Update: Cassation Court of Egypt Declined to Recognize Anti-Arbitration Injunction against Ongoing ICC Arbitration

By Mostafa A. Hagras (Advocate, Egypt)

 

1. Summary And Update
   1. This post updates my previous post on anti-arbitration injunctions entitled “The Egyptian Arbitration Law and Anti-Arbitration Injunctions Due to Expiry the Time Limit for the Final Award – Case Study”, posted on 3 February 2015. The post introduced the position of the Egyptian arbitration law and of some Arab Middle Eastern laws, whereby state courts are conferred the authority to terminate an ongoing arbitration if the time limit for rendering the final award has expired.
   2. The post, inter alia, remarked this position as an anti-arbitration injunction, which is one of the pervasive problems of international arbitration in some Arab Middle Eastern countries. The post also presented a study for the ICC Case No. 14695/EC/ND. This case was terminated by an injunction granted by the chief judge of the Cairo Court of Appeal on 7 July 2008 on the ground that the time limit for the final award had expired without the statement of claim having been filed.
   3. The injunction (injunction no. 19/125) was granted under article 45 (2) of the Egyptian Arbitration Act, which provides that if the contractual or statutory time limit expires without the final award having being rendered, each party to the arbitration may request the chief judge of the competent court^[[1]] to fix a new time limit or terminate the arbitration.
   4. The claimants appealed the injunction, but their appeal was dismissed and the injunction was confirmed by injunction no. 23/125 dated 24 March 2009.
   5. The sole arbitrator, notwithstanding, refused to comply with the injunction and declared that the arbitral proceedings must resume, irrespective the injunction.
   6. The respondent filed a court action against the sole arbitrator claiming damages, which were allegedly caused by the sole arbitrator’s decision to continue the proceedings irrespective of the injunction.
   7. The sole arbitrator, consequently, resigned and suspended the proceedings until receiving the decision of the ICC Court in this respect. On 13 August 2009, the ICC Court appointed a new sole arbitrator pursuant to Article 12 (4) of the ICC Rules.
   8. Although the respondent added the new sole arbitrator as an additional respondent in the court action for damages, the new sole arbitrator rendered an award on jurisdiction on 17 November 2009. In the award, the sole arbitrator declared his refusal to recognize the injunction. He considered that Egypt is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). As a result, Egypt is bound by Article II of the New York Convention to recognize the agreement to arbitrate and enforce it by referring the parties to arbitration, unless it finds that the arbitration agreement is null and void, inoperative, or incapable of being performed. The Egyptian Arbitration Act provides for the same in Article 13. It further provides for the ‘Competence-Competence’ principle in Article 22.
   9. The new sole arbitrator concluded that neither the New York Convention nor the Egyptian Arbitration Act confer the power on state courts to terminate the arbitration. The court’s act therefore runs contrary to the obligation under the New York Convention. The new sole arbitrator proceeded to hear the merits of the case and rendered the final award on 26 January 2011.
   10. On 2 May 2011, the respondent initiated a court action before the Cairo Court of Appeal to set aside the award. The respondent asserted that, due to the injunction, the new sole arbitrator lacked jurisdiction to render an award.
   11. On 7 April 2013, the Cairo Court of Appeal dismissed the respondent’s case on the ground that the parties had agreed to refer their dispute to arbitration under the 1998 ICC Arbitration Rules. Therefore, these rules shall apply and the Egyptian Arbitration Act shall cease to apply. Hence, the rules governing the arbitral process including the time limit for the final award and a termination of the arbitration fall within the exclusive jurisdiction of the ICC Court. The Egyptian courts have no jurisdiction to terminate the ICC proceedings. The injunction is, therefore, frustrated and has no sanctity or power under the Egyptian law. ^[[2]]
   12. The respondent challenged the judgment of the Cairo Court of Appeal before the Cassation Court of Egypt on the ground that the Cairo Court of Appeal is precluded from reviewing the injunction because it was final and had res judicata value. The Cassation Court, on 10 March 2015 upheld the decision of the Cairo Court of Appeal and declined to recognize the injunction.
   13. The Cassation Court concluded that, under the joint-venture agreement dated 10 August 2001, the parties agreed to arbitrate their disputes under the ICC Arbitration Rules. Therefore, the arbitration shall be governed by the procedural rules of the ICC and the provisions of the Egyptian Arbitration Act shall cease to apply, except those provisions relating to public order. Specifically, Article 24 of the ICC Rules applies, whereby the ICC Court may extend the time limit to render the final award at the request of the arbitral tribunal or on its own initiative if it finds it necessary. Thus, the injunction terminating the ICC arbitration violated the parties’ agreement.
   14. Furthermore, the Cassation Court found that the injunction granted under Article 45 (2) of the Egyptian Arbitration Act, in general, is an interim inunction in nature. Thus, its binding effect expires when the subject matter of the dispute is finally decided. Therefore, the Cairo Court of Appeal was correct when it refused to recognize the injunction.
   15. The Cassation Court confirmed that the time periods and extensions as provided under the ICC Rules should have been applied instead of the time periods provided for in the Egyptian Arbitration Act. Therefore, the Cassation Court upheld the decision of Cairo Court of Appeal and declined to recognize the injunction. ^[[3]]

 

2. Commentary
   1. As the Cassation Court concluded, when a set of procedural rules, which are agreed to govern the arbitration, contains a rule governing the issue of a time limit and its extensions, Article 45 of the Egyptian Arbitration Act does not apply and an injunction should not be granted. If wrongfully granted, the injunction should not be recognized.
   2. On the other hand, the Cassation Court was incorrect when in categorized the injunction granted under Article 45 (2) of the Egyptian Arbitration Act, in general, as having an interim nature. It is difficult to consider an injunction that belongs to the group of anti-suit injunctions as an interim injunction. An injunction that restrains the continuance of an ongoing arbitration and consequently allows either party to submit the dispute to national courts is naturally a permanent one.
   3. The Cairo Court of Appeal (Circuit no. 64) in a similar case recently annulled an ICC award that was rendered irrespective of an injunction and terminated the proceedings under Article 45 (2) of the Egyptian Arbitration Act. The Court held that the Court of Appeal (Circuit no. 50) terminated the ICC Case no. 17185/FM/JHN/GFG and the injunction was served to the chairman and the claimant’s co-arbitrator.^[[4]] Therefore, the arbitrator should have to respect the power of res judicata and stop the proceedings. If the proceedings are nevertheless continued, the award is void and has no legal effect.^[[5]]
   4. The Cairo Court of Appeal in this case set aside the ICC award in favor of the res judicata of the injunction. This also indicates that that Circuit of the Cairo Court of Appeal categorized the injunction as one of permanent nature.
   5. A leading scholar, in the Arab Middle East jurisdiction, noted in this context that once an injunction terminating the arbitral proceedings is granted, it shall be enforced automatically with no need for an exequatur.^[[6]]
   6. Even if the Cassation Court has found that the injunction is of a permanent nature, it is sufficient not to recognize such injunction whenever it violates the party autonomy principle.

 

For any queries, you are welcome to contact me at: mostafa.a.hagras@outlook.com.

This post updates a previous one released at: https://youngicca-blog.com/the-egyptian-arbitration-law-and-anti-arbitration-injunctions-due-to-expiry-the-time-limit-for-the-final-award-case-study/.

 

 

^[[1]]              The literal translation from Arabic is the “president of the competent court“.

^[[2]]              Cairo Court of Appeal_ Circuit no. 7­ commercial_ Cases nos. 20 & 64 / 128 JY_16, 20, & 47 / 129 JY_ Session of 7 April 2013.

^[[3]]              Cassation Court of Egypt_ Challenge no. 10370/83 JY_ Session of 19 March 2015.

^[[4]]              In the meanwhile the respondent’s appointed arbitrator was not in its office and a substitute has been appointed subsequently.

^[[5]]              Cairo Court of Appeal_ Circuit no.64 commercial_ Case no. 18/2014_ Session of 28 August 2014. This decision is still pending in front of the Cassation Court of Egypt.

^[[6]]              Prof Dr Fatehy Waly_ The Arbitration in National and International Commercial Arbitration, In Theory And Practice_ Dar Monshaat El-Maarf_ Egypt_ 2013_ p.495.