Arbitration: PARTIAL REMEDY TO JUDICIAL ILLS? [Archives:1999/05/Law & Diplomacy]

February 1 1999


By: Husain Al-Hubaishi,
Former Minister of Legal Affairs
for the President and Prime Minister of Yemen
Considering that reforming the judicial system with separate or unified courts was almost an impossible task, the economists initially started thinking of referring their disputes for post- arranged arbitration. Secondly, jurists within and outside government bodies embarked on a campaign of legislation and activating for the process of attribution and establishing centers for that purpose.
There are certain advantages for the parties to a dispute to refer it to arbitration rather than take an action in the courts, the main advantages are as follows:
(1) The process can be expedient.
(2) Details of the subject matter can be kept relatively unpublicized.
(3) When the dispute concerns a technical matter persons chosen to arbitrate generally possess the appropriate qualifications
(4) The parties may choose or agree to the law and rules of procedure applicable.
(5) There can be a saving in costs.
(6) The parties have the convenience of considering the time and place of arbitration.
In Yemen the statutory definition of arbitration is as follows: “The voluntary choice of two parties, another person, or persons other than the competent court to arbitrate their differences or disputes.”This kind of generalized definition helped those concerned in Yemen to think of arbitration as if it was CONCILIATION, or a sort of tribal arbitration by customs. Conciliation or mediation in Yemen does not need a written agreement, the conciliators are mostly persons not necessary versed in law or even specialists in one field or another. No specific procedure written or otherwise is followed and unless the conciliator or conciliators are men of power and authority, the decision of the conciliator is often ignored.
On the other hand, Yemenis of tribal affiliation think of arbitration, whether commercial or otherwise, as a kind of customary system
Al-A’araf (as it is known among tribes) are commonly enunciated and accepted norms of behavior and settlements of disputes. To give a provisional definition of the term ‘custom’ observed relatively by tribes, customary law is the body of accepted unformulated rules and principles instituted by human conduct for a lengthy period in accordance with accepted criteria and forming part of the imminent source of law as such certain legislations in Yemen try to introduce some of those rules in law and regulation governing Arbitration.
B. First legal Attempt Thwarted.
By reason of the above facts when law no. (33) of 1981 was promulgated with regards to arbitration, it comprised few rules of conciliations and many concerning tribal customs. As in conciliation, the law did not mention the law applicable or stipulated or the procedure to be followed. In article (22) the law envisaged a binding decision of the conciliator and in general used the word arbitrator in place of conciliator.
On tribunal customs, article (a) made it a condition that an arbitrator, if he were acquainted with Sharia, should also be familiar with tribal customary rules. Article (6) went further to envisage a situation where the whole tribe would be the arbitrators. Also article (16) tackled the cases of manslaughter and sedition and finally article (24) left the execution of the award to the guarantors of enforcement.
Thus the relevant statutory law governing arbitration was a blending of traditional rules of conciliation, tribal customs, Sharia and modern provisions and as such was born dead. However, arbitration under different names was practiced as an alternative to ordinary litigation in Yemen. Nevertheless no official tribunals were set up apart from some quasi-judicial committees on tax and customs tariffs. Although the law allowed the Chamber of Commerce to establish a tribunal for settling commercial disputes the Chamber never availed itself of this privilege.
Lastly, it will be interesting to note that in Aden at the time of the British rule arbitration ordinance as early as 19 March 1941 was promulgated concerning voluntary arbitration allowing that any court was enforceable as it was a decree of the court (article 13). However the court may set aside the award if it has been improperly procured. (article 13)
C. Call for Economic Reforms.
Yemen, like any other under-developed states, went through most of the economic conditions for a comparatively modern state; the development of non-agricultural society, the influx of some Arab and western capital and entrepreneurs, and the development of light industry. However, it was hindered by several political and economic factors which threatened its obsolete financial policy and hence it’s political stability.
Since the middle of the nineties, the government has battled with intended reforms for economic and administrative issues. It succeeded somehow in regaining control over the financial situation, but not all of the economic situation reforms were achieved at the expense of the poor and middle-class in the short term. However, the government is reluctant for political and other reasons to go full ahead with administrative and judicial reforms.
To attract foreign capital, Arab and non-Arab alike, especially in the field of investment, the government promulgated acts concerned with the establishment of a semi-independent public authority for investment. The later authority adopted a reasonably hospitable law to investors, Yemenis and foreigners alike. One of the economic problems of Yemen is that Yemeni entrepreneurs prefer establishing limited family companies than the banks and selfishly less courageous to tap long term enterprises. Also there is a lot of unused capital in the country because of the lack of joint stock public companies.
Therefore the need is greater to attract foreign capital, Arab or otherwise. Still, that has to wait for concrete guarantees and facilities. As shown by world bank demand, the first prerequisite was to establish an efficient and just regular judiciary if not specialized system of courts to deal with commercial and financial disputes and with that or without it if that is difficult to achieve, any kind of legal system to settle disputes expediently and equitably.
D. New Law: A Leap Forward.
Governmental authorities concerned tried to respond to the first demand, but so far without result. It responded favorably to the second demand but had partial success. At the same time it elected to make a short cut to settlements of disputes and opted to enact a new statue regarding arbitration.
The idea was to promulgate a new law for arbitration which will make up for the old law, whence law no. (22) of 1992 was issued. It was a legal piece of diligence as a whole, however it has its pit-falls some of which we mention below:
1) The Arbitration Agreement:
We notice that article 2 of the above mentioned law defined arbitration according to the “Place” and not the “Party” contrary to other countries in the area. In addition the law did not expressly mention the need for mentioning the subject matter of dispute in the agreement. However, this unintended omission has been corrected by the amendment (article 15, law 33 of 1997).
2) Arbitration and Tribunal:
The legislator ignored what are obvious and well-used words in similar legislation, 1 and 2) the word “tribunal” and replaced with the word “committee”. Also the law in paragraph (1) article 22 allowed the court concerned to choose the sole arbitrator without giving the choice to the parties, the law also allowed the parties to elect two arbitrators without an umbrae contrary to arbitration usage. Worse than that, article 6 specifies certain qualifications which are legality ambiguous such as “just” and “eligible” which are Sharia terms and needs time and knowledge to explain.
3) Procedure and Applicable Law:
Article 33 did not go into detail of equality of parties and assistants in their presence before the tribunal; “such parties should not be excluded without good grounds or the awards may be set aside.” Furthermore, in case of a motion to remove an arbitrator, the request was to be forwarded to the tribunal, while in corresponding laws the request should be sent to the court. Article (45) did not differentiate between the laws applicable with regard to merit and procedure.
4) The Award:
The law did not consider the case of the parties repositioning the tribunal on a merit which has been ignored by the arbitration. Moreover, Yemeni legislators did not grant judicat to the award in spite of an action. The law also did not stipulate expressly that the award must comply with the submission or that the making of the award not be delegated to another person, “but a legal advisor may draw up the award” (Re Underwood & Bedford Ry 1861).
There are other comments and legal arguments on execution, but this is not the place to go into details. These comments do not belittle the serious attempt by the legislator to enact an up-to-date act of law. To close this article, I advise the removal of certain provisions which make non-Yemenis hesitate to refer disputes to the judiciary or even to arbitration in Yemen. This in turn, makes them hesitate to invest in Yemen,. When executing contracts in Yemen, they often insist on stipulating that litigation takes place outside of Yemen and that the applicable law or interpretation of procedure should be a law other than Yemeni law.
Furthermore, it is high time, if Yemen wants foreign capital and investment, to start negotiations of assessment to international agreements of settling disputes and execution of foreign awards.
E. Tribunals Arbitration Centers in the Making.
A few years ago Yemen had no official tribunal in the ministries concerned. The legal office of the state (The Ministry of Legal Affairs) set up in the seventies two quasi-judicial committees to arbitrate custom tariffs and tax disputes, and a third one to settle labor disputes.
In non-official circles, even though the law regulating the Chamber of Commerce was privileged with the right of setting up its own tribunal or tribunals, I cannot envisage a foreign investor having a dispute with a Yemeni businessman and trusting the settlement of that dispute to an institution set up by colleagues of his opponent in an underdeveloped country, and a corrupt one at that.
Since 1997, there has been a growing awareness of the importance of arbitration. A group of jurists and other professionals in cooperation with the Association of Banks and the Federation of Chambers of Commerce & Industry founded the Yemeni Center for Conciliation and Arbitration. As this center was doing well, other lawyers set up another center mainly for settling tribunal disputes.
In conclusion, I want to say neither the promotion of commercial courts nor the formation of arbitration centers can make up for the inefficiency of the judicial system in the long run. What counts is a persistent effort to make the three institutions run efficiently in a parallel manner.