THE AUTHOR:
Zyad Loutfi, Triple-qualified Attorney (Cairo – New York – Paris)
Recognition and enforcement of arbitral awards, albeit facilitated by the adoption of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (“New York Convention”), often uncovers the procedural intricacies and particularities of national legal orders. Indeed, the Convention does not provide for any procedural rules on the issue and rather entrusts the Contracting States to regulate the latter in their respective lex arbitri. In the case of Egypt, despite its long-standing Egyptian Arbitration Law no. 27 of the year of 1994 (“EAL”), some aspects of its enforcement mechanism still spur some hot debates.
On August 25, 2024, the Cairo Court of Appeal (the “Court”), third commercial circuit, invalidated the Order of the President of the Court (Order No. 49/Judicial Year 139) refusing the enforcement of an arbitral award issued by the Cairo Regional Centre for International Commercial Arbitration (“CRCICA”) on the ground that the President of the Court lacks material jurisdiction. The Court then ordered the exequatur of the award and, in doing so, it clarified some of the complexities around the enforcement mechanism of arbitral awards as set out under the EAL and the Code of Civil and Commercial Procedures of 1968 (“CCCP”).
Background
On December 11, 2019, Man Capital (“Claimant”), a Bulgarian joint-stock company concluded a contract with Engineering Consulting Group (“Respondent”), an Egyptian joint-stock company, with the aim of providing it with tailored consulting services. These services included inter alia the preparation of a strategic work plan aiming at restructuring and modernizing the Egyptian company under the supervision of its Bulgarian counterpart in order to achieve its performance goals. Once the dispute arose between the Parties, arbitral proceedings were commenced before the CRCICA pursuant to the arbitration clause in their contract; an arbitration which led to an award, issued on November 6, 2022, in favor of Man Capital (CRCICA award no. 1504 of the year 2022).
Claimant, Man Capital, applied for exequatur under the rather straightforward rules of the EAL and the CCCP regarding the recognition and the enforcement of awards in Egypt. However, it was surprised on October 11, 2023, with the Cairo Court of Appeal’s President refusal to grant leave and enforcement of the award on the ground that the Court lacked “material” jurisdiction to issue such order. On November 6, 2023, Man Capital petitioned the Order of the Court in an attempt to enforce its award all while seeking explanations for such blunt and unjustified refusal.
Cairo Court of Appeal’s Decision on the Petition from Order No. 49/Judicial Year 139
The Court, on August 25, 2024, invalidated the initial Order refusing exequatur (No. 49/Judicial Year 139) and granted leave for enforcement of the CRCICA award. As a result, the Court streamlined the procedural route that should be taken for enforcing arbitral awards under the EAL.
This route is not complicated or arduous. In a nutshell, according to article 56 of the EAL, jurisdiction to issue enforcement orders of arbitral awards whether conducted in Egypt or abroad, lies with the President of the Cairo Court of Appeal unless the parties agree on the jurisdiction of another Egyptian appellate court. A party seeking enforcement of an award rendered in Egypt needs to first notify the award to the unsuccessful party by a court bailiff. Then, after the lapse of ninty (90) days – period during which annulment procedings can be commenced –, a party needs to file for an exequatur order with the competent judge by submitting two copies of its application as regulated under articles 194 to 200 of the CCCP – rules regulating “orders on petitions”. Article 56 of the EAL provides that such application must be accompanied by:
- the original award or a signed copy of it;
- a copy of the arbitration agreement;
- a certified Arabic translation of the award in case the latter was not issued in Arabic, and finally;
- a copy of the procès-verbal attesting the deposit of the award pursuant to Article 47 of this Law with the competent court.
Once deposited, the competent judge, in ex parte proceedings, is obliged to render its decision, either granting or refusing leave, on any of the two copies of the application within a day of the application, except where just cause for delay exists. According to article 58, paragraph 3, of the EAL, orders refusing exequatur may be challenged within thirty days by petitioning the Court whereas orders granting exequatur cannot be challenged. However, since the Supreme Constitutional Court’s decision in 2011 (Challenge No. 92 of the judicial year 21, Session of 6 January 2001), orders granting exequatur are also reviewable within ten to thirty days. This discrepancy regarding the time limit stems from the fact that decisions granting exequatur were originally final under the EAL, which made scholars argue that the default 10-day time limit under the CCCP should apply.
In our case, the Court pointed out that the judge erred in refusing enforcement on several occasions. On the one hand, the Court found that the judge entered its order refusing exequatur on a separate document, not on one of the two copies of the petitioner’s application, and did that after a month of the application. Furthermore, the Court explains that this goes against the very nature of the mechanism of “Orders on Petition” as per article 195, paragraph 1, of the CCCP which obliges the judge to enter its order on either of the two copies submitted to it and, albeit extreme delays, to issue such order within a day of the application. On the other hand, the Court noted that the judge grossly erred when refusing exequatur of an arbitral award pursuant to the mechanism of “Order on Petition” for lack of material, or subject-matter, jurisdiction. The Court highlighted that, in doing so, the judge was in clear violation of the EAL which allow for the enforcement of awards by ex parte exequatur proceedings under the “Orders on Petition” mechanism of the CCCP.
Therefore, given that the award was duly notified to the other party and that the Claimant’s exequatur application fulfilled all its formal and substantive legal requirements, the Court granted leave for enforcement.
Commentary and Conclusion
The reader might wonder why the judge initially declared its lack of jurisdiction and refused to grant leave for enforcement if, after all, the EAL is that straightforward on enforcement procedures. As is often the case, understanding the background and history of any legislation can provide some context. Prior to the adoption of the CCCP, in order to obtain enforcement of an arbitral award, the parties had to comply with the rules found in articles 296 to 301 of the CCCP which obliged them to file a lawsuit in the court of first instance having jurisdiction over the place where the enforcement measure was to be carried out. However, under the less burdensome method adopted by the EAL in 1994, a party only needs to petition the President of the competent court for an ex parte order to obtain enforcement.
This duality in enforcement mechanisms has stirred a lot of debate within the Egyptian arbitration community. Scholars like the late Professor El-Kosheri, explained that the rule under the CCCP was not abrogated and therefore both procedures still coexist. In this context, he further clarified that “only awards rendered in Egypt can be the subject of ex parte applications to the president of the competent court of appeal, while the old procedure of filing a lawsuit in the court of first instance must continue to be followed for awards seated abroad” (Ahmed Sadek El-Kosheri, ‘Key Aspects of Egyptian Case Law on International Arbitration’, in Nassib G. Ziadé (ed), Liber Amicorum Samir Saleh: Reflections on Dispute Resolution with Particular Emphasis on the Arab World, Kluwer Law International 2019, pp. 43 – 60).
Nonetheless, in 2015, the Court of Cassation confirmed that the provisions of the EAL, rather than those under the CCCP, should apply to the enforcement of both local and foreign arbitral awards in Egypt (Court of Cassation, Challenge No. 15912/Judicial Year 76, Hearing dated April 6, 2015). In other terms, the Cassation confirmed that the procedural conditions imposed by the 1968 CCCP were overridden by the newer procedure set forth in the 1994 EAL. This ruling, which echoed an earlier one handed in 1999 by the Court of Appeals on the same issue (See Ahmed El-Kosheri, Panorama de jurisprudence égyptienne, 2002 (1/2) Cahiers de l’arbitrage 40–44), reinforced the primacy of Article 3 of the New York Convention and prohibited the imposition of more stringent conditions on the enforcement of foreign awards in Egypt. Paradoxically, more recently in 2020, the Cairo Court of Appeal diverted from the Cassation Court’s stance and considered that the procedural route for enforcing foreign awards should be done in accordance with the old rule of the CCCP (Cairo Court of Appeal, Challenge No.15/Judicial Year 136, Hearing dated December 31, 2020).
The Court’s decision, following the Man Capital’s successful petition, does not state whether the arbitration was seated in Egypt or not. It only states that the award was issued by CRCICA in an “international” commercial arbitration according to article 3 of the EAL. The latter considers an arbitration to be deemed international under several scenarios, notably if the principal places of business of the two parties to the arbitration are situated in two different States, or if the parties to the arbitration have agreed to resort to a permanent arbitral organization or to an arbitration center headquartered in Egypt or abroad.
As a result, it could be possible that the President of Court might have equated this “international” award as a “foreign” award, which cannot be enforced by ex parte proceedings but rather through the CCCP mechanism – a rationale consistent with the 2020 Court of Appeal ruling. If that is the case, then we can consider that the Court’s decision to grant leave for exequatur in Man Capital is now aligning its practice with the 2015 Cassation ruling that does not distinguish between the type of the award involved. Nonetheless, it is important to note that the Court’s reasoning here does not confirm explicitly whether “foreign” awards, seated aboard, can be subject to such ex parte enforcement proceedings.
In conclusion, the dichotomy in enforcement procedures of arbitral awards, depending on the type of award involved, is an old vexing debate in Egypt, and the uncertainty in the caselaw does not adequately address the issue. Albeit missing on an important opportunity to fully address this issue and provide some clear guidance, the Court’s decision on this petition confirms the possibility to enforce international arbitral awards through ex parte proceedings. If we consider that this reasoning is consistent with the earlier 2015 ruling of the Court of Cassation, we can confidently conclude that, in Egypt, international and foreign awards are enforceable under the same enforcement mechanism outlined in the EAL – an approach which is in full congruency with the provisions of the New York Convention.
ABOUT THE AUTHOR
Zyad Loutfi is a triple-qualified attorney based in Paris where he focuses on international commercial arbitration and dispute settlement. He is admitted to practice in Egypt and in the State of New York. His expertise and scholarship span international arbitration, intellectual property law, and investment law, and his work involves advising and representing companies, States, and State-owned entities in a wide range of industries. He holds a Ph.D. in private law from the University of Paris City. He is also a graduate of Cornell Law School (where he was President of the Cornell International Arbitration Society), the University of Paris Descartes, the University of Paris-Est Créteil, and Cairo University.
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