This post is the third part of a series covering issues that frequently arise in international arbitration, each with a specific regional focus. This post addresses the enforcement of arbitral awards, and the potential liability of arbitrators and experts practising in the region. We also consider the impact of COVID-19 on these two topics.
Disputes in Egypt
Egypt has experienced significant activity in the construction sector in recent years, seeing construction contracts worth over US $708.1 million awarded in 2018. Generally, the construction market in the Middle East and Africa was projected to be the fastest growing construction market in the world between 2018 and 2022. However, with the growth in construction projects, the potential for disputes has also increased, and the demand for arbitration to resolve them.
This post considers two categories of issues that frequently arise in construction arbitrations relating to Egypt:
- The enforcement of arbitral awards.
- The potential liability of arbitrators and experts practising in the region.
We also consider the impact of COVID-19 on these two topics.
Enforcement of arbitral awards
Egypt has a well-established arbitration culture. The Egyptian Arbitration Law No. 27 of 1994 was promulgated 26 years ago. It is a Model Law-adapted legislation, and courts have applied it rigorously. Its scope encompasses arbitrations seated in Egypt, as well as those seated abroad if the parties agree on its application.
Under the Egyptian Arbitration Law, there is a 90-day period from the date of an award within which a party may apply for its annulment, and only on the expiry of that period may a party apply for enforcement (articles 58 and 54.1, Egyptian Arbitration Law). However, an application for annulment does not automatically preclude an application for enforcement or entail a stay of enforcement of the arbitral award. An application for enforcement may only be rejected if the award contradicts a previous Egyptian court decision on the merits, if it violates public policy, or if the losing party has not been properly notified of the award (article 58.2, Egyptian Arbitration Law). It was previously considered that no challenge could be brought to any court order enforcing an award – the terms of the Egyptian Arbitration Law only expressly allow a grievance to be raised against an order refusing enforcement of an award (article 58.3, Egyptian Arbitration Law) – but that provision was declared unconstitutional by the Constitutional Court, which confirmed that a party may contest both types of orders within 30 days of their issuance (Egyptian Constitutional Court, Challenge No 92 of judicial year 21).
Egyptian courts generally favour enforcement of foreign arbitral awards, although the applicable procedures are relatively lengthy. Foreign awards are enforceable pursuant to the Egyptian Arbitration Law’s provisions on enforcement (article 1, Egyptian Arbitration Law), without prejudice to the provisions of the New York Convention. In a 2005 decision (Egyptian Court of Cassation, Challenge No. 966 of judicial year 73), the Egyptian Court of Cassation confirmed that the provisions of the Egyptian Arbitration Law are applied consistently with Article 3 of the New York Convention, which precludes the application of more onerous conditions for the enforcement of foreign awards than those applicable to domestic awards. The Court confirmed that the provisions of the general Code of Civil and Commercial Procedure applicable to foreign decisions would not apply, and instead foreign arbitral awards would be subject to the simplified procedure of the Egyptian Arbitration Act.
Potential liability for arbitrators and experts
In recent years, attention has been drawn to a significant risk for arbitrators who accept appointments in the Middle East, of personal liability and the possibility of criminal prosecution. As a result, many arbitrators have refused nominations to tribunals for arbitrations seated in the Middle East, and there has been concern that even those accepting appointments may approach their duties and produce awards more conservatively, to avoid a risk of liability.
In Egypt, there exists no text providing expressly for arbitrators’ immunity from civil liability. However, generally such immunity is presumed by analogy with the immunity granted by legislation to judges. An arbitrator may, however, remain potentially exposed to liability for gross negligence, fraud or deceit in the performance of their role.
Recent judgments have also indicated that arbitrators in Egypt may be exposed to criminal liability. In January and May 2019, Egyptian courts passed imprisonment sentences against a number of arbitrators and members of a purported local arbitration institution who were involved in the issuance of an award in sham arbitration proceedings. The individuals were charged with misappropriation by fraudulent means and forgery (Al-Nozha Misdemeanor Court in Cairo, Case No. 12648 of Judicial Year 2018).
However, the facts of this case were extraordinary, involving sham proceedings that resulted in the issuance of a US $18 billion award against Chevron Corporation, in circumstances that the court considered to be a criminal scheme. Outside of such exceptional circumstances, arbitrators are not generally subject to criminal liability for acts carried out in the performance of their roles. Therefore, it does not appear that arbitrators are exposed to any greater potential criminal liability than is the case in any other jurisdiction.
COVID-19’s impact on enforcement of awards and arbitrators’ liability
The COVID-19 pandemic has forced arbitration practitioners to explore and resort to novel means in the conduct of arbitration proceedings. Arbitrators, however, are faced with the risk of how national courts are going to treat their awards when novel and unexpected means of managing the arbitral proceedings have been implemented in an attempt to cope with this worldwide pandemic.
For instance, arbitrators may find themselves in need of amending the procedural timetable, holding virtual hearings or even deciding on issues without the need for a hearing. While such steps may promote efficient conduct of arbitration proceedings amidst the restrictions created by the pandemic, the question remains as to the effect of these decisions on due process and the parties’ ability to defend their cases, and how this may impact the issue of liability of arbitrators.
The Egyptian courts are required to ensure that public policy is upheld, and that arbitration awards comply with it. It is therefore an important consideration in the context of enforcement of an award or an application for its annulment, and the court is required to raise points of public policy ex officio if the parties do not (articles 58.2 and 53.2). Due process and the principe du contradictoire are features of public policy, and the courts are required to ensure that a party has had reasonable opportunity to present its case in any arbitration (article 53.1, Egyptian Arbitration Law). The courts must also consider other significant procedural matters, such as the appointment of arbitrators in violation of the parties’ agreement, or any other serious procedural violation (article 53.1, Egyptian Arbitration Law). Therefore, great care must be taken by arbitrators faced with difficulties caused by COVID-19, to ensure that steps taken to allow proceedings to continue are taken in a manner that is consistent with the fundamental due process rights of the parties.
However, it must also be recognised that there will be a potential for parties to try to exploit any difficulties created by the COVID-19 pandemic to try to delay proceedings or to annul awards issued following novel procedural steps. Time will tell how the Egyptian courts, which have already shown growing support to international arbitration, will react to such circumstances, and the extent to which the Egyptian courts will support new procedures.
For this post, Debevoise collaborated with Zulficar & Partners LLP, a leading firm based in Cairo, Egypt.