Claimant, a UK company, objected to the capacity of the first of several Respondents to be party to the arbitration, on the ground that he was the subject of a bankruptcy order in Egypt.

'Chapter V. The Positions of the Parties

Section I. The position of Claimant

A. The issues

24. The issue before us, namely whether or not Respondent n° 1 . . . is entitled to conduct the defence of the claim brought against him and/or to conduct the counterclaim brought by him against [Claimant] in this arbitration, arises from the fact that [Respondent No. 1], an Egyptian national, has been the subject of bankruptcy proceedings in Egypt. In particular, by an Order . . . of the . . . First Instance Court, [Respondent No. 1] was declared bankrupt in his capacity as Chairman of . . ., an Egyptian company, and by an Order . . . of the . . . First Instance Court, [Respondent No. 1] was declared bankrupt in his personal capacity. [Respondent No. 1]'s trustee in bankruptcy, Respondent No. 7 (also referred to as the "Trustee"), has made clear, by a letter to the ICC Secretariat . . ., that he does not intend to participate in these arbitration proceedings, either in defending the claims brought against [Respondent No. 1] or in pursuing the counterclaims brought by [Respondent No. 1].

25. Claimant considers that, as a result of these Orders (collectively referred to as "the Egyptian Bankruptcy Orders"), [Respondent No. 1] is not, as a matter of Egyptian law, entitled to conduct the defence of any claims brought against him by [Claimant] or to bring and conduct any counterclaims against Claimant; that, as a matter of Egyptian law, [Respondent No. 1]'s trustee in bankruptcy is the only person legally authorised and empowered to do so; and that, as the Trustee has made clear that he does not intend to do so, [Respondent No. 1], as a matter of Egyptian law, does not have standing to sue and to defend in this arbitration. Claimant further contends that, by reason of its conflict of laws rules, English law recognises and gives effect to the fact that this is the position under Egyptian law; and, accordingly, as a matter of English law, [Respondent No. 1] has no legal capacity or right to conduct the defence of the claims in this arbitration or to pursue the counterclaims.

26. Claimant finally disputes [Respondent No. 1]'s arguments that the effect of the Egyptian Bankruptcy Orders is that [Respondent No. 1]'s property is vested in the Trustee; that the Egyptian Bankruptcy Orders do not have any extraterritorial effect (affecting only property in Egypt); that the claims in this arbitration (both brought against and by [Respondent No. 1]) are property located in England; and that, the Egyptian Bankruptcy Orders do not, therefore, have any impact on such claims; and finally that English conflict of laws rules have no relevance in this arbitration.

27. According to Claimant the following sub-issues arise in relation to this preliminary issue:

1) The effect of the Egyptian Bankruptcy Orders as a matter of Egyptian law.

2) Whether [Respondent No. 1] is entitled or not to conduct the defence of the claim brought against him in this arbitration or to conduct the counterclaim brought by him against [Claimant] in this arbitration; whether he has legal capacity to do so.

B. Effect of Egyptian Bankruptcy Orders under Egyptian Law

28. Claimant relies on the expert opinions of [A] with respect to the relevant principles of Egyptian bankruptcy law and concludes that the effect of the Egyptian Bankruptcy Orders is as follows:

a) The basic principle is that the bankrupt is deprived of the power to administer his own affairs; and instead it is the Trustee who is legally authorised and empowered to administer the bankrupt's affairs (see Articles 573, 579, 590, 594 & 605 of the Egyptian Commercial Code).

b) The Trustee is, consequently, the only person legally authorised to defend proceedings brought against a bankrupt, and is the only person legally authorised to bring and conduct proceedings in the name of the bankrupt.

c) The bankrupt has no authority or power to defend proceedings brought against him and has no legal right to take any step in such proceedings. He has no authority or power to bring and conduct proceedings in his name, and has no legal right to take any step in such proceedings. These are matters within the sole and exclusive authority and power of the Trustee.

d) There is no territorial restriction in the case of an Egyptian bankruptcy order. It is wrong to contend that the bankruptcy only affects property in Egypt.

e) If the Trustee decides not to defend a claim brought against the bankrupt, or decides not to bring or conduct proceedings, the bankrupt may apply to the Egyptian Bankruptcy Court (1) for an order that the Trustee take an active part in and/or commence and conduct such proceedings and/or (2) for an order that the bankrupt be authorised to take an active part in and/or commence and conduct such proceedings and/or (3) for an order that the Trustee be replaced.

f) If (1) the Trustee decides not to participate in proceedings brought against the bankrupt despite having been joined in those proceedings and/or to conduct proceedings brought by the bankrupt and (2) the Egyptian Bankruptcy Court does not make any one of the three orders referred to above, then any decision made against the bankrupt in such proceedings does not bind the Trustee.

29. According to Claimant, it is thus clear that, as a matter of Egyptian law, as the Trustee has communicated to the ICC his decision not to defend the claims or to pursue the counterclaims in the arbitration and as [Respondent No. 1] has not sought to challenge that decision before the Egyptian Courts, [Respondent No. 1] has no legal right to take any step in these proceedings; it follows that [Respondent No. 1] has no capacity to sue or to defend in this arbitration.

C. Recognition of Egyptian Bankruptcy Orders under English Law

30. Claimant contends that the Tribunal should apply English conflicts of laws principles for the purpose of determining the issue whether or not the Egyptian Bankruptcy Orders have any effect on this arbitration and, in particular, on [Respondent No. 1]'s right to conduct the defence and to conduct the counterclaims brought by him in the arbitration. This is so because (1) English law is the procedural law expressly chosen by the parties; (2) English law is the law governing the substance of the dispute which has been referred to arbitration; (3) English law is the law governing the arbitration agreements contained in the main contracts and (4) London is the seat of the arbitration.

31. Claimant argues that it is apparent from a line of authority, starting with the classic case of Alivon v. Furnival (1834) 1 Cr.M & P. 277, which was recently cited with approval in Chen Li Hung v. Tin Lei Miao (2000) 1 H.K.LR.D. 252 at 258, that English Courts will recognise and give effect to the consequences of a foreign bankruptcy order. If, as in that case, the effect of the foreign bankruptcy order is that the bankrupt has no right to administer his affairs and that all rights to administer his affairs and rights of action lie with the trustee in bankruptcy, English Courts will not permit an action to be brought (or defended) by anyone other than the party authorised under the foreign bankruptcy order to do so.

32. Therefore, it is Claimant's position that English Courts would not allow [Respondent No. 1] to defend legal proceedings brought against him in England or advance a counterclaim in legal proceedings brought in England. Arbitrators, who have to apply these English legal principles, will adopt the same approach.

33. With respect to the issue of capacity, Claimant alleges that the effect of the Egyptian Bankruptcy Orders is to affect the capacity of the bankrupt, [Respondent No. 1]. Unlike English bankruptcy law, whose application results in the bankrupt's assets being assigned to and so vested in the Trustee in Bankruptcy, Egyptian law simply affects the capacity of the bankrupt to administer his affairs. It deprives him of all such capacity, including the capacity to conduct legal proceedings.

34. Claimant further contends that, under English conflicts principles, issues of capacity are generally determined by reference to the domicile of the party whose capacity is affected (see Rule 179 in Dicey & Morris). It follows that the Tribunal should accept that [Respondent No. 1] has, under Egyptian law (see §25 hereabove), no capacity to conduct these proceedings and that only the Trustee has capacity to conduct them.

35. Claimant disputes the position of [B], expert for Respondent N° 1, that [Respondent No. 1] is able to act personally as respondent in the arbitration. It seems to be [B]'s opinion that the scope of the replacement of a bankrupt by his trustee does not extend to the present circumstances. [B] appears to rely for his contention upon five "established rules":

a) contracts signed by a bankrupt are valid between the parties but only non-opposable to the creditors represented by the trustee;

b) the "hands off' effect of bankruptcy for the bankrupt person does not extend to conservatory measures;

c) the "hands off" effect of bankruptcy has a limited scope as to assets;

d) according to Art. 594 /2 of the Egyptian Commercial Code, the court may permit the bankrupt to join in legal actions related to the bankruptcy;

e) according to Art. 597 of the Egyptian Commercial Code, the bankrupt may, without permission, start a new business with assets which are outside the bankruptcy estate ("la masse");

Claimant notes that according to [A] . . . none of these rules have any relevance in the present circumstances.

36. Claimant finally disputes [B]'s conclusion that bankruptcy judgments in Egypt are limited to assets situated in Egypt. The premise for this conclusion appears to be that foreign bankruptcy judgments are devoid of effect in Egypt and an Egyptian bankruptcy judgment is limited to commercial activities and assets in Egypt, because "in all the international agreements signed by Egypt on the mutual recognition of foreign judgments, bankruptcy judgments are expressly accepted and excluded". Claimant points out that, as [A] establishes in his reports, this assertion by [B] is factually incorrect. In particular:

a) it is common in Egypt for creditors who have obtained a foreign bankruptcy judgment to obtain an exequatur on the judgment to enforce it in Egypt;

b) there are a number of bilateral treaties between Egypt and foreign States which involve mutual recognition of bankruptcy judgments;

absent a contrary provision in a treaty between Egypt and the United Kingdom (and no such treaty exists), the effect of domestic rules of private international law is that an Egyptian Court will apply a foreign bankruptcy judgment.

According to Claimant, further support for the conclusions of [A] is to be found in provisions of the Egyptian Commercial Code . . . It is inconceivable that a Code which deals with all aspects of bankruptcy under Egyptian Law, including the limitations of the effect of a bankruptcy ruling on a bankrupt, would not have made it clear (if it were intended to be the case) that such a ruling was intended to apply only to assets and liabilities which were located in Egypt alone.

Section II. The position of Respondent No. 1

A. The issues

37. Respondent No. 1 alleges that in order to determine whether he has standing to participate in this arbitration, a number of preliminary issues need to be resolved. These issues are the following:

1. Have the parties chosen the substantive law applicable to the issue of standing?

2. If not, how should the applicable law be determined? In particular, should it be determined by reference to:

(i) the substantive law applicable to the underlying contracts,

(ii) the law of the arbitration agreement,

(iii) the procedural law of the arbitration, or

(iv) the ICC Rules and the Terms of Reference?

3. What is the position under the applicable law, as determined in accordance with the principles identified above, in relation to the issue of standing?

B. Have the parties chosen the substantive law applicable to the issue of standing?

38. The parties chose English Law to govern the underlying contracts under which the disputes subject of this arbitration have arisen. According to Respondents, the issue of standing does not relate to any of the underlying contracts. It follows that the parties have not chosen English law to govern the issue of standing.

C. How should the applicable law be determined?

39. Respondent No. 1 disputes Claimant's arguments suggesting that the choice of English law as the Substantive Law of the Underlying Contracts results in the application of English conflict of laws principles. As stated above the issue of standing does not relate to any of the underlying contracts; it follows therefrom that the parties have not chosen English law to govern the issue of standing. Respondent No. 1 refers to Article 15 of the Rome Convention which provides: "[t]he application of the law of any country specified by this Convention means the application of the rules of law in force in that country other than its rules of private international law". Accordingly, English conflict of law principles are not applicable to the resolution of the issue of standing merely by reason of the fact that the parties chose English law as the governing law of the underlying contracts.

40. In the same vein, Respondent No. 1 states that the Law of the Arbitration Agreements in the underlying contracts being that of those contracts generally, namely English law, for the reasons set out above, the choice of English law does not incorporate English conflict of laws rules.

41. According to the First Respondent, the applicable law should not be determined by reference to the Procedural Law of the Arbitration. In the underlying contracts, the seat of the arbitration was stated to be Paris. However, as a matter of convenience, the Parties have agreed that the seat should be moved to London and accordingly the applicable procedural law is English law. Respondent No. 1 underlines that Section 46 of the 1996 Arbitration Act states that the fact that English law is the procedural law of the arbitration does not entail the applicability of English conflict of laws principles. Section 46(2) provides: "For this purpose the choice of the laws of a country shall be understood to refer to the substantive laws of that country and not its conflict of law rules".

42. Respondent No. 1 further alleges that in the absence of any agreement between the parties as to the applicable law on the issue of standing, it should be determined in light of:

- Article 17(1) of the ICC Rules which provides: "[t]he parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it is determines to be appropriate";

- and Article 97 of the Terms of Reference which provides: "[t]he Arbitral Tribunal shall follow the ICC Rules. For issues not dealt with within these rules, it shall apply the rules which the Parties will have agreed upon. In the absence of such an agreement, it shall apply the rules it deems appropriate".

43. Accordingly, Respondent No. 1 considers that it is for the Tribunal itself to determine the law applicable to the resolution of the question of standing without being required to refer to any national conflicts of laws principles whether English or otherwise.

D. The applicable law on the issue of standing

44. Respondent No. 1 contends that the question of standing arises because of the decision of the Egyptian Court adjudicating Respondent No. 1 bankrupt in his personal capacity. Accordingly, the Tribunal should first consider the extent to which that decision of the Egyptian Court is relevant to the position of Respondent No. 1 in these arbitration proceedings.

45. Respondent No. 1 points out that the rights sought to be enforced by and against him arise out of contracts governed by English law. However, such rights are not assets situated in Egypt. Accordingly, on the basis that the assets in question are not situated within Egypt, the first question is whether the effect of the order of the Egyptian Court adjudicating Respondent No. 1 bankrupt has any effect concerning assets situated outside Egypt.

46. Respondent No. 1 first contends that it is clear from the opinions of [B] that Egyptian Bankruptcy Law has no extraterritorial effect. According to [B], the strict territoriality of bankruptcy judgments is recognized under Egyptian law as a normal consequence of the limitation of States' sovereignty to their respective territories; a foreign bankruptcy judgment is devoid of effect in Egypt, and, conversely an Egyptian bankruptcy judgment is limited to commercial activities and assets in Egypt. For all activities and assets outside of Egypt, Egyptian bankruptcy judgments are devoid of legal effect (see Section II of [B]'s opinion . . .). [B] further states that, for all his activities and assets located outside of Egypt, [Respondent No. 1]' s rights to take any action, conclude any agreement, acquire or relinquish any rights, undertake any obligation, pursue any existing business or start any new business are unfettered and totally unaffected in any way by the bankruptcy judgment issued in Egypt.

47. Respondent No. 1 argues therefore that the Trustee has no standing to take part in this arbitration involving, as it does, issues relating to assets situated in England. Accordingly, the only person entitled to participate in this arbitration is Respondent No. 1 personally.

48. Respondent No. 1 further sets forth that it is also apparent from the opinion of [B] that as a matter of Egyptian law, Respondent No. 1 is in any case entitled to defend and pursue claims in this arbitration personally.

49. According to [B], the rules of Egyptian law on bankruptcy are considered rules of public policy and of mandatory application to all bankruptcies declared in Egypt. The fact that a foreign law, such as English law, is chosen by the parties to govern their contract(s) has no bearing on the mandatory application of Egyptian bankruptcy law to such contract(s) and, under Egyptian law, the declaration of bankruptcy in Egypt does not result in any incapacity for the bankrupt. It results only in a temporary and limited replacement of the bankrupt by the Trustee for the management of his assets located in Egypt and the pursuit of his rights until the end of the bankruptcy. This replacement by the trustee is geared only to the protection of the creditors and this explains why it is limited in scope and in time (see Section I . . . of [B]'s opinion).

50. According to Respondent No. 1, it is therefore not necessary to consider to what extent this Tribunal should give effect to Egyptian bankruptcy law. It is simply not relevant to the issue of standing at all in relation to the position of Respondent No. 1 in this arbitration.

51. It is Respondent No. 1's position that Claimant's argument that English Courts will recognise the jurisdiction of the Courts of any foreign country over a debtor if, first, the debtor was domiciled in that country at the time of the presentation of the position or, second, if the debtor submitted to the jurisdiction of its Courts, has no relevance in the present case:

- on the facts, neither of the cases relied upon by the Claimant involves the same issue as to the extraterritorial effect of Egyptian law as arises here; in the case of Alivon v. Furnival the issue was simply whether two out of the three trustees had power, under French law, to represent the bankrupt in relation to the English proceedings; in the Chen Li Hung v. Ting Lei Miao case, the principal issue was whether the Courts of Hong Kong should recognise orders made by Courts sitting in Taiwan, a country which the Republic of China does not recognise;

- as the Claimant notes in its submissions, it is correct that the case of Alivon v. Furnival was cited with approval in support of the proposition that if a foreign trustee has, under the law of the country in which he was appointed, a right to sue in his own name to recover the debts of the bankrupt, an English Court will recognise that right to sue in England. However, the First Respondent points out that it is not the issue here. The issue here is whether the Egyptian bankruptcy law has any extraterritorial effect, not whether the Trustee is entitled to bring and defend claims in the bankrupt's place, if the law does have extraterritorial effect.

52. Respondent No. 1 also disputes Claimant's reliance on English conflicts of law principles in submitting that issues of capacity are generally determined by reference to the law of the domicile of the party whose capacity is in issue. The reference by the Claimant in fact concerns the capacity of an individual to contract which is not the issue here. According to Respondent No. 1, Claimant is seeking to recharacterise the issue from a question whether the Egyptian bankruptcy law should have extraterritorial effect to the question whether Respondent No. 1 has capacity to continue to participate in this arbitration.

53. Respondent No. 1 alleges that for the reasons set out in the opinions of [B], as a matter of Egyptian law, [Respondent No. 1] is entitled personally to participate in this arbitration both by defending and in bringing counterclaims; therefore the issue whether, under English conflicts of law principles, the issue of capacity should be determined by reference to the domicile of the party concerned is moot. In any case, and as set out above, the Tribunal is invited to determine these issues according to the law or rules of law it deems applicable without reference to any national conflicts of laws principles.

54. Respondent No. 1's position is that any other solution than the one set forth at Section 53, above, would be unjust. The Trustee has indeed indicated to the Arbitral Tribunal that it does not intend to take part in this arbitration.

55. According to Respondent No. 1, if Claimant is right, it is entitled to pursue its claims against [Respondent No. 1] in this arbitration safe in the knowledge that in practice those claims will not be defended. No doubt Claimant will seek to enforce any subsequent award against Respondent No. 1 notwithstanding its position that the proper Respondent should be the Trustee. It is obvious that Claimant's purpose in making this application is to avoid having to respond to Respondent No. 1's counterclaim. Respondent No. 1 believes that this raises very serious issues which it is appropriate for this Tribunal to consider and determine following consideration of the relevant evidence. It is plainly unfair for the Claimant to be permitted to continue to pursue its claims against Respondent No. 1 effectively unrepresented by his Trustee (who will not take any part in these proceedings) while denying at the same time that the First Respondent should be able to bring his counterclaims against Claimant arising out of the same facts and matters.

Chapter VI. Decision on the Issue of Standing

56. The Arbitral Tribunal first notes that as of the date of the hearing, the Bankruptcy Orders . . . of the . . . First Instance Court have not been appealed; that the parties agree on the other hand that these Orders would be recognized by English courts.

57. Article 17 of the ICC Rules of Arbitration provides that: "1. The parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it determines to be appropriate. 2. In all cases the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages."

58. In this particular case, the Arbitral Tribunal is not confronted with a bilateral choice of law problem. The issue concerns the scope of the Bankruptcy Orders (more precisely the Order . . . by which Respondent No. 1 was declared bankrupt in his personal capacity) and the scope of Egyptian law, the latter being a rule of immediate application (règle d'application immédiate) which determines itself its scope of application.

59. The Arbitral Tribunal has come to the conclusion that the bankruptcy of Respondent No. 1 extends to all his assets, including this claim; and that no distinction should be made depending upon the location of the relevant assets.

60. The dispositive part of the Order . . .provides that : "5. The Court appoints [C], the next official on the Court assignment roll, as the bankruptcy trustee to receive the debtor's property, manage it, collect its rights and settle its liabilities . . ."

61. The fact that the bankruptcy extends to assets located in Egypt and abroad is also confirmed by Article 553 of the Egyptian Commercial Code which provides that the request made by an individual to be declared bankrupt should contain: "d. A detailed statement of the realty and movables he owns, their approximate value at the date he discontinues paying, and the cash amounts deposited in his name with the banks whether in Egypt or abroad".

62. Moreover, no distinction is made in other provisions of the Egyptian Commercial Code between assets located in Egypt and assets located abroad. For example, Article 592 of the Egyptian Commercial Code provides that the assets in the bankruptcy shall comprise "ail property owned by the bankrupt on the day the bankruptcy declaration ruling is pronounced, and the property of which the ownership devolves to him while he is in a state of bankruptcy . . .".

63. On the other hand, the Arbitral Tribunal also considers that all the debates between the parties concerning the remaining capacity of Respondent No. 1 are irrelevant. The issue is who has the standing to sue and defend in this arbitration. In this respect, Article 594 of the Egyptian Commercial Code provides that: "1. After issuance of the bankruptcy declaration ruling, no court action shall be brought by or against the bankrupt, nor shall steps be followed therefor, with the exception of the following: a) the actions connected with the property and dispositions not included in the hand binding; b) actions related to the bankruptcy works that the law allows the bankrupt to carry out; c) criminal actions. 2. The Court may permit the involvement of the bankrupt in bankruptcy related actions . . . 3. If the bankrupt files or against him is filed a criminal action, or an action related to his person or his personal status, the bankruptcy trustee shall be involved therein, if it comprises financial claims".

64. It is clear from the text that from the moment an individual is declared bankrupt in Egypt, only his trustee has standing to sue and defend in Court or before an Arbitral Tribunal. The experts also agreed that this rule belongs to public policy. They moreover confirmed that the normal course of action in such a case is for a party to assign the trustee qualita qua and that the trustee and the bankrupt may not be together in the case whether as claimants or defendants.

65. The Egyptian Supreme Court in a decision no. 2272/54 delivered on January 20, 1992 has confirmed that: "the bankruptcy ruling causes the bankrupt to lose his capacity to litigate and the trustee in bankruptcy replaces him for this function, beside other functions".

66. In this particular case, the trustee in bankruptcy, Respondent No. 7, was duly notified of the arbitration procedure. He is properly in the procedure but so far has decided not to appear. The Arbitral Tribunal considers that by suing Respondent No. 1 in person while he was already bankrupt, Claimant sued the wrong person. The proper person to sue is the Trustee and only the Trustee. He is now properly in the procedure. The action against Respondent No. 1 should therefore be dismissed and consequently also the counterclaim filed by him. Respondent No. 1 could only file a counterclaim if he was properly Respondent in this arbitration, which he is not. The claim and the counterclaim are inadmissible, without prejudice to the merits.

67. The Arbitral Tribunal also considers that Respondent No. 1 may not avail itself [sic] of Article 589/3 of the Egyptian Commercial Code which provides that "fettering the bankrupt's hand from managing and disposing of his property and funds shall not prevent him from taking the necessary procedures toward maintaining and preserving his rights". In the Supreme Court decision quoted above (at no. 65), the Court pointed out that the raison d'être of the rule according to which the bankrupt loses his capacity to litigate is to protect the interests of the bankrupt's creditors but that this rationale does not exist "when the bankrupt attempts to carry out conservatory measures that may benefit his creditors without harming their interests such as raising appeals to decisions concerning bankruptcy, but not extending to proceeding in the case. Hence, the bankrupt can file an appeal to decisions against the bankruptcy without being restrained by the bankruptcy ruling (before the lapse of the legal period of the appeal), yet he cannot pursue proceedings related to such appeal before the court".

68. Article 589, paragraph 3, concerns urgent measures of protection. It cannot be a proper justification for the counterclaim to stand. There was no urgency to file a counterclaim. The latter may still be filed by the trustee.

69. The Arbitral Tribunal consequently decides that Respondent No. 1 is not entitled either to conduct the defence of the claim brought against him by Claimant or to conduct the counterclaim brought against [Claimant] in this arbitration since he has no legal capacity to do so. In particular, he had no capacity to introduce a counterclaim. Consequently, Respondent No. 1 is not a proper party to this arbitration. To the extent the claims formulated by Claimant are directed against Respondent No. 1, they are dismissed as inadmissible, without prejudice to the merits. The same applies to the counterclaim. It is also dismissed as inadmissible, without prejudice to the merits.

70. The Arbitral Tribunal finally notes that according to Articles 575 and 576 of the Egyptian Commercial Code, Respondent No. 1 may still start an action before Egyptian Courts to force the trustee to appear in this arbitration or to have a new trustee appointed in his place.'