Alternative Methods [Archives:1998/07/Law & Diplomacy]

February 16 1998

of Dispute Resolution
Defined by the Law as “the resolving of dispute between two parties at their own consent, as long as it does not contradict the Shariah (Islamic Law)”, arbitration is becoming one of the most active mechanisms to resolve disputes between parties in the Republic. The court system, being what it is, is infested with corruption, and encumbered with unnecessary delays thus burdening the parties with frustration and cost. We then as lawyers, find ourselves drafting into most contractual agreements arbitration clauses that aim to end disputes, whether minor or major, between parties through arbitration. This guarantees to the parties a much favorable outcome / decision, at a fraction of the time and cost, in comparison with resolving the dispute before the courts.
Agreeing to arbitration, however, may not be as simple as including an arbitration clause in an agreement or contract, as in some instances such clauses may be rendered void by the local courts. To insure that the process of arbitration is not abused, a law has been passed, and recently amended in 1997 which sets out the procedures for arbitration.
The law, on the one hand gives freedom to the parties in dispute to resolve their misunderstanding outside the courts, avoiding the disadvantages referred to above; at the same time the Law continues to leave an open door for the local courts to have some jurisdiction in the event any of the parties to the arbitration abuse or do not show a real intention to follow the procedure of arbitration, or if the parties disagree on the application of the arbitration agreement.
Although an arbitration clause in an agreement is considered to be an agreement in itself, it is still advisable for the parties to agree, and set out the full procedure to be followed including the time limits that will regulate the appointment of arbitrators, their remuneration and the place of arbitration. The rules according to which the arbitration will be conducted should be agreed upon and attached as an annex or schedule to the main agreement signed, and must at least include the following.
1- The number of arbitrators to be appointed. If the parties do not state the number of arbitrators, the law presumes them to be  3, one to be appointed by each party and the third (the Umpire) to be agreed upon. The appointment of arbitrators is in my opinion one of the most important items in the arbitration. Parties should carefully set out who they want their dispute to be resolved by and his/their qualifications if necessary.
The arbitrators should be professionals of a high standing in the community, with knowledge of the law, legal or otherwise, and well versed in the subject matter of the dispute. If the parties, after they each appoint their representative arbitrator, fail to agree on appointment of the umpire, and if the arbitration clause / agreement does not mention the body which would appoint the umpire, then in such an event the law gives the court the jurisdiction to intervene and appoint one on their behalf.
As it is advisable to avoid the courts, the parties should set out in the arbitration agreement words to the effect that “. . . if the parties cannot come to an agreement on appointing an umpire one shall be appointed for them by ………..” an independent body, such as the chamber of commerce, or the commercial department in an embassy. Having agreed on the appointment of the arbitrators the courts also have jurisdiction to remove an unfit arbitrator. Again to keep away from the courts, the parties should state, even briefly, the characteristics of the arbitrator to be appointed including if necessary his qualifications and occupation, as well as on condition that he must have a good command of the English language. Parties are permitted, if they jointly decide, to remove or change the umpire, if they both come to the conclusion that he is unfit to make a decision in the ongoing dispute.
2- The procedure which the arbitration is to follow. It is advisable to set out the arbitration procedure, either by referring to international arbitration rules such as the International Chamber of Commerce (ICC), The United Nations Commission on International Trade Law (UNCITRAL), or the rules of any other Chamber of Commerce.
For minor disputes such as lease or construction agreements setting out high-powered arbitration rules does not serve the purpose of resolving the problem. For such minor agreements it is not a bad idea to refer to the Yemeni Arbitration Law or an amended version of it, as it is simple and fair, at the same time it allows arbitrators the freedom of calling upon expert witnesses, if necessary. The Yemeni Law also allows the Arbitration Committee to ask for certain guarantees from either party prior to commencing the arbitration, in order to ensure that the decision reached is implemented.
3- Arbitration expenses and arbitrator’s fees. This sensitive subject is best being addressed and mentioned in the arbitration agreement as it is the one that almost always creates friction between the arbitration committee and the parties, and in some cases this particular issue becomes itself a dispute and is referred to the relevant courts to be settled.
As to a arbitration expenses the parties may agree to split the costs equally and set a limit which is not to be exceeded. The Umpire’s fees may be decided on at a later stage after his appointment, as his fees will normally depend on the caliber of the umpire in question.
By: Khalid T Abdullah – Advocate B.A. (Hons), LLM(Lon) Law Offices of Sheikh Tariq Abdullah