Due to the big economic development that
the world witnessed in the second half of
the Twentieth Century and early current
century, the countries, on the top of which the
developing countries, hastened to encourage
the flow of foreign capitals to them to tackle
their economic problems and upgrade the
level of the individual’s income through
removing all the barriers and obstacles that
can hinder their arrival, and provide all the
incentives and temptations, and create the
suitable and adequate investment climate for
their flow.
Furthermore, by encouraging the foreign
investments, these countries will get use of
the different modern scientific means, due to
the fact that investment brings to the receiving
economy sources that cannot be circulated
commercially in the markets, but in an
imperfect way, especially the technology, and
methods of getting use of it, administrative
expertise, skilled workers, accessing to
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the international production networks, and
penetrating the major markets and the
names of the trademarks. These assets can
play an important role in modernizing the
national economy, and accelerating the pace
of economic growth.
In addition to that, investment contributes in
developing the infrastructure in the developing
countries, such as telecommunications,
roads, and airports. It contributes in training
the domestic manpower, and in growing and
developing different industries that the state
needs.
Therefore, most of the developing countries,
acknowledging in the importance of the role
that investment plays, were keen to provide
suitable and encouraging circumstances for
investment in their territories. Currently, the
developing countries are competing among
each other for attracting foreign investors
to them through granting them a package of
exemptions, merits and guarantees.
There are many matters that affect in directing
the investments towards a certain country. It
is no doubt that the most important of them
is to convince the investor and gaining his
trust in the state that he chooses to invest
in. This convention and trust do not generate
from none, but rather from a comprehensive
deliberate look to the political, economic,
social, demographic, and climatic conditions
and others in the country that he is thinking
to invest in. Therefore, it was necessary to
elaborate the mechanisms necessary for
achieving that. The most important of which
is introducing tranquility to the selves of the
money holders and companies to motivate
them to deal with it and invest in it.
Due to the fact that invoking dispute about
investment with the state or one of its bodies
is considered of the probable matters for
any investor, whether local or foreign, it is
necessary to take precautionary steps for
facing such dispute in case it is arisen, and
guarantee providing neutral and effective
means for settling the disputes that can
be entailed on the investment agreements
in proportion with their special nature, in
accordance with their importance to their
parties, whether for the state or one of its
public bodies or the investment contracted
with it.
Due to the fact that the ordinary litigation
systems in the countries that host investment
do not fulfil the desired need, as related
to quick separation in the disputes arisen
from executing the contracts and holders
of rights receive their rights in a short time,
not to mention lack of responsiveness of
such systems with the requirements of the
international trade and investment, it was
necessary to search for an independent,
neutral, effective and quick means to fulfil
these needs.
It is no doubt that arbitration, “which is
defined as a special means for litigation
based on an agreement through which the
parties entrust a person or several persons
the mission of settling the disputes related
to them through issuing a binding award
enjoying the pretext of the judged matter” is
now considered the basic and only means for
settling disputes of investment to the extent
that some people consider it an evitable
matter related to these disputes, and that it
became the normal judgment in this field,
due to what arbitration is characterized in
by achieving equality among the parties
of tis disputes and the independency of its
procedures and the condition of arbitration
from the investment contract itself, and from
its destiny, not to mention that it provides the
foreign investor with a neutral body, that he
is in bad need for it due to the weakness of
his legal position against the country in which
the investment is existed.
The importance of arbitration is emphasized
after enacting the investment laws in many of
the Third World Countries. These countries
were keen to include in these laws a set of
merits and guarantees that guarantee to
encourage and attract foreign investments,
including exiting the investment disputes
from the competency of their courts, and
giving the authority to arbitration to examine
them. The deduction of these laws indicates
to a general trend that almost becomes a
common phenomenon, which is adopting
arbitration system as a procedure in which
all the disputes of the hosting country with
the foreign investors are settled.
Due to the increased importance of arbitration
and its effective role in settling investment
disputes, it gained the interest of the
different countries of the world, of which the
Gulf Cooperation Council Countries (GCCC).
Thus, they concluded several international
agreements and protocols for it, and created
lots of permanent arbitration centers of local
and international character, acting by the
dictum: “Wherever there is investment, there
is arbitration”.
From what is mentioned earlier, it is clear
that there is no doubt that there is a kind
of concomitance or reaction between
arbitration and investment. It is also no doubt
that the holders of capitals, who search for
investment, whether they were national or
foreigners, became more inclined to subject
their contracts to arbitration, in case dispute
aroused. This is due to several reasons, some
of which are related to what arbitration enjoys
of merits that suit the nature of investment
disputes (First). Some of them are relate to the
fears of the foreign investors to resort to the
justice of the country that hosts investment
(Second). Others are related to the fact that
arbitration is a judicial guarantee because
it is one of the means of attracting foreign
investment and one of its non-commercial
guarantees (Third).
Investment contracts are characterized by
a special nature resulting from the nature of
the parties of these contracts: the state on
the one hand and the foreign investor on the
other, and the process subject of the contract.
The contract is related to a huge project that
takes several years to be executed and costs
hundreds of millions of US Dollars, and the
relations resulting from it are intermingled.
It requires high technical experiences. With
this specificity, arbitration, with what it enjoys
of merits, represents the natural justice for
settling the disputes of these contracts. These
merits are represented in the following:
Quickness in Procedures: Arbitration is
characterized by quick procedures required
for separating the dispute the shortest time
possible, due to the fact that the procedures
of arbitration leads to save lots of time.
That quickness is usually not available in
the traditional judicial systems that are
restricted by the legal texts that hinder quick
separation in the dispute. This is what the
separation needs in the disputes of investment
contracts, where there are investments and
big and frozen amounts of money pending
the issuance of the justice judgment.
Consequently, there will be achieved loss as
a result of delaying such amounts that wait
for the separation in the disputes thereof. The
parties in the investment contracts prefer to
resort to arbitration due to what it offers of
quick justice. Quick justice that arbitration
offers is due to two factors:
The first is obliging the arbitrator to separate
the disputed presented to him within a certain
period of time assigned to him by the parties
as a general principle. The arbitration laws,
bylaws and authentications usually assign
a period of time that the arbitrator shall not
exceed when issuing his decision, but it also
allows to the parties to amend in this period
when they agree on arbitration. The arbitrator
shall lose his capacity after finishing it.
First: Merits of Arbitration are suitable
with the nature of the investment
contracts disputes:
Arbitration is characterized by quick
procedures required for separating the
dispute the shortest time possible
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The Second Factor is related to the fact that
arbitration is a system for litigation from one
degree. The judgment issue by the arbitrator
enjoys the Res judicats of the judged case.
It cannot be appealed by any of the ordinary
appealing methods, along with the possibility
of launching the legal action of nullity related
to it, and for the reasons mentioned in the
law restrictively, along with observing the
fact that appealing by nullity shall not stop
the execution of the arbitration award as a
general principle.
Confidentiality of Arbitration: This is
another merit of arbitration, which is not less
importance than the quickness, if not more
importance, especially in the field of trade and
investment. The main reason for the parties
to choose arbitration as a means for settling
the dispute is due to what it is characterized
by confidentiality. The unpublicized arbitration
hearings, and declining to publish the awards
are considered of the greatest merits of
arbitration. The secrets related to the
contract and the inventions remain secret.
The parties in the investment contract do not
want to know the disputes arisen between
them, their reasons and motivations, due
to what such a knowledge may touch their
financial or economical positions.
Freedom of the Parties in the Shadow of
Arbitration: The flexibility of arbitration
allows to the litigants to form it in the way
suitable to them, because it gets away from
the solid molds. First, the parties have the
choice to choose the type of arbitration. They
may choose, either the arbitration to be ad
hoc or institutional arbitration. They may also
choose whether the arbitration to be special
or institutional, or that this arbitration
to be arbitration by law or reconciliation.
Arbitration gives the way before the
will of the parties in choosing the place of
convening arbitration and its time, and the
law that the arbitrator apply on the arbitration
agreement and procedures of arbitration and
the subject of the dispute that is the core of
arbitration.
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Arbitration is a Specialized Jurisdiction: It
guarantees the specialized legal and technical
knowledge and experience necessary for
settling the investment disputes, whose
disputes settlement requires modern
economic and technical knowledge, and
experience suitable with the expansion of
the foreign investment fields. Most often, the
arbitrators are at highest level of scientific
and legal competency to separate in the
disputes attributed to them, besides to the
fact that most of them enjoy the scientific
and practical experience in the disputes that
are chosen to separate in, as well as the
languages that contracts and issued and the
correspondences are performed between
the parties. It is no doubt that the existence
of a specialized jurisdiction would achieve
a justice that achieves the desires of the
parties. May be what assists on that is that the
parties in general are the ones who choose
the arbitrators. They for sure will resort to
choose the most suitable arbitrators that the
specificity of the case subject of the dispute
requires.
Second: Adhering of the Foreign
Investor in the Arbitration Condition:
Due to the fact that the investment contracts
are concluded between two unequal parties:
the state of sovereignty, on the one hand and
the special foreign investor, on the other. The
justice of the courts of the state is not met by
complete satisfaction by the foreign investor,
due to the difficulties that he may face when
resorting to them, and due to his expectation
that their attitude will be completely neutral
in this dispute.
Therefore, the investor contracted with the
state is quite keen to enlist the arbitration
condition to solve the disputes that the
investment contracts provoke, for fear from
the fact that the state may use its sovereignty
when examining the disputes in the courts,
besides to lack of trust in the justice of the
courts of the hosting state.
Most often, the arbitrators are at highest level
of scientific and legal competency to separate
in the disputes attributed to them, besides to
the fact that most of them enjoy the scientific
and practical experience in the disputes that
are chosen to separate in
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What the state enjoys of independence and
sovereignty makes it difficult to separate the
disputes that it is part in them before the
national justice of another state. In spite of
the fact that the modern system tends to
take the immunity that restricts the state,
and its objective is to prevent the state to
get benefited from its immunity, except for is
sovereign works without the other acts that
are related to its practice to its commercial
activities and the
ordinary administrative
works, this doesn’t
mean the end of enjoying
immunity as a general
principle, as the origin
is to enjoy it. Here, there
appears the difficulty in
the disputes when the
judicial immunities of the
state contradict with the
fact that other courts of
other countries solve the
disputes that the state
is part in them, which
leads to waste the rights
related to the foreign
investor. However, in
case the courts of the
hosting state examine the dispute, the foreign
investor, who is a party in the dispute, may
expose to sudden or coercive decisions that
the state may issue due to what it enjoys of
sovereignty to achieve political or economic
considerations.
In addition to that, the foreign investor is keen to
enlist the arbitration condition due to his lack
of trust in the impartiality and justice of the
courts of the hosting state, because he does
not expect that its attitude will be completely
neutral towards the dispute. The national
justice of the contracted state, whatever the
merits that it enjoys of independence and
neutrality form the state itself, at the end, the
matter is a justice not neutral to the disputes
that the state is part in them with the foreign
contractor, which aroused from a contract
related to the economic or social interest and
the sovereignty of the state.
the foreign investor is keen to
enlist the arbitration condition
due to his lack of trust in
the impartiality and justice
of the courts of the hosting
state, because he does not
expect that its attitude will be
completely neutral towards
the dispute.
For all that is mentioned above, we find the
foreign investors quite keen to enlist the
condition of arbitration in their contracts with
the hosting state, even it was at the expense
of declining to complete the contract. May be,
in the contract of “Disney World” concluded
between American Company and France is the
best example thereof. The American investor,
in order to agree on investment, stipulates
that the disputes related to this investment,
which occurs in the suburbs of Paris, to be
referred to arbitration. However, the problem
that encountered the French Government is
that the opinion at the French State Council,
contrary to the court of discrimination related
to the international contracts related to the
interest of the international trade, is that it is
not permitted to resort to arbitration in the
contracts, in which the state is a party, abiding
by what maintaining the French sovereignty
imposes. The value of the contract was
billions of dollars. France was hesitated
how to quit the French Consultative Council
that enacted the administrative laws to
France and the World? The conclusion of the
contract delayed and became a matter to be
a project or not depending on the arbitration
condition… Finally, France accepted the
arbitration condition.
Third: Arbitration is a Procedural
Guarantee for Encouraging Investment:
It is fixed that in order achieve the biggest
attraction of the investments necessary
for developing the resources of the hosting
country, it is necessary to provide adequate
protection to secure the investments of the
special foreign party.The capital is coward in
its nature. It needs security. The investor is
worried and scared. He needs to get relieved.
The hosting state is worried about its
sovereignty, and alerts towards the foreign
penetration.
all that is mentioned above, we find the foreign
investors quite keen to enlist the condition of
arbitration in their contracts with the hosting
state, even it was at the expense of declining
to complete the contract
Encouraging foreign investments needs
guarantees with which the investor feels
comfortable and removes the wordiness from
himself, while the state keeps the right to
take the procedures that the public interest
necessitates, provided to compensate the
damaged investor for what is incurred to
him of damage. The most important of these
guarantees is the availability of judicial
guarantees to protect his investments.
The investor usually rests assured to the
judgment of arbitration, which became the
normal jurisdiction in this field, especially
that arbitration would dissipate the fears of
the foreign investors as related to subjecting
their disputes to the ordinary jurisdiction of
the state, which rarely is a welcomed source
as related to the foreign investors. Hence,
the interaction and communication between
arbitration and the flows of the capitals
and their diversities appear. The challenge
that the international foreign investments
face became of the type “To be or not to
be”. In case it was impossible to resort to
arbitration as a mechanism for settling
disputes, the big companies that belong to
the industrial countries, which are alone able
to offer the projects, sophisticated technical
and scientific knowledge for the developing
countries will most often will quit performing
the investments that the developing countries
need.
As a keen interest from the
countries, especially the
developing ones, on attracting
foreign investments, they
approved arbitration as a means
for settling the investment
disputes. This was manifested by:
Their joining to the international
agreements related to protecting
and encouraging investment,
which include expressive texts
makes the separation in the
investment disputes from the
competency of the arbitration
jurisdiction, without the justice
of the hosting country.
The investor usually rests assured to the judgment of
arbitration, which became the normal jurisdiction in this
field, especially that arbitration would dissipate the fears
of the foreign investors as related to subjecting their
disputes to the ordinary jurisdiction of the state, which
rarely is a welcomed source as related to the foreign
investors. Hence, the interaction and communication
between arbitration and the flows of the capitals and their
diversities appear.
The included in their legislations certain
texts that make arbitration among the means
that have priority on which the disputes of
foreign investments are settled. For example,
what article /26/ paragraph /B/ of the Syrian
Investment Law no. /10/ of the year 1991
included, that: “The investment disputes
between the investors of the subjects of the
Arab and foreign countries, whose projects
are included in the provisions of this law and
the Syrian public entities and institutions
shall be settled as follows: – through amicable
solution. However, if both parties declined to
reach to amicable solution within a period
of six months from the date of submitting
a written notification for settlement by one
of the two parties of the dispute, either one
of them may resort to one of the following
ways:- resorting to arbitration
Such texts that dedicate arbitration in the
field of international investment disputes, we
find them in the Egyptian law of guarantees
and incentives no. /8/ of the year 1997, in the
seventh article thereof, which stipulated that:
“It is permitted to settle the investment
disputes in the way that the investor agrees
on. It is also permitted to agree on settling
these disputes in the frame of bilateral
agreements between the Arab Republic of
Egypt and the State of the Investor, or in the
frame of Washing to Agreement related to
settling the investment disputes between the
states and the subjects of other countries,
or in accordance with the provisions of the
Egyptian Arbitration Law no. /27/of 1994.
It is also permitted to agree on settling
the disputes referred to above through
arbitration before Cairo Regional Center
for International Commercial Arbitration
….”, and the Lebanese Investment Law no.
/360/ of the year 2001, where the twelfth
article thereof stipulated that: “ The disputes
between the establishment and the investor
shall be settled in an amicable way. However,
it is impossible to reach to amicable solution,
It can be resorted to arbitration in Lebanon or
in any other international arbitration center”,
as well as the Bahraini Arbitration Law no.
Accordingly, the targeting of the state to
attract foreign investments to its territory
necessitates that the law in it (especially the
investment legislation) to approve the principle
of permitting to submit the investment
disputes on a body that the investor trusts
in its neutrality, such as the arbitration
bodies in the frame of what is agreed on with
the investor, or in the frame of the related
international agreements. It is no doubt that
approving such a principle would increase the
authenticity of the commitment of the state
in fulfilling its undertakings that it adopted
by itself. In this regard, the Syrian Ministry
of Justice prepared a Law Project related
to Internal and International Arbitration, in
which it observed what had been credited of
the International Arbitration Systems in the
international and Arab agreements, getting
use of the experiments of the countries in
this context in a way that makes Syria among
the countries that encourage arbitration.
To sum up: Arbitration is closely connected
with investment, and plays an important
role in its flow to the hosting countries, as
it represents a security, and stability factor
for the investors, because, in their opinion,
it is considered the effective means that
guarantee settling the investment disputes
with complete partiality and abstraction
within a certain period, away from the
jurisdiction of the state and what it suffers
from complications and slowness, besides to
the fear of the investors from alignment of
the national justice with the other party, the
fact that would expose their investments to
risks that they can dispense with. Therefore,
arbitration and investment is now being
looked at as being twin that cannot be
separated from each other. Therefore, in my
opinion, the rule should be overlapped in the
dictum that we mentioned: (Wherever there
is investment there is arbitration) and reverse
it to become: (Wherever there is arbitration,
there is investment).
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