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Navigating Arbitration in the Middle East: Cultural and Legal Considerations

Navigating Arbitration in the Middle East: Cultural and Legal Considerations

Western arbitral principles are difficult to implement in the Middle East since Islamic law is the primary source of the region's political, legal, and commercial institutions. The region's current arbitration centres, such as those in Bahrain and the United Arab Emirates, are a reflection of Islamic communities' long-standing reliance on arbitration as a means of resolving disputes. However, the reason for this discrepancy is a lack of cultural awareness and knowledge of the political and religious history of the area. Islam recognizes two methods of resolving disputes that are distinct from Western arbitration: sulh and tahkim. According to the New York Convention, an award may not be recognized or enforced if it would be against the public policy of the country in question or if the subject matter of the dispute cannot be resolved by arbitration under the rules of that nation. Nonetheless, several countries in the area, including Kuwait and Syria, have indicated that they are prepared to follow the Convention.

An important turning point for the Middle East was the Organisation of Islamic Cooperation (OIC) Agreement of 1981, which obligated 27 governments to a multilateral agreement for investor-state conflicts to be resolved by ad hoc arbitration. But the OIC Secretary-General has come under fire for allegedly failing to uphold this duty, endangering investor rights and compromising the organization's effectiveness as a regional dispute settlement body. Founded in 1979, the Cairo Regional Centre for International Commercial Arbitration (CRCICA) assists in resolving disputes involving investments and commerce. With the establishment of the Dubai International Arbitration Centre (DIAC) and the DIFC-LCIA, which offer alternative dispute resolution services to both domestic and foreign companies operating in the area, the United Arab Emirates has also concentrated on developing international commercial dispute resolution venues. To satisfy the demands of the current global business environment, these modernization initiatives reflect a renewed focus on international commerce and economic development.

With assistance from the International Chamber of Commerce (ICC), Israeli and Palestinian businesspeople established the Jerusalem Arbitration Centre (JAC) in 2013. The JAC was created as a professional, unbiased, neutral, independent, and legally binding venue for settling business disputes between Israel and Palestine. The Joint Venture Agreement and the JAC Cooperation Agreement, which resemble charters, set out the fundamental principles of the JAC. The General Manager, Court of Arbitration, Secretariat, and Governing Body of the ICC serve as the foundation for the JAC's organizational structure. The Joint Venture Agreement specifies Paris, France as the arbitration seat, while physical hearings will take place in the JAC Hearing Centre in East Jerusalem. The jurisdiction of the JAC is established by the parties' agreement. Several issues, including failed talks, political unrest, economic strains, and the shortcomings of national judicial systems, may have contributed to the JAC's demise.

As the economic gap between Israel and Palestine widens, maintaining a stable relationship is essential to luring in new investors and resources. On the other hand, legal concerns for business ventures have been made worse by the absence of an impartial venue. As long as it is managed properly, investment arbitration is still a good way to promote security and economic ties between Israel and Palestine. To establish an autonomous, impartial, and safeguarding commercial arbitration framework, emphasis needs to be placed on fortifying and advancing regional centres of arbitration, while simultaneously reducing reliance on first-world standards. A lack of legislative protection behind arbitration in Israel and Palestine may have contributed to the JAC's demise. East Jerusalem should host the planned institutional framework for an impartial, independent economic arbitration court between Israel and Palestine that is free from political intervention. The rules, arbitrator selection, and arbitration location should be the main concerns of the proposed organization.

The norms governing the proposed arbitral forum between Israel and Palestine will be adapted to the particulars of the dispute and pulled from regional arbitration centres such as the DIAC. This strategy is especially crucial in the case of Palestine and Israel, where social conditions including animosity between the governments, societal conflicts, and unequal economic power dynamics have a significant influence on the dichotomy between the two countries. The objectives of all parties concerned, without favouring any one party over another, must be represented in the rules of a regional investment arbitration process in addition to the demands of the jurisdiction. Unless they are against national law or public policy, arbitral verdicts rendered in either territory must be recognized and upheld under the New York Convention. To enhance the enforcement of arbitral rulings and foster economic growth, Middle Eastern countries need to mobilize resources and exhibit political resolve to advance and finance arbitration.

  • The establishment of the Jerusalem Arbitration Centre (JAC) aimed to provide a neutral venue for settling business disputes between Israel and Palestine, but faced challenges amid political unrest.
  • The Organisation of Islamic Cooperation (OIC) Agreement has aimed to resolve investor-state conflicts through ad hoc arbitration, but its effectiveness has been questioned.
  • Cultural differences and Islamic law present challenges for implementing Western arbitration principles in the Middle East.

BY : Vaishnavi Rastogi

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