The new Algerian legislation on International Arbitration

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https://www.benlawyers.com/publications/the-new-algerian-legislation-on-international-arbitration/ The. Algerian arbitration law on international arbitration has been thoroughly changed by the Law No 08-09 of February 25 2008, which entered in force on Februa

The. Algerian arbitration law on international arbitration has been thoroughly changed by the Law No 08-09 of February 25 2008, which entered in force on February 25 2009, pertaining to the New Algerian Code of Civil and Administrative Procedure (hereafter ` the Code`). This new arbitration law is built into articles 1006 through 1061 of the Code. This reform was expected as a logical follow-up of the Decree No. 93-09 of April 25 1993, which modified the former code of civil procedure by introducing a modern arbitration law, of Algeria’s 1988 ratification of the New York Convention of June 10, 1958, on the Recognition and Enforcement of Foreign Arbitral Awards.

In the drafting of the decree on international arbitra­tion, the law maker took into account the UNCITRAL (United Nations Commission for International Trade Law) Model Law, the European convention on arbitration of 1961, as well as new arbitration laws passed in various countries. Recent principles established in international arbitration case law were also taken into consideration. Articles 1006 through 1061 of the New Algerian Code of Civil and Administrative Procedure constitute therefore very modem legislation.

1. Definition of International Arbitration

Article 1039 of the Code provides the following definition of international arbitration:‘Within the meaning of this code the arbitration is international an arbitration which concerns disputes relating to economic interests of at least two States’

The new Algerian arbitration law adopts a definition of `intemationality` based on purely economic criteria. The legal criterion of article 458 bis 1 of the former code: a difference in the place of residence of the parties is thus abandoned.

2. The Arbitration Agreement

According to Article 1007 of the Code: “.The arbitration agreement is the agreement by the parties to a contract (…) undertakes to submit to arbitration disputes which might arise in connection with this contract”…

According to Article 1011 of the Code: «The arbitration agreement is the agreement by which the parties to litigation undertake to submit it to arbitration”.

Therefore, the traditional distinction between an arbitration agreement already in existence before the dispute arises and a submission relating to an existing dispute has not been retained in Algerian arbitration law has been retained, whereas it had been abandoned under the previous legislation, which considered only one type of arbitration agreement. This may be surprising given the current tendency in legal systems not to make this distinction.

Arbitration agreements are obviously governed by contract law. However, there are certain distinguishing char­acteristics regarding the validity of an arbitration agree­ment in Algerian arbitration law. Examined below are the following points: the prin­ciple of autonomy of the arbitration agreement, conditions of form and of substance required for its valid­ity, and lastly, the question of the validity of an arbitration agreement entered into by the state or a corporate state entity.

2.1 Principle of Autonomy

Article 1040 paragraph 4 provides that:

“The validity of an arbitration agreement cannot be con-tested on the basis of the invalidity of the main contract.”

This article fully recognizes the principle of the indepen­dent character of the arbitration agreement in Algerian arbitration law, which remains unaffected by the invalidity of the main contract. This provision is the codification of the now well-estab­lished international case law on the matter.

2.2 Conditions of Form

Article1040 paragraph 2 provides that:

“An arbitration agreement must be made in writing, or by any other means of communication which allows the written proof of its existence; it would be otherwise null and void.”

Thus, to be valid under Algerian arbitration law, an international arbitration agreement must be in written form However, the arbitration clause can derive from an exchange of letters, faxes, fax or e-mails. The new legislation has therefore fully taken into account the new technologies of the information and communication.

It should also be noted that the new Algerian arbitration law is in harmony with the New York Convention of June 10, 1958, which provides in Artide II (1) that a foreign award must be made on the basis of a “written agreement” in order to be recognized and enforced.

2.3 Conditions of Substance

Regarding the actual substance of an international arbi­tration agreement, in Algerian arbitration law, there are three possible sources of validity. Article1040 paragraph 3 provides that:

“As to the actual substance of the arbitration agreement, it is valid if it satisfies the conditions set either by the law chosen by the parties or by the law governing the merits of the dispute, or by the law that for the arbitrator considers appropriate.”

In the first place, the arbitration agreement can be governed by a law designated by the parties. In practice, it is rare for such a choice to be made, at least expressly.

Specific criteria are taken into account in the determina­tion of the law applicable to the arbitration agreement. For example, when considering the validity of the agree­ment regarding its substance, the arbitrator or judge (if the agreement is brought before a court) can apply, nota­bly, the law of the seat of arbitration.’

Secondly, the arbitrator or judge can refer to the law applicable to the main contract to decide upon the validity of the substance of the arbitration agreement. It should be noted that the majority of international arbitration awards find that both the main contract and the arbitra­tion agreement are governed by the same law. This is logical, since the two separate legal transactions will have identical connecting factors that bring them under the same law.

Lastly, the validity of the substance of the arbitration agreement can be determined by the arbitrator.

2.4 Capacity of State and Public Entities

According to Article 1006 paragraph 3 of the Code:

“Corporate bodies governed by public law may not enter into arbitration agreements except in their international commercial transactions and in public tendering.”
Under Algerian arbitration law, a foreign party can therefore now insert an arbitration clause into an Algerian state contract, without running the risk of its being called into question because of the Algerian party’s lack of capacity.

This provision should put an end to a major controversy concerning public tenders. Indeed in the past it was common for entities subject to public law to reject the inclusion of an arbitration clause in the contract to be signed by arguing that disputes relating to this type of contracts should be submitted to Algerian administrative court

3. Appointment of Arbitrators

The first paragraph of Article 1041 provides that:

“The parties can directly or by reference to a set of arbitration rules appoint the arbitrator(s) or provide for the procedure of their appointment as well as their removal or replacement.”

Under Algerian arbitration law, if one of the parties fails to nominate his arbitrator, the other party may apply to the presiding judge of the Court of Algiers to nominate the arbitrator if (i) the place of abitration is Algeria or (ii) if the parties have chosen the application of Algerian procedural law.

I this respect Paragraph 2 of Article 1041 provides that:

The different methods for establishing the substantive law that may be used by the arbitrator are beyond the scope of this article. The solution provided by Article 1054 of the Code is rather straightforward, under this article:

“The arbitral tribunal shall resolve the dispute applying the legal rules chosen by the parties, or failing such choice, applying the rules and customs which it deems appropriate.”

The first half of this article refers to the principle of party autonomy. In Algerian arbitration law, the parties are free to choose the law to be applied to the merits of the dispute.

The second half specifies that failing such choice, the arbitrator shall apply the legal rules and customs he deems appropriate.

The concept of “legal rules,” the role given to customs, and the limits to the arbitral tribunal’s discretion require further examination.In using the term “legal rules” rather than “law,” the Algerian arbitration law wished to allow the parties and arbi­trators to apply extra-legal rules and, notably, general principles of law, as well as international trade usages, whether codified or not.

Moreover, by providing that the arbitrator shall resolve the dispute applying legal rules and customs, Article 1040 puts customs on an equal footing with legal rules and, notably, state legislation. Customs, therefore, are not just supplemental to the law.

It should be noted that this enhancement of the status of customs is in keeping with the importance given to customs by Article 107 of the Algerian Civil Code.

Finally, in Algerian arbitration law, the arbitrator does not have unfettered discre­tion as to the applicable legal rule or customs. His choice must be “appropriate,” which implies that a connection with the contract in question is required.

4. Procedural Law

Article 1043 provides that:

“The arbitration agreement may provide for the proce¬dure to be followed directly or by reference to a set of arbitration rules. The arbitration agreement may also provide for the application of a specified procedural law.If nothing is mentioned in the arbitration agreement and the parties have not agreed otherwise, the arbitral tribunal shall establish the rules governing the pro¬ceedings as required, either directly or by reference to a law or a set of arbitration rules.”

This article fully recognizes the principle of party autonomy regarding the rules governing the proceed­ings. The article makes no reference whatsoever to a connection with the law of the seat of arbitration. The Algerian arbitration law gives thus complete freedom regarding the organization of the pro­cedure to the parties, or to the arbitrator should the parties fail to exercise their choice.

Thus, three choices are available to the parties or the arbitrator. The rules governing the proceedings may be established directly, in which case the parties draft their own procedural law, or by reference to a set of arbitration rules, or lastly, by reference to a particular national law.

5. The power of the Tribunal to decides on its jurisdiction and appointment

The Algerian arbitration law has given the arbitral tribunal the right to verify its competence and to rule on the validity and limits of its own appointment if contested.

Article 1044 provides that:

“The arbitral tribunal decides upon its own competence. Any objections to jurisdiction must be raised before any substantial defense is submitted. The arbitral tribu­nal will make a preliminary award [ruling] on its com­petence unless the objection to jurisdiction is con­nected with the substance of the dispute.”
As for the procedural rules involved in this verification of competence, the tribunal may either render a prelimi­nary award or deal with both the objection to jurisdiction and the substance of the dispute in the final award.

6. Evidence

Under Algerian arbitration law, the parties and the arbitrator have unfettered discretion in the taking of evidence. Under Article 1047, the “arbitral tribunal proceeds with gathering evidence,”

Matters relating to evidence therefore will be either subject to an appropriate set of rules that do not have their source in a national legislation, or dealt with by reference to a national legislation or a set of arbitration rules.

7. Interim measures

In Algerian arbitration law, the question of interim measures is dealt with in Arti¬cle 1046, which provides:

“Unless the parties agree otherwise, the arbitral tribunal may order interim measures at the request of one of the parties.

If the party concerned does not willingly comply, the arbitral tribunal may request assistance from the com-petent court which will apply its own law.The arbitral tribunal or the judge may make the interim measures which were requested of him subject to the provision of appropriate guarantees by the plaintiff.”

This fundamental provision clearly affirms the arbitra­tor’s competence to take interim measures to safeguard the rights of the parties. However, in Algerian arbitration law, the arbitral tribunal does not have any enforcement powers, which lie only with the national courts. The effectiveness of the measures dictated by the arbitral tribunal therefore depends on the will and cooperation of the parties. Where one of the parties refuses to execute voluntarily an interim measure made by the arbitral tribunal, the tribunal may under the law seek assistance from the competent judge. In such a case, the judge will apply the court’s own procedural law and can request that an adequate guarantee be furnished.

Nevertheless, in Algerian arbitration law, can one of the parties, in order to obtain a result quickly, seek interim measures from a national court before going to the arbitral tribunal? It would seem that Article 1046 does not allow this. Such a request to a national court could be authorized only in exceptional circumstances where the arbitral tribunal fails to react to the refusal by one of the parties to comply with the interim measures dictated by the tribunal.

8. Recognition and Enforcement of the award

In Algerian arbitration law, the conditions for recognition and enforcement of an arbitral award are expressed in just one provision, Article 1051, which provides:

“Arbitral awards are recognized in Algeria if their exis­tence is proved by the claimant and if their recognition is not contrary to international public policy.`Subject to the same conditions, they are declared enforceable in Algeria by the presiding judge of the court in whose local jurisdiction they were pronounced or by the presiding judge of the court of the place of enforcement, if the seat of arbitration was outside the territory of the Republic.”

This article specifies that, in Algerian arbitration law, the court competent to recog­nize or enforce the award is the one in whose geographi­cal jurisdiction in Algeria the award was rendered. If the seat of arbitration was outside Algeria, application has to be made before the court of the place where enforce­ment of the award is sought.

Article 1052, which repeats Articles IV (1) (a) and (b) of the New York Convention of June 10, 1958, pro­vides that:

“The existence of an arbitral award is proved upon production of the original copy together with the arbi­tration agreement or copies of these documents subject to the conditions required for [establishing] their authenticity.”

Surprisingly, this article makes no provision as to the language in which these documents are to be written. In view of the Algerian legislation in force, documents not in Arabic must be submitted together with an official Arabic translation.

Under Algerian arbitration law, and especially under article 1051, mentioned above, international arbi­tral awards are recognized in Algeria if their existence is proved by the claimant and if such recognition is not manifestly contrary to international public policy. Subject to the same conditions, they are declared enforceable by the judge.

The judge deciding upon recognition or enforcement must restrict himself to verifying the prima fade regularity of the award. He will also verify that it is in conformity with international public policy as perceived by Algerian national courts. Any review or alteration of the substance of the award during this verification is absolutely forbidden.

9. Appeals

9.1 Appeal of Refusal of Recognition or Enforcement

Artide 1055 expressed succinctly:

“It is possible to appeal against a judgment refusing recognition or enforcement.”

As noted, under Algerian arbitration law, the verification of the award by the court charged with recognition or enforcement is strictly limited to confirmation of the material existence of the award and verification of its conformity to international public policy. It follows then that the appeal provided for in Article 1055 which is not an appeal against the award itself but against a judgment refusing recognition or enforcement of the award can be based only on an error by the judge in interpreting the statutory reasons for refusing recognition or enforcement, which are listed exhaustively in Article1056.

Article1056 provides eight grounds for appeal against a judgment recognizing or ordering the enforce­ment of an award; it states:

“It is possible to appeal against a judgment recognizing or ordering the enforcement of an award only in the following situations:a.    if the arbitral tribunal made an award without an arbitration agreement or on the basis of a null or expired agreement;b.    if the arbitral tribunal was irregularly composed or if the sole arbitrator was irregularly appointed;c.    if the arbitral tribunal made an award without carrying out the mission it was assigned;d.    if the arbitral tribunal failed to consider one of the plaintiff’s claims;e.    if the arbitral tribunal has failed to state its reasons for the award, or if the reasons are conflicting;f.   if recognition or enforcement is contrary to international public policy.”

9.2 Appeal to Set Aside the Award

In Algerian arbitration law, an appeal to set aside the award is available only against international arbitral awards rendered in Algeria. Article 1058 provides:

“An application for setting aside may be filed against an arbitral award rendered in Algeria in the context of international arbitration in the situations provided in Article 1056 above.There is no appeal against an order granting enforce­ment of the award. However, an application for setting aside an arbitral award implies an appeal against the order of enforcement or for the removal of the case from the judge.”

This appeal provided for in the Algerian arbitration law, conforms to Article V (1) (e) of the New York Convention of June 10, 1958.

The grounds for setting aside an award are identical to those for appeal against a judgment of recognition or enforcement of an award, which are listed in Article 1056, above.
Lastly, the filing of an application to set aside an arbitral award suspends the enforcement of the award and the time limit granted for its execution.

Conclusion

The solutions provided by the new Algerian arbitration law are liberal and of high technical quality. They are an incentive to insert international arbitration clauses in contracts with Algerian legal entities. The validity of these clauses cannot from now on be disputed, even when they are inserted in Algerian State contracts.