What is Arbitration
Arbitration is an internationally established means of resolving disputes outside the national court system. Typically faster than court proceedings, it is often the preferred method of dispute resolution in international business relations.
At its core, arbitration is a consensual dispute resolution process. Parties agree to submit their future disputes for resolution to an arbitral tribunal, either in the provisions of a contract or through an applicable investment treaty. Parties can also submit existing disputes to arbitration through an agreement called a “submission agreement”, which specifies the subject matter of the dispute.
Arbitration is known for its procedural flexibility, which allows parties to engage in an efficient, confidential, and fair process leading to a final, binding and enforceable award.
Arbitration awards are enforceable in over 170 countries around the world, due to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958, New York) “the New York Convention“.
Parties are free to choose a neutral arbitral seat when drafting their arbitration clause. Moreover, once a dispute has arisen, parties can appoint independent arbitrators of their choice to form a neutral tribunal.
Arbitration allows the parties to determine the applicable procedures, language, and law on the merits. After the arbitral proceedings have commenced, parties might opt to settle their dispute amicably and agree on a consent-award, enforceable as other arbitral awards; or to resort to other ADR mechanisms during the proceedings, and return to arbitration if no settlement was reached.
Nevertheless, the law provides for a number of procedural requirements that need to be met in order for the award to be valid and enforceable.
Time and cost-efficiency
Due to the flexibility and finality of arbitral proceedings, resolving disputes through arbitration may often be faster and more cost effective than resolution through litigation.
Arbitration hearings are conducted in camera (i.e. not accessible to the public) and awards are, under normal circumstances, not published. Therefore, disputes will not be revealed to the public, thereby, maintaining business relationships where possible.
Enforcement of foreign court judgments can be difficult in the absence of an appropriate bilateral or multilateral treaty. This is not the case in arbitration where a single international convention, the New York Convention, applicable in over 170 jurisdictions, requires its signatories to undertake to recognise and enforce arbitral awards made in other signatory countries. On the Arab level, the Riyadh Convention also permits the smooth recognition and enforcement of arbitral awards in the Member States of the Arab League of Nations.
Final and Binding
Arbitration is a single-instance procedure, resulting in a final and binding award. Therefore it is not possible to appeal an arbitral award (i.e. it is not subject to review on the merits), thereby avoiding prolonged court appeal procedures.
However, parties can challenge the validity of the arbitral award before the competent national court to set it aside. The court is tasked solely with determining whether or not the arbitral proceedings met the requirements provided for by the law. For example, under Egyptian Arbitration Law No. 27 of 1994, Article 53 provides exhaustive grounds for setting aside an arbitral award.
Types of Arbitration
There are two different types of arbitration, institutional and ad hoc, the essential features of each are set out below:
- Institutional arbitration is administered by an arbitration institution, such as CRCICA, and is conducted according to its rules.
- Institutional arbitration provides important administrative assistance to the parties.
- Institutional arbitration guarantees the predictability of the arbitral proceedings, especially the arbitrators’ fees, which are determined by the institution. The parties are able to assess, when they select an institution and before the commencement of the proceedings, the costs of the arbitration, except legal fees.
- Institutional arbitration also regulates the deposits of the arbitrators’ fees.
- Institutional arbitration makes the procedures more efficient by avoiding the need to resort to state courts in the proceedings, especially in the appointment, removal, and challenge of arbitrators.
- Typically, proceedings are conducted under the arbitration rules of the chosen institution, which establishes the parameters of the procedure from the submission of the notice of arbitration to the issuance of the award.
Parties who wish to agree on arbitration under the CRCICA Arbitration Rules are recommended to use the following model arbitration clauses.
Ad Hoc Arbitration
Ad hoc arbitrations are arranged solely between the arbitrator(s) and the parties. The parties must envisage and advance the arbitral proceedings themselves under the supervision of the tribunal. The parties may choose to adopt a ready-made set of arbitration rules (such as the UNCITRAL Arbitration Rules or the Egyptian Arbitration Law No. 27 for 1994) or the proceedings may be conducted in accordance with a set of bespoke rules, drawn up by the parties specifically for that particular case, as long as they comply with the legal requirements of the seat of the arbitration.