Resolving Arab Capital Investment Disputes: The Aftermath of the Al-Kharafi Award’s Annulment by the Egyptian Courts

Abstract

This article analyses the Egyptian Court’s decisions regarding the Al-Kharafi USD 1 billion award in an investment dispute between Al-Kharafi, a Kuwaiti construction firm and the Libyan State, which was issued by an ad hoc arbitration panel under the auspices of the Unified Agreement for the Investment of Arab Capital in the Arab States. In particular, it focuses on the judicial debate between the Cairo Court of Appeals and the Egyptian Court of Cassation over the appropriateness of applying the articles of the Egyptian Arbitration Law, including the annulment proceedings, on an investment dispute arbitration.  

This article will demonstrate that the investment dispute mechanisms in both the Unified Agreement for the Investment of Arab Capital and the Amended Agreement that took place in 2013 suffer from serious shortcomings that do not provide any form of judicial scrutiny of the decisions issued by arbitral panels. This is evidenced by the fact that, on two occasions, the Arab Investment Court has ruled that it does not have the jurisdiction to scrutinise the arbitral awards issued by ad hoc arbitration. This article argues that in face of a lack of recourse under the above mentioned agreements and the dangers of enforcing an abusive award  in Al-Kharafi award damages for the sum of USD 1 billion, the Egyptian Court of Cassation instructed the Cairo Court of Appeals to hear the annulment proceedings against the award on two occasions .

The article will examine the recent decision of the Cairo Court of Appeals to set aside the Al-Kharafi award for violating Egyptian public policy by awarding an enormous sum of damages for unsubstantiated injury. The article will examine how the Cairo Court of Appeals applies the principle of proportionality of damages with injury by awarding damages for lost profits for the touristic project that was not completed in war-torn Libya before being overturned by the Egyptian Court of Cassation 24 June 2021 decision.

Finally, this article will demonstrate the current outcomes of the Egyptian Court’s decisions. First, the prolongment of the litigation process will be subject to judicial scrutiny by the Egyptian Courts. Second, the application of the  Egyptian Arbitration Law  to the Al-Kharafi Award opens the door for the Egyptian Public Prosecution to intervene as prescribed by the Egyptian law. Third, the Egyptian Court of Cassation has asserted that the Egyptian Arbitration Law  applies territorially to any arbitration held inside Egypt regardless of its nature.