Chambers Global 2020: Practice Area Overview
Egypt: Dispute Resolution
The Egyptian judicial system was historically considered as the main and sometimes the only forum for disputes’ settlement in Egypt. This view, however, has changed to include arbitration, along with alternative dispute resolution mechanisms (ADR) as an often-preferred mechanism for dispute settlement. Despite the constraints surrounding the choice between resorting to arbitration or litigation, arbitration, over the last three decades, has gained traction as the favored dispute resolution mechanism, especially for foreign business owners, as it offers advantages that are crucial to many businesses. However, the government’s efforts to improve the litigation system and allow it to be more welcoming to foreign business owners cannot be overlooked.
II- Litigation vs. arbitration
Because Egypt’s litigation system was historically the only method of dispute settlement, whether for local business disputes or international ones, the caseload in local courts has become overburdened. Consequently, litigation has become a time-consuming mechanism that can fail to keep up with the requirements of modern international commercial transactions. Since time is a crucial factor in dispute resolution, many business owners prefer a costly but expeditious arbitration rather than inexpensive but lengthy court proceedings. Arbitration allows the parties to entrust knowledgeable individuals and experts with their complex and high-value disputes. Nonetheless, a variety of efforts are being made to improve the efficacy and efficiency of the Egyptian litigation system. In that vein, in 2008, the establishment of the Cairo Economic Court aimed at allowing the settlement of specific types of disputes before well-suited judges based on specific business knowledge and expertise.
Following the establishment of the Cairo Economic Court, ordinary courts must now refer commercial disputes having an economic aspect (i.e. the laws of capital markets, investment, intellectual property, financial leases, transfer of technology, unfair competition, commercial agency, insolvency and banking laws) to the competent economic court in Egypt. The delegation of specific disputes to relevant economic courts is an important facet of the state’s endeavors to improve the litigation process, as it was expected to reduce the duration of the cases’ review by courts.
In addition, the Egyptian legislature, in a draft law amending the Egyptian Code of Civil and Commercial Procedures, has contemplated the possibility of digitizing certain aspects of litigation, if not all of them. In fact, a large number of national courts have already been equipped with the necessary instruments for the proposed digitization. The amendment also aims at reducing the burdensomely numerous litigative procedures, as well as filing certain procedural gaps in the law in force.
Meanwhile, arbitration has become a forum that is rapidly gaining popularity. The Egyptian Arbitration Law No. 27/1994 (EAL), based on the United Nations Commission on International Trade Law (UNCITRAL) model, as well as the establishment of an institution like the Cairo Regional Centre for International Commercial Arbitration (CRCIA), have also facilitated the flourishing of arbitration as a popular dispute resolution mechanism. Egypt has now, in fact, become one of the most welcoming countries for arbitral proceedings. In a recent decision by the Cairo Court of Appeal (Judgment No. 70 of 123, Seventh Commercial Circuit, Mar. 9, 2011), the judges emphasized that the arbitrator is “absolutely free” and is not bound by a literal application of the national law chosen by the parties. It added that the rules enacted by states must be nuanced when applied to an arbitration due to the different interests and factors taken into account, and “due to the independence of the arbitration system vis-à-vis national laws which makes it subject to a set of international rules that correspond to its flexible and pragmatic nature.”
As to the enforcement of arbitral awards, article 52(1) of the EAL expressly excludes arbitral awards from being challenged through the means of recourse set forth for national court rulings. Hence, it is possible to apply for the setting aside of any final arbitral award that has been issued as of May 22, 1994 (the date the EAL entered into force) and provided that the place of arbitration is Egypt, pursuant to exhaustive grounds listed in article 53 of the EAL. Unlike an appeal, the setting aside procedure does not allow for review of the findings of the arbitrators but is a limited review of the possible existence of one of the grounds of annulment listed in article 53 of the EAL.
The increase in recourse to commercial arbitration is reflected through the sharp rise in the number of commercial cases heard before CRCICA in the last decade. In 2011, 66 new cases were filed; in 2017, 65 new cases were filed compared to 77 new cases in 2018.
III- Egypt: a country determined to accommodate investors
The year 2011, the high point of the Arab Spring in Egypt, paved the way for an influx of arbitration cases, largely brought against governments by foreign investors.
Egypt was a prime example of this and, ultimately, became one of the most challenged countries in the world with 34 cases brought against it before the ICSID to date. Egypt’s decision not to evade liability or repeal the BITs under which the cases were being brought has lent it the reputation of a country that consistently honors its commitments to foreign investors. Amongst the most frequent respondents to ICSID cases since 2011, Egypt had a highly favorable approach to the various arbitrations triggered against it since the Arab Spring, and opted for settlement in a large number of these cases.
Egypt is therefore now considered a favorable forum as an international arbitration venue. The CRCICA is one of the leading arbitral institutions in the region, and in 2019 won the GAR Regional Award for an Arbitral Institution That Impressed. Additionally, the provisions of the arbitration law itself, inspired by international model laws, offer both protection and flexibility to business owners and parties in arbitral proceedings. As an alternative, for those who do not opt for arbitration, the litigation process is becoming increasingly developed, in order to accommodate the needs of modern commercial transactions.
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