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Arbitration and Maritime in Egypt

MAP

 

Wars will remain while human remains. I believe in my soul in cooperation, in arbitration but the soldier’s occupation we cannot say is gone until human nature is gone.

Rutherford B. Hayes

Apart from the fact that shipping is a fascinating, globalised and complex industry, it still remains unique and different from other industries.

The main reason we find the shipping industry to be unique is due to its international nature, the volume of risk associated with each transported shipment and the fact that operations take place both marine and non-marine environment. The contracting parties may be exposed to significant risks and the arbitration may constitute the most convenient alternative dispute resolution method.

Both Hamburg rules and the Egyptian maritime law have recognized the peculiar nature of the marine industry and their articles were tailored to cope with the volatile nature of the market, searching for a better protection for the goods owner.

In fact, that was the reason why a notable number of countries didn’t ratify or accede to Hamburg because those countries adhere to the political exception of liability provided in The Hague Visby Rules

It is no surprise that the number of states that have ratified the convention have a small market share in the shipping industry and do not play a significant role in the maritime traffic of goods, a situation which will become prejudicial to the unification of maritime law and international trade.

The present dissimilarity between both Hamburg Rules and Hague Visby Rules concerns the arbitration agreement and the choice of both seat of arbitration and the applicable law. According to the Egyptian Maritime Law any prior arbitration agreement depriving the claimant of his right to choose the seat (venue) of arbitration or judging in inconsistency with the Egyptian Maritime Law No. 8/1990 will be null and void.

Article 246 of the Egyptian Maritime Law No 8 /1990 stipulates that “ In case the parties agreed in the sea transport contract that all claims arising under the said contract shall be referred to arbitration, then the said arbitration shall be conducted at the claimant’s choice, within the jurisdiction of the court at the port of loading or discharging, at the defendant’s country of residence or at the location where the contract has been concluded, provided that the defendant would have a head office, branch or agency at that location or at the location where it has been agreed upon to hold the arbitration in the arbitration agreement or within the court jurisdiction where the arrest on the ship has been placed. Any agreement prior to the dispute depriving the claimant from such privilege of choosing or restricting this choice shall be null and void”.

It is clear from the above mentioned article that the nullification not only denies the claimant’s right to choose the seat of arbitration but also disallows any action that may restrict the claimant’s right to choose the seat of arbitration which would be more suitable for the claimants after the dispute has arisen.

Article 247 of the Egyptian Maritime Law No 8 for the year of 1990 stipulates that “ In case it has been agreed in the sea transport contract that all claims arising under the said contract shall be referred to arbitration, then arbitrators shall be bound to rule in the dispute pursuant to the provisions of the present law (No 8 /1990). Any agreement prior to the dispute depriving the arbitrators from holding under the provisions of the said law shall be null and void”.

It may be derived from the above that the legislator has taken into account the importance of arbitration as a preferred alternative dispute resolution mode for both the carriers and cargo interests (merchants).

In this respect, the legislator has deemed it fit to set up a balance between the conflicting interests of both the carriers and cargo interests (merchants), since any disequilibrium between these interests will likely enable the stronger party to force the weaker party at the time of concluding the contract to accept an unsuitable forum which would also cost the weaker party excessive expenses, that would be ultimately prevent that party from commencing arbitration proceedings or would give to the arbitrators the power not to abide by the governing law which in our case will be the Egyptian Maritime Law No. 8/1990. In fact, the legislator has nullified any prior agreement that has been brought up before the dispute has arisen which would dispossess the plaintiff right from (1) choosing the suitable forum (provided that the conditions required for a proper forum are available in the seat of the arbitration chosen by the plaintiff), and/or (2) preventing the arbitrators from ruling under the applicable law. These rules are consistent with the provisions of articles 22 and 23 of the United Nations convention on the Carriage of Goods by Sea, 1978 (Hamburg Rules).

In this respect, we would refer to a precedent set by the Egyptian Supreme Court (Cour de Cassation)which ruled in a case where the Bill of lading included an arbitration clause referring to the place of arbitration agreed in the charter party.

The said arbitration clause provided for that “the place of arbitration New York U.S. Law and Antwerp Rules 1974 to apply”.

The Cassation court held that “what is mentioned in the charter party (C/P) deprives the consignee of his right of choosing the place of arbitration and confines it to New York City and also does not allow the application of the provisions of the Egyptian Maritime Law No. 8 of 1990 on the dispute, providing that the applicable law is the law of USA and the York Antwerp rules. This invalidates both conditions stipulated in the relevant C/P, hence the arbitration clause becomes null and void and gives the claimant the right to resort to the courts, having the general jurisdiction over all disputes except in case a special provision is in place, given that the claimant has insisted on the nullity of the arbitration clause for having exclusively confined the location of arbitration to New York.

The Provisions of the Egyptian Maritime Law No. 8/1990 should apply on the issue of the arbitration clause subject to the present dispute and on its consequential effects and a ruling should be given nullifying this clause and given that the judgment rendered by the court below ruled differently, it is ill founded.

((Cassation No 595/63 –hearing 28/02/2006))

The above gives in brief the view of the Egyptian legislator and how it its applied in practice before the courts, in the quest to maintain the equilibrium needed between the parties. This need is manifested in not allowing any pre-written clauses in the contract of carriage to govern the disputes between the carrier and the cargo interests. Those articles were proclaimed to protect the shipper’s and receiver’s right in the B/L and to prevent the carrier from exempting his responsibility by choosing a seat of arbitration that will avert the shipper to commence arbitration because of legal fees/cost or to choose a substantive law to govern the arbitration agreement giving them an advantage not stipulated in the Egyptian Maritime Law. Hence, the arbitration clauses referring to complex, expensive and far forums will be nullified by the Egyptian judges as these would prevent the cargo interests from claiming their rights before a jurisdiction they would choose and would force them to resort to unfavorable jurisdictions; same goes for the governing law in foreign jurisdictions.