kuwait essentially incorporated its terms into
Kuwaiti substantive law and judges are obliged to apply them to awards issued in
another party state. This means that at least in theory, Kuwait courts may only refuse
to enforce a foreign arbitral award issued by another Convention state on the grounds
specified in the Convention.

The methods of obtaining the recognition and enforcement of an arbitral award,
however, are the same as those applied to foreign judgments.26 Parties have the right
to file a case for the nullification of an award before a court of first instance, who very
likely will send it to a magistrate for examination. This magistrate will afford the
parties an opportunity to have a hearing and present evidence on the issues raised
before issuing a recommendation. This recommendation may or may not be accepted
by the judge, who may request another hearing before issuing a decision. Once this
decision is issued, it can be appealed to the Court of Appeals and the Court of
Cassation. The whole process may take many months or over a year. Accordingly,
although a judge may refuse to enforce a foreign arbitral award issued by another
Convention state only on the grounds specified in the Convention, there are a number
of procedural hurdles a party can impose to make obtaining such enforcement a long
and costly affair.

Moreover, although Kuwaiti law is rather advanced and includes relatively
sophisticated provisions concerning commercial transactions, including the possibility
of including “interest” as an element of damages in cases ruled by the Commercial
Code,27 Kuwait, like many other states in the Middle East, includes a provision that in
order to be enforced an award “must not be contradictory with a judgment or ruling
previously made in Kuwait or contrary to public order or Kuwaiti good morals.”28

As is the case with Saudi Arabia, it is unclear how these provisions will be interpreted
and applied by Kuwaiti courts. With respect to the issue of interest it might be argued
that since the Kuwaiti commercial code permits compensation for delay in receiving
payment to be incorporated as an element of damages in breach of contract actions,
such courts will not be reluctant to enforce an international arbitration award that

   Article 200 of the Code of Civil Procedure.
   Article 110 of the Commercial Code.
   Articles 199-200 of the Code of Civil and Commercial Procedure.

includes an award of interest. However, an award of an amount to compensate a party
for delay in receiving what he is entitled to receive is not precisely the same as an
award of a payment of interest that is part of the agreement itself.

Moreover, there are other situations in which Kuwaiti public policy might be invoked
to prohibit the enforcement of an award. In an attempt to protect Kuwaiti distributors
from being forced to accept unfair contract terms from Western companies, Kuwait
has enacted a provision requiring such companies to provide fair compensation to
such distributors in the event that such companies, without due cause, decide to
terminate a distributorship agreement.29 In order to ensure that the companies do not
circumvent this provision by contractual opt out clauses, the provision is deemed
mandatory and unwaiverable and a matter of Kuwaiti public policy.

Lest you think that this is an example of an unfair law passed by an overly protective
municipal authority, I should point out to you that this legislation is nearly verbatim
based upon legislation designed to do precisely the same thing which exists on the
books of New Jersey and California and very similar in respects to one to which the
European Union subscribes. A few years ago I represented a Kuwaiti distributor in an
action against a Western company before an eminent English arbitrator who refused
to apply these provisions and who issued an award in favor of the Western company.
I would suggest that the Western company would find it difficult to have that award
recognized and enforced in Kuwait.

Just how far Kuwaiti courts would be willing to go to enforce Kuwaiti concepts of
public policy is yet to be seen, but is a question to which parties to an arbitration
involving a Kuwaiti party should give some thought.

The above discussion assumes, of course, that the courts of countries which have
signed the New York Convention at least make an attempt to adhere to its terms.
Unfortunately, this is not always the case in Middle East countries. Just as in other
areas of the world judges in Middle East countries find it hard to see their authority
displaced, the more so if they have little training in or familiarity with the concept of
international arbitration as it is practiced in the West. Despite the clear directives of
the Convention, in practice it is not always easy to predict whether a court will refuse
to take jurisdiction over a particular matter or to review the terms of an award –
particularly if it contains conditions that would be considered onerous or procedures
that would be considered unfair by local standards.

With respect to Kuwait there is just one other wrinkle I should mention. Since 1996
the government of Kuwait has instituted a form of “judicial” arbitration and made it
applicable, in general, to most contracts signed with government entities.30 Under this
system each party to a dispute is able to nominate an “arbitrator”, who, rather than
being considered neutral, is expected to be an advocate for that party’s interest before
a panel of three Kuwaiti judges. After hearings conducted pursuant to procedural
rules prescribed by Kuwaiti law the judges, in their role as “arbitrators” issue an
“award” which carries the weight of a judgment under Kuwaiti law. Although termed

  Articles 281 and 282 of the Commercial Code.
  Law No. 11 of 1995 Concerning Judicial Arbitration in Civil and Commercial Matters, (“The
Judicial Arbitration Law of 1995”).

an “arbitration” these proceedings closely resemble a court action, and, in my opinion,
courts of other states who are members of the New York Convention may refuse to
accord decisions rendered by these tribunals the rights and privileges of
“international” arbitral awards.31 If that is the case – and I believe it will be – and if
the Kuwait government requires foreign parties to contracts with the government to
submit to this process rather than standard international arbitration I believe parties to
such contracts may find that the only place in which they are guaranteed to be
enforceable is in Kuwait – to the distinct disadvantage of the Kuwaiti government in
such disputes. So far there has been little precedent in this area, but it is a problem
worth noting.

III.     States Which Have Not Ratified the New York Convention

For those states which have not ratified the New York Convention the rules governing
international commercial arbitration are even more complex, divergent and
unpredictable. These states may be further subdivided into those which have ratified
“regional” conventions, and those which have not ratified any applicable conventions.
For purposes of this discussion I will disregard the various regional conventions to
which some states might adhere since they would affect primarily arbitrations among
the countries of the Middle East – a subject that would not be of particular interest to
international practitioners outside that area. Instead, I will focus on the implications
to Western and Far Eastern concerns of entering into an arbitration contract with an
entity from a Middle East state that does not adhere to an international arbitration
convention that pertains to the contract or an award issued under it, or who wish to
enforce an award in such a state.

Practitioners may be surprised to discover that two of the most important states in the
region: Iraq and the UAE/Dubai, belong to this category.

Iraq has not ratified a single international convention concerning international
arbitration with the exception of the Riyadh convention concerning the recognition
and enforcement of arbitral decisions issued in member states of the GCC. Nor is Iraq
presently a party to many bilateral investment treaties which refer disputes to
arbitration. This situation may change in the forthcoming months, but for the time
being Iraq remains one of the more backward nations with respect to the practice of
international arbitration.

Not only is Iraq not a member of any international regime regulating international
arbitration, it has no domestic law statutes which concern the recognition and
enforcement of international awards. Neither Articles 272 et seq. of the Code of Civil
Procedure (which concern domestic arbitration) nor Law No. 30 of 1928 concerning
the execution of foreign judgments apply to international arbitration awards. As a
result there exists no known case of an international arbitration award being executed
in Iraq.

  Besides the fact that procedurally, such arbitrations are similar to court cases, a Kuwaiti court can
refuse to enforce awards rendered by these tribunals on the grounds that they have violated or wrongly
applied a law, utilized irregular procedures, or if there is any other reason which requires
reconsideration. See, Article Ten, Paragraphs (a), (b) and (d).

Most experts agree that the only way an international award can currently be
recognized and enforced in Iraq is for it to be assimilated into a foreign judgment
which is then enforced under the rubric of Law No. 30. In order for such a judgment
to be executed in Iraq, however, the party seeking execution must first obtain from an
Iraqi court an execution order. The procedures before the Iraqi court in order to
obtain such an order follow those for contested civil proceedings in general: the
foreign judgment can be attacked on a number of grounds – including evidentiary --
and is subject to appeal before both the Court of Appeals and the Court of Cassation.

As if this were not a great enough hurdle, execution of a foreign judgment in Iraq is
only possible to the extent that the jurisdiction which has entered the judgment
recognizes and enforces Iraqi judgments in accordance with its own domestic laws or
to the extent such enforcement is provided for in a bilateral treaty between Iraq and
that jurisdiction.32 In practice, this requirement of reciprocity has been nearly an
absolute bar to the enforcement of such awards. To make matters simple, the Iraqi
courts have compiled a list of those states whose judgments may be recognized and
enforced within Iraq. They include only Great Britain, Syria, Lebanon, Jordan, Egypt,
Italy, India, Pakistan, Canada, Jamaica, Hong Kong, Malta and Cyprus.

Even in the cases in which such reciprocity is established, an Iraqi judge may reject
enforcement of the judgment if he finds that the procedures utilized by the foreign
court were not reasonable or that the judgment contravenes notions of equity and
good faith, or that it was procured by fraud or is contrary to Iraqi public policy.
Moreover, a claimant must establish that the judgment was rendered by a court having
jurisdiction under Iraqi requirements for jurisdiction. In such circumstances it is not
surprising that few, if any, foreign judgments have been successfully executed in Iraq.

Surprisingly, considering its importance as the site of Dubai, one of the major
commercial centers in the Gulf, the UAE has so far not enacted sophisticated
arbitration statutes either.

The UAE does not have an arbitration law except for a limited number of provisions
in its codes of Civil Procedure. So far, apart from specific regulations relating to
disputes arising out of dealings in securities and commodities in the Dubai Financial
Market and the Abu Dhabi Securities Market, there has not been any serious attempt
to introduce an independent arbitration law under any model in the UAE.

Although it became a member of the ICSID convention in 1982, the UAE has not
ratified the New York Convention and there are no rules specifically governing the
enforcement of foreign arbitral awards in the UAE; rather, as in the case of Iraq, such
awards are subject to the laws and procedures which are generally applicable to the
recognition and enforcement of foreign judgments. This situation may change
shortly: in 2003 the UAE Cabinet of Ministers approved a suggestion made by the
Minister of Justice to accede to the New York Convention and the matter has now
been put to the Supreme Council of the UAE for ratification. If the UAE ratifies the
Convention it will have a major effect on the enforcement of foreign awards in that
jurisdiction. However, for the time being the enforcement of foreign awards is
     Article 11 of Law No. 30 of 1928.

subject to this problem as well as to several other pitfalls, and domestic arbitration in
the UAE is subject to its own peculiarities.

The UAE’s nascent domestic arbitration rules are contained in Articles 203 to 218 of
the Code on Civil Procedure, which provide rules governing the enforceability of an
arbitration clause, the validity of an arbitration award, the appointment of arbitrators
and some miscellaneous provisions. In terms of formalities a court in the UAE must
assure itself that the parties have agreed to submit their dispute to arbitration, which
means that evidence must be produced that the parties had actual knowledge of the
existence of the arbitration clause. This is normally implied when a clause is part of a
normal contract negotiated by the parties; however, when one is printed in a standard
clause in fine print as general terms and conditions or on the back of an invoice or
delivery note it might not be considered sufficient notice.

The courts in the UAE, at least in theory, will not hear an action if the parties have
agreed to refer the matter to arbitration. However, the person challenging the
jurisdiction of the court must raise the issue at the first hearing of the case or be
considered to have waived the defense. Although there are no restrictions on the
issues that may be arbitrated, for reasons of public policy it may not be possible to
arbitrate matters relating to labor and commercial agency agreements.

The arbitration award must, according to statute, be delivered within six months from
the date of the first hearing; failing that either party may pursue its case through the
court system. However, in practice, courts are prone to imply waivers of this time
limit by the parties and in any event the court may extend this period upon application
by the arbitrator.

In an application to the courts to ratify or annul an arbitration award, litigants in the
UAE are given the same rights as litigants to a court case. That is, the same
procedures, applications, hearings and submissions will apply to the case and the
period for appeal and other process will be identical to any other process. Thus in the
UAE, the ratification or nullification of the award becomes effectively the subject of a
separate legal action and the claimant will not be able to enforce the arbitration award
until it is converted into a final judgment – which may involve months or years of
additional procedures.

Accordingly, although both the Abu Dhabi Chamber of Commerce and Industry and
the Dubai Chamber of Commerce and Industry have set up arbitration centers33 to
encourage the use of arbitration as a means of settling commercial disputes; the lack
of sophisticated rules governing “domestic” arbitration detracts from the utility of
these centers.

When it comes to the enforcement of foreign arbitral awards, although a court in the
UAE will not normally look into the merits of the award,34 the award will have to be
incorporated into a foreign judgment and satisfy the conditions for the recognition and

   Respectively, the Abu Dhabi Commercial Conciliation and Arbitration Center and the Dubai
Chamber of Commerce and Industry Commercial Conciliation and Arbitration Center.
   Court of Cassation Judgment 371/18 (June 30, 1998); Court of Cassation Judgment 157/19 (April 25,
1999). The court will look into the merits, however, to ensure that the procedures were “fair.”

enforcement of foreign judgments in order to be recognized and enforced, and the
procedural hurdles imposed upon a party may be daunting. The principles which are
applicable to the enforcement of foreign judgments are those enumerated in Article
235 of the Code of Civil Procedure, unless they have been superceded by a relevant
bilateral or regional treaty.35

These conditions, which are similar to the conditions imposed by other Gulf states
with respect to the recognition and enforcement of foreign judgments, require
findings, among others, that the foreign “court” has jurisdiction over the matter, that
the parties have been given the opportunity to appear, and that the award does not
conflict with a judgment or order previously issued by a UAE court and contains
nothing in breach of the public morals or public order of the UAE.

Courts in the UAE have exercised wide latitude in interpreting their powers under
these Articles. Although there is nothing in UAE law requiring a foreign arbitration
award to follow UAE procedures, on occasion UAE courts have attempted to impose
this requirement on litigants. In addition, courts tend to request strong judicial
evidence that the requirements of Article 235 have been satisfied: that the arbitral
award is final and good for execution in the country where it was delivered, that
parties have been given the opportunity to be heard, that the procedures utilized were
fair. In short, courts make it difficult to enforce a foreign arbitration award in the
UAE, especially if it is based on “foreign” rules. One scholar has stated: “there is a
long string of statutes allowing setting aside arbitration awards granted
internationally, by freezing them, subjecting them to various appeals, or simply
ignoring them.”36

One final matter should be noted with respect to Dubai in particular: neither the
Dubai government, nor any of its departments, agencies or authorities is permitted to
enter into any agreement for foreign arbitration unless a special consent is given by
the Government authorizing the department, agency or authority to enter into such an
agreement.37 Thus, the resolution of international commercial disputes with the
Dubai government through international arbitration is rendered off limits to Western

As a result of the problems faced by parties to contracts with entities in such states as
the UAE and Iraq in resolving disputes through arbitration, international investment in
these countries and other countries which have not ratified the New York Convention
have been severely hampered, leading to calls for reform of the laws and institutions
regarding international arbitration in all of these countries.

   The UAE is a member of the GCC Treaty applicable to awards from member states of the Gulf and
has signed a number of bilateral investment treaties. Also it is a member of ICSID. Other than where
such treaties have superceded the procedures to be used in the recognition and enforcement of awards,
the domestic legislation will apply.
   Chibli Mallat, A Comparative critique of the arbitration process in the Arab World, Lebanese
Review of Arab Arbitration (Vol. I, issue 3, 1996); quoted in MEALEY’S, supra, at 35. The author
went on to state that some of the most recent examples can be found in UAE [Arts 203-218 of the
Federal Law of Civil Procedure].
   Article 36 of Dubai Law No. 6 of 1997 concerning Contracts of Government Departments in the
Emirate of Dubai.

    IV.     Conclusion

The conclusion that should be drawn from the foregoing is quite simple. It would be
a mistake for practitioners from the West or the Far East to assume that the same
criteria or standards for the conduct of international arbitrations or the recognition and
enforcement of international arbitral awards which prevail in their countries will be
applied by countries comprising the Moslem Middle East. It would be an equally
great error for them to assume that all of the countries comprising the Moslem Middle
East will follow the same criteria or standards on those issues. It will be necessary to
recognize that, as a general rule, the practice of international arbitration in these states
is still in its infancy -- probably the way it was in the West in the 1950s – and that the
experience and training of most lawyers and judges in the Middle East on
international arbitration issues lags far behind what it is in such commercial centers as
New York, London and Paris.

Nevertheless, it is true that the nations of the Moslem Middle East are becoming more
interested in the concept of international arbitration and in modernizing their laws,
institutes and practices in order to conform to internationally accepted norms.
Unfortunately, the pace of such reforms has been slow and uneven in the area and
improvements in the education of jurists and judges in international arbitration
concepts are virtually non existent.

Accordingly, it will be a while yet before the countries of the Moslem Middle East
take a place in the international arbitration hierarchy commensurate with their
economic power. That day, however, will arrive and will be hastened to the extent
that conferences such as this and programs by bar associations such as the ABA and
by institutions such as the ICC in Paris, the AAA in New York, the LCIA in London
and ICSID in Washington, D.C. make international arbitration less frightening and
foreign to practitioners in those countries.

I congratulate you for addressing the subject of international arbitration in the Middle
East in this conference and hope that programs on this topic will be included in future

Abdullah Kh. Al-Ayoub


A summary of the laws on arbitration of the various States in the Middle East:


Before the French occupation in 1830 Algeria applied the Maleki school of Islam to
its laws. French law began to replace the Islamic rules at that time but it did not
remove these rules immediately. It was not until the mid 20th century that French law
succeeded in supplanting all but the Islamic rules concerning family law and other
exceptional areas.

After its independence in 1962 Algeria recognized two systems of arbitration,
voluntary arbitration according to the rules of the old French law, and compulsory
arbitration of the type applied in socialist states and applicable to disputes arising
between two entities owned by the state or between two public sector parties.

Algeria, in the aftermath of the oil expropriation cases against Abu Dhabi and Saudi
Arabia, was considered for some time to be hostile to international arbitration.
However, this attitude has begun to change. Algeria has entered into some bilateral
agreements with other states which include recourse to arbitration in case of disputes
and has ratified both the ICSID and the New York Conventions.

On April 25, 1993, in an effort to modernize its laws, Algeria enacted Decree No.
9/1993. This Decree, which was inspired by the French arbitration laws enacted in
1981 and the Swiss Private International Law Act of 1987, amended the Procedural
Law (section 4) to include provisions on international commercial arbitration and
introduce the principle of party autonomy in such arbitrations.

Accordingly, the parties to international arbitrations are free to choose the law
applicable to the procedures and to the substance of the dispute. The courts are
provided the power to interfere in order to aid an arbitration in cases where
proceedings are hindered, such as where a party is reluctant to appoint his arbitrator.

However, in order to be considered international and subject to the provisions of the
1993 Decree, two criteria must be fulfilled. First, like the French law of 1981, the
dispute must relate to the interests of international commerce. Second, at least one of
the parties must have its place of business or domicile abroad.


Bahrain’s system of law, that those of its neighbor, Kuwait was until modern times
based upon the Majallat. In 1971 Bahrain issued it first Procedural Law which
included arbitration provisions derived from the Egyptian codes (since repealed),
which were themselves based upon the old French provisions.

Bahrain ratified the New York Convention in 1988 and the ICSID convention in
1996. In addition, on August 16, 1994 it enacted Decree Law No. 9/1994 with
Respect to the Promulgation of International Commercial Arbitration, whereby

Bahrain adopted the UNCITRAL Model Law for international commercial, but not
domestic, arbitrations.

Bahrain is trying to establish itself as the major site for arbitrations in the Gulf and
currently hosts two arbitration centers: the Centre for International Commercial
Arbitration, which uses the UNCITRAL rules and is trying to attract cases involving
parties from throughout the world, and the Gulf Cooperation Council Arbitration
Centre, which is specifically designed to hear cases in which at least one party is a
GCC member.


The Majallat was applied in Egypt up to the closing of the 19th century. With the
downfall of the Ottoman empire, Egypt began developing new laws.

The principle architect of the modern laws of Egypt was a scholar by the name of Al-
Sanhoury, who was greatly influenced by the laws then prevailing in France. Under
his tutelage Egypt enacted laws of civil and commercial procedures that were highly
advanced for its time and which influenced the development of similar laws
throughout the Middle East, particularly in the Gulf.

The new codes contained provisions on arbitration, and following their enactment
Egypt quickly became a major player on the international arbitration scene. In 1959 it
ratified the New York Convention and since that time has historically accounted for
the majority of cases from the Middle East handled by major institutions such as the
ICC. In 1972 it ratified the ICSID convention and has recently been involved in
several major cases brought under the ICSID rules.38

The last revision of the laws on Civil and Commercial Procedures in Egypt was in
1968, and this included Articles 501-513 on arbitration. Although a step forward in
certain respects, Article 503, para. (3) of the law required the nomination of
arbitrators in the arbitration agreement, thus posing a problem for most international

As a result of problems emanating from the restrictions in these Articles Egypt
decided twelve years ago to overhaul completely its laws concerning international
commercial arbitration, making its laws some of the most progressive in the Middle
East. In 1994 Egypt promulgated Law No. 27 (the “Arbitration Law”), adopting the
principles of the UNCITRAL Model Law of Arbitration in all civil and commercial
matters. The Arbitration Law applies to arbitrations having their venue in Egypt,
unless the parties have agreed otherwise, as well as to those taking place abroad
whose parties have agreed to have it applied. The Law also applies even if one or
both of the parties are in the public sector.

  Both of these recent cases resulted in decisions against the government. In Wena Hotels Limited v.
Egypt, 41 ILM 896 (2002), a case involving the government and a UK investor owned by an Egyptian
national, a tribunal held that the government had breached the obligation of fair and equitable treatment
and constant protection and security under the terms of the UK-Egypt bilateral investment treaty, and in
Middle East Cement Shipping and Handling Co. v. Egypt, Case No. ARB/99/6, the actions of the
Egyptian government in rejecting the claimant’s shipping rights were held to be an expropriation.

As initially envisaged the Law would apply only to international arbitrations, but it
was determined that its provisions should be applied to domestic arbitrations as well,
with certain extra provisions relating to international arbitrations. Important
provisions include methods of appointing arbitrators absent agreement of the parties
and the means to resolve other problems addressed by the more sophisticated statutes
of Western states.

According to the 1994 Law – unlike the previous statute -- parties are at liberty to
choose or to designate the way in which arbitrators are to be chosen either prior to or
after a dispute has arisen, and arbitrators need not be named in the arbitration
agreement. Another important principle adopted by the Law is the principle of
competence de la competence, whereby the arbitrators have jurisdiction to rule on
their own jurisdiction. An important corollary is the principle of the severability of the
arbitration agreement, whereby the agreement to arbitrate can be held valid regardless
of the invalidity of the underlying contract in which it is contained.

One important aspect in which the Egyptian law contravenes the dictates of the
UNCITRAL Model Law is with respect to the definition of “public policy” as a
criterion for the rejection of an award. Unlike the UNCITRAL Model Law, which
clearly states that to refuse the recognition and enforcement of an international arbitral
award on public policy grounds it must be a rule of international public policy, the
Egyptian law refers to domestic public policy. Another area of divergence concerns
the requirement of finality of an award under the laws of the issuing state under the
New York Convention. Egyptian law has adopted a slightly modified version of this


Iraq applied the rules of the Majallat prior to British occupation. In 1915 the British
authorities enacted a new system of law derived from laws applicable in India. In
1920 the application of the Ottoman law was resumed and lasted until 1956. Since
then Iraq, in enacting new legislation, has incorporated elements of Islamic law
according to the Hanafi school, English law, Egyptian law and laws of the Socialist
countries (particularly laws providing for compulsory arbitration in disputes between
public sector entities which were later repealed in favor of laws requiring such
disputes to be settled by administrative agencies).

In 1956 Iraq enacted its Code of Civil and Commercial Procedures, which included in
Articles 139-149 provisions on arbitration. In 1969 a new Code of Civil and
Commercial Procedures was enacted, Chapter II or Book Three of which deals with
arbitration (Articles 251-276). The arbitration provisions resemble the old French
influenced Egyptian codes. During the last two decades of rule by the Baathist party
reform of Iraqi legislation in this field was virtually nonexistent.

On the international front, although U.S. advisors are urging it to do so, Iraq has not
yet become a signatory to the New York Convention or the ICSID convention. At
present, no mechanism exists for the enforcement of foreign arbitral awards other than
by obtaining a local judgment into which they are incorporated. Iraqi courts will apply
the procedural requirements for the recognition and enforcement of foreign
judgments, including the requirement of reciprocity, and may exercise a de novo

review of the merits of the award, and parties will have available the full appeal
system (three layers) of the Iraqi court system.


At the time of the Ottoman Empire the Majallat constituted the law of Jordan. After
the establishment of Jordan as an independent political entity in 1922 some steps were
taken towards modernizing its system of law. In 1933 a law was enacted which
included provisions on arbitration. In 1953 a law of Arbitration was enacted. The
1953 law reflected the influence of English law on arbitration. The Jordanian law
does not permit arbitrators to be authorized to act as amiables compositeurs, and in
other ways reflects the English law on arbitration as it existed at that time. While
reflecting the English approach on certain issues, however, its application depends
upon Egyptian jurisprudence because of Jordan’s dependence on Egyptian
jurisprudence as a source of its own substantive laws.

Jordan over the years has conducted international arbitration under the auspices of a
number of international arbitral institutions. In 1972 it ratified the ICSID convention
and in 1979 the New York Convention. It has recently promulgated new laws for
commercial arbitration based on the UNCITRAL Model Law.


The law initially applied in civil and commercial matters was derived from the
Majallat, the law which governed the Ottoman Empire prior to the First World War.
After gaining independence in 1960, Kuwait began enacting new legislation on civil
law, civil and commercial procedures, commerce and the judicial system which was
greatly influenced by the reforms enacted in Egypt by the great scholar Sanhoury.
Sanhoury, in turn, was greatly influenced by the laws then prevailing in France, and
accordingly, Kuwait’s judicial structure, legal procedures and codes are based on the
civil law tradition. Over the years, however, Kuwait has incorporated into its codes
legal concepts of a number of other jurisdictions, including England and the United

Kuwait is a member of both the New York Convention and ICSID.

In 1980 Kuwait passed Law No. 38/1980 on Civil and Commercial Procedures which
includes, in Articles 173-188, provisions concerning voluntary arbitration. Although
modern by Gulf standards, these provisions do not include modern arbitration
principles such as competence de la competence or the principle of severability of the
arbitration clause in a contract. They also vest the judiciary with considerable powers
to interfere in arbitrations. Moreover, arbitrators may not be authorized to act as
amiables compositeurs unless they have been nominated in the arbitration agreement.
For these reasons, there is pressure in Kuwait to enact new legislation on domestic
arbitration adopting the principles of the UNCITRAL Model Law.

In other respects, however, Kuwaiti domestic arbitration law is relatively advanced.
For instance, although Kuwait adheres to French concepts of administrative law there
are no limitations on the reference to arbitration of disputes arising from
administrative contracts, either domestically or concerning international arbitrations.

Kuwait also has a system of “judicial arbitration” pursuant to Law No. 11/1995 under
which parties may voluntarily submit disputes in writing to panels consisting of a
panel of three judges and two members having relevant expertise.

Kuwait ratified the New York Convention in 1978 and the ICSID convention in 1979.
In the early 1980s it was a party to one of the major oil nationalization cases: Aminoil
v. Kuwait,39 in which an international arbitral tribunal, following administrative law
concepts, determined that although Kuwait was within its rights to nationalize its oil
industry, it had to pay the oil company which had concession rights appropriate


The Ottoman system of law was applicable in Lebanon during Ottoman rule.
However, from the time of the French Mandate Lebanon adopted the French system
of law. In 1983 Lebanon issued Law No. 90/1983 on arbitration. Even though there
are some slight differences, the Lebanese law on international arbitration is quite
closely modeled on the French Law of 1981. The provisions on national arbitration
are also copies from the French Law, with a few changes.

For the international arbitration provisions to apply, the dispute must relate to the
interests of international commerce. This is a purely economic criterion which does
not take into account such factors as the nationality or residence of the parties and
arbitrators, the place of the arbitration or the place where the contract was concluded.

In an attempt to keep up with current developments in the practice of international
arbitration Lebanon has recently joined both the ICSID and the New York


Under Ottoman rule Libya applied the provisions of the Majallat. Later, under Italian
occupation, the same rules were applied. After independence in 1951, Libya began
enacting new, more modern codes, including a Code of Civil and Commercial
Procedures enacted in 1953, Chapter 4 of which included provisions on arbitration.
which resembled the old Egyptian provisions.

The 1953 codes resembled the old Egyptian provisions on arbitration. In 1970, as a
result of disappointment with the oil expropriation cases, this law was amended to
forbid the settlement by arbitration of disputes arising from administrative contracts.
However, in 1972, after realizing that this had negative effects on foreign investment,
this new law was repealed and the arbitration of disputes arising from administrative
contracts concluded with foreign entities was permitted, albeit on an exceptional basis
and following approval by the Popular Committees.

In 1973 legislation was enacted to authorize chambers of industry and commerce to
conciliate and arbitrate between domestic or foreign parties who agree to submit their
     21 ILM 976, 1000 (1982).

business disputes to them, and in 1975 this was expanded to confer upon the Popular
Committees the power to conciliate and arbitrate between citizens who agree to
submit their disputes to them. According to Articles 20 and 21 of the Law on
Petroleum Investments, which was promulgated by Law No. 25/1955, petroleum
disputes must be settled by arbitration unless the parties agree otherwise.

Libya’s taste for arbitration soured significantly after its involvement in three major
oil dispute arbitrations, all of which involved its attempt to nationalize oil company
interests in the country. In its cases with British Petroleum and LLIAMCO the
tribunals held that Libya had breached its obligations under the deeds of concession
with those companies and awarded damages to the companies; in its case with
CALASIATIC/|TOPCO the tribunal held that it had breached its obligations and that
restitution in integrum was the appropriate remedy. It appears that Libya has recently
become more interested in international arbitration. Although it is neither a signatory
to the New York Convention nor the ICSID convention, commentators have noted
that the authorities are considering enacting a new arbitration law based on the
UNCITRAL Model Law40 and that the proposed Exploration and Production Sharing
Agreement (EPSA) IV contract will include an arbitration clause with recourse to ICC


Domestic arbitration was practiced in Mauritania according to Islamic law before the
French occupation, following which Mauritanian legislation began to be influenced
by French law. The influence of French law continued after independence in 1960.
In 1997 the Mauritanian authorities began drafting new legislation on arbitration. A
draft law was prepared with a view to adopting the UNCITRAL Model Law,
following the approach of Tunisia.

Although this legislation has not yet been passed, Mauritania acceded to the New
York Convention in January 1997 and is also a member of the ICSID convention.


In 1912 Morocco became a French Protectorate. Before then, it had applied customs
and rules derived from the Maleki school of Islam. From 1913 Morocco began to
enact legislations and codes influenced by French law.

Morocco continues to be influenced by the old French law on arbitration and has not
changed its rules of arbitration following independence in 1956. Arbitration is
covered by the provisions of the Code of Civil and Commercial Procedure, which in
turn adopted the approach of the old French codes, with all its negative effects.
However, Morocco has entered into several bilateral international agreements which
introduced modern arbitration provisions and ratified both the New York Convention
and the ICSID convention.

   M.I.M. Aboul-Enein in “The Development of International Commercial Arbitration Laws in the
Arab World”, Yearbook of Commercial Arbitration, Vol. 65, No. 4, November 1999, at 319.
   Ariel M. Ezrahi, “Arbitration in the Arab Middle East, A Snapshot”, in MEALEY’S International
Arbitration Report, Vol. 20, No. 11, November 2005, at 34.


Oman has applied in its laws Islamic principles according to the Ibadi sect of Islam.
In many respects these principles resemble those of one or more of the Sunni schools.
After the discovery of oil in Oman important economic changes took place,
accompanied by the enactment of “modern” Western styled laws such as the
Commercial Agencies Act of 1977, the Administrative Organizations Act of 1975, the
Commercial Registry Act of 1974, the Act on Commercial Companies, Foreign
Craftsmen and the Investment of Foreign Capital, the Act Protecting Developing
Industries of 1974, and the Company Tax Act of 1981.

The final law to be enacted in this series of modernizations was the Law on
Arbitration in Civil and Commercial Disputes, which was enacted on July 28, 1997 by
Soltani Decree No. 47, and which is a replica of the new Egyptian Arbitration Law,
based on the UNCITRAL Model Law. The provisions of this law, however, are only
applicable to awards made in the Sultanate of Oman. Sultanate Decree No. 13/97
governs the enforcement of foreign awards.

Since 1999 Oman has been a member of the New York Convention and since 1995 it
has been a member of ICSID.

Foreign awards are enforced by decree of the Council for Settlement of Commercial
Disputes. In practice even before Oman acceded to the New York Convention it
granted leave to enforce international arbitral awards, without reviewing the subject
matter, in all but exceptional circumstances.


Qatar follows the pattern of its neighbors Kuwait and Bahrain in its legal
development, deriving most of its laws from the Majallat during the Ottoman regime,
and more recently from the influence of Sanhoury and the Egyptian codes. Until
recently, however, little attempt was made to modify either its commercial laws or its
approach to international arbitration.

This has now changed and the Qatari government, in an attempt to attract
international investment, has introduced a number of new measures. In 2003 Qatar
ratified the New York Convention. Although it has not yet become a member of
ICSID it has been involved in a number of investment related arbitrations under the
rubric of UNCITRAL or ICC clauses.

In the Wintershall A.G. v. Qatar case, 28 ILM (1989) a tribunal held that an EPSA
which had an UNCITRAL arbitration clause in it remained in force and that the
parties were obligated to arbitrate their contractual dispute under its terms. In
Creighton v. Qatar, an ICC arbitration, an American company was awarded more than
$8 million against the government in a contract dispute.42

     As cited in MEALEY’S International Arbitration Report, supra, at 35, fn. 13.

Saudi Arabia

Saudi Arabia has a history of applying in all areas of life Islamic law according to the
Hanbali School. What modern legislation has been introduced into the law has not so
far included modern statutes on the subject of arbitration.

Nevertheless, arbitration has been practiced in all civil and commercial matters
according to Islamic law in an informal way for a number of years and in the early
years of the Kingdom the state did incorporate international arbitration provisions in
some of its major contracts with Western interests.

The defeat of the Saudi government in the Aramco43 case was directly responsible for
the unpopularity of international arbitration in the latter part of the 20th century. This
dispute concerned the right of the state to transport oil produced by an oil company
which had a concession granted to it by the government many years previously. The
arbitral tribunal decided that the producing company, Aramco, had an exclusive right
to transport the oil any way it chose. In coming to that decision, and deciding upon
which rules of law to apply, the tribunal ruled that Saudi law – which was agreed by
the parties to be the law applicable to the dispute – was insufficient for the purpose
and should be complemented by other sources of law.

As a direct result, on June 25, 1963 Decree No. 58/1963 was promulgated, forbidding
state agencies from resorting to arbitration without the consent of the Council of
Ministers, and international arbitration became confined to disputes between private
entities. Over time, however, this position was relaxed. In 1965 Saudi Arabia
became a member of the ICSID convention. In 1976 the U.S. OPIC concluded with
Saudi Arabia an agreement to refer to arbitration any dispute between the Kingdom
and any American investor guaranteed by OPIC. In 1993 Saudi Arabia ratified the
New York Convention.

In 1983 an Arbitration Regulation was enacted and Implementation Rules were issued
in 1985, beginning to introduce modern arbitration techniques and rules at the
domestic level. However, Saudi Arabia has yet to formulate modern rules to govern
the management of, recognition or enforcement of arbitral awards at the international


The Sudan has had an exceptional and different experience in formulating its modern
legal system. It started by applying Ottoman law prior to becoming part of the British
Empire in 1898. In 1900 the British authorities enacted a Procedural Law which
included a mixture of rules applied in some Indian provinces, some Ottoman rules and
rules applied in some British African colonies.

Since 1971 there has been a trend to liberate Sudanese legislation from British
influence. In that year civil and procedural laws were enacted which were influenced
by the old Egyptian and French laws and which replaced the previously applicable

     ILR Vol. 27, pp. 117 (1963).

laws in those fields. However, in 1974 these laws were repealed and Sudan issued
new laws that reflected the previous laws.

The law of arbitration is greatly influenced by English law prior to the English
Arbitration Act of 1996. It permits arbitrators to seek the opinion of the courts in the
disputes submitted to them, the courts are authorized to correct and amend the
decisions of the arbitrators and to remit the case to them for a review. The courts may
also set aside awards and adjudicate upon disputes themselves. The law does not
permit arbitrators to settle the dispute as amiables compositeurs. It provides for
compulsory conciliation before arbitration if the judge having jurisdiction so decides,
or if the agreement of the parties provides for it.

International arbitration is not popular in the Sudan. Although it is a member of the
ICSID convention, Sudan has not ratified the New York Convention. There is
currently a movement on the part of jurists in the country to enact a new and more
advanced law on arbitration in order to encourage foreign investment in the country.


During the Ottoman Empire Syria applied Islamic law in accordance with the
Majallat. Syria preserved this system of law when it fell under the French Mandate.
After independence in 1941 and following the termination of the French Mandate in
1944 Syria began modernizing its legislation. In 1949 it enacted a Civil Code, a
Commercial Law and a Penal Code. In 1952 it enacted its Civil Procedure Code
which included provisions on arbitration. These provisions resembled the provisions
of the old Egyptian law (based on the old French law). To this day Egyptian
jurisprudence and books of law are frequently referred to by the courts.

According to the Syrian system of arbitration there is voluntary arbitration based upon
the agreement of the parties, and compulsory arbitration, influenced by the systems of
Socialist countries. The latter applies to contracts of the Ministry of Defence,
agricultural disputes, labor disputes, some property disputes, customs disputes and
disputes between public sector parties.

In 1959 Syria ratified the New York Convention and in 2005 it signed the ICSID
convention, although it is not yet in force.

Syria is currently preparing its new legislation on arbitration. The draft law is based
on the UNCITRAL Model Law.


Until shortly before the defeat of the Ottoman Empire Tunisia applied Islamic law
based primarily on the Maleki School. In 1881 Tunisia became a French Protectorate.
From that time until its independence in 1956 its laws were influenced by French law.
In 1967 Tunisia ratified the New York Convention and it is also a member of the
ICSID convention.

In the 1980s and 1990s legislative steps were taken towards encouraging foreign
investment. One of the main steps taken in this regard was the enactment of a new

law on international commercial arbitration which adopted the principles of the
UNCITRAL Model Law. The Arbitration Code, Majallat Al Tahkim, was issued by
Law No. 42/1993 on April 26, 1993.

The Tunisian law did not follow the Egyptian approach of applying the principles of
the Model Law rules to both international and domestic arbitrations: they are
applicable only to international arbitrations. The rules applicable to domestic
arbitrations give domestic courts more powers of supervision.

United Arab Emirates/Dubai

Before the independence of the United Arab Emirates (UAE) in 1971 the applicable
law on civil and commercial matters was Islamic law according to the Hanafi School
as incorporated into the Majallat. After independence, legislation was enacted which
followed modern legal trends in different fields, mixing Western principles with those
from the Maleki, Hanbali, Shafi and Hanafi schools.

In March 1992 the Federal Law on Civil and Commercial Matters was enacted.
Articles 203-218 made provision for arbitration. Article 205 requires the names of the
arbitrators to be stipulated in a written document issued by the parties if the tribunal is
to be authorized to act as amiable compositeur. The law gives the courts considerable
powers of intervention over arbitrations. For example, Article 214 permits them to
remit an award to the tribunal to clarify its decision within three months.

The UAE courts have in the past been problematic with respect to the enforcement of
foreign arbitral awards. One scholar has noted that “there is a long string of statutes
allowing setting aside arbitration awards granted internationally, by freezing them,
subjecting them to various appeals, or simply ignoring them.”44

There is strong feeling among members of the legal profession that the UAE’s rules of
arbitration need to be improved despite the fact that they are considered in general to
be more advanced than those of Abu Dhabi, Dubai and Sharjah. The UAE is
currently studying a revision of the laws that would incorporate advances in
technology and permit a certain amount of on-line arbitration.

Significantly, the UAE is not a signatory to the New York Convention, although it has
been a member of the ICSID convention since 1982.


During the period of the Ottoman Empire, Yemen applied Islamic law according to
the Majallat. After the decline of the Ottoman Empire Yemen continued to apply
Islamic law, adopting the El-Zaydi doctrine. Although this is a Shiite inspired
doctrine, it is similar in many respects to some of the Sunni schools.

Yemen is a member of both the New York Convention and ICSID.

  Chibli Mallat, “A Comparative Critique of the Arbitration Process in the Arab World”, Lebanese
Review of Arab Arbitration (Vol. 1 issue 3, 1996) cited in MEALY’S International Arbitration Report,
supra, at 35, fn. 10, 11.

Yemen has codified Islamic law in its domestic legislation while incorporating into
this legislation modern trends in different fields of law. One example of this is
legislation on arbitration that it first enacted in 1981 and then replaced with a new law
in 1992 following the unification of North and South Yemen.

The 1992 law differentiates between domestic and international arbitration and adopts
many principles embodied in the New York Convention as well as the principle of
party autonomy. As a result, parties to an international arbitration may agree on an
applicable law other than that of Yemen to control the arbitration and may choose to
conduct the arbitration in any language and in any place. The award will be
considered final if the parties so agree or if the arbitrators were authorized to act as
amiables compositeurs. Other than in these two cases an award may be appealed.
The principle of competence de la competence is recognized by this law as well as the
principle of the severability of the arbitration clause.

According to an article appearing in the New York Times on November 24, 2005, two
U.S. companies – ventures owned by Hunt Oil and Exxon Mobil – have recently filed
a claim at the ICC against the Yemeni government for allegedly expropriating an oil
producing block with an output of more than $1 billion per year. This will constitute
one of the first times a dispute concerning expropriation in the oil industry will be
heard by an ICC tribunal and the only such case for many years that has been brought
to arbitration.


It is unclear what position will be taken by the countries which comprise the Moslem
Middle East with regards to enforcing an international arbitral award containing an
award of interest.

Some scholars have noted that countries following the Hanafi school of Islamic law,
such as Egypt, Jordan and Syria, have enacted laws whereby interest is regulated but
nonetheless allowed and as such may be reluctant to refuse to enforce an international
arbitral award that includes an element of interest on public policy grounds. This
might also be the case in Kuwait, where interest is permitted under the Commercial
Code, but not the Civil Code.

On the other hand, Hanbali dominated countries such as Saudi Arabia and North
Yemen, may find it harder to uphold an award of interest since the prohibition against
interest is strictly enforced under the domestic laws of those countries.

The situation in Qatar, an otherwise conservative country, is somewhat complex and
unclear because of the leader’s interest in turning the country into a regional
commercial and banking power. Likewise, the situation in Oman – which follows the
Ibadi sect of Islam – is unclear.

If past court decisions are any guide, however, the obstacles posed to claimants may
not be as severe as one might assume.

For instance, in 1985 in an ICC arbitration concerning a company which was
incorporated in Oman, the tribunal rendered an award in favor of the English claimant
for an amount held in the Union Bank of Oman which constituted proceeds of
promissory notes and the accrued interest. The Authority for the Settlement of
Commercial Disputes in Oman, proceeded to order enforcement of the award despite
the fact that interest was included. See, Sigvard Jarvin, Enforcement of An Arbitration
Award in Oman, Journal of International Arbitration, Vol. 2. No. 4 (1985).

Likewise, in 1986 the Constitutional Supreme Court of Egypt upheld the Egyptian
Civil Code provisions authorizing the payment of interest. See, Ahmed S. El Kosheri,
Public Policy Under Egyptian Law, ICCA Congress Series No. 3, NY, 1986.

Likewise, in the 1990s a Maltese company filed a claim against a UAE entity over
failure of the latter to pay the former for the hire and expenses of a shipping vessel.
The tribunal issued an award ordering the UAE company to pay the amount owed to
the Maltese company plus interest at 7.75%. The Maltese company sought
enforcement in the Dubai Court of First Instance where the court, although refusing it
on grounds that the claimants had not proved the finality of the award and had not
proved that reciprocity existed between the country of origin of the award and the
UAE, nevertheless dismissed the argument relating to the unlawfulness of the award
because of the provision of interest. Judgment No. 190/98, 10 November 1998.

Albert Jan van den Berg in his article on the few cases where awards were refused
enforcement under the New York Convention did not mention a single case in a court
of a Moslem country so far where for public policy reasons a foreign arbitration
award containing an award of interest was refused enforcement. Albert Jan van den
Berg, “Refusals of Enforcement under the New York Convention of 1958, the
Unfortunate Few”, Arbitration in the Next Decade – Special Supplement 1999 ICC
International Court of Arbitration Bulletin.

This situation, of course, may change as certain countries in the region, prompted by
an increased interest in adherence to Islamic rules, promulgate new laws and policies,
and as the use of Islamic banking concepts as an alternative to Western banking
practices becomes more pronounced throughout the region. However, as of this date
the issue of interest has not caused a major problem with respect to the recognition
and enforcement of international arbitral awards.


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