The Egyptian Court of Cassation shows its support for international arbitration in a landmark decision

The Egyptian Court of Cassation shows its support for international arbitration in a landmark decision

kaminsky-bassily

On 27 October 2020, the Egyptian Court of Cassation (the “Court” or “Court of Cassation”) issued a landmark decision in Case No. 18309 for the Judicial Year 89 (the “Decision”). The Decision confirms that the estoppel principle exists under Egyptian law, although it is not expressly spelled out in any legal provision. In addition, the Decision recognizes that parties to an arbitration, be it domestic or international, are free to appoint non-Egyptian lawyers or even non-lawyers to represent them in arbitral proceedings, a question that was debated amongst scholars. The Decision also refers to the increasing recourse to virtual hearings in international arbitration, implying that such virtual hearings are not prohibited under Egyptian law. Finally, the Decision is a welcome reminder that judicial review of arbitral awards is limited under Egyptian law: annulment proceedings are not appeal proceedings, and the judge dealing with a motion to set aside should not review the adequacy, appropriateness or soundness of the arbitrators’ determinations.

Briefly, the relevant facts are the following: Company (A) challenged the decision rendered by the Cairo Court of Appeal (the “Court of Appeal”) in Case No. 57 for the Judicial Year 135, which rejected its request to annul an arbitral award rendered under the auspices of the Cairo Regional Center for International Commercial Arbitration (the “CRCICA”) on 20 February 2018 (CRCICA Arbitration Case No. 914/2013). Company (A) based its challenge on the following three grounds, all of which were dismissed by the Court of Cassation.

 

Ground 1: Company (A) first argued that the Court of Appeal had erred in its application of the law by not finding that the arbitration agreement had been rendered null and void by the fact that the person who had concluded the arbitration agreement in question was not authorized to represent Company (A).

The Court of Cassation rejected this challenge on the basis of article 8 of the Arbitration Law No. 27/1994 (the “Arbitration Act”), which provides that if a party knows that a requirement of the arbitration agreement has been violated or that a non-mandatory provision of the Arbitration Act has not been complied with, but yet proceeds with the arbitration without raising an objection without delay, then such party is deemed to have waived its right to object. Accordingly, the Court of Cassation ruled that Company (A) was deemed to have waived its right to invoke the nullity of the arbitration agreement as it proceeded with the arbitration without raising its objection before the arbitral tribunal, despite being able to do so.

The Court of Cassation added that the estoppel principle was another reason why Company (A)’s challenge should be dismissed. It pointed out that it is a universally recognized principle of law that a party may not rely on its own contradictory positions, or its own wrongdoings to the detriment of a third party, even when such third party is also a wrongdoer. The Court of Cassation asserted that although the estoppel principle is not expressly codified in Egyptian law, it nevertheless is a well-established principle of Egyptian law, as reflected by the terms of article 1(2) of the Egyptian Civil Code, which specifies the legal principles to be applied in the absence of specific legal provisions.

 

Ground 2: Company (A) also argued that the Court of Appeal had erred in law by not finding that the arbitral proceedings were null because Company (A) had been represented by a consulting engineer, rather than by a lawyer as required by article 3 of the Egyptian Legal Profession Law No. 17/1983 (the “Legal Profession Law”), which is of mandatory application.

Article 3 of the Legal Profession Law provides that non-lawyers shall not exercise the functions of a lawyer, which include appearing on behalf of parties before arbitral tribunals. Article 2 of the same law indicates that the term “lawyer” describes only members of the Egyptian bar, access to which is limited to Egyptian nationals under article 13(1). Therefore, non-lawyers, including foreign lawyers, are not, in principle, permitted to represent parties in arbitral proceedings seated in Egypt.

The question of whether non-lawyers can represent parties in arbitral proceedings seated in Egypt has been a hot question under Egyptian law and was at the heart of previous annulment proceedings. In these proceedings, the Court of Cassation ruled that Egyptian public policy does not prevent parties from agreeing to have non-lawyers represent them in arbitral proceedings, including by submitting their disputes to arbitration rules that permit the parties to be represented by non-lawyers.

In the case at hand, the Court of Cassation not only confirmed the rulings it had issued in the context of these annulment proceedings, but also provided an in-depth analysis as to the applicability of article 3 of the Legal Profession Law. It explained that the Legal Profession Law had been enacted before the current Arbitration Act, in order to regulate an arbitration system that no longer exists. According to the Court of Cassation, the new Arbitration Act now regulates all matters relating to arbitration, as it constitutes a lex specialis that superseded the Legal Profession Law as far as arbitration is concerned. The Court of Cassation therefore concluded that, in light of the new approach reflected in the Arbitration Act, article 3 of the Legal Profession Law is no longer applicable to arbitral proceedings, regardless of whether they are ad hoc, institutional, domestic or international.

It is interesting to note that in further support of its position on this question, the Court of Cassation noted that due to globalization and Egypt’s ratification of the New York Convention of 1958, it had become more common for foreign lawyers to represent parties in arbitral proceedings seated in Egypt. The Court also acknowledged the difference between the seat of arbitration and the venue of the hearing, as well as the increased reliance on virtual hearings. While the Decision does not concern an arbitration award arising from a case that involved virtual hearings, the fact that the Court made an express reference to virtual hearings in its judgment implies that they are not prohibited under Egyptian law.

 

Ground 3: Company (A) argued that the Court of Appeal’s reasoning was flawed as the Court of Appeal had not accepted the argument that the award was void because it had been issued without proper deliberations. More specifically, Company (A) asserted that the tribunal had not appointed its own engineering expert, despite the fact that only one of the arbitrators, an engineer, had the expertise to understand the technical issues at stake. According to Company (A), this meant that the award was based of the personal expertise of one of the arbitrators rather than on serious deliberations.

The Court of Cassation dismissed this objection, finding that there was no evidence supporting it, particularly considering that the award expressly mentioned that the arbitrators had deliberated before issuing their unanimous award. The Court explained that it is not uncommon for parties to appoint arbitrators having an expertise in subject-matters similar to the ones at stake in the dispute in question and that such expertise would normally be reflected in the award. It added that the grounds for annulling arbitral awards are enumerated exhaustively in article 53 of the Arbitration Act, which does not list as a ground for annulment the miscomprehension, by the arbitral tribunal, of the facts or even a mistaken application of the law. The Court clarified that setting aside proceedings are not appeals; thus, judicial review of the award is limited and judges are not allowed to examine the soundness of the arbitrators’ analysis.

 

Conclusion

The Decision of the Court of Cassation once again confirms Egypt’s alignment with recent developments in international arbitration practice. By solving the long-lasting debate relating to party representation in arbitration proceedings seated in Egypt and by implying that virtual hearings are not prohibited under Egyptian law, the Court not only clarified previously debated questions; it also showed its support for the principle of party autonomy in international arbitration.