Welcome addresses

Opening the conference for the day, Hassan Arab (Partner, Al Tamimi & Co, Dubai and President of the UAE Arbitration Commission) started by recognizing the importance of a ‘friendly court system’ to support arbitration. He discussed the region’s ‘huge improvement’ in the response to arbitration over the past few years, and identified trends showing an increasingly positive attitude of the courts toward arbitration.

Alexis Mourre (President of the ICC International Court of Arbitration, Paris) then highlighted some key statistics in relation to ICC arbitration:

  • the ICC is seeing an increased average disputed amount per case - now approx. US$140M;
  • In 2019, the ICC recorded a total of 1700 cases, with 1500 parties in 147 different jurisdictions;
  • 15% of cases involve state entities and 50 of the registrations were filed before the ICC Court of Arbitration’s office at the Abu Dhabi Global Market (ADGM);
  • 77% of reviewers saw the ICC remaining as the most preferred institution for arbitration; one of the reasons being that parties trust there is a high level of scrutiny of the arbitral award, which has to be reviewed by the ICC Court before it is notified to parties.

Justice Jamal Alsumaiti (judge of the Court of Cassation, Dubai Courts) further spoke about artificial intelligence (‘AI’) in the UAE. He discussed the significant advancement of AI in arbitration in the UAE, which has become the regional hub for the enforcement of modern arbitration law that reflects the modern practices. He added, that the UAE is home to 12 of the region’s arbitral institutions and that the country has a significant role to play in developing the strategy for AI. According to him, the UAE is currently actively working on this matter (see for example the Mohamed Bin Zayed University of Artificial Intelligence and the introduction of Federal Law No. 6 of 2018 - which allows hearings to be held by video-conference). He referred to both (i) the growth in the number of cases using AI and (ii) the capabilities of AI, including:

  • translating and reviewing thousands of documents at a very high speed;
  • assisting with appointing a default authority – it can provide a list of suitable people;
  • assisting with conflicts of interest; and
  • predicting results of the arbitration process.

The quest for cosmopolitan arbitration in the MENA region: where do we stand now?

Speaker: Karim A. Youssef, Managing Partner, Youssef Partners, Cairo

Over the last two decades, arbitration has become truly universal. While resistance remains in some dark places, the light of arbitration has reached the four corners of our galaxy. However, as we cross into 2020, dark forces of anti-cosmopolitanism (nationalism, protectionism and stigma) exist …

In a presentation in a Star Wars style, Mr Youssef stressed to the audience the importance of cosmopolitanism, particularly in (and to assist) international arbitration:

Cosmopolitanism is key … it is what allows the system to achieve its potential’.

According to him, being cosmopolitan is being well-travelled, and having an affinity for foreign cultures. He cited His Highness the Aga Khan who stated:

A cosmopolitan ethic is ‘a readiness to work across frontiers of distinction and distance without trying to erase them … [it] accepts our ultimate moral responsibility to the whole of humanity, rather than absolutizing a presumably exceptional part.

Mr Youssef reminded the audience that whilst there exists certain ‘anti-cosmopolitan haters’ in power today, we are moving forward (for example, there are more signatories to the New York and ICSID Conventions than the Genocide Convention). The MENA region in particular has two of the ‘star seats’ according to the GAR/London Principles (i.e. a framework for evaluating the best arbitral seats set up by the Chartered Institute of Arbitrators) – Cairo and Dubai.

He then ran a poll of the audience, asking ‘how far are we from being cosmopolitan’? Most of the attendees thought we are a ‘work in progress’ (‘WIP’) (progress being made but still a way to go).

He concluded that the best way to assist the progress of international arbitration is to have a cosmopolitan ethic.

Recent developments and best practices in construction arbitration in the MENA

Members of the panel: Akram Abu El-Huda (MCIArb, General Counsel and Director of Compliance, CICON, Abu Dhabi), Richard Harding QC (Barrister and Arbitrator, Keating Chambers, UK), Yasemin Cetinel (Founding Partner, Cetinel Law Firm, Turkey), Nada Sader (Partner, Derains & Gharavi International, Lebanon), and Ziva Filipic (Chair of the panel, Managing Counsel, ICC International Court of Arbitration, Paris).

The panel started with some statistics about construction arbitration in the region – including that one in four ICC arbitration cases are construction-related (including 25% of the 136 expedited cases heard by the ICC so far). The common seats for these disputes are London, Paris, Dubai and Singapore. Again, for construction disputes, the panel discussed the fact that the ICC still remained the preferred institution largely because of its reputation, the high level of administrative services, its neutrality and internationalism. However, the ‘elephant in the room’ remained the efficiency of dealing with construction cases.

Richard Harding QC then gave a presentation on the often-disputed notice provisions in construction contracts. He gave the audience some ‘food for thought’ with potential scenarios of notices given out of time and sought a ‘show of hands’ as to their fairness. The scenarios included:

  1. whether it would be fair for an employer to rely on a notice provision if it received a notice on the 29th day when the contract provided that it must be given within 28 days; and
  2. whether it would be fair for an employer to rely on a notice provision if it had not been given a formal written notice in the time required by the contract, but had been regularly updated as to delayed progress on site by the contractor at weekly meetings.

Whilst the majority thought both scenarios were unfair, ultimately, Mr Harding highlighted the importance of the civil law concept of ‘good faith’ and the role it would play in determining whether the employer could rely on those provisions, together (of course) with highlighting the terms of the contract itself. According to him, it depends on the circumstances. For example, progress reports are often used by contractors attempting to get around notice provisions by stating that the Employer knew of the delay, but these are not usually sufficient enough to constitute a valid notice under FIDIC clause 4.20.

The panel then considered various other common concepts in construction disputes including:

  • termination – The panel focused on whether a contract can be terminated by the contractor when it has not been paid (an issue all too-often faced in the region). In addressing this question, Mr Harding said it was important to understand what had not been paid – for example, if it was a certified amount, then the grounds for termination may be stronger than if the amount was a claimed/disputed amount (where the risk of termination would be larger). Also, ultimately, lawyers should be very careful in advising a client to terminate a contract – it is a commercial decision to be made by the client, and the uncertainty in the reaction of a Tribunal to termination means it is risky.
  • performance bonds – The panel discussed the various countries in the region’s approach to attachments on the calling of bonds, which, in many of the countries require ‘serious and certain reasons’ to be granted. Nada Sader discussed how in Lebanon this is a relatively high threshold and that sometimes the calling of bonds was considered ‘manifest abuse’ – for example if they were called after the expiry of a defect’s liability period. The panel also discussed the types of bonds – particularly the ‘on demand’ bond which can as a matter of principle be called at any time. She added that in some instances where the contractor fears that the employer is likely to abusively and unlawfully call the bond, the contractor can attempt to seek an order from the court to prevent the employer from calling the bond and the bank from liquidating it.
  • risk allocation and the market – the panel also discussed the more general state of the construction market where Akram Abu El-Huda stated that the position largely remains that contractors in the UAE do not have the same negotiating power against employers as they may have in other jurisdictions. He added that employers are still largely passing the risk onto main contractors, who are then attempting to pass it down to the subcontractors. The panel considered that one way to attempt to shift the market were if specialized suppliers could push back on unfair contract terms, especially to ensure they are paid on time.

Yasemin Cetinel further spoke on third party funding, particularly in Turkey. She outlined how third-party funding has recently been treated in various jurisdictions. In the Middle East in particular, third party funding is not prohibited – and more specifically not prohibited under Sharia law. It has even been found in recently reported cases to increase access to justice. The concept became quite prevalent in Turkey after the Libyan crises in 2011. Many of the Turkish contractors were heavily invested in Libya and so were significantly affected by the crisis, with many of them becoming bankrupt. Their claims, however, remained, and funders often stepped in to assist in claim recovery. The difficulty was (and still remains) that contractors are facing significant upfront cost and work to provide the due diligence required by the funder (i.e. ‘frontloading’), which they may not have the capacity to take on.

The panel concluded with some general discussion and again took a poll of hands on whether FIDIC Red Book contracts’ dispute resolution provisions were being amended to litigation, or were largely being kept as arbitration. The majority seemed to reflect that construction disputes were still mostly going to arbitration instead of litigation.

A civil/common law judicial roundtable on the review and enforcement of arbitral awards

Members of the panel: Saif Ahmad Alhadad AlHazmi (judge, Court of Cassation, Dubai Courts), Mostafa Mahmoud Ali El Sharkawy (judge, Court of Appeal, Dubai Courts), Nabil Omran (Deputy Chief Justice, Court of Cassation, Egypt), Shamlan Al Sawalehi (judge, Court of Appeal and judge in charge of Arbitration Division, DIFC Courts), Zalfa El Hassan (President of the Civil First Instance Court of Beirut, Lebanon), and Georges Affaki (Chair of the panel, Partner, AFFAKI, France).

This was ICC MENA’s first ever session held in Arabic, which also hosted court judges from the region.

Nabil Omran talked about sham arbitral institutions in Egypt and the fraud convicted by the administrative body of that institution in the Chevrolet vs. Aramco case. In this case, a local sham institution wrongfully seized jurisdiction and reappointed a second arbitral tribunal after an award was initially rendered by a first tribunal that was appointed by the same institution. The second arbitral tribunal rendered an award 16 days after its appointment, ordering Aramco to pay Chevrolet US$ 18 billion. The award’s debtor objected to the execution of the award and filed for the nullification of the award before the California courts, which rendered a judgment refusing execution of the same. The matter was raised before the courts in Egypt, which ordered the imprisonment of the individuals that were involved in the fraud, declared the institution as a sham and rendered a judgment defining ‘arbitration institutions’ under Egyptian law.

As for Lebanon, Zalfa El Hassan talked about the limited conditions set in the Lebanese law for nullifying a domestic arbitral award, which are aligned with international standards. She then touched upon the fact that the Republic of Lebanon is signatory of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and on the courts’ criterion for determining whether an award is domestic or international, one of which being whether the commercial dealing is international or domestic. She then talked about the notion of public order and clarified that the Lebanese courts’ trend has been to consider the international public order when enforcing international arbitration awards. She then queried whether that trend will remain in light of the internal economic crisis, the ‘exceptional circumstances’, the country is presently facing.

As for the UAE, Saif Ahmad Alhadad AlHazmi and Mostafa Mahmoud Ali El Sharkawy talked about the latest positive trends in enforcing arbitration awards following the enactment of the UAE Federal Law no. 06 of 2018 (the ‘Arbitration Law’). They explained that the process has become very fast and efficient and that the courts are acting in support of arbitration. They discussed Article 7(1) of the Arbitration Law and clarified that any decision on jurisdiction that is issued by an arbitral tribunal is deemed ‘interim’ until the 15-day period mentioned in the law lapses, following which it will become final and cannot be reopened before the court. They also clarified that the courts are being more lenient in determining what constitutes an arbitration agreement. They then touched upon the notion of public order and explained that what is taken into consideration is the domestic public order of the UAE, which is the public, social, political and economic interests of the society in the UAE. Judge Shamlan Al Sawalehi discussed the case Assas OPCP Limited v. VIH Hotel Management Ltd Assas where the Dubai Courts had nullified the arbitration award for lack of capacity of the signatory of the arbitration agreement, whereas the DIFC courts had accepted jurisdiction and rendered a judgment declaring the arbitration agreement valid. He added that the latest position of the Judicial Tribunal For the Dubai Courts and the DIFC Courts which dealt with conflict of jurisdictions between these two courts was that DIFC Courts have jurisdiction when the parties agree to that, or when the arbitration is seated in the DIFC, or one of the parties is based/ licensed from the DIFC, or when the arbitration is subject to the DIFC-LCIA arbitration rules or DIFC arbitration law.

Arbitrating M&A disputes in the MENA

Members of the panel: Demet Kasarcioglu (Senior Associate, Esin Attorney Partnership, Turkey), George Traub (Managing Partner, Lumina Capital Advisers, Dubai), Marwan Sakr (Member of the Beirut and Paris Bars, admitted before the DIFC Courts, Chartered Arbitrator, Partner, SAAS Lawyers, Lebanon), Omar Zizi (Lawyer, Member of the Paris Bar, Allen & Overy, Morocco), and Dany Khayat (Chair of the panel, Partner, Mayer Brown, France).

The panel’s discussion generally focused on the most common types of disputes in M&A transactions – some of which arise in the pre-contractual and negotiation phases of a deal (such as to what extent Letter of Intent and Memorandum of Understanding are binding, breach of confidentiality, abusive termination of negotiations) and other post completion matters (e.g. price adjustment, breach of representation and warranties). The panel considered the importance and frequency of interim measures being sought in M&A disputes, again the most common being:

1. During the negotiations / pre-contractual steps:

  • in relation to the letters of intent and breaches thereof;
  • breaches of the non-disclosure / confidentiality agreements – where specifically, the panel recommended considering a penalty clause to be inserted into NDA’s where damages cannot be quantified to simplify the claim; and
  • allegations in relation to abusive termination of negotiations

2. During the contractual-phase such as:

  • injunctions to prevent breaches of non-compete clauses;
  • in relation to the put and call options and breaches of the rights of first refusal (which are very time-limited); and
  • in relation to breaches of the guarantees and indemnities in the contract.

The panel also considered how the ICC’s emergency arbitrator process is used in M&A cases and can be quite efficient to obtain remedies such as urgent injunctions.

Alternative Dispute Resolution (ADR)

Pierrick Le Goff (Partner, De Gaulle Fleurance & Associes, France) began with a presentation on ‘Expertise as an ADR mechanism’. He considered the main differences between having disputes determined by an expert versus by arbitration (i.e. that the expert’s role is to provide a factual – and not legal analysis, and his/her determination is not an ‘award’ covered by the recognition and enforcement rules of the NY Convention). He also considered the ways expert determination and arbitration can work together including that:

  • If the expertise is used as an ADR mechanism, it is first in the sequence (then arbitration if the parties have agreed on an escalation process);
  • If the expert determination is challenged, it can still have an evidentiary role in arbitration; and
  • If the expert determination is not challenged or enables a successful settlement, it avoids arbitration proceedings.

Lindy Patterson QC then presented on dispute boards and the important role they can play – particularly with their use increasing due to the new FIDIC form of contracts. She discussed the main differences between dispute boards and arbitration – largely that the dispute boards can be fast-track decisions/recommendations, their decisions are usually not finally binding, and their enforcement is not generally underpinned by legislation or convention. Dispute boards can also play an important dispute-avoidance role, particularly if a standing-dispute-board is appointed at the beginning of a project, where it can be kept up to date with progress and its views can be sought along the way (via informal opinion or formal referral of a dispute). Parties may want to consider dispute boards ahead of arbitration if they have a desire to preserve their relationship, keep the project on track or seek a non-legal solution.

The value of mediation was also discussed, not only in small cases, but also in large complex disputes. Mediation can be used both before a matter reaches arbitration, or in parallel. When drafting contracts, lawyers should ensure the mediation or pre-dispute steps are carefully drafted (and include possibly a penalty for non-compliance). They should also be careful not to ‘hijack’ ADR procedures, as there would be little utility in mediation becoming quasi-arbitral procedures.

The panel conducted a poll of the audience on the kinds of ICC dispute resolution clauses being used in contracts – again showing that arbitration was still the preferred route:

Closing speech: climate change challenges in international arbitration

Risteard de Paor (Partner, Dentons, Madrid) delivered the closing speech. He began with the science and the IPCC warning that if we surpass the 1.5-degree Celsius increase threshold, there will be stark consequences in terms of human health, security and economic growth. He highlighted the unprecedented mobilization of the private sector and how business, via organizations such as the ICC, is stepping up to the challenges posed by climate change. While focussing on the findings of the report of the ICC Task Force on Resolving Climate Change Related Disputes through Arbitration and ADR, he peppered his talk with examples of how such disputes could arise in MENA and best be tackled through arbitration.

Identifying the securing of relevant expertise as the first hurdle to overcome, he cited the proposed Two Seas Canal project and hydrogen production projects in water-scarce regions (such as MENA) as projects that could give rise to climate change-related disputes, calling for a tribunal with the requisite balance of scientific, technical and legal knowledge.

He pointed out that the technicality of the subject matter also risks slowing down the arbitral process. To address this, he pointed to the wisdom of early use of the case management conference and terms of reference to consider whether climate change-related issues are likely to arise and, if so, what specific features may be required as a result. Such features could involve a decision on issues to be decided based solely on documents; bifurcation of the proceedings and rendering partial awards; joint expert reports and/or witness or expert conferencing having previously defined a list of issues pursuant to which the conferencing will proceed, and whether it be led by the tribunal or counsel.

He also stressed the usefulness of incorporating Dispute Boards into a project’s suite of contracts. In a MENA context, he said, such DBs could make decisions on such issues as water use, delays to construction projects due to climate-related factors such as excessive heat, floods (as experienced by Jeddah three times in the past decade) or extreme weather events.

The potential to refer to climate change law or policy in the governing law of the contract and the importance of appropriately addressing transparency, third party participation and costs in such disputes were the issues on which Mr de Paor concluded his speech.