Abstract
Investment arbitration has increasingly become one of the primary methods for the settlement of legal disputes between foreign investors and sovereign States. International investment agreements provide foreign investors with direct legal recourse to international arbitration against host States’ adverse actions. However, on the national level, administrative courts may also have jurisdiction to exercise judicial review over the same challenged government actions. The adjudication of the same measures on both levels often leads to an inevitable interaction between investment tribunals and administrative courts. This article examines the interaction between the courts of Majlis al-Dawla in Egypt and international arbitral tribunals and attempts to highlight the points of their collaboration and mutual reliance. The analysis of the interaction shows that the risk of investment tribunals exercising de facto appellate review over domestic courts’ decisions is minimal, not least because both institutions adjudicate disputes under different and distinct legal bases.
1 Introduction
Investment arbitration has increasingly become one of the primary methods for the settlement of legal disputes between foreign investors and sovereign States.1 As of October 2021, there are more than 2,600 international investment agreements that provide for foreign investors’ direct legal recourse against host States through arbitration, as an additional or alternative forum to national courts.2 These treaties typically offer protections to foreign investors — enforceable via international arbitration — against arbitrary or illegal government measures that adversely affect their investment in the host State. On the national level, administrative courts may also have jurisdiction to exercise judicial review over challenged government actions, often at an earlier stage. The adjudication of the same measures on both levels often leads to an inevitable interaction between investment tribunals and administrative courts. This interaction may vary in substance from cooperative and complementary to divergent, competitive, and dismissive.
In the last three decades, Egypt has been at the forefront of investment arbitration due to the substantial number of cases brought against it by foreign investors.3 Some of these disputes have been litigated domestically before Majlis al-Dawla, the main judicial institution for administrative justice in Egypt — prior to their transformation into international proceedings. As a result, in resolving these international disputes, arbitral tribunals have been called upon to examine Majlis al-Dawla’s decisions and scrutinize its litigation processes procedurally and substantively.
This article examines the interaction between the courts of Majlis al-Dawla and international arbitral tribunals and attempts to highlight the points of their collaboration and mutual reliance. We argue that the risk of investment tribunals exercising de facto appellate review over domestic courts’ decisions is minimal, not least because both institutions adjudicate disputes under different and distinct legal bases. The interaction between the courts of Majlis al-Dawla and investment tribunals supports this view. Section 2 of this paper presents an overview of the investment arbitration process and the general interaction that takes place between investment tribunals and domestic courts. Section 3 provides a brief background of Majlis al-Dawla and the manner in which its courts have addressed matters involving foreign investment disputes. Section 4 analyses two major investment arbitration claims brought against Egypt and casts light on the way in which investment tribunals have perceived and commented on Majlis al-Dawla’s decisions and treatment of foreign investors. Finally, in Section 5, the paper concludes with brief observations on the significance of this judicial dialogue between domestic courts and investment tribunals.
2 Domestic Courts and Investment Tribunals
The interaction between domestic courts and investment tribunals is multifaceted and complex. This complexity stems from the nature of investment arbitration as a means for settling disputes, which stands at the intersection between international and domestic jurisdiction, public and private laws, and procedural and substantive issues. What furthers the complexity of this relationship is the principle of international law’s supremacy, under which ‘international law prevails over domestic law.’4 This is a foundational and established principle of public international law, which international courts and tribunals have applied repeatedly.5 The principle has been codified in Article 3 of the International Law Commission’s Draft Articles on Responsibility of States for Internationally Wrongful Acts (ILC Draft Articles)6 and Article 27 of the Vienna Convention on the Law of Treaties.7 Conversely, the findings of domestic court judgments are not binding on international tribunals. Rather, international arbitrators and judges must make de novo determinations on the issues underlying domestic court judgments before them and decide for themselves whether the State action at issue is consistent with international law or not.8 Thus, the only role domestic law — and domestic court judgments — play in international adjudication is to serve as a factual element and evidence ‘which express the will and constitute the activities of States.’9
Against this background, this section provides a general overview of these dynamics. It first gives a brief introduction to investment arbitration as a process. It then considers the different roles that domestic courts may play in the course of an investment arbitration.
2.1 Investment Arbitration in a Nutshell
Investment arbitration is a process to resolve legal disputes between foreign investors and host States (i.e., States where foreign investors have made their investment and perform their investment-related activities). The resort to international arbitration is made available through the consent of the host State, which is most commonly offered in dispute resolution clauses in investment agreements and international treaties, such as bilateral investment treaties (BIT s),10 multilateral investment agreements,11 or free trade agreements.12 The State’s consent may also be found, although less commonly, in the domestic statues of the host State, such as in a foreign investment or mining law.13
The dispute resolution clause contained in the instrument of consent usually provides options for the procedural rules that govern the arbitration. The most common of these rules are the International Centre for Settlement of Investment Disputes (ICSID) Rules of Procedure for Arbitration Proceedings (ICSID Arbitration Rules) and the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules (UNCITRAL Rules).14 When a foreign investor opts for the ICSID Arbitration Rules, the investment arbitration proceedings will be instituted under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) and administered by ICSID.15 The UNCITRAL Rules, on the other hand, are not confined to a particular institution. Rather, they may be applied by an ad hoc tribunal in a non-institutional — self-administered — setting or in proceedings administered by an arbitral institution chosen by the parties. However, investment arbitration proceedings brought under the UNCITRAL Rules are regularly administered — through the agreement of the parties — by the Permanent Court of Arbitration.16
Investment arbitration provides foreign investors with access to an independent and impartial panel of arbitrators, most often three, selected by the parties to resolve the dispute through a dispute resolution process that results in an enforceable award. This allows foreign investors to avoid resorting to domestic courts, which foreign investors may consider as lacking independence, especially insofar as disputes involving the State are concerned, and to resolve the dispute in accordance with different legal standards afforded under international treaties or general international law.17
Foreign investors may invoke only the substantive legal protections afforded in the instrument of consent, which may include general principles or customary international law. These protections impose certain obligations on the host States that include, the requirement to refrain from unlawful expropriation and to provide compensation when lawful expropriation takes place, to refrain from discrimination and arbitrary conduct, to afford investors and their investments fair and equitable treatment and full protection and security, and to observe contractual obligations entered with investors.18
The resemblance between the aforementioned obligations and those arising in the context of domestic public law, i.e., administrative and constitutional law has led investment arbitration scholars to argue that the field should be understood as a form of international judicial review over host States’ conduct, including the conduct of their domestic courts. Whereas some academics and practitioners have regarded the growing jurisprudence in this respect as a welcome evolution of the international legal system and the basis for developing a new global administrative law field, others have perceived it with caution because it impinges upon host States’ sovereignty.19 At the heart of this debate is the role that domestic courts play in investment arbitration and the way investment tribunals deal with their decisions.
2.2 The Interaction between Domestic Courts and Investment Tribunals
The nature and types of interaction between domestic courts and investment tribunals may vary depending on the phase in which it takes place during the life cycle of an investment arbitration. Domestic courts may intervene in an arbitration process even prior to the commencement of the arbitration proceedings. This section classifies the interaction between domestic courts and arbitral tribunals into three categories: (1) pre-arbitration interaction, (2) post-arbitration interaction, and (3) interaction during the pendency of the arbitration.
2.2.1 The Pre-Arbitration Interaction
Prior to the commencement of an investment arbitration, a party may submit to a domestic court a dispute that was agreed by the parties — in their arbitration agreement — to be exclusively resolved through investment arbitration. The party resorting to such tactics is typically seeking to circumvent the investment arbitration process, with the counterparty arguing that the domestic court lacks jurisdiction by virtue of the arbitration agreement. In such circumstances, if ICSID is the exclusive forum, then the exclusivity rule under Article 26 of the ICSID Convention would require the domestic court to stay the proceedings until a final determination of the dispute by an ICSID tribunal.20 In non-ICSID investment arbitration, a domestic court of a State party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) would be required to decline jurisdiction in compliance with paragraph 3 of Article II of the New York Convention.21
Pre-arbitration, domestic courts may also be petitioned by a party to assist in the constitution of the tribunal. Most arbitration clauses in contracts specify a particular set of arbitration rules agreed by the parties. In the case of investment treaties or investment laws, several sets of rules may be identified, of which the party initiating arbitration must select one. These rules govern certain procedural aspects of the arbitration process, including matters related to the appointment and challenge of arbitrators. All of the major institutional rules include a mechanism for appointing an arbitrator or the full tribunal in the event of party default, including the designation of an appointing authority that has the power to appoint arbitrators when the respondent party defaults or when the parties fail to select a presiding arbitrator.22 In this capacity, the appointing authority also decides on the challenges raised against the arbitrators during the arbitration proceedings. The UNCITRAL Rules contain a similar set of procedures .23 However, where the parties’ arbitration clause does not refer the parties to specific procedural rules,24 the law of the seat of the arbitration (lex arbitri) will give the domestic courts of the seat a greater role to play in constituting the tribunal.25 Most domestic arbitration laws grant the parties the right to request the assistance of domestic courts in the constitution of the tribunal.26 The selection process is often subject to the now transnational standards of impartiality and independence, and in this situation, domestic courts continue to maintain their role as appointing authority throughout the arbitration proceedings, including resolving any challenges raised against an arbitrator.
2.2.2 Post-Arbitration Interaction
In non-ICSID investment arbitration, and subsequent to the conclusion of the arbitration proceedings, domestic courts interact with the arbitral process in two major ways, namely the enforcement of the arbitral award and, if sought by the losing party, its set aside.27 To enforce a non-ICSID award, a petition for recognition and enforcement must be submitted to the competent domestic court in which enforcement is sought. The enforcement proceeding is governed by the arbitration law of the jurisdiction in which enforcement is sought and by the New York Convention or any other applicable international treaty for the enforcement of foreign arbitral awards.28
Insofar as State parties to the New York Convention are concerned, for an application for recognition and enforcement to be refused, the domestic courts must base their decision on one or more of the exclusive grounds for refusal of enforcement and recognition provided in Article V of the Convention. These grounds are related to the parties’ capacity to conduct the arbitration, the validity of the arbitration agreement, procedural flaws in constituting the tribunal, awards that exceed the parties’ demands (ultra petita awards), arbitrability of the subject matter, and public policy considerations.29
Setting aside — also known as vacatur or annulment in some jurisdictions — is the tool by which domestic courts of the seat exercise review over arbitral awards. For non-ICSID investment arbitration,30 the grounds of setting aside are contained in the national arbitration law of the seat. The standard of review and the layers of adjudication that must be exhausted vary from one jurisdiction to another. However, the UNCITRAL Model Law on International Commercial Arbitration, which has been adopted in 85 States around the world, includes a fairly exhaustive list of the typical grounds for annulment, including lack of the tribunal’s jurisdiction, flawed composition of the tribunal, lack of independence and impartiality of the arbitrators, lack of due process during the proceedings, an ultra petita determination by the tribunal, or a determination in conflict with public policy.31
2.2.3 Interaction during the Pendency of the Arbitration
The interaction that takes place during the arbitral proceedings is perhaps the area which showcases the most significant impact of domestic courts on the investment arbitration process. This impact is sometimes procedural and jurisdictional, but may also extend to substantive aspects that go to the heart of the dispute.
2.2.4 Procedural and Jurisdictional Overlap
A foreign investor may seek remedies to vindicate its rights under either the domestic law of the host State, the investment protection instrument between the investor’s home State and the host State of the investor, a municipal law containing a consent to arbitrate, or an applicable contract between the disputing parties. In such a case, the competent domestic court of the host State, the investment tribunal constituted under the BIT, and sometimes the tribunal established under the contract, would each have jurisdiction over — what is substantively — the same dispute and the same government action. Typically, each forum would examine the dispute under a distinct governing law. However, under certain circumstances, an investment tribunal may — in addition to applying international law — also determine aspects of the dispute by applying the applicable domestic law or contract.32
Some BIT s include provisions attempting to regulate this jurisdictional overlap by demarcating the boundaries between domestic and international claims.33 In certain instances, BIT s may contain a “fork-in-the-road” provision, which requires the investor to choose one forum to the exclusion of other available fora.34 Other BIT s may include clauses that make exhaustion of local remedies a pre-condition for recourse to arbitration. Some BIT s subject the exhaustion of local remedies rule to a time limit, whereby investors may only resort to arbitration after the domestic proceedings fail to effectively resolve the dispute after the time-period prescribed in the BIT lapses.35
Notwithstanding these delineations, investment tribunals have grappled with the interpretation and application of these provisions, which are often unclear and do not account for the fact that elements of the disputes in each forum may be distinct. For instance, in H&H v. Egypt, a contractual dispute arose between the investor (H&H) and Grand Hotels of Egypt (GHE), a State-owned entity, concerning the management and operation of a resort in Egypt. Prior to the ICSID proceedings, GHE submitted the dispute to local arbitration at the Cairo Regional Centre for International Arbitration (CRCICA). In that arbitration, H&H submitted a counterclaim. Following an unfavourable award, H&H brought a series of lawsuits before Egyptian courts, which were unsuccessful. In 2009, H&H submitted its claims to ICSID under the US-Egypt BIT, and Egypt objected to the tribunal’s jurisdiction on various bases, including the fork-in-the-road provision in the BIT.36
Both parties asserted different interpretations of the provision and argued that the tribunal should apply different tests. H&H argued that the tribunal should apply the ‘triple identity test’, under which the fork-in-the-road provision is triggered only when both proceedings share the same (i) parties, (ii) cause of action, and (iii) requested relief. H&H conceded that the local proceedings and the ICSID arbitration involved the same parties but asserted that the causes of action and the relief sought in both proceedings were different.37 The tribunal applied the so-called ‘fundamental basis test’, which focuses on the subject matter of the two proceedings. Applying this test, the tribunal found that the fundamental basis of the claims raised before the local tribunal, the courts, and the ICSID tribunal were all the same, namely the allegations that GHE violated the contract with H&H. Thus, having made the election to seize the national court’s jurisdiction, the tribunal held that, by virtue of the fork-in-the-road provision, H&H no longer was permitted to raise the same fundamental contention before an ICSID tribunal.38 As a result, and among other reasons, the tribunal dismissed H&H’s claim.39
The determination of whether a foreign investor has satisfied an exhaustion of local remedies requirement is also a delicate task. In Helnan v. Egypt, the claimant (Helnan) was a Danish company managing a five-star hotel in Cairo pursuant to a contract with the Egyptian Organization for Tourism and Hotels (EGOTH), a private organization. Following the Ministry of Tourism’s inspection of the facility, the minister issued a decree downgrading the hotel to four-stars. As a result, EGOTH brought a contractual arbitration against Helnan before a CRCICA tribunal, which declared the contract terminated and required Helnan to hand over the hotel facility to EGOTH.40
After Helnan’s failure to set aside the award in Egyptian courts, it initiated ICSID proceedings against Egypt alleging that the Ministry of Tourism’s downgrading of the hotel and the enforcement of the CRCICA award led to the expropriation of its investment in breach of the Denmark-Egypt BIT. In its defense, Egypt argued that Helnan’s expropriation claim was barred because it failed to seek judicial review over the downgrade issue and to exhaust local remedies before Egypt’s administrative courts prior to bringing its arbitration. Despite the tribunal’s acknowledgment that the Denmark-Egypt BIT does not contain an exhaustion of local remedies requirement, it held that Helnan’s failure to make reasonable efforts to challenge the downgrade before Majlis al-Dawla precluded a claim against Egypt on the international level. In particular, the tribunal stated that the ‘ministerial decision to downgrade the hotel, not challenged in the Egyptian administrative courts, cannot be seen as a breach of the Treaty by Egypt. It needs more to become an international delict for which Egypt would be held responsible under the Treaty.’41 Consequently, the tribunal dismissed Helnan’s case.42
2.2.5 Substantive Interaction
In certain disputes, investment tribunals may encounter treaty claims based on alleged wrongful acts attributed to the domestic courts of host States. Under general international law, States may be held liable for violations of international law through the misconduct of their domestic courts, which constitute an organ of the State.43 In these circumstances, an investment tribunal will exercise a specific form of review over the conduct of the domestic court in question to ascertain whether that conduct constitutes a breach of the host State’s international obligations under the investment protection instrument invoked by the investor.
The most common claim of this nature is one for denial of justice, which derives from the customary international law to protect aliens from wrongful conduct of the judiciary of the alien- or investment-hosting State.44 In the context of investment arbitration, the concept has been developed as an element of the fair and equitable treatment standard provided in most investment protection treaties.45 Typically, investment tribunals have set a high bar for satisfying a claim of denial of justice.46 This includes the requirement that an investor must exhaust all available means provided by the host State’s judiciary before asserting that a denial of justice was committed. Here, the exhaustion requirement is distinguished from the one discussed earlier in that it represents a substantive element of a claim as opposed to an admissibility or a jurisdictional limitation that bars a claim from being heard.47
Denial of justice may arise in a variety of situations, including when serious procedural defects take place in domestic proceedings, such as a violation of the right to be heard,48 a denial of access to the court system of the host State,49 needlessly protracted and lengthy proceedings to the detriment of the investor,50 or when the outcome of the domestic proceedings is so irrational to an extent that exceeds the mere misapplication of the law.51 An example of a denial of justice claim brought against Egypt is demonstrated in Jan de Nul v. Egypt, which is discussed in Section 5.2.
Investment tribunals’ review of domestic courts’ decisions is not limited to denial of justice claims. The misconduct of a host States’ judiciary may violate other international legal standards included in investment treaties. For instance, certain tribunals have found that, apart from the denial of justice claim, the fair and equitable standard may include protections against cases of the judiciary’s misconduct that do not amount to denial of justice, including disregard of due process, arbitrariness, and procedural impropriety.52 Other tribunals have contemplated that domestic courts could engage in expropriatory behaviour tantamount to an unlawful taking or include issuing decisions that crystalize the host State’s unlawful taking.53 A limited number of tribunals have also envisaged the possibility that a dysfunctional court system could lead to a breach of the full protection and security standard.54
3 Majlis al-Dawla’s Experience with Investment Arbitration
Throughout its history, international law has not been an unfamiliar concept to Egypt’s judiciary.55 Indeed, since its 1923 Constitution, international treaties have been directly applicable and enforceable in domestic courts once they are ratified and published.56 Egypt’s subsequent constitutions have maintained the same status for international treaties and vested them with equal enforceability as domestic legislation.57 However, only recently has the judiciary begun to interact with investment treaties and the awards of investment tribunals. This, perhaps, is due to the high number of foreign investment disputes against Egypt in the last two decades and the increase in recourse to investment arbitration to settle these disputes. This section addresses the interaction between both forums through the lens of the courts of Majlis al-Dawla. It first provides an overview of Majlis al-Dawla’s history, structure, and jurisdiction (Section 3.1). It then discusses a decision where the courts of Majlis al-Dawla engaged substantively with investment tribunal jurisprudence (Section 3.2).
3.1 Overview of Majlis al-Dawla
Egypt’s judiciary consists of three main judicial institutions. Each institution resolves certain types of disputes, i.e., the constitutional judiciary (constitutional questions), the general judiciary (civil and criminal matters), and administrative judiciary (scope and limit of public power).58 At the apex of each institution is a supreme court, which reviews appeals and challenges against the institution’s lower court decisions and ensures the consistency and predictability of their jurisprudence.
Inspired by the French model of the Conseil d’État, Majlis al-Dawla was established in 1946 as a judicial institution with the power to exercise judicial review over government actions. Initially, Majlis al-Dawla only consisted of two levels of administrative adjudication, the Administrative and Disciplinary Court (ADC), as a court of first instance, and the Court of Administrative Justice (CAJ) as the court of last resort. In 1972, a new law organizing Majlis al-Dawla was issued, whereby the Supreme Administrative Court (SAC) was established, and the present structure of Majlis al-Dawla was instituted.59
Currently, the CS’s court system comprises three levels of adjudication. The ADC is a district court of the lowest level. It has limited jurisdiction over disputes involving public servants and government personnel issues, and disputes involving administrative contracts in which the amount in dispute does not exceed 500 Egyptian pounds (approximately 65 USD).60 The CAJ is a court of general jurisdiction over administrative matters. It acts in two capacities: (i) as a court of first instance in administrative disputes not falling within the limited jurisdiction of the ADC, and (ii) as an appellate court in appeals brought against decisions rendered by the ADC. The SAC is the highest court and authority in Majlis al-Dawla and the court of last resort with respect to challenges against decisions of the CAJ.61 It is seated in Cairo with 11 circuits, the first of which is presided over by the President of Majlis al-Dawla and has jurisdiction over disputes between investors, local or foreign, and investment-related government agencies, including the Ministry of Investment, the Ministry of Finance, the General Authority for Investment, the Capital Market Authority, the Central Bank of Egypt, and the General Tax Authority.62
Although Egypt is a civil law jurisdiction, Majlis al-Dawla performs its functions within a quasi-common law system. There is no administrative code in Egypt; the law has been developed through the jurisprudence and legal principles articulated by the courts of Majlis al-Dawla since its founding. Thus, the decisions of the SAC have binding authority and its legal dicta are almost always followed by Majlis al-Dawla’s lower courts.63 In addition to members of the bench, Majlis al-Dawla adopts the system of Commissaire d’État, which is a separate judicial department within Majlis al-Dawla whose members act as pre-trial judges and legal advisers to the courts. In advising the courts, the Commissaire d’État is required to furnish written memoranda on each case, in which it sets forth the parties’ arguments, questions of fact and law involved, relevant evidence, applicable law, and concludes with a legal opinion that the court most likely follows. The rationale behind the Commissaire d’État system is that it reinforces due process for the litigating party by ensuring that the courts of Majlis al-Dawla are provided with neutral and impartial third-party advice. The Commissaire d’État is attached to all the courts of Majlis al-Dawla and circuits at all levels of adjudication.64
3.2 Investment Tribunals’ Direct Engagement with Majlis al-Dawla
It is not uncommon for administrative courts to encounter disputes in which the legality of government measures affecting foreign investment are questioned. In fact, on the national level, administrative courts are created specifically to exercise judicial review over such government actions. However, in a monist jurisdiction, administrative courts may also be empowered to review these government measures against international law.65 The CAJ undertook this task in the Indorama case.
As part of the privatization program that the Egyptian government commenced in the 1990s, the Ministry of Investment (MoI) approved the sale of the long-standing state-owned company and textile producer, Shebin El Kom Textiles Company (STC). In 2006 and 2007, pursuant to the approval, STC’s shareholders, i.e., other Egyptian state entities, entered into two sale agreements with Indorama Shebin Textile (Indorama), an Egyptian subsidiary of the Indonesian fabric conglomerate, Indorama Corporation. The sale agreements contained an arbitration clause referring disputes between the parties to be settled exclusively through arbitration under the CRCICA rules.
In 2010, an Egyptian public interest attorney filed a lawsuit at the CAJ against the Prime Minister, the Minister of Investment, and the parties to the sale agreement requesting the court to invalidate the government’s decision to privatize STC and to declare the sale agreements as null and void. The claim was based on violations of Egypt’s public tender law, corruption in offering the sale on unconscionable terms, and abuse of administrative authority. Among the defenses the Egyptian State Lawsuit Authority (ESLA), the government’s counsel, raised was an objection to the CAJ’s jurisdiction over the dispute based on the arbitration clause in the sale agreements.
The CAJ rejected the objection on two grounds. First, it characterized the agreements as administrative contracts within the meaning of Article 1 of Egypt’s Arbitration Law No. 27/1994, which requires the competent minister’s consent to any arbitration agreement involving an administrative contract. Article 1 prohibits the delegation of the minister’s powers with respect to this consent. Thus, notwithstanding the Minister of Investment’s initial approval of the sale, the CAJ concluded that the arbitration clauses in these agreements were null and void because the MoI was not a signatory party to the agreements and STC’s shareholders did not have the power to consent to arbitration.
The second, and more relevant, ground on which the CAJ relied was corruption. After examining the procedures the government followed in the public tender, the CAJ determined that the government committed several violations of the public tender law, including providing Indorama with an unlawful preferential treatment in the bidding process in breach of the principles of equality, transparency, and due process. Further, the CAJ established that this preferential treatment was given as a result of corruption in violation of international public policy. On this issue, the CAJ referred directly to the jurisprudence of ICSID tribunals to support its position with respect to corruption. In particular, the CAJ relied on the tribunal’s award in World Duty Free Ltd. v. Kenya, which decided that the claimant in that case was not legally entitled to maintain its claims as a matter of international public policy because of corruption. The CAJ quoted the following passage from the tribunal’s award:
In light of domestic laws and international conventions relating to corruption, and in light of the decisions taken in this matter by courts and arbitral tribunals, this Tribunal is convinced that bribery is contrary to the international public policy of most, if not all, States or, to use another formula, to transnational public policy. Thus, claims based on contracts of corruption or on contracts obtained by corruption cannot be upheld by this Arbitral Tribunal.66
Ultimately, the CAJ quashed the government’s decision to privatize STC, with the resulting legal effect of rendering the contractual arrangements between STC’s shareholders and Indorama null and unenforceable. Unsurprisingly, three months after the judgment, Indorama filed a request for arbitration at ICSID against Egypt claiming that the CAJ judicially expropriated its investment plans to acquire STC and requested approximately 156 million USD in damages. The ICSID proceedings were eventually discontinued, and the parties settled the dispute for 54 million USD.67
4 Pre-Arbitration Events and the Domestic Proceedings Instituted before Majlis al-Dawla’s Courts
In contrast to domestic courts’ occasional reference to arbitral jurisprudence, investment tribunals’ often undertake extensive analysis of the form and/or the substance of domestic court decisions related to the investment dispute at hand. This section discusses two landmark investment arbitration cases brought against Egypt, namely Siag v. Egypt and Jan de Nul v. Egypt. It presents a timeline of the pre-arbitration events and the domestic proceedings instituted before Majlis al-Dawla’s courts. It also analyses how investment tribunals engaged with these proceedings and their outcome. The analysis shows that, despite the non-binding effect of domestic court decisions on the arbitral process, which investment tribunals acknowledge, the latter have almost always given careful consideration to the findings of Majlis al-Dawla’s courts, and in some instances have even relied upon and supported the courts’ findings to resolve investment disputes.
4.1 Siag v. Egypt
As discussed previously, investment tribunals may encounter legal issues the determination of which must be made on the basis of the host States’ domestic law. One such issue is the nationality of the foreign investor, on which the tribunal’s jurisdiction ratione personae must be established. The claimants in Siag v. Egypt were Mr. Wagiuh Elie George Siag (Mr. Siag) and his mother, Ms. Clorinda Vecchi, both of whom were Italian nationals who previously held Egyptian nationality. In 1989, they entered into a sale agreement with the Egyptian Ministry of Tourism (MoT) to purchase coastal land in the Sinai Peninsula — at the border with Israel — to build a resort. In 1996, while the project was still under development, the MoT issued a binding resolution terminating the sale agreement and ordering the seizure of the land and all the installations that had been constructed. The MoT justified the termination on the basis that Mr. Siag allegedly failed to complete the project on time in accordance with the terms of the sale agreement. In June 1996, the security forces in Sinai seized the land and handed its control over to the MoT.68
Mr. Siag did not choose arbitration as a first resort. He first had recourse to Majlis al-Dawla in a long battle to invalidate the MoT’s resolution. He filed the first lawsuit before the CAJ in Cairo seeking a provisional injunction against the seizure and a decision on the merits to invalidate the resolution. The CAJ granted Mr. Siag the provisional injunction and made the following prima facie findings:
[the] Resolution is illegal for being issued before the expiration of the deadline set for the completion of the first phase of the project according to the contract concluded between the Ministry and the plaintiff company. … In addition, the decree included taking the land together with all constructions thereupon, which are valued at millions of Egyptian pounds. … Consequently, this decision involved confiscation of the plaintiff company’s money, … and this is in violation of the provisions of Article 36 of the Constitution, which stipulates “Public confiscation of money is prohibited, and the private confiscation is permissible only by virtue of a judicial ruling”.69
On the merits, the CAJ decided that the resolution was valid and departed from its appointed expert’s opinion, which concluded that there was no delay on the part of Mr. Siag, and that, in any event, most of the delay was due to the government’s failure to issue the necessary approvals on time. Mr. Siag appealed this judgment at the SAC, which reversed the CAJ decision on the merits by upholding the sale agreement and invalidating the MoT’s resolution.70
The government ignored the SAC judgment. A month later, the MoT issued a new decree, which again terminated the land sale agreement. Mr. Siag challenged the decree before the CAJ, which stayed the decree’s execution, and then later found in Mr. Siag’s favour on the merits. The government tried unsuccessfully to appeal this judgment, but the SAC confirmed the CAJ’s decision.
Notwithstanding these judicial pronouncements, the government persisted in attempting to expropriate Mr. Siag’s property. Less than four months after the SAC decision, the President of Egypt issued Decree No. 205/2002, which expressly expropriated Mr. Siag’s land, designated it as public property, and authorized the Prime Minister to utilize the land for public use. Accordingly, the Prime Minister issued Decree No. 315 assigning the land to an Egyptian energy company, Al Sharq Gas Company, to build a natural gas line in Sinai. Al Sharq Gas Company took over the entire land along with the structures erected and the equipment thereon. For the third time, Mr. Siag resorted to Majlis al-Dawla to challenge both decrees before the CAJ, which quashed them on grounds of illegality. On appeal, the SAC confirmed the CAJ findings. Nevertheless, the government did not take any steps to comply with these judgments and retained control over the land.
In 2005, Mr. Siag and his mother brought their international arbitration claim at ICSID as Italian investors under the Egypt-Italy BIT. They contended that Egypt unlawfully expropriated their investment, failed to provide full protection and security, and failed to accord them fair and equitable treatment. In determining the jurisdiction and deciding the merits of the case, the tribunal relied heavily on the jurisprudence of Majlis al-Dawla and the above judgments. Regarding jurisdiction, at issue was whether Mr. Siag had lost his Egyptian nationality before the dispute arose. Under the Egyptian Nationality Law, then in effect, an Egyptian national is required to seek permission from the government before acquiring other nationality. Once the permission is granted and the person acquires the foreign nationality, the person must make a formal written declaration to the government requesting to retain the Egyptian nationality within one year from the date of acquiring the foreign nationality.71 Before the dispute arose, Mr. Siag applied and was given permission to acquire Lebanese nationality in 1989. However, he had not provided a written request to maintain his Egyptian nationality.
The parties disagreed as to the effect of Mr. Siag’s failure to submit the declaration. Egypt submitted as evidence a considerable number of official documents indicating that Mr. Siag maintained and benefited from Egyptian nationality and had presented himself as such since the 1980s up until the arbitration proceedings. Mr. Siag argued that these documents had no value as their effect contradicts Egyptian law. In resolving the issue, the tribunal relied on a SAC ruling finding that ‘whereas the establishment of the nationality of a person is determined exclusively by the provisions of the legislation regulating the nationality, all data in documents even official have no legal value in proving the Egyptian nationality.’72 Ultimately, the tribunal determined that Mr. Siag had lost his Egyptian nationality by operation of the CS’s interpretation of the Egyptian Nationality Law when he failed to make the declaration during the period prescribed by the law. Therefore, Mr. Siag was held to be an Italian investor during all the relevant times of the dispute for the purposes of the ICSID Convention.73
On the merits, the tribunal held Egypt liable for unlawful expropriation, impairment of the claimants’ investment through unreasonable measures, and failure to provide fair and equitable treatment and full protection and security. As part of its analysis of the expropriation claim, the tribunal found that Egypt failed to afford due process to the claimants when it terminated the land sale agreement. The tribunal refused to accept the alleged delays in completing the project as a valid reason for the termination. Citing the SAC ruling, the tribunal stated that ‘[i]t is important to note that the Supreme Administrative Court of Egypt held the same view. It ruled that the decision to issue Resolution No. 82 before the specific date was “without any legal basis, in all respects.”’74 Further, the tribunal found that Egypt’s failure to comply with the CS’s court decisions constituted a denial of justice and that Egypt had engaged in unreasonable conduct resulting in the impairment of Mr. Siag’s investment.75
4.2 Jan de Nul v. Egypt
When investment tribunals are faced with a denial of justice claim, they typically are required to conduct an extensive review of the domestic court’s conduct and decisions at issue. Investors have brought denial of justice claims against host States in numerous investment arbitration cases.76 However, Jan de Nul v. Egypt stands as one of the earliest, and perhaps most comprehensive, analyses made by an investment tribunal over a domestic court decision. The claimants in this dispute were two Belgium dredging companies, Jan de Nul NV and Dredging International NV. In 1992, the claimants won a tender and contracted with the Suez Canal Authority (Authority) to dredge certain lots and sections of the Suez Canal. The tender, upon which the contract was based, included technical specifications regarding the hardness, volume, and layers of the soil in the lots to be dredged. The claimants commenced work in 1992 and completed it in 1994. During these years, they allegedly encountered conditions not detailed in the technical specifications, including ‘a lesser volume to be dredged, an imbalance between the deepening and widening operations, and a higher proportion of rock.’77 After the project’s completion, the claimants requested compensation for the additional costs they had incurred. While the Authority accepted the work, it did not answer the claimants’ compensation request and even made further deductions (2.9 million USD) of the amount due under the contract as administrative, regulatory, and delay charges.78
Pursuant to the dispute resolution clause of the contract, the claimants filed two lawsuits before the CS. The first was submitted in 1994 to the Administrative Court of Port Saïd, where the claimants contended that the Authority had misrepresented the amount of work required under the contract in breach of Egypt’s Civil Code.79 The claimants requested that the court declare the contract null and void and award compensation of 130 million USD for the losses incurred due to the Authority’s omission, plus lost profits. The second lawsuit was brought in 1995 before the Administrative Court of Ismaïlia, where the claimants sought damages for the deductions that the Authority had made from the amounts to be paid under the contract.
The court in the first case appointed a panel of three experts specializing in soil mechanics, and then referred both cases to the Commissaire d’Etat. After reviewing the experts’ opinion, the Commissaire d’Etat issued its advice on both cases and found that the claimants were entitled to compensation for the actual value of the work executed, and that the delay charges were ill-founded. In addition, the Commissaire d’Etat recommended that the two cases be consolidated.80 In 1998, the Administrative Court of Ismaïlia joined both proceedings, and designated the Ministry of Justice to appoint a second tripartite panel of engineering and accounting experts to supplement the first panel’s report.81
The second panel revised the findings of the first one and replied to the Commissaire d’Etat’s opinion. It concluded that the claimants were entitled to only 8,600,000 USD.82 In 2003, the Administrative Court of Ismaïlia rendered its decision on both lawsuits. Regarding the first case, the court found that the claimants failed to conduct the necessary investigation of the conditions of the soil prior to entering into their contractual relationship with the Authority. Thus, the court rejected the claimants’ request to annul the contract for misrepresentation or fraud and dismissed their claim for compensation. With respect to the second lawsuit, the court ruled that the claimants were entitled to an amount of approximately 1 million USD for the unlawful deductions.83
Both parties appealed the judgment. However, prior to the SAC’s review of the appeal, the claimants submitted their dispute to ICSID under the BIT between Egypt and Belgo-Luxemburg Economic Union. In addition to the alleged breach of Egypt’s contractual obligations, the claimants rested their case on the claim that Egypt’s courts had denied them justice, which amounted to a violation of the BIT’s fair and equal treatment standard. The claimants focused their legal claim on the administrative proceedings and claimed that they had suffered a ‘gross miscarriage of justice’ due to the ‘inordinate duration and blatant defiance of the principles of fairness and due process’ during the proceedings.84 In particular, they claimed that the court (i) systematically disregarded evidence of fraud favourable to them, (ii) joined the two proceedings for dilatory purposes to overrule the Commissaire d’État’s opinion, (iii) unjustifiably appointed the second panel to overrule the favourable findings of the first one and passively embraced the second panel’s unfounded conclusion, and (iv) negligently extended the duration of the proceedings for more than 10 years to the detriment of the claimants.85
As a preliminary matter, the tribunal had to respond to Egypt’s argument that the tribunal stay the proceedings until the SAC had resolved the administrative dispute. The tribunal disagreed with Egypt and stated that exercising jurisdiction over the arbitration dispute would not ‘transform the Tribunal into a ‘supranational appellate court’ reviewing national administrative decision.’ It further confirmed that ‘the mere fact that the Claimants have filed a (parallel) appeal before the High Administrative Court of Egypt … is irrelevant.’86
In determining the denial of justice claim, the tribunal distinguished between substantive and procedural denial of justice. Whereas the latter concerns violations of the party’s procedural rights, the former’s must involve an incident of extreme misapplication of the law that makes the judgment ‘improper and discreditable’.87 The tribunal thoroughly examined the judgment of the Administrative Court of Ismaïlia, the first and second panels’ reports, and the Commissaire d’Etat’s legal opinion. With respect to the first issue, the tribunal applied the substantive denial of justice’s high threshold and found no indication that the court had disregarded evidence of fraud.88 The tribunal highlighted that the court had examined this issue and concluded that the claimants failed to establish the elements of fraud under Egyptian law.89 In this context, the tribunal pointed out that ‘it is not the role of the Tribunal to review whether the Ismaïlia Court conducted a correct contractual analysis or correctly applied Egyptian law. … It is not the role of a tribunal constituted on the basis of a BIT to act as a court of appeal for national courts. The task of the Tribunal is rather to determine whether the Judgment is “clearly improper and discreditable.”’90
Turning to the remaining contentions, which the tribunal considered as procedural denial of justice claims, the tribunal found no evidence that joining both proceedings was pursued for dilatory purposes. In the tribunal’s view, the joinder was reasonable considering that the two proceedings were related to the same contract.91 The tribunal also noted that the court did not appoint the second panel on its own motion but upon the Authority’s request. It maintained that the mere designation of the Ministry of Justice to appoint the second panel did not constitute in and of itself arbitrary conduct or a breach of due process, especially given that both parties had equal opportunity to appear before the second panel and made oral and written presentations of their positions. Thus, due process was satisfied.92
With respect to the duration of the administrative proceedings, the tribunal acknowledged that ‘ten years to obtain a first instance judgment is a long period of time.’93 However, it also noted that the dispute involved highly complex and technical issues, the submissions were voluminous, and the expert reports extensive. In light of these factors, the tribunal concluded that ‘while the duration of the proceedings leading to the Ismaïlia Judgment is certainly unsatisfactory in terms of efficient administration of justice, it does not rise to the level of a denial of justice’.94
As a final issue on the denial of justice claim, the tribunal had to determine whether exhaustion of local remedies is required for a denial of justice claim to be successful on the merits. Egypt argued that the tribunal should dismiss the denial of justice claim because the claimants did not await the SAC to issue its final judgment on the appeal.95 The tribunal agreed with Egypt. Citing investment arbitration case law, the tribunal reiterated that a respondent State ‘must be put in a position to redress the wrongdoings of its judiciary’ and that ‘it cannot be held liable unless “the system as a whole has been tested and the initial delict remained uncorrected.”’96 The tribunal noted that the claimants’ grievance did not concern ‘the failure of the Egyptian legal system as such, but merely of the conduct of the Ismaïlia Court and its appointed experts’ and found that such a complaint is insufficient to establish denial of justice, especially ‘when there is no claim that the appellate proceedings are in any manner dysfunctional’.97 Ultimately, the tribunal dismissed Jan de Nul’s claims in their entirety.98
5 Conclusion
An investment arbitration practitioner once depicted arbitrators as possessing ‘omnipotent’ qualities ‘greater authority than the most excellent trial judge, or the most eminent intermediate court of appeal’.99 Idealistic as this may sound, this ‘greater’ quasi-constitutional authority — to determine the legitimacy of State actions — raises concerns that investment tribunals may be exercising an authority akin to those vested in domestic appellate courts.100 However, the practice of investment tribunals draws a different, and more complex, picture.
The concern that investment tribunals compete with domestic courts or that they sometimes assume the functions of an appellate institution is unfounded. As this paper shows, the standard upon which investment tribunals conduct their review over domestic courts’ conduct makes it difficult to consider such a review as an appeal. Although international law does not ascribe any binding effect to domestic court decisions or their findings, investment tribunals have been careful to clarify and characterize their function so as not to create the impression of exercising an additional layer of appeal on domestic courts’ rulings.101 As illustrated earlier, the high threshold to establish a denial of justice claim supports this finding.
In addition, the evidence provided in this article challenges the widespread misconception that domestic courts operate within the insulated realm of their municipal legal systems and the perception that they are inadequately equipped to address or engage with investment arbitration jurisprudence. The courts of Majlis al-Dawla, in the Indorama case, exhibited a profound and cutting-edge understanding of investment arbitration jurisprudence and even employed it as a supporting argument to its reasoning. In fact, investment tribunals, in Siag v. Egypt and Jan de Nul v. Egypt, supported and relied substantially on the rulings and dicta of Majlis al-Dawla’s courts, despite not being bound to do so. Had the Egyptian government complied with the courts’ decisions in those cases, the arbitration proceedings most likely would have never been brought to light.
The fact that tribunals review administrative measures under a different standard and a distinct legal regime reduces any risk of them acting as an appeal mechanism and attenuates any concern in this regard. Indeed, as provided in the ILC Draft Articles, the ‘characterization of an act of a State as internationally wrongful is governed by international law. Such characterization is not affected by the characterization of the same act as lawful by domestic law.’102 Thus, by confirming that host States’ application of domestic law through their judiciary is compatible with the States’ international obligations, investment tribunals discharge their arbitral mandate in a manner that arguably does not overlap with the functions preserved for domestic administrative courts.
Acknowledgement
The views expressed herein are the authors’ own and do not reflect the views of Dechert LLP, Sidley Austin LLP, or their clients. All errors are likewise the authors’ own.
The term ‘investment arbitration’ is used in this paper to refer to international arbitration proceedings instituted by foreign private investors against sovereign States, whether under a treaty, a contract, or a domestic statute.
See UNCTAD, ‘Recent Developments in the IIA Regime: Accelerating IIA Reform’, IIA Issues Note, Issue 3 (August 2021). In addition, foreign investors may invoke arbitral consents contained in certain foreign investment laws to arbitrate against the State. Many of these laws also contain substantive protections similar to those contained in investment protection treaties. See, A. Ali & D. Attanasio. International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice (Alphen aan den Rijn: Kluwer Law International, 2021) 399–430.
In the last decade, Egypt has been ranked within the top five most frequent State respondents in investment arbitrations. See UNCTAD, ‘Investor-State Dispute Settlement Cases Pass the 1,000 Mark: Cases and Outcomes in 2019’, IIA Issues Note, Issue 2 (July 2020).
ICJ, Applicability of the Obligation to Arbitrate under Section 21 of the United Nations Headquarters Agreement of 26 June 1947 (Advisory Opinion), [1988] ICJ Rep. 12, p. 34, para. 57, and p. 35, para. 57.
PCIJ, Case of the S.S. ‘Wimbledon’ (1923), PCIJ Rep. Series A, No. 1, p. 29; PCIJ, The Greco-Bulgarian ‘Communities’ (Advisory Opinion) (1930), PCIJ Rep. Series B, No. 17, p. 32; PCIJ, Case of the Free Zones of Upper Savoy and the District of Gex (Judgment) (1932), PCIJ Rep. Series A/B, No. 46, p. 167.
Article 3 of the Articles on Responsibility of States for Internationally Wrongful Acts provides: ‘The characterization of an act of a State as internationally wrongful is governed by international law. Such characterization is not affected by the characterization of the same act as lawful by internal law.’
Article 26 of the Vienna Convention on the Law of Treaties provides: ‘A party may not invoke the provisions of its internal law as justification for its failure to perform a treaty. This rule is without prejudice to Article 46.’
ICJ, Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening) (Judgment), [2012]. ICJ Rep. 99, p. 117, paras 37–38, p. 122, para. 53; see, also, A. Nollkaemper, National Courts and the International Rule of Law (Oxford University Press, Oxford: 2011), 247.
PCIJ, Case concerning Certain German Interests in Polish Upper Silesia (Merits) (1926), PCIJ Rep. Series A, No. 7, p. 19; ICJ, Frontier Dispute (Burkina Faso/Republic of Mali) (Judgment), [1986] ICJ Rep. 554, p. 568, para. 30. For a general discussion on the relationship between international law and municipal law, see, J. Hepburn, Domestic law in international investment arbitration (Oxford: Oxford University Press, 2017); H.E. Tomka, J. Howley & V.-J. Proulx. ‘International and Municipal Law before the World Court: One or Two Legal Orders?’, Polish Yearbook of International Law 35 (2015): 11–45; M. Kamto, ‘The Status of Municipal Law before the World Court in the Light of Recent Cases’, in T. Maluwa, M. du Plessis & D. Tladi (eds), The Pursuit of a Brave New World in International Law (Leiden: Brill Nijhoff, 2017) 212–233.
See, e.g., Agreement between the Government of the Hashemite Kingdom of Jordan and the Government of the Arab Republic of Egypt on the Mutual Promotion and Protection of Investments (8 May 1996), Article 6.
See, e.g., Agreement on Promotion, Protection and Guarantee of Investments Among Member States of the Organization of the Islamic Conference (5 June 1981) (OIC Investment Agreement (1981)), Article 17.
See, e.g., Unified Agreement for the Investment of Arab Capital in the Arab States (26 November 1980), Annex (Conciliation and Arbitration), Article 2.
See, e.g., Law No. 15 of 2010 (Yemen), Article 26; Mining Law No. 007/2002, as emended by Law No. 001/2018, Article 319 (Dem. Rep. Congo).
A. Ali, J. Wessel, A. de Gramont & R. Mellske, The International Arbitration Rulebook: A Guide to Arbitral Regimes (Alphen aan den Rijn: Kluwer Law International, 2019) 63, 113.
A. Newcombe & L. Paradell, Law and Practice of Investment Treaties: Standards of Treatment (Alphen aan den Rijn: Wolters Kluwer, 2009), 27. See also C. Schreuer, The ICSID Convention: A Commentary (Cambridge: Cambridge University Press, 2009), 10–12.
B.W. Daly, ‘The Permanent Court of Arbitration in Indian Treaties: Its Role, Potential Procedural Problems, and Drafting Solutions’, Indian Journal of International Law 47(3) (2007): 359–76. While ICSID Convention and UNCITRAL arbitration are the most widely available and commonly selected, several other forms of arbitration are also used to resolve investor-State disputes, including the International Court of Arbitration of the International Chamber of Commerce (ICC) and the Arbitration Institute of the Stockholm Chamber of Commerce (SCC).
J. Paulsson, The Idea of Arbitration (Oxford: Oxford University Press, 2013) 1–28.
For general discussions, see J.W. Salacuse, The Law of Investment Treaties, 2nd edn. (Oxford: Oxford University Press, 2015), 330–332; R. Dolzer & C. Schreuer, Principles of International Investment Law, 2nd edn. (Oxford: Oxford University Press, 2012), 126–129, 152–124; Newcombe & Paradell, supra note 15 at 352–355.
For this debate, see A. Roberts, ‘Clash of Paradigms: Actors and Analogies Shaping the Investment Treaty System’, American Journal of International Law 107 (2013): 45–94, 50; O. Diggelmann & T. Altwicker, ‘Is There Something Like a Constitution of International Law? A Critical Analysis of the Debate on World Constitutionalism’, Zeitschrift für ausländisches öffentliches Recht und Völkerrecht 68 (2008): 623–650; V. Vadi, Analogies in International Investment Law and Arbitration (Cambridge: Cambridge University Press, 2015), 195; M. Paparinskis, ‘Analogies and Other Regimes of International Law’, in Z. Douglas, J. Pauwelyn & J. Viñuales (eds), The Foundations of International Investment Law: Bringing Theory into Practice (Oxford: Oxford University Press, 2014), 73; S. Schill, ‘Enhancing International Investment Law’s Legitimacy: Conceptual and Methodological Foundations of a New Public Law Approach’, Virginia Journal of International Law 52(1) (2011): 57–102, 60; D. Schneiderman, ‘Investment Rules and the New Constitutionalism: Interlinkages and Disciplinary Effects’, Law & Social Inquiry 25(3) (2000): 757–787; B. Kingsbury & S. Schill, ‘Investor-State Arbitration as Governance: Fair and Equitable Treatment, Proportionality and the Emerging Global Administrative Law’, in B. Kingsbury & R. Stewart (eds), El Nuevo Derecho Administrativo Global en América Latina (New York, NY: Institute for International Law and Justice, 2009), XXX 275–276; G. Van Harten, Investment Treaty Arbitration and Public Law (Oxford: Oxford University Press, 2007), 10; D. Schneiderman, ‘Global Constitutionalism and International Economic Law: The Case of International Investment Law’, European Yearbook of International Economic Law (2016): 23–43; D. Schneiderman, ‘Against Constitutional Excess: Tocquevillian Reflections on International Investment Law’, University of Chicago Law Review 85(2) (2018): 585–608; T. Ginsburg, ‘International Substitutes for Domestic Institutions: Bilateral Investment Treaties and Governance’, International Review of Law and Economics 25 (2005): 107–123, 119.
See Convention on the Settlement of Investment Disputes between States and Nationals of Other States (April 2006) (ICSID Convention), Article 26 (‘Consent of the parties to arbitration under this Convention shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy. A Contracting State may require the exhaustion of local administrative or judicial remedies as a condition of its consent to arbitration under this Convention’.). For discussion over Article 26 of the ICSID Convention, see, also, G. Delaume, ‘ICSID Arbitration and the Courts’, American Journal of International Law 77(4) (1983): 784–803; Schreuer, supra note 15 at 386.
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (10 June 1958) (New York Convention), Article II(3) (‘The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed’.).
See ICSID Convention, Article 38; ICC Arbitration Rules (in force from 1 January 2021), Article 12; Ali et al., supra note 14, 299.
See UNCITRAL Arbitration Rules (1976), Articles 6–8; UNCITRAL Arbitration Rules (2010), Articles 8–10.
See, e.g., OIC Investment Agreement (1981), Article 17; Agreement Establishing a Free Trade Area between the Arab Republic of Egypt and the Republic of Turkey (27 December 2005), Article 34.
The seat of arbitration is a national legal system selected by the parties to govern the arbitration procedures.
In Egypt, in accordance with Articles 9 and 17(2) of Law No. 27/1994, the competent court with respect to these matters in an international arbitration is Cairo Court of Appeal. Law No. 27/1994 Promulgating the Law Concerning Arbitration in Civil and Commercial Matters (Official Gazette No. 16(bis), 21 April 1994) (Egypt) (Law No. 27/1994), Articles 9 and 17(2).
The reason ICSID arbitration is excluded from this discussion is because, under Article 54(1) of the ICSID Convention, enforcement is automatic and domestic courts are bound to enforce ICSID award ‘as if it were a final judgment of a court in that State’. Further and uniquely, the ICSID Convention contains its own annulment award system, which can be found in Articles 50–52 of the Convention.
Apart from the New York Convention, there are regional treaties in the Arab world that regulate the enforcement and recognition of arbitral awards, including the 1952 Convention of the Arab League on the Enforcement of Judgments and Arbitral Awards and the 1983 Convention on Judicial Cooperation between States of the Arab League. In addition, Egypt has a number of bilateral judicial cooperation treaties that also provide conditions for the recognition and enforcement of arbitral awards, including Egypt-Germany Treaty of May 22, 1969, issued by Presidential Decree 1536 of 1969; Egypt-Kuwait Treaty of April 6, 1977, issued by Presidential Decree 293 of 1977; Egypt-France Treaty of March 15,1982, issued by Presidential Decree 331 of 1982; Egypt-Bahrain Treaty of May 17, 1989, issued by Presidential Decree 260 of 1989; and Egypt-China Treaty of April 21,1994, issued by Presidential Decree 361 of 1994.
See New York Convention, Article V. Egypt’s arbitration law mirrors the grounds for annulment provided in the New York Convention and the UNCITRAL Model Law. See Law No. 27/1994, Article 52.
An annulment of an ICSID award is also subject to ICSID exclusive system of review, where an ICSID ad hoc annulment committee is constituted and exercises exclusive jurisdiction over the annulment application under the grounds listed in Article 52 of the ICSID Convention.
UNCITRAL Model Law on International Commercial Arbitration (as amended, 2006), Article 34.
See H.E. Kjos, Applicable Law in Investor-State Arbitration (Oxford: Oxford University Press, 2013); A. Parra, ‘Applicable Law in Investor-State Arbitration’, in Contemporary Issues in International Arbitration and Mediation: The Fordham Papers (2007), Volume 1 (Leiden: Brill, 2008) 1–12.
J. Crawford, ‘Treaty and contract in investment arbitration’, Arbitration International 24(3) (2008): 351–374.
See Agreement between the Government of the Arab Republic of Egypt and the Government of Qatar Concerning the Promotion and Protection of Mutual Investment (2 December 1999), Article 6; Agreement between the Government of the Republic of Mauritius and the Government of the Arab Republic of Egypt on the Reciprocal Promotion and Protection of Investments (25 June 2014), Article 10(5) (‘Once the investment dispute has been submitted to the competent court of the Contracting Party in whose territory the investment was made or to the arbitration for a referred to in paragraph (4), that choice is final’.).
See Agreement between the Swiss Confederation and the Arab Republic of Egypt on the Promotion and Reciprocal Protection of Investments, Article 12(2)–(3) (‘Before submitting an investment dispute for settlement in accordance with paragraph (3), the investor shall in addition to paragraph (1) submit the dispute to the domestic administrative procedure of the Contracting Party in whose territory the investment has been made (hereinafter referred to as “disputing Party”). The investor may submit the investment dispute to the domestic administrative procedure in parallel or in conjunction with the procedure of amicable settlement referred to in paragraph (l). The two procedures shall in no case exceed six months from the date of the written request for consultation, negotiation or mediation submitted by the investor. If within six months the investment dispute cannot be settled through the procedure of amicable settlement and the investor is not satisfied with the outcome of the domestic administrative procedure, the investor may submit the dispute either to: … an ad hoc-arbitral tribunal …’.).
H&H Enterprises Investments, Inc. v. Arab Republic of Egypt, ICSID Case No. ARB/09/15, Decision on Respondent’s Objections to Jurisdiction (5 June 2012), 6.
H&H Enterprises Investments, Inc. v. Arab Republic of Egypt, ICSID Case No. ARB/09/15, Award (6 May 2014) (excerpts), 363.
H&H v. Egypt, ibid., pp. 359–87. The tribunal imported the ‘fundamental basis test’ from the award in Pantechniki v. Albania case, where the sole arbitrator found that ‘[t]he Claimant chose to take this matter to the Albanian courts. It cannot now adopt the same fundamental basis as the foundation of a Treaty claim’. Pantechniki S.A. Contractors & Engineers (Greece) v. Republic of Albania, ICSID Case No ARB/07/21, Award (30 July 2009), para. 67.
H&H v. Egypt, supra note 37 at 415.
Helnan International Hotels A/S v. Arab Republic of Egypt, ICSID Case No. ARB/05/19, Award (3 July 2008), 3–9.
Helnan v. Egypt, ibid., p. 148.
Helnan v. Egypt, ibid., p. 68.
See Draft Articles on Responsibility of States for Internationally Wrongful Acts (2001), Yearbook of the International Law Commission 26, Vol. II (Part Two) (2001) (ILC Draft Articles), Article 4(1) (‘The conduct of any State organ shall be considered an act of that State under international law, whether the organ exercises legislative, executive, judicial or any other functions, whatever position it holds in the organization of the State, and whatever its character as an organ of the central Government or of a territorial unit of the State’.).
F. Francioni, ‘Access to Justice, Denial of Justice and International Investment Law’, European Journal of International Law 20(3) (2009): 729–747; U. Kriebaum, ‘Investment Arbitration — Rule of Law Demands of the Domestic Judiciary (Denial of Justice, Judicial Expropriation, Effective Means)’, in A. Reinisch & S. Schill (eds), Investment Protection Standards and the Rule of Law (Oxford: Oxford University Press, 2023) 145–172; A. Mourre & A. Vagenheim, ‘Some Comments on Denial of Justice in Public and Private International Law After Loewen and Saipem’, in M. Fernández-Ballesteros & D. Arias (eds), Liber Amicorum Bernardo Cremades (2010): 843–866; M. Paparinskis, ‘Franck Charles Arif v Republic of Moldova: Courts Behaving Nicely and What to Do About It’, ICSID Review — Foreign Investment Law Journal 31(1) (2016): 122–128; J. Paulsson, Denial of Justice in International Law (Cambridge: Cambridge University Press, 2005); M. Sattorova, ‘Denial of Justice Disguised? Investment Arbitration and the Protection of Foreign Investors from Judicial Misconduct’, International and Comparative Law Quarterly 61 (2012): 223–246.
See B. Demirkol, Judicial Acts and Investment Treaty Arbitration (Cambridge: Cambridge University Press, 2018); M. Stevens & R.D. Bishop, ‘Fair and Equitable Treatment: Denial of Justice’, in M. Kinnear, G.R. Fischer, J. Minguez Almeida, L.F. Torres & M. Uran Bidegain (eds), Building International Investment Law: The First 50 Years of ICSID (Alphen aan den Rijn: Wolters Kluwer, 2015) 295–306.
As the tribunal in Philip Morris v. Uruguay put it: ‘As held by one decision, “[a] denial of justice implies the failure of a national system as a whole to satisfy minimum standards.” The high standard required for establishing this claim in international law means that it is not enough to have an erroneous decision or an incompetent judicial procedure, arbitral tribunals not being courts of appeal. For a denial of justice to exist under international law there must be “clear evidence of … an outrageous failure of the judicial system” or a demonstration of “systemic injustice” or that “the impugned decision was clearly improper and discreditable”’. Philip Morris Brands Sàrl and others v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award (8 July 2016), 499–500 (citations omitted).
Z. Douglas, ‘International Responsibility for Domestic Adjudication: Denial of Justice Deconstructed’, International and Comparative Law Quarterly 63(4) (2014): 867–900.
Krederi Ltd. v. Ukraine, ICSID Case No. ARB/14/17, Award (2 July 2018) (excerpts), 461–465; Philip Morris v. Uruguay, supra note 46, 501.
Iberdrola Energía, S.A. v. Republic of Guatemala (I), ICSID Case No. ARB/09/5, Award (17 August 2012), 432; Limited Liability Company Amto v. Ukraine, SCC Case No. 080/2005, Final Award (26 March 2008), 75; Robert Azinian and others v. United Mexican States, ICSID Case No. ARB(AF)/97/2, Award (1 November 1999), 102, ICSID Review — Foreign Investment Law Journal 14(2) (1999): 538–575.
Oostergetel v. Slovakia, UNCITRAL Ad Hoc Arbitration, Final Award (23 April 2012), 290; Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award (7 December 2011), 602; Toto Costruzioni Generali S.p.A. v. Lebanese Republic, ICSID Case No. ARB/07/12, Decision on Jurisdiction (11 September 2009), 156–158.
Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award (8 April 2013), 445; Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award (29 July 2008), 652, 653.
Mohammad Ammar Al-Bahloul v. Republic of Tajikistan, SCC Case No. 064/2008, Award on Jurisdiction and Liability (2 September 2009), 221; see Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2, Award (31 October 2012), 478–480.
See OAO Tatneft v. Ukraine, PCA Case No. 2008-8, Award on the Merits (29 July 2014), 459–461; Eli Lilly and Company v. Government of Canada, ICSID Case No. UNCT/14/2, Final Award (16 March 2017), 221; Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/99/6, Award (12 April 2002), 139. For a discussion over judicial expropriation, see H. Gharavi, ‘Discord Over Judicial Expropriation’, ICSID Review — Foreign Investment Law Journal 33(2) (2018): 349–357.
See Frontier Petroleum Services Ltd. v. Czech Republic, UNCITRAL, Final Award (12 November 2010), 273.
See, e.g., the Court of Administrative Justice, Case No. 622/4, Decision (1951) (unpublished), where the court applied the standards recognized by customary international law on the treatment of aliens to determine whether the government had the right to expel an individual who did not hold Egyptian nationality.
See Royal Decree No. 42 of 1923, Building a Constitutional System for the Egyptian States (1923), Article 46.
See Constitution of the United Arab Republic (1964), Article 125; Constitution of the Arab Republic of Egypt (1971), Article 151; and Constitution of the Arab Republic of Egypt (2014, with amendments through 2019), Article 151.
Constitution of the Arab Republic of Egypt (2014, as amended in 2019), Articles 185–195.
Law No. 47/1972 Concerning the Organization of Majlis al-Dawla (Law No. 47/1972).
Law No. 47/1972, ibid., Articles 15–22.
Law No. 47/1972, ibid., Articles 10, 13, 23.
President of Majlis al-Dawla, Decision No. 522/2020.
See N. Brown, The Rule of Law in the Arab World: Courts in Egypt and the Gulf (Cambridge Middle East Studies, No. 6) (Cambridge: Cambridge University Press, 2007); S. Al Din Al Hajjaji, ‘The Egyptian Judiciary in the Age of the Republic: The Role of Internal Conflicts in Controlling the Judicial System’, Indonesian Journal of International & Comparative Law 4 (2017): 363–396.
Law No. 47/1972, Articles 27–33.
See M. Kumm, ‘International Law in National Courts: The International Rule of Law and the Limits of the Internationalist Model’, Virginia Journal of International Law 44(1) (2003): 19–32; J. d’Aspremont, ‘The Systemic Integration of International Law by Domestic Courts: Domestic Judges as Architects of the Consistency of the International Legal Order’, in A. Nollkaemper & O. Fauchald (eds), The Practice of International and National Courts and the (De-) Fragmentation of International Law (Oxford: Hart, 2012) 141–165.
Case No. 34517/65, Judgment of 21 September 2011 (quoting World Duty Free Company v. Republic of Kenya, ICSID Case No. ARB/00/7, Award (4 October 2006), 158).
Indorama International Finance Limited v. Arab Republic of Egypt, ICSID Case No. ARB/11/32. For additional details on the claim, see UNCTAD Investment Policy Hub, ‘Investment Dispute Settlement Navigator: Indorama v. Egypt’, available online at https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/406/indorama-v-egypt (accessed 17 September 2021).
Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of Egypt, ICSID Case No. ARB/05/15, Award (1 June 2009), 12–44.
Cairo Court of Administrative Justice, Decision of July 21, 1996 (as quoted in Siag v. Egypt, supra note 68 at 45).
Siag v. Egypt, supra note 69 at 55–63.
Egyptian Nationality Law No. 26/1975, Article 10.
Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of Egypt, ICSID Case No. ARB/05/15, Decision on Jurisdiction (11 April 2007), 149.
Vecchi v. Egypt, ibid., pp. 172–173.
Siag v. Egypt, supra note 69, p. 441.
Siag v. Egypt, ibid., p. 459.
Krederi Ltd. v. Ukraine, ICSID Case No. ARB/14/17, Award (2 July 2018) (excerpts), 461–465; Iberdrola Energía, S.A. v. Republic of Guatemala (I), ICSID Case No. ARB/09/5, Award (17 August 2012), 432; Limited Liability Company Amto v. Ukraine, SCC Case No. 080/2005, Final Award (26 March 2008), 75; Robert Azinian and others v. United Mexican States, ICSID Case No. ARB(AF)/97/2, Award (1 November 1999), 102, in ICSID Review — Foreign Investment Law Journal 14(2) (1999): 538–75; Oostergetel v. Slovakia, UNCITRAL Ad Hoc Arbitration, Final Award (23 April 2012), 290; Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award (7 December 2011), 602; Toto Costruzioni Generali S.p.A. v. Lebanese Republic, ICSID Case No. ARB/07/12, Decision on Jurisdiction (11 September 2009), 156–158; Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award (8 April 2013), 445; Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award (29 July 2008), 652, 653.
Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID Case No. ARB/04/13, Award (6 November 2008), 76.
Jan de Nul v. Egypt, ibid., pp. 78–81.
The claimants relied on Articles 120, 121 and 125 of Law No. 131/1948. These provisions address the reasons for an agreement to be non-enforceable, including mistake, significant mistake and fraud.
Jan de Nul v. Egypt, supra note 78 at 90.
Jan de Nul v. Egypt, ibid., pp. 80–93.
Jan de Nul v. Egypt, ibid., p. 99.
Jan de Nul v. Egypt, ibid., pp. 103–106.
Jan de Nul v. Egypt, ibid., p. 112.
Jan de Nul v. Egypt, ibid., p. 197.
Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID Case No. ARB/04/13, Decision on Jurisdiction (16 June 2006), ft 16, p. 25.
Jan de Nul v. Egypt, ibid., p. 207. The distinction between procedural and substantive denial of justice is debatable in the case law, where some tribunals have denied the existence of the former and considered denial of justice to be only procedural. See OAO Tatneft v. Ukraine, supra note 53 at 352; Reinhard Unglaube v. Republic of Costa Rica, ICSID Case No. ARB/09/20, Award (16 May 2012), 273; Rumeli v. Kazakhstan, supra note 51, pp. 652–653.
Jan de Nul v. Egypt, supra note 78, p. 198.
Jan de Nul v. Egypt, ibid., p. 254.
Jan de Nul v. Egypt, ibid., p. 209.
Jan de Nul v. Egypt, ibid., p. 200.
Jan de Nul v. Egypt, ibid., p. 201.
Jan de Nul v. Egypt, ibid., p. 204.
Jan de Nul v. Egypt, ibid., p. 204.
Jan de Nul v. Egypt, ibid., pp. 255–257.
Jan de Nul v. Egypt, ibid., p. 258.
Jan de Nul v. Egypt, ibid., p. 260.
Jan de Nul v. Egypt, ibid., p. 282.
Paulsson, supra note 17 at 9.
H. Kelsen, Introduction to the Problems of Legal Theory (B. Litschewski Paulson & S. Paulson (trans.), 1997) (CPP, 1992), 64.
Liman Caspian Oil BV and NCL Dutch Investment BV v. Republic of Kazakhstan, ICSID Case No. ARB/07/14, Award (22 June 2010) (excerpts), ¶ 274; Helnan v. Egypt, supra note 44, ¶ 106.
ILC Draft Articles, Article 3.