Constitution of the Arbitral Tribunal and Selection of Arbitrators

The stage of constituting the arbitral tribunal and selecting the arbitrators is the cornerstone upon which the entire course of the arbitration dispute is built, and it represents one of the fundamental safeguards for the issuance of a fair and enforceable arbitral award. While commercial arbitration provides companies with a significant degree of flexibility and speed in resolving disputes, the success of this mechanism depends primarily on the independence, impartiality, and expertise of the individuals entrusted with deciding the dispute.

Whether you are an Egyptian company seeking to resolve a commercial dispute, a foreign investor, or an international shipping company seeking legal stability within the Egyptian market, understanding the mechanisms for constituting the arbitral tribunal in accordance with Egyptian law and international rules remains an indispensable step for protecting commercial interests and avoiding the risks of arbitral awards being set aside.

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The Legal Framework for Constituting the Arbitral Tribunal in Egypt

Egyptian Arbitration Law in Civil and Commercial Matters No. 27 of 1994, as amended by Law No. 9 of 1997 and Law No. 8 of 2000, regulates the mandatory and supplementary rules relating to the constitution of the arbitral tribunal. The Law was drafted under the influence of the “UNCITRAL” (UNCITRAL) Model Law on International Commercial Arbitration, making its framework familiar to multinational companies and foreign investors.

Key governing legal rules:

• Odd number of arbitrators: Egyptian law expressly requires the number of arbitrators to be odd, whether a sole arbitrator, three arbitrators, or five arbitrators. If the parties agree on an even number, the arbitration is considered invalid.
• Freedom of selection: The law grants the parties full freedom to agree on the number of arbitrators and the method of their selection, whether the arbitration is conducted on an Ad-hoc basis or institutionally under the rules of a particular arbitration centre, such as the Cairo Regional Centre for International Commercial Arbitration CRCICA.
• Supportive judicial intervention: If the parties fail to agree on the selection of arbitrators, the Egyptian judiciary intervenes, whether through the court originally competent to hear the dispute or the Cairo Court of Appeal in international arbitration, to appoint the arbitrators and ensure that the proceedings are not disrupted.

Practical Requirements and Procedures for Selecting Arbitrators

The procedures for constituting the arbitral tribunal differ depending on whether the agreement provides for a sole arbitrator or a tribunal composed of three arbitrators. Each structure has a different appointment mechanism, although the objective in both cases is the same: to complete the constitution of the tribunal without disrupting the course of the proceedings.

1. Procedures for Appointing a Sole Arbitrator

In less complex cases or disputes involving a lower financial value, the parties may prefer to resort to a sole arbitrator in order to save time and costs.

• The claimant proposes one or more names to undertake the arbitration mandate.
• The respondent must agree to one of the proposed names within 30 days from the date of receiving the request.
• If the period expires without agreement, the Egyptian judiciary or the competent institutional arbitration centre appoints the arbitrator at the request of either party.

2. Procedures for Appointing a Three-Member Arbitral Tribunal

A three-member tribunal is the most common structure in international commercial disputes, investment disputes, and major construction disputes, given the diversity of expertise and deliberation it provides among the members of the tribunal.

• The claimant appoints its arbitrator in the Request for Arbitration or notice commencing the proceedings.
• The respondent appoints its arbitrator within 30 days from the date of receiving the request.
• The two appointed arbitrators agree on the selection of the “third arbitrator”, who will preside over the arbitral tribunal, within 30 days from the date on which the latter of the two was appointed.
• If any of these steps encounters difficulty, whether because one party refrains from making an appointment or because the arbitrators fail to select the chair of the tribunal, the concerned party may apply to the competent court or institutional body to complete the constitution of the tribunal.

Quick Comparison: Sole Arbitrator vs. Three-Member Tribunal

Legal Risks and Commercial Implications for Companies

The process of constituting an arbitral tribunal is not limited to procedural considerations alone. It also involves legal risks that may have significant commercial and operational consequences for companies if this stage is not managed professionally.

• Risk of the arbitral award being set aside: If the tribunal is constituted in violation of the parties’ agreement, if its composition breaches the requirement for an odd number of arbitrators, or if the lack of independence or impartiality of any arbitrator is established, the arbitral award becomes vulnerable to annulment before the Egyptian courts, thereby wasting the time and money already expended.
• Delay tactics (Guerilla Tactics): A bad-faith party may attempt to obstruct the constitution of the tribunal by refusing to appoint its arbitrator or by repeatedly challenging arbitrators (Challenging Arbitrators), with the aim of exhausting the other party’s resources and delaying resolution of the dispute.
• Disruption of cash flow: For import, export, and construction companies, delays in constituting the tribunal lead to delays in resolving claims for the recovery of amounts due, which may adversely affect the company’s liquidity and operations.

Special Considerations for International Clients and Foreign Companies

When a dispute has an international character, more sensitive considerations arise that foreign companies and international law firms must take into account when selecting arbitrators in cases connected with Egypt.

• Nationality of the chair of the arbitral tribunal: As a best practice in international arbitration, it is preferable that the chair of the arbitral tribunal or the sole arbitrator not share the nationality of any party to the dispute, in order to ensure complete neutrality and dispel concerns relating to national bias.
• Expertise in the applicable law: If the contract is governed by Egyptian law, it is necessary for the tribunal, or at least its chair, to include an expert experienced in Egyptian civil and commercial law in order to understand the nuances of the legal system (Civil Law System).
• Familiarity with international trade practices: In disputes involving shipping companies or international trade, arbitrators should be selected who possess technical and legal expertise in international trade arrangements (Incoterms) and maritime law.
• Need for Local Counsel: Engaging an Egyptian law firm is indispensable for assessing the backgrounds of proposed local arbitrators, understanding their previous legal approaches, and ensuring that no undisclosed conflict of interest exists.

Common Mistakes During the Constitution of the Arbitral Tribunal

A defective arbitration clause creates a paralysed arbitral tribunal.

Many litigants make fundamental mistakes during this stage. The consequences of some of these errors do not appear immediately, but only become apparent later during the proceedings or when the award is challenged.

1. Failure to conduct a thorough Conflict of Interest review: Neglecting to verify the existence of past or present relationships between the selected arbitrator and any party or their counsel may later result in a successful application to “challenge the arbitrator”.
2. Reliance on conventional but non-specialised names: Appointing arbitrators with general legal experience to resolve a highly technical dispute, such as intellectual property disputes or engineering construction contract disputes.
3. Drafting an ambiguous arbitration clause (Pathological Clauses): Including arbitration clauses in contracts that do not clearly specify the number of arbitrators, the language of arbitration, or the method of selection in the event of disagreement may open the door to disruption of the proceedings from the very first day.
4. Unjustified unilateral communications (Ex Parte Communications): A party engaging in prolonged unilateral communications with the arbitrator it appointed to discuss the details of the case may raise doubts concerning the arbitrator’s independence.

Practical Best Practices for Selecting Arbitrators

To ensure the constitution of a strong and effective arbitral tribunal, the selection process should not be based solely on a name or professional reputation. There are practical considerations that precede the appointment and directly affect the tribunal’s efficiency and ability to manage the dispute.

• Proactive disclosure: Requesting a written declaration from the arbitrator before appointment, disclosing any circumstances that may raise doubts regarding impartiality or independence, in accordance with the standards of the International Bar Association IBA Guidelines on Conflicts of Interest.
• Balancing the composition of a three-member tribunal: If the dispute is complex, an arbitrator with a technical background, such as an engineer, may be appointed alongside an arbitrator with a purely legal background, while selecting a chair with extensive experience in managing hearings and drafting arbitral awards (Arbitral Awards).
• Establishing the timetable: Agreeing in advance with the selected arbitrators that they have sufficient availability to hear the dispute, thereby reducing the likelihood of delays in issuing the award due to their involvement in other cases.

When Is the Involvement of a Specialist Lawyer or Local Counsel in Egypt Required?

The need for a lawyer specialising in arbitration in Egypt becomes greater when the process of constituting the tribunal encounters legal or procedural obstacles, or when one of the parties to the dispute is a foreign entity requiring efficient management of local aspects.

• The opposing party refuses to appoint its arbitrator: This requires prompt recourse to the Egyptian judiciary to obtain an order appointing an arbitrator on behalf of the opposing party, thereby ensuring the continuation of the proceedings without disruption.
• Grounds for challenging an arbitrator emerge: If the company discovers a conflict of interest involving the opposing party’s arbitrator or the chair of the tribunal, the procedures for “challenging the arbitrator” require formal applications supported by evidence to be filed within very short time limits, often within 15 days from the date of becoming aware of the relevant circumstances.
• Representation of foreign entities: International law firms managing a dispute on behalf of a foreign company require Local Counsel in Egypt to manage procedural matters before courts supporting arbitration and to provide advice regarding a list of reliable local arbitrators.

How Can Specialized Legal Support Help?

At El Rouby Law Firm, we recognize that the constitution of the arbitral tribunal is a strategic decision that may determine the course of the entire dispute. From this perspective, we provide comprehensive legal support to companies and investors to ensure that this stage is managed properly.

• Regulatory compliance and risk management: Ensuring that the procedures for constituting the tribunal comply with the Egyptian Arbitration Law and the rules of international arbitration centres, thereby preventing defects that could lead to the award being set aside in the future.
• Contract drafting and dispute prevention: Drafting precise and professional arbitration clauses (Arbitration Clauses) in commercial contracts that clearly determine the mechanisms for constituting the tribunal and close avenues for delay tactics.
• Representation before Egyptian authorities: Handling all judicial procedures relating to the support of arbitration, such as obtaining decisions from the competent Egyptian courts appointing arbitrators, or representing clients in proceedings concerning challenges to arbitrators.
• Negotiation, settlement, litigation, and arbitration: Providing strategic advice on selecting the most suitable arbitrators with strong reputations for integrity and technical expertise corresponding to the nature of the dispute, whether commercial, maritime, or construction-related, and acting as Local Counsel for foreign law firms.

Conclusion

Precision in constituting the arbitral tribunal and selecting arbitrators is not merely a passing procedural step; it represents a genuine investment in justice and the timely recovery of commercial rights. Selecting the right arbitrator means more effective management of the dispute and a sound legal award that is difficult to challenge.

If your company is preparing to commence arbitration proceedings in Egypt, or has encountered obstacles in constituting the arbitral tribunal, obtaining specialised legal advice represents the first line of defence for your interests.

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Frequently Asked Questions

What happens if the other party refuses to appoint its arbitrator in Egypt?

If the 30-day period expires without the arbitrator being appointed, the other party may apply to the competent Egyptian court or institutional arbitration centre to appoint an arbitrator on behalf of the defaulting party, thereby ensuring that the proceedings are not disrupted.

Can the parties agree on an even number of arbitrators under Egyptian law?

No. The Egyptian Arbitration Law expressly requires the number of arbitrators to be odd, whether a sole arbitrator, 3 arbitrators, or 5 arbitrators. If the parties agree on an even number, the arbitration is considered invalid.

What are the requirements for an arbitrator in commercial disputes in Egypt?

The arbitrator must have full legal capacity, must not have been convicted of a felony or a misdemeanor involving dishonesty or moral turpitude, and must be fully independent and impartial in relation to the parties to the dispute.

Can the arbitrator selected by the other party be challenged?

Yes. An application to “challenge the arbitrator” may be submitted if serious circumstances exist that raise doubts regarding the arbitrator’s impartiality or independence, or if there is an undisclosed conflict of interest.

Must an arbitrator in Egypt necessarily be a lawyer?

No. Egyptian law does not require an arbitrator to be a lawyer. An arbitrator may instead be an engineer or financial expert depending on the nature of the dispute, provided that the general legal requirements are satisfied.

What is the importance of engaging Local Counsel when selecting arbitrators in Egypt?

Local counsel assists foreign companies in assessing the reputation, experience, and approaches of local arbitrators, verifying that no conflict of interest exists, and managing proceedings before courts supporting arbitration.

References

1. Egyptian Arbitration Law in Civil and Commercial Matters: Law No. 27 of 1994, as amended (Chapter Two: Arbitral Tribunal).
2. Cairo Regional Centre for International Commercial Arbitration (CRCICA): The Centre’s arbitration rules relating to the constitution of the tribunal.
3. United Nations Commission on International Trade Law (UNCITRAL): The Model Law on International Commercial Arbitration from which the Egyptian law derived its fundamental rules.
4. International Bar Association (IBA): Guidelines on conflicts of interest in international arbitration (IBA Guidelines on Conflicts of Interest in International Arbitration).