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Guide To Regional Arbitration (volume 4 - 2016)

Institutions Worth a Closer Look: Middle East and Africa

03 November 2015

In 1997, Judge Charles Brower published a piece in The American Journal of International Law describing the “three phases” of arbitration in the Middle East.

The first phase, stretching from World War II to the 1970s, saw cases ending badly for the Arab side, usually a state. (Petroleum Development (Trucial Coast) Ltd v Sheikh of Abu Dhabi is a particularly good example of just how badly some of those cases went.) European arbitrators gave short shrift to arguments deriving from shariah law. The second phase was a turning away from arbitration.

But only briefly. The concept of private dispute resolution is in fact a strong part of Arab culture. The Bahraini minster of justice, Sheikh Khalid bin Ali Al Khalifa, once said, “Arbitration harmonises with an Arab’s psychological make-up – which is imbued with sentimentalism and which is more at home with a spirit of peace, goodwill and conciliatory brotherhood.”

So after a “winter”, the third phase has seen a flowering of local arbitration providers. Things have reached the point where, as Reza Mohtashami (a GAR editorial board member and Freshfields partner) noted, speaking at a GAR Live conference in Istanbul, “The tiny island of Bahrain is in fact home to three arbitral centres.”

Almost 20 years after Brower’s article ran, this third phase is still in full bloom – 2014 saw a Saudi Arabian resolution to establish a new commercial arbitration centre in Riyadh while authorities in Dubai are to set up a maritime arbitration centre for the UAE. Whether or not we are entering a possible fourth phase – in which local providers expand their caseloads, successfully atomise the market and trump the big international centres as the first choice for investors – is open to debate.

A key recent development that colours this discussion is the rise in investment treaty disputes across the Middle East and North Africa.

Traditionally, the region has generated more commercial disputes than investment treaty cases, perhaps because much investment in the region has been in sectors of the economy where the state has a presence, enabling aggrieved investors to sue under contracts rather than treaties.

The rise in treaty cases doubtlessly owes something to the political sea change of the Arab Spring and the consequent reassessment of contracts that comes with new regimes. But that’s not the whole story: increasing awareness of the treaty process among governments and rises in outgoing investment were both highlighted by speakers at GAR Live Dubai in 2014.

So what are the options for investors, and are they worth using?

Sadly, it’s not quite that simple. The courts across the Middle East are the weak link, rather than the arbitration providers. According to highly respected local arbitration figure Essam Al Tamimi, the problem is “a persistent lack of certainty” from the courts. “You will bring the same case you brought last year – and which got a good result – [then] put it back in the same pipeline and get a bad judgment, different from the previous one”.

He added that, with arbitration recently becoming a compulsory part of the legal syllabus in the Arab League, “90 per cent of judges will be properly trained in it, not just 10 per cent like now.”

States are also finding ways to take their courts out of the equation: by creating special financial zones with their own “common” law borrowed from the wider world (the DIFC in the UAE and the QIFC in Qatar). Some use the concept of “the virtual seat” (you can nominate the law from anywhere in the world to apply). The presence of those zones, with their own courts staffed by judges from elsewhere is expected to improve the standard of courts around the region.

So the region’s future, as a seat, is brighter. But for now parties with options might decide not to risk the region.

Nassib Ziadé – the Chilean-Lebanese CEO of the Bahrain Chamber for Dispute Resolution (BCDR-AAA) and a former acting secretary general of ICSID, speaking at GAR Live Dubai – meanwhile advised Arab investors seeking redress from a state in the region to opt for administered rather than ad hoc arbitration proceedings overseen by a well-known institution that would ensure “a public perception of legitimacy”.

So far, ICSID has been a major beneficiary of the treaty case rise, posting a 4 per cent rise in new matters from the MENA region from 2013–2014; more than twice the volume of traditional treaty hotspot Latin America.

However, the region has also attracted joint ventures between a Middle Eastern state and an international arbitral brand name (such as the AAA-ICDR or the LCIA), more of which may be announced in the future.

Home-grown institutions are also gaining greater market share. The Cairo Regional Centre for International Commercial Arbitration (CRCICA) is named as a possible administrator of investment arbitration proceedings in a number of inter-Arab treaties, and was the inaugural winner of GAR’s up-and-coming regional centre award in 2014.

So in time, the Middle East may be seen as a more dependable place to go for arbitration.

That’s not to say things are quiet. Thanks to the courts’ shortcomings and a downturn in the local economy a few years back, arbitration providers are more than busy. According to Al Tamimi, a “veritable army” of lawyers, arbitrators, experts and support services are at work on disputes in the region. One source recently estimated that there are 750 arbitrations a year in the UAE alone (a combination of domestic and “foreign-related” work).

Institutions in Sub-Saharan Africa, while less prominent than their neighbours to the north, have their own momentum. For example, Mozambique didn’t have an independent legal profession until 1990, meaning that its entire judicial system had to be built from scratch following the constitutional reforms of that year. Currently, the country has one lawyer for every 20,000 people. But 2001 saw the arrival of an arbitration institution – the Centro de Arbitragem, Concilição e Mediação – buoyed by Mozambique’s attractiveness as a foreign investment destination (among the top six in the region) as well as a proactive legal fraternity willing to take the market seriously; the centre has around 200 arbitrators on its panel.

Similar ingredients are currently at play in Djibouti, which is home to one of Africa’s largest ports, and where an international team of big name academics and practitioners plans to launch an international arbitration centre in 2016. “Big name” here isn’t just a throwaway term; Columbia Law School professor George Bermann, French professor of international law at Sciences Po Jean Yves Gontier, former White House legal adviser Ian Bassin, former ambassador of Djibouti to France and UNESCO Rachad Farah, IGAD executive secretary Mahboub Maalim, and president of the Djibouti Chamber of Commerce Youssouf Moussa Dawaleh are all working on the development of the International Arbitration and Amicable Dispute Resolution Centre.

Here is our pick of the best institutions across the Middle East and Africa.

Cairo Regional Centre for International Commercial Arbitration (CRCICA)

Why is it seen as a success?

It’s been operating for more than 35 years and has administered more than 1,000 cases, many with an international element.

Who set it up?

The CRCICA is an independent non-profit organisation. It was founded by the Asian-African Legal Consultative Organisation, which has since founded four other regional arbitration centres (the Kuala Lumpur Regional Centre for Arbitration (KLRCA); the Lagos Regional Centre (RCICAL); the Tehran Regional Centre (TRAC); and the Nairobi Regional Centre). But out of all of those, Kuala Lumpur and Cairo are the best known and are seen as the strongest.

What are Cairo’s strengths?

It’s an impressively solid organisation and one that’s now been operating for long enough to have encountered most situations at least once. Together with the Qatar International Centre for Conciliation and Arbitration (QICCA), it is seen by one respected source as “the current class of the field” in the Middle East. Credit is usually laid at the feet of its directors.

Who are they?

The CRCICA has had a string of highly respected directors. For many years it was led by Mohamed Aboul-Enein, a former judge and law professor, who during that time became a fully fledged member of international arbitration’s inner circle, and a regular fixture on the international circuit.

When he died in a car accident in 2008, en route to an IFCAI meeting, ex-diplomat and international judge Nabil Elaraby took over.

More recently, Elaraby has gone back into international affairs, and the running of CRCICA has passed to Mohamed Abdel Raouf, an Aboul-Enein protégé.

Abdel Raouf has promoted the centre just as vigorously abroad as either of his predecessors (representatives from the centre made 15 international conference appearances in 2014 alone); a project which has been greatly helped by his appointment as a vice president of the International Council for Commercial Arbitration (ICCA) in 2014.

What sorts of cases go there?

All sorts. Case sizes vary – they aren’t earth-shattering, but it has had matters (in oil and gas, and telecoms) reaching into the billions of Egyptian pounds from a range of countries.

Which countries?

In 2014, the top non-Egyptian users were from Saudi Arabia, Sudan, Syria, the UK, the British Virgin Islands, Kuwait, Lebanon and Libya. This represents something of a change from recent years, when European companies were the major users of the centre, and a return to its more traditional, regional user-base.

None of which is to say that the CRCICA is losing ground outside of the region – those Europeans are still there – but rather that its Middle Eastern neighbours, in the post-Spring world, view it as a trusted forum.

And who gets appointed as arbitrator?

Some internationals, but mostly locals. That is, however, changing thanks to better rates of pay. Parties already have autonomy over who they appoint – no approval from the centre is needed – but it’s been hard to entice international arbitrators to work on CRCICA matters because the pay is low. It should be easier to get your preferred candidate now.

What changed?

New rules. According to Caline Mouawad and Rocio Digon, who performed a critical assessment of those rules for the International Journal of Arab Arbitration, they will “certainly persuade more arbitrators to accept appointments, which, in the medium and long term, will help the centre’s image and reputation”.

How ambitious is it and what’s it doing to grow its business?

Very ambitious. It wants to be the “foremost administrator of cases relating to the Arab world”. One area it is trying to get into is sports disputes. In 2012, it signed an agreement with the Court of Arbitration for Sport in Lausanne (CAS) to host CAS cases. The centre’s 2014 figures listed one sports case on its books.

In 2014, CRCICA entered into a further cooperation agreement with the Arbitration and Mediation Centre of the Chamber of Commerce Brazil–Canada, with an eye to exchanging information, recommending arbitrators and mediators and providing technical assistance.

How much does it give back, in terms of education and so on?

A fair bit. It’s been partnering with part of the ABA on a series of programmes aimed at newly qualified lawyers since 2009. More recently, it has started a series of four courses, one on each phase of an arbitration, working with the Cairo branch of the CIArb.

Is there any special reason to select CRCICA?

Well, it’s very affordable. Going back a few years, a 2010 GAR survey by Louis Flannery and Benjamin Garel of Stephenson Harwood found it to be the most affordable of six arbitral institutions whose fees were being compared. Garel and Flannery have since updated their results, and the CRCICA continues to be either the cheapest or nearly the cheapest in their research.

On top of that, there may also be a small enforcement advantage – at least locally – and its new rules have a couple of useful elements that help to counteract local “worst practice”.

Which parts of the rules do that?

Article 8/5 anticipates a common problem: the arbitrator who is bent on frustrating the process (or who seems a likely a candidate to do that). The Centre can reject a proposed appointee for a “past failure to comply with duties”, among other things – ie, a bad track record.

The flipside of this is article 12. This allows the Centre to remove an arbitrator who is failing to act, or has become incapacitated. Both rules require at least one oral hearing to be held following any such substitution.

The Centre is also very proud of how carefully the rules translate the UNCITRAL model into Arabic.

How do we know?

They’ve gone so far as to describe their work as “an original version” of the UNCITRAL package, such is the care taken during translation.

Is it an IFCAI member?

Yes.

Does the model clause make any default choices that should be highlighted?

No.

How responsive is it as a case administrator?

It has a dedicated dispute management department. The staff can work in English, Arabic and French.

Has it been affected by recent events?

The centre would say not, and that it has been business as usual in Egypt since the events of 2010–2011. And the numbers seem to back it up: CRCICA registered 150 new cases over the Morsi years, many of which were entirely international. When GAR announced it would be doing an inaugural up-and-coming regional centre award, CRCICA was an immediate frontrunner; it duly won in February 2014. Now, though, to call it “up and coming” may seem a little unfair.

Qatar International Centre for Conciliation and Arbitration (QICCA)

Why haven’t I heard of it?

It’s still early days. Although it’s been around since 2006, QICCA has been slow, until recently, to promote itself internationally.

How is it promoting itself now?

In 2010 deputy secretary general Minas Khatchadourian joined. He’s worked hard to spread the word abroad.

Why is GAR white-listing it?

People have only good things to say about it. Even before Khatchadourian’s arrival, QICCA had become the forum of choice for most Qatari government entities in international contracts. It is the only institution in the Gulf states that uses UNCITRAL Rules. A source who’s had several first-hand experiences with the Centre describes its work as “very impressive”.

Is it busy?

About 40 to 50 new cases per year – and increasing.

Why?

It’s winning favour with other governments in the Gulf region.

Who gets credit for this?

Khatchadourian. He was an Egyptian professor and a respected arbitrator when he took the job. He’s updated the rules, waged a publicity campaign abroad, and started expanding QICCA’s roster of arbitrators to bring in more international figures.

Who uses it, and on what kinds of dispute?

There are a lot of Qatari parties using it, as one might expect – but also entities from Bahrain, Saudia Arabia, Germany and the UK. A typical value for a dispute is about 50 million Qatari riyals, although there have been some much higher-value cases.

Is it non-profit?

Yes. It sits within the Qatar Chamber of Commerce and Industry.

Can I appoint whoever I want as arbitrator?

Yes, although an arbitrator probably needs a good knowledge of GCC laws, given the nature of the contracts in dispute. But after that you have a free hand. The centre maintains a list of 150 individuals but it is “indicative only”.

And will international arbitrators like the rate of pay?

Fees are similar to other regional centres. That means, for a substantial case, it shouldn’t be too hard to obtain an international name. Smaller matters? It might be problematic. But some think locals should handle such cases anyway, as it builds the local arbitrator pool.

How big is the secretariat?

Three case managers and a full-time secretary. They can work in English and Arabic, while the director is fluent in French.

What does the future hold?

QICCA is marketing hard to Qatari corporations to make itself their default choice, with Doha as seat. It is also planning to roll out rules for ad hoc dispute resolution boards.

Any downsides?

The website (www.qatarchamber.com) could be more informative.

Dubai International Arbitration Centre (DIAC)

Why’s it in the white list?

It’s a well-run organisation with a respected registrar of international stature, overseen by a board that’s stocked with big international arbitration names. And it has a serious caseload.

How serious?

Very. There’s little public confidence in the UAE’s courts, and DIAC pretty much fills in the gap. That means it gets quite a variety of work.

Variety – how?

It gets everything from local, low-value, real estate disputes, including landlord–tenant matters, to international stuff. But the bulk of its work is domestic. Sometimes it’s almost too busy. In 2009–2010, shortly after the financial crisis hit, DIAC had 478 new claims, which led to some grumbles.

What were the grumbles?

Mainly that it was struggling to cope. But DIAC responded well.

What did it do?

It went out into the international transfer market and got a big-name manager in.

Who?

Nassib Ziadé, formerly of ICSID at the World Bank. He not only lent DIAC much greater international credibility, he also sorted out operational kinks. Although he’s since moved on (the Bahrain Chamber of Dispute Resolution “poached” him), the DIAC is better for his influence, despite having a rocky time after he left.

What’s been rocky?

GAR understands that the DIAC board of trustees appointed a new director after Ziadé’s departure but that his successor also left after two weeks in the position. A spokesperson for the institution said that its board of trustees would appoint a permanent replacement for Ziadé, but this doesn’t appear to have happened yet.

Habib Al Mulla who was confirmed as Jan Paulsson’s successor as the centre’s chair in 2015, says that DIAC is still “actively looking” to fill the role.

Nevertheless it seems less threatened by the presence of rivals.

Who was it feeling threatened by before?

The DIFC–LCIA.

How do we know?

Well, there were some incidents where the DIAC suggested that awards from its new rival would be unenforceable in Dubai or the wider Emirates.

What happened?

It’s all water under the bridge now. The DIFC has had some issues of its own to contend with, but the animosity that was present for a while seems to have declined.

DIFC–LCIA

When was it founded?

In 2008, but it’s fair to say it didn’t go full steam from the start.

Why was that?

Every centre benefits from being led by an evangelist. The DIFC-LCIA launched with an eminent corporate lawyer as its registrar. He tried to fit promoting it in with his day job. Not ideal. It didn’t help that another Dubai arbitral institution began taking shots at it in the press.

Which institution did that?

The DIAC, or rather an individual on its board of trustees. He queried the legal infrastructure on which enforcing some DIFC–LCIA awards depends.

What infrastructure is that?

The DIFC–LCIA is part of the Dubai International Financial Centre, which is an autonomous jurisdiction with its own commercial laws.

What happened?

Nothing. The matter has been resolved and the institutions get along well now. But it did help to highlight a rather unique element of the DIFC–LCIA.

What’s the unique element?

Essentially, it sits in a bubble of common law, overseen by the DIFC court, staffed by leading foreign judges from around the world, including Michael Hwang SC from Singapore and the deputy chief justice Sir John Chadwick from the UK – to name but two.

That’s confusing… why don’t parties simply go to the DIFC courts?

The courts are public.

Is it all running successfully?

It’s a little early to declare it a success. A new registrar, Nizar Fadhlaoui, certainly gave it a burst of energy for a while, but it’s been impeded by some concerns about its legal infrastructure.

Have these been assuaged?

Not quite. A new registrar, Keisha Williams, came aboard in 2014, but left for a role with the Chartered Institute of Arbitrators in the spring of 2015. LCIA director general Jacomijn Van Haersolte-van Hof has said that a permanent replacement for Fadhlaoui will be appointed once a restructuring of the DIFC-LCIA joint venture that is currently under way is complete.

Why did the LCIA decide to set up in the Middle East?

Adrian Winstanley, former director general of the LCIA, said it recognised the economic growth taking place in the region. Jan Paulsson, the then-president of the LCIA’s court, said that if parties are to perform contracts in the Middle East it is “frustrating” not to be able to have their rights and obligations determined there. If LCIA-quality arbitration were available in a good seat, all such reluctance should fade away.

Was Paulsson right?

It seems so – dozens of cases are now under way. It helps that the two organisations – parent and offspring – share so much DNA; the LCIA’s illustrious court serves both. The DIFC–LCIA rules also mirror the LCIA’s with a similar light touch when administrating, and the same payment of arbitrators (by the hour worked).

Why not go straight to the parent in London?

Convenience. There’s also – on some occasions – an enforcement advantage.

What kind of occasions?

Well, if enforcement is envisaged in greater Dubai (or another emirate), the DIFC–LCIA takes a slight shortcut. At the risk of oversimplifying, it can be enforced as a judgment of the DIFC court (which its Dubai counterparts will recognise directly). It thereby skips the possibility of an “against public policy” challenge, which would be a risk with a standard New York Convention enforcement.

Has that been demonstrated to work?

Yes.

Who uses it?

Most cases feature an Emirati and international (ie, non-UAE) party.

Who can I appoint as arbitrator?

Anyone, subject to an LCIA rule that he or she has certain qualifications. But in keeping with the LCIA’s light-touch philosophy, parties can waive that rule. If it’s making the appointment itself, the DIFC-LCIA has the LCIA’s vast reservoir of experience (and databases) to draw on.

What does the future hold?

According to one source, the DIFC–LCIA already has “dozens of cases” and will get many more “once users realise the ease of enforcing an award in the DIFC courts”.

Are there any pitfalls or default selections to watch out for?

Pitfalls, no. The model clause makes a few choices you might want to adjust: one arbitrator, DIFC seat, use of English, and so on.