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Arbitration in Egypt | Arbitration

Arbitration has long existed in Egypt, although it remained uncodified for many years. In the nineteenth century, Egyptian law was a blend of Sharia and European law. First, Egyptian legislation followed Islamic “Fiqh”, codified in the “Medjella”, which contained the rules related to arbitration.[1] Arbitration in Egypt was then governed by Articles 501-513 of the Code of Civil Procedure enacted by Law No. 13 of 1968.[2]

Today, arbitration in Egypt is governed by Law No. 27/1997 Promulgating the Law Concerning  Arbitration in Civil and Commercial Matters (the “EAL”), influenced by the UNCITRAL Model Law and the principles on which it is based. The EAL became effective on 22 May 1994 and repealed Articles 501-513 of the Code of Civil Procedure.

The EAL applies to all pending disputes subject to its provisions prior to its entry into force, or to disputes commenced thereafter even if the contract was concluded before 22 May 1994.[3]

Arbitration Egypt

Arbitration Agreement in Egypt

Substantive Validity of the Arbitration Agreement

Prior to the enactment of the EAL, the Egyptian Code of Civil Procedure admitted the validity of arbitration clauses on the condition that the clause contained the names of the arbitrators.[4] One important modification brought by the EAL in this respect was to abolish the provision regarding the appointment of arbitrators. Thus, the EAL recognizes the validity of arbitration agreements even if the parties did not stipulate the names of their arbitrators in advance, like most modern arbitration statutes.

An arbitration agreement is essentially a contract. Hence, to form a legally binding arbitration agreement, it must comply with the requirements for a valid contract under the Egyptian Civil Code. There are three requirements for a valid contract under the Egyptian Civil Code, namely:[5]

  • mutual consent;
  • a specific subject matter defined by the contract; and
  • cause for mutual obligations of the parties.

Applying these elements, one may conclude that: (i) the parties’ consent must be flawless; (ii) the subject matter of the contract must be capable of being settled by arbitration and not violate public policy; (iii) the cause of the parties’ mutual consent to use arbitration must not be fraudulent or illegal.[6] In this regard, the Cairo Court of Appeal has set aside an arbitral award on the basis that the court understood that the parties had resorted to arbitration to avoid the compulsory fees, under Egyptian law, for the registration of immovable real estate.[7]

Formal Validity of the Arbitration Agreement in Egypt

Another important change brought by the EAL concerns the form of arbitration agreements. The old arbitration provisions required arbitration agreements to be in writing. Following this approach, Egyptian courts had confirmed that neither an acknowledgment nor a witness statement could be used as proof of an arbitration agreement.[8] The EAL expressly adopted the courts’ position. Thus, Article 12 of the EAL provides that “[t]he arbitration agreement must be in writing, on penalty of nullity.[9]

However, the EAL made the writing requirement less strict. The second part of Article 12 provides that an agreement is in writing if “it is contained in a document signed by both parties or contained in an exchange of letters, telegrams or other means of written communication.[10]

Therefore, writing is a formal requirement for the conclusion of an arbitration agreement. Consequently, arbitration agreements concluded orally are not valid under the EAL.[11]

Lastly, the validity of an arbitration agreement may be established if it is included in an addendum to the main contract, provided that the main contract expressly refers to the addendum.[12]

Arbitrability and Severability of Arbitration Agreements

The EAL does not define the concept of arbitrability. It merely provides that “[a]rbitration is not permitted in matters which cannot be subject to compromise.[13]

Article 551 of the Egyptian Civil Code, in turn, indicates that “[c]ompromise is not allowed in matters relating to personal status or pertaining to public policy. However, compromise is allowed with respect to financial interests resulting from a personal status or resulting from committing a crime.[14] Based on this provision, matters related to (i) personal status (e.g., marriage) and (b) public policy (e.g., criminal matters, real estate disputes, labour and employment issues, antitrust disputes) are not arbitrable in Egypt.[15]

The EAL also expressly provides that an arbitration agreement is an independent agreement separate from the main agreement:

Article 23

The arbitration clause shall be treated as an independent agreement separate from the other terms of the contract. The nullity, rescission or termination of the contract shall not affect the arbitration clause, provided that such clause is valid per se.

Accordingly, in Egypt, as in most jurisdictions, the arbitration clause remains valid even if the main contract is null, void, or terminated.[16]

Arbitral Tribunal and Procedure

As explained above, the EAL no longer requires the parties to appoint the arbitrators in their arbitration agreements. Instead, the EAL gives the parties the freedom to agree upon the number of arbitrators and their method of appointment.[17] Therefore, arbitrators may be selected pursuant to the parties’ agreement or any rules incorporated therein.

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Arbitrators’ Appointment

If the parties fail to reach an agreement or if one of the parties fails to appoint its arbitrator, and no other rules have been agreed, the appointment shall be made by the court that would have jurisdiction over the dispute for domestic arbitration, or the Cairo Court of Appeal for international arbitration.[18]

Arbitrators’ Capacity

In terms of capacity, arbitrators shall have full capacity to exercise his/her civil rights and not be:[19]

  • a minor;
  • under guardianship; or
  • deprived of civil rights due to a judgement for felony or misdemeanour, or by reason of a declaration of bankruptcy, unless he/she has been rehabilitated.

Further, the EAL does not impose any requirements as to the arbitrator’s gender or nationality. The EAL does not mention that the arbitrator must be a Muslim.[20]

Evidence and Experts

The parties are free to agree on the rules of evidence. The Egyptian Evidence Law is often adopted in domestic arbitration; however, parties may also agree on following the IBA Rules on Taking of Evidence in International Arbitration, commonly used in international arbitration. In the absence of an agreement, the arbitral tribunal shall have the power to determine the rules for the taking of evidence that it deems appropriate.

Confidentiality of Arbitration in Egypt

While arbitral proceedings governed by the EAL are not confidential by default, the parties may agree to hold their proceedings in a confidential manner. In this respect, the Cairo Court of Appeal held that the failure of one party to respect confidentiality does not render the arbitral award null or void, but it may give rise to compensation if damages are incurred by the other party.[21]

Interim Measures in Egypt

Arbitrators are authorized to issue interim or conservatory measures under the EAL, provided that the parties have agreed to grant the arbitrators such a power. Also, any party may require the other party to provide adequate guarantee for the costs of the ordered measure.[22]

Article 24

1. Both parties to the arbitration may agree to confer upon the arbitral tribunal the power to order, upon request of either party, interim or conservatory measures considered necessary in respect of the subject matter of the dispute and to require any party to provide appropriate security to cover the costs of the ordered measure.

If the party against whom the order was issued fails to execute it, the arbitral tribunal can authorize the other party to request enforcement of the order before the Egyptian courts:[23]

Article 24

2. If the party against whom the order was issued fails to execute it, the arbitral tribunal, upon the request of the other party, may authorize the latter to undertake the procedures necessary for the execution of the order, without prejudice to the right of said party to apply to the president of the court specified in Article 9 of this Law for rendering an execution order.

In 2018, the Cairo Court of Appeal confirmed the conditions that Egyptian courts should apply when deciding upon the request to enforce an interim measure. The court must ensure that:[24]

  • an arbitration agreement exists;
  • the party requesting the interim measure has empowered the arbitral tribunal to grant provisional measures;
  • the procedures required for issuing the provisional measure were respected; and
  • the arbitral tribunal did not issue a provisional measure contrary to Egyptian public policy.

Evidentiary Hearings

The arbitral tribunal may hold oral hearings, although they are not mandatory:

Article 33

1. The arbitral tribunal may hold oral hearings in order to enable each party to explain the merits of the case and to present its arguments as well as evidence. It may also decide that the proceedings shall be conducted exclusively on the basis of the submitted briefs and written documents, subject to any contrary agreement by the parties.

With respect to oral statements, neither factual witnesses nor experts are required to take the oath to carry out their missions.[25]

Arbitration in Egypt: Awards and Set Aside Proceedings

Law Applicable to the Merits

If the parties fail to agree on the applicable law to their dispute, the EAL provides that the arbitral tribunal shall apply the law which it considers has the closest connection with the dispute. The EAL also provides that the tribunal must comply with (i) terms of the contract, and (ii) the trade usages applicable to the transaction.[26]

Formal Requirements of Arbitral Awards

In terms of formality, arbitral awards must:[27]

  • be in writing;
  • be signed by the arbitrators or by the majority of the arbitral tribunal (indicating the reasons for the refusal of the dissident arbitrator, if any);
  • be motivated, unless the parties agreed otherwise, or the law applicable to the dispute do not require the arbitrators to motivate the award;
  • contain the names and addresses of the parties;
  • contain the names, addresses and nationalities of the arbitrators;
  • contain a copy of the arbitration agreement and a summary of the parties’ requests; and
  • contain the date and place it was issued.

Enforcement of Arbitral Awards

Arbitral awards rendered in Egypt or abroad are subject to the exequatur of the President of the court where the award was deposited pursuant 47 of the EAL.[28]

The party seeking enforcement must provide:[29]

  • the original award or a signed copy;
  • a copy of the arbitration agreement;
  • an authenticated Arabic translation of the award if the award was rendered in a foreign language; and
  • a copy of the procès-verbal attesting the deposit of the award pursuant to Article 47.

Before giving leave for enforcement, the President of the court must ensure that the award meets the following criteria:[30]

  • it does not contradict a judgement previously rendered by an Egyptian Court on the same subject matter;
  • it does not violate public policy in Egypt; and
  • it was properly notified to the party against whom it was rendered.
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Foreign arbitral awards are enforceable according to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the New York Convention) to which Egypt adhered on 9 March 1959.

Annulment of Arbitral Awards

A request for annulment against an award rendered outside of Egypt should be filed before the Cairo Court of Appeal.[31] On the other hand, domestic awards may be annulled before the court that would have jurisdiction over the dispute.[32]

Any annulment proceeding must be brought within 90 days from the date of the notification of the award to the debtor.[33]

The grounds for annulment of an arbitral award are enumerated in Article 53, as follows:[34]

  • if there is no arbitration agreement, if it is void or voidable, or it has expired;
  • if either party to the arbitration agreement was, at the time of its conclusion, fully or partially incapacitated according to the law governing its legal capacity;
  • if either party to the arbitration was unable to present its case as a result of not being given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or for any other reason beyond its control;
  • if the arbitral tribunal failed to apply the law agreed upon by the parties to govern the subject matter in dispute;
  • if the constitution of the arbitral tribunal or the appointment of the arbitrators was in violation of the applicable legal provisions or the parties’ agreement;
  • if the arbitral award dealt with matters falling beyond the scope of the arbitration agreement or exceeding the limits of the agreement. However, in cases where matters falling within the scope of the arbitration can be separated from the part of the award which deals with matters not subject to the arbitration, nullity shall be exclusive to the latter parts only;
  • if the arbitral award itself or the arbitration procedures affecting the award contain a legal violation that gives rise to its nullity; and
  • if the arbitral award violates the Egyptian public policy.

The Cairo Court of Appeal has confirmed on different occasions that the above list for annulment is exclusive. Therefore, no arbitral awards shall be annulled for any grounds falling outside the above grounds.[35]

[1]             D. Luo and J. El-Ahdab, “Arbitration in Egypt” in Arbitration with the Arab Countries (2001), p. 158

[2]             I. Shehata, Arbitration in Egypt: A Practitioner’s Guide (2021), p. 21.

[3]             Id., p. 23; see also EAL, Article 1 of the Preamble.

[4]             D. Luo and J. El-Ahdab, “Arbitration in Egypt” in Arbitration with the Arab Countries (2001), p. 160.

[5]             I. Shehata, Arbitration in Egypt: A Practitioner’s Guide (2021), p. 36.

[6]             Id., p. 37.

[7]             Id., p. 37 (referring to Cairo Court of Appeal, Challenge No. 68/Judicial Year 123, Hearing dated 2 July 2007).

[8]             D. Luo and J. El-Ahdab, “Arbitration in Egypt” in Arbitration with the Arab Countries (2001), p. 162.

[9]             EAL, Article 12.

[10]            EAL, Article 12 (emphasis added).

[11]            I. Shehata, Arbitration in Egypt: A Practitioner’s Guide (2021), p. 38.

[12]            D. Luo and J. El-Ahdab, “Arbitration in Egypt” in Arbitration with the Arab Countries (2001), p. 162.

[13]            Article 11 of the EAL.

[14]            I. Shehata, Arbitration in Egypt: A Practitioner’s Guide (2021), p. 83.

[15]            Ibid.

[16]            D. Luo and J. El-Ahdab, “Arbitration in Egypt” in Arbitration with the Arab Countries (2001), p. 174.

[17]             Id., 179; EAL, Article 17(1); see also Article 9 of the EAL: “Competence to review the arbitral matters referred to by this Law to the Egyptian judiciary lies with the court having original jurisdiction over the dispute. However, in the case of international commercial arbitration, whether conducted in Egypt or abroad, competence lies with the Cairo Court of Appeal unless the parties agree on the competence of another appellate court in Egypt.

[18]             EAL, Articles 9 and 17(1)(a)(b).

[19]             EAL, Article 16(1).

[20]            Id., p. 181.

[21]            I. Shehata, Arbitration in Egypt: A Practitioner’s Guide (2021), p. 133 (referring to Cairo Court of Appeal, Challenge No. 2/Judicial Year 131, Hearing dated 4 January 2016).

[22]            EAL, Article 24.1 (emphasis added).

[23]             D. Luo and J. El-Ahdab, “Arbitration in Egypt” in Arbitration with the Arab Countries (2001), p. 189; EAL, Article 24.2 (emphasis added)

[24]             I. Shehata, Arbitration in Egypt: A Practitioner’s Guide (2021), p. 138 (referring to Cairo Court of Appeal, Challenge No. 44/Judicial Year 134, Hearing dated 9 May 2018.)

[25]             EAL, Article 33.4

[26]            EAL, Article 39.3; see also D. Luo and J. El-Ahdab, “Arbitration in Egypt” in Arbitration with the Arab Countries (2001), p. 197

[27]             EAL, Article 43.

[28]            See supra Article 9 of the EAL.

[29]            EAL, Article 56.

[30]            EAL, Article 58.

[31]            I. Shehata, Arbitration in Egypt: A Practitioner’s Guide (2021), p. 293.

[32]            Ibid.

[33]            EAL, Article 54.1.

[34]            Id., p. 301.

[35]            Id., p. 301 (referring to Cairo Court of Appeal, Challenge No. 88/Judicial Year 126, Hearing dated 26 June 2012; Cairo Court of Appeal, Challenge No. 54/Judicial Year 130, Hearing dated 21 December 2016; Cairo Court of Appeal, Challenge No. 11/Judicial Year 135, Hearing dated 20 June 2018).

Reference Article: https://www.international-arbitration-attorney.com/arbitration-in-egypt/

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