The purpose of such bifurcation is the enabling of the parties to the arbitration to maintain control of the impact of the Shariah in the law that they choose for arbitration. Middle East states that have not removed religion from their rules of arbitration will continue to administer arbitrations through strictly adhering with the principles of Shariah law and it is likely that these states will place a prohibition on speculative contracts and provisions of contracts calling for strict adherence to Shariah law.
VII. Shariah Law and the Basis of Arbitration
It is reported that whether the arbitration award is binding on the parties may be dictated by the Shariah and in countries where the Shariah is the basis of arbitration awards there must be four inclusive parts: (1) a description of the dispute; (2) the findings of facts under Shariah rules of evidence; (3) the reasoning of the award with reference to the Shariah source; (4) and the decision itself.” (Gemmell, 2006 cited in: Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009) it is reported as well that countries in the Middle East have consistently mandated that for an award of arbitration to have a res judicata effect, that the award must be court-approved and this is despite what form of law or methods of enforcement are chosen (Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009, paraphrased) the outcome of this mandate is that the rendering of an award in the arbitration process does not make the dispute to be finally resolved since there is procedural room left for “…expeditious judicial management or judicial meddling, procrastination, and delay.” (Al-Ayoub, 2006 cited in Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009)
The Middle Eastern Countries that adopted the New York Convention include those of Bahrain, Oman, Saudi Arabia, Jordan, Qatar and the UAE and these countries should make provision of “… straightforward enforcement of foreign arbitral awards in those states.” (Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009) the New York Convention however, is also inclusive of “an exception allowing courts to repudiate foreign awards that are “contrary to the public policy of that country.” (Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009) This exception is used for the basis of denying enforcement of foreign arbitration awards that fail to comply with the Shariah in Middle Eastern Countries. In fact, it is reported that Saudi Arabia is more likely to refuse recognition of foreign arbitration awards on the basis that the law as policy in Saudi Arabia is opposed to the laws and rules of many member nations or those nations of the New York Convention. (Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009, paraphrased)
Therefore, Saudi Arabia may not be under a requirement for enforcement of non-domestic arbitration awards to any greater extent than prior to the 1994 accession to the New York Convention in Saudi Arabia. The influence of the Shariah on the local laws in the Middle East combined with complications associated with enforcing arbitration awards has rendered foreign investors to be somewhat reluctant for their arbitrations to be governed by Middle Eastern laws. Added to this the process and policies of arbitration in the Middle East is still very young and the largest part of attorneys and judges in the Middle East have little experience in this area of the law.
VIII. Modernization and Reform of Arbitration Laws and Practices
Modernization and reform of the arbitration laws and practices has been addressed in the Middle East and are stated to have “ranged from the adoption of the familiar United Nations Commission on International Trade Law (“UNCITRAL”) Model Law on International Commercial Arbitration in the countries of Bahrain, Iran, Jordan, Oman, Egypt and Tunisia to the adoption of Western arbitration models in Qatar and Lebanon. ” (Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009) Furthermore, it is reported that the region is gaining more in the way of arbitral institutions which enables the “effective administration of local arbitrations by experienced personnel backed by recognized rules and modern resources.” (Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009) the Middle Eastern region is presently attempting to gain conformance in the area of international arbitration community laws. The UAE however, is reported to lack a common arbitration law as arbitration law in the UAE is presently “governed by a handful of provisions in the UAE’s Civil Procedure Code.” (Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009) the UAE Code requires that arbitration agreements to be valid and binding that: (1) it must be evidenced in writing; and the subject matter of the dispute must be clearly defined. (Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009) the validity of the arbitration clause that is included in an insurance policy or on the back of an invoice is not upheld in UAE arbitration law and the UAE Code is stated to make provision of the permissibility of the arbitration “only between parties who are legally entitled to dispose of the disputed right.”
Appointment of arbitrators under the UAE Code is done in three different ways as follows: (1) Nomination by the parties in accordance with the terms of the arbitration agreement; (2) nomination by an arbitral institution, provided that the parties have submitted their dispute to the rules of an arbitration institution that provide for the institution to appoint an arbitrator in the absence of an agreement between the parties; and (3) nomination by the competent court at the seat of the arbitration, at the request of any party. (Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009) the arbitrator is stated to be only authorized to act if they have been named specifically and “…empowered to act in the arbitration agreement or in a subsequent agreement. Minors, bankrupts and those who lack legal capacity or have been deprived of their civil rights due to the commission of a criminal offense may not serve as arbitrators.” (Weinberg, Wheeler, Hudgins, Gunn and Dial, 2009)
Kutty (2005) writes in the work entitled: “The Shariah’a Factor in International Commercial Arbitration” that the “historical acceptance of arbitration is also evident from more contemporary terms as Bahrain was a center of international commercial arbitration before Paris and London. In Saudi Arabia for instance, until the 1950s arbitration was the primary tool for resolving oil concession agreement disputes.” (Kutty, 2005) Three phases in the Middle East in the area of international commercial arbitration is described in the work of Brower and Sharpe:
(1) From the ending of World War II to the 1970s: a time when Islamic domestic laws where undermined and negated and the “superior” western laws where imposed in the arbitration of long-term oil concession disputes.
(2) the second phase is characterized with many Middle Eastern nations as well as the developing world in general gaining more confidence as a result of a number of factors including, inter alia: the end of colonialism; rise in nationalism; challenge to capitalism; increasing oil wealth, etc.140 the firm belief in many of these nations that the whole international arbitration framework was developed without any consideration being given to their culture, values and legal traditions gave impetus to a growing challenge to the international arbitration regime’s very legitimacy.
(3) the third and current phase, according to Brower and Sharpe, is characterized by growing participation in and promotion of the international arbitration movement by Islamic countries. (Kutty, 2005)
It is stated by Kutty that part of the growing system of global adjudication indicates that Islamic nations are “more and more…becoming party to international arbitration conventions; adopting “arbitration-friendly” domestic arbitration laws; and are setting up arbitration centers.” (2005) the best evidence that arbitration is coming back into favor in the region is that more than half the members of the Organization of Islamic.
International arbitration distrust is stated to have been reinforced in Arab countries in the 1963 case Saudi Arabia v. Arab Am. Oil Co. (ARAMCO), in which the panel “…ruled against the Saudi’s. The panel held that Saudi laws had to be “interpreted or supplemented by the general principles of law, by the custom and practice in the oil business and by notions of pure jurisprudence,” because ARAMCO’s rights could not be “secured in an unquestionable manner by the law in force in Saudi Arabia.” (Kutty, 2005)
The work of Bertrand and Leathley reports that an issue that has received a great deal of attention in the area of Middle East Commercial Arbitration is that of party autonomy and this is stated to be more true in the case of the Kingdom of Saudi Arabia, than in any other country in the region. Bertrand and Leathley report that the applicable law is “virtually always Saudi Law.” (2009) However, in the case of international disputes in which the seat of arbitration is in the Kingdom of Saudi Arabia the applicable law “is determined with reference to private international law.” (Bertrand and Leathley, 2009)
This means, according to law precedence from the Board of Grievances that the “law of the contract will be the…