Introduction
The world is currently witnessing a unique increase in commercial disputes traversing national boundaries due to the huge amount of interrelated and globalised world trade transactions. Although the issues of reorganizing international commercial treaties and conventions, as well as interpreting arbitration agreements and practices, are taking the lion’s share of attention in the international arena, variations in religious ideology, culture and custom will continue to fuel conflicts and disputes in international commercial transactions. In the last few decades, a considerable growth in commercial relationships between Western businesses and their Middle Eastern counterparts has been observed. Given these vital communications consisting multi- political and economic approaches with such a great and rich region, it is of great importance for Western lawyers and international commissioners to maintain a reasonable level of knowledge of the general principles of Shari’a or Islamic law, which is the source of law in Arabic and Islamic regions.1
Obviously, the legal community has undergone globalisation due to the growth of international commercial transactions, but it is argued that an examination of the influential elements of religion, culture and politics has not been taken into account in forming the current framework of International Commercial Arbitration. There is indeed a very little consideration of these elements in the majority of international commercial laws and treaties. Given the increasing calls for a return to Shari’a law and the growth of global independence, the current framework of international arbitration law can no longer be internationally successful in resolving disputes or linking between international and Islamic national laws, while ignoring the principles of Shari’a. It is undeniable that appreciating the religious values, cultures and customs of any nation will be the key to the success and the acceptance of International Commercial Arbitration.2
This paper will attempt to highlight the areas of tensions in International Commercial Arbitration and its practice under Islamic law, considering a comparative approach between the general principles of Islamic rules and the UNCITRAL Model Law and the New York Convention’s Articles, in order to find out to what extent the current international arbitration law is consistent with the principles of Shari’a law.
The paper will commence with a brief overview of International Commercial Arbitration; the rules and institutions. It then proceeds to shed light on the history of arbitration within Arabic tribes before the coming of the Islam. The paper also discusses the ideology of Islamic Law and its comprehensive legal system in order to create an obvious approach to the unique system of Islamic law. There is also a brief exploration of the legality of arbitration under Islamic law; the position of arbitration in Islamic states is also considered by this study. The main purpose of this paper is to carry out a comparative approach which analyzes legal conflict matters between international commercial rules (the rules of the UNCITRAL Model Law and the New York convention’s Articles) and Islamic Law, this includes vital points in the field of arbitration such as the nature and scope of arbitration, the uncertainty in the Rules and the principle legal differences, which are divided into several sections including: 1- Public Policy; 2- Interest (riba); Gambling, Speculation and Unfair Trade Practices; 3-Capacity of Arbitrator; 4- The Holiness of Contract; 5- The Legal Responsibility of Arbitrators; and 6- The Statute of Limitations. The choice of the Applicable Law and the Scope of the Judicial Review and the Enforcement of the foreign arbitral awards are also tensional points to be discussed in the paper.
II. International Commercial Arbitration
In its conventional meaning, commercial arbitration is considered to be a private dispute resolution system. The parties to the arbitration are largely allowed to settle their commercial dispute in a private way which ensures their dispute is resolved speedily, cheaply and confidently. The fact that arbitration is highly flexible and harmonically amendable is acknowledged by the high degree of control and intervention in the proceedings that is offered to the parties during the process of the arbitration advance; that is, the situation in which the parties are extremely free to decide their own procedural rules and to choose from the different applicable laws, which intrinsically facilitates the process of resolving their dispute by making the arbitral procedures comply with their own needs and interests. 3 In addition, jurisdiction can be forcibly maintained over parties by arbitration tribunals; especially when the parties agreed to the arbitration clause and agreement in advance of a dispute. Most interestingly, it provides a method of enforcing international arbitral awards when dealing with the states that are recorded as signatories to related treaties and conventions.4
International Commercial Arbitration is fundamentally promoted to arbitrate commercial issues that arise between international representatives among states or private parties. Arbitration is the preferable method of resolving international commercial disputes5:
“In the realm of international commercial transactions, arbitration has become the preferred method of dispute resolution. Arbitration is preferred over judicial methods of dispute resolution because the parties have considerable freedom and flexibility with regard to choice of arbitrators, location of the arbitration, procedural rules for the arbitration, and the substantive law that will govern the relationship and rights of the parties.”6
International commercial arbitration is intended to provide international neutral procedures which are autonomic by their own rules and cannot be invoked by national courts or other domestic jurisdictions. Therefore, it is ensured that the parties coming from different countries and cultures will experience a neutral system of dispute resolution under International Commercial Arbitration, irrespective of their cultural or religious backgrounds. This point is of great importance when analyzing the different approaches between International Commercial Arbitration and Islamic law regarding arbitration, as will be explored later.7
International commercial arbitration is governed by sophisticated legal rules provided in international conventions, arbitral institutions and many domestic laws:
“In addition to transnational treaties, international commercial arbitrations are governed by several sources of law, including: (1) the national law governing the parties’ capacity to enter into the arbitration agreement; (2) the law governing the arbitration agreement itself; (3) the law controlling the arbitral proceedings, such as the rules of a permanent arbitral institution like the International Arbitration Forum or an ad hoc arbitral body established by the parties; and (4) the law governing the substantive issues in the dispute.”8
In fact, many elements form the structure of International Commercial Arbitration, as can be internationally recognized today. Famous principle arbitral institutions, in addition to the most important international conventions and the United Nations Commission on International Trade Law (“UNCITRAL Model Law”), have all brought arbitration into its current active situation. However, arbitration in its practical sense can be governed either personally; in other words, an ad hoc arbitration; or institutionally. The former is governed by the parties themselves without the support or the counsel of any arbitral institution, while the latter is governed by approved arbitral institutions, giving the parties access to legal expertise when resolving their dispute. Parties who are involved in an ad hoc arbitration are free to either set up their own procedural rules selected from the applicable laws or use the rules of the United Nations Commission on International Trade Law (“UNCITRAL”). However, The UNCITRAL rules are not as inclusive as the ICC arbitration rules, as discussed below. In ad hoc arbitration, however, the parties should carefully set their arbitral procedural rules, as they may lack the experience provided by the legal arbitral institutions. 9
With regards to institutional arbitration, it is better to rely on one of the well known arbitral institutions to arbitrate the commercial dispute; these include: the International Chamber of Commerce (ICC) 1923, the London Court of International Arbitration (LCIA) 1892, and the American Arbitration Association (AAA) 1991. The reputations of these institutions are highly regarded in international arbitration. The arbitration procedural rules have been enacted in each of these arbitral institutions as the parties have to apply such rules while agreeing to submit their dispute to one of those institutions. It is not the direct function of those institutions to arbitrate the dispute for the parties, but rather to smooth the progress of the arbitration by supporting the arbitrators chosen by the parties, and also to provide the arbitral procedural rules that govern the conduct of the arbitration process. Additionally, those rules give authority to the arbitral institutions to decide certain issues in the event of a lack of agreement between the parties upon those issues10:
”Set a timetable for the proceedings; help resolve challenges to arbitrators; designates the place of arbitration; help set or influence the fees that can be charged by arbitrators; and in some situations review the arbitral award to reduce the risk of unenforceability”11
The arbitral institutions’ leading institute is The International Chamber of Commerce. In 1923, the International Court of Arbitration (ICC’s court) was established, and it encompasses the membership of about 80 nations at the present time. The ICC still leads the way in terms of the development of International Arbitration and its rules (ICC’s rules) are widely applied in cases of arbitration. The ICC has dealt with more than 13,000 cases since it established its court in 1923, and has dealt with 580 new circumstances including 123 jurisdictions that were inserted into the files of the Court. The ICC’s rules were adopted in 1923 by the ICC’s Congress and have been lately reviewed in 1998.12 According to the ICC’s rules, this institution is widely involved in running individual arbitrations all over the world. Faisal M. Kutty stated that:
“The role includes, but is not limited to the following: (i) determine whether there is a prima facie agreement to arbitrate; (ii)decide on the number of arbitrators; (iii) appoint arbitrators in the event one party defaults or parties cannot agree; (iv) decide challenges against arbitrators; (v) ensure that arbitrators are conducting the arbitration in accordance with the ICC Rules and replace them if necessary; (vi) determine the place of arbitration; (vii) fix and extend time-limits;(viii) determine the fees and expenses of the arbitrators; (ix) setting and collecting payments on account of costs; (x) reviewing the “Terms of Reference” which define the issues to be arbitrated; and (xi) scrutinize arbitral awards”13
The London Court of International Arbitration (LCIA) is the one of the significant leading institutions in International Commercial Arbitration. The LCIA, established in 1892, is viewed principally as an English institution, in spite of its labours to change this approach. The LCIA has its own administrative rules which were recently reviewed in 1998. In contrast to the ICC rules, the LCIA rules do not include terms of reference procedures and there is no provision for reviewing the arbitral awards in these rules. However, the LCIA have an influential authority in discovering and securing legal expenses.14
The American Arbitration Association (AAA) is the most progressive arbitral institution with regards to resolving international commercial disputes. The AAA institution has enacted several arbitral rules for specified types of disputes, and offers the most extensive commercial arbitration rules. The AAA deals with about 400 international disputes every year. In 1991, the AAA International Arbitration Rules were declared to be particularly suitable for use in international arbitration. It is interesting to note that these rules are enacted principally on the UNCIRAL Arbitration Rules basis, and were planned to allow a high level of flexibility and a low level of administrative intervention.15 The most recent revision of those rules was in 1997. Faisal M. Kutty pointed out:
“AAA administrative staff play less of a role in the arbitration process than the ICC. Among other things, the AAA does not receive or serve initial notices or requests for arbitration; does not require or review a Terms of Reference; does not review draft awards; and plays a less significant role in setting the arbitrators' fees” 16
The United Nations Commission on International Trade Law of the Arbitration Rules (UNCITRAL Arbitration Rules) 1976 has played an important role in broadly developing International Commercial Arbitration. Parties can use these rules in an ad hoc arbitration if they don’t intend to deal with one of the previously mentioned institutions. The rules of the UNCITRAL Model Law were also redrafted by the commission in 1985 to be applied in International Commercial Arbitration. It is perhaps correct to say that the Model Law serves as the source of arbitration laws in different countries.17
It was worth paying brief attention to the previously mentioned international commercial arbitral institutions and their significant rules in order to develop a clear understanding when setting up this comparative study of International Commercial Arbitration and its practice under Islamic Law. Moreover, it was also important to look at the rules of the UNCITRAL system, as it will be necessary to shed light on points of non compliance with the general principles of Islamic law, insomuch as it is required by the purposes of the study.
It is necessary to mention that the majority of the developed commercial countries (including Islamic states) have ratified national arbitration legislation. This legislation provides an enforcement agreement and arbitral awards; limits intervention for jurisdiction in the arbitration proceedings; authorizes a particular judicial support for the arbitral proceedings; asserts the capacity of parties to enter into valid and binding agreements to arbitrate future commercial disputes; provides the method of enforcing such arbitration agreements; and also is able to rule on recognized and enforced arbitral awards. Additionally, the majority of modern arbitration legislation delays the capacity of intervention in the arbitration proceedings by national courts until the stage of reviewing and enforcing the arbitral award.18
The next part of the study shall concentrate on the early history of arbitration in Arabic countries, which later became entirely Islamic countries. Exploring the background of the pre-Islamic period of arbitration is important for the study, as it will lead to as greater understanding of the influential factors that caused Islamic arbitration to differ from international arbitration on some particular points. These differences will be further explored later in the study, as they will be compared with certain selected rules of the UNCITRAL Model Law of International Arbitration and the New York Convention.....
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