Academic journal article Journal of Legal, Ethical and Regulatory Issues

The Impact of Sharia on the Acceptance of International Commercial Arbitration in the Countries of the Gulf Cooperation Council

Academic journal article Journal of Legal, Ethical and Regulatory Issues

The Impact of Sharia on the Acceptance of International Commercial Arbitration in the Countries of the Gulf Cooperation Council

Article excerpt

INTRODUCTION

With almost half of the world's oil reserves lying underneath their territories, countries of the Gulf Co-operation Council (hereinafter GCC) are strongly represented on the international business map. Enterprises of all sizes and forms are keen to enter the GCC region, particularly countries like the United Arab Emirates (hereinafter UAE), which have become a major business hub, not only for GCC countries but also for a large part of the Middle East and North Africa (hereinafter MENA). However, this interest in trading with the GCC has long been accompanied by complaints about the lack of modern arbitration laws in many of its member states(Arthur J. Gemmell, 2006).

Oman, in 1997, passed legislation implementing the UNCITRAL Model Law on International Commercial Arbitration of 1985 (as amended in 2006) (hereinafter the Model Law). However, other GCC countries have been slow in modernizing their national arbitration laws. Saudi Arabia adopted a new arbitration law in 2012, which is partially based on the Model Law (Faris Nesheiwat, Ali Al-Khasawneh, Santa Clara, 2015). Bahrain recently adopted a new arbitration law in 2015, also based on the Model Law 1. The UAE and Qatar recently established arbitration centres affiliated with key arbitral institutions in the world2, although draft arbitration laws in both of these countries are still pending. The Kuwaiti arbitration law issued in 1995 has been subject to heavy criticism and it is often described as not being in line with "modern arbitration practices" (Dalal Al Houti, 2016). The fact that GCC countries are parties to international legal instruments regulating international arbitration, such as the New York Convention 1958, has definitely mitigated the problem of bringing arbitration practices in the region in line with accepted international practice, but not fully solved it. There is still ambiguity about the relationship between the New York Convention of 1958 and national arbitration laws as evident from some court decisions in the GCC (Elana Levi-Tawil, 2011).

The fact that the legal systems in these countries are either entirely based on sharia, like Saudi Arabia or partially, like the rest of GCC countries, is seen by many western scholars and lawyers as being responsible for the incompleteness of some of these countries' arbitration systems (Steven Finizio and Christopher Howitt, 2016 and Gemmell, 2008). This article focuses on the question of whether sharia has hindered the acceptance of modern arbitration practices in GCC countries. It argues that modern practices of international commercial arbitration are compatible with sharia and the delay in accepting these practices in some of the GCC countries results from previous frustrating experiences with arbitration, especially arbitration cases over oil concession agreements with western companies.

The main focus in this article will be on the rules of sharia concerning arbitration, and reference to the local law of GCC countries will be made when necessary. The analysis will be according to the four Sunni schools of Islamic jurisprudence (Hanafi, Shaif'i, Maliki and Hanbali), as these schools are the dominant ones in the legal systems of the GCC countries. What should be mentioned here is that not all issues considered in this article are necessarily dealt with by every school of Islamic jurisprudence. It should also be noted that a complete analysis of all points of intersection between sharia and international commercial arbitration is outside the scope of this article. This article will therefore focus on some key issues in the debate over the compatibility of sharia with modern practices of international commercial arbitration.

The first part of this article explains the sources of sharia law. The second part briefly describes modern practices of international commercial arbitration. The third part introduces an analysis of the main rules of sharia governing arbitration, in order to show that sharia can accommodate modern international arbitration practices. …

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