Litigation and Enforcement in Egypt

MULTI-JURISDICTIONAL GUIDE 2014/15 DISPUTE RESOLUTION

© This article was first published in the Dispute Resolution Multi-Jurisdictional Guide 2014/15 and is reproduced with the permission of the publisher, Thomson Reuters. The law is stated as at 1 August 2014.

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Litigation and enforcement in Egypt: overview Khaled El Shalakany Shalakany Law Office

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MAIN DISPUTE RESOLUTION METHODS

1. What are the main dispute resolution methods used in your jurisdiction to settle large commercial disputes?

The modern Egyptian legal system was developed in the 19th century. It was initially modelled on the French Civil Code System (Code Napoleon), but later developed its own legal principles and structures. The system has greatly influenced the legal systems of many other Middle Eastern countries. Many civil codes of other Arab countries are closely modelled on the Egyptian Civil Code. Egyptian jurists are also influential in most Arab countries. The Egyptian legal system, similar to most continental European civil code systems, is based on a Civil Code that covers:

• Personal rights.

• Contract law.

• Obligations.

• Elements of tort law.

In addition, there are specific codes dealing with other areas of law, such as the Commercial Code, which complements the Civil Code in certain areas of commercial law, and the Code of Civil Procedures. These Codes deal mainly with private law but there are also elements of public law, for example administrative legal matters. Administrative law is basically judge made law developed by a separate administrative court system. Administrative law deals with matters relating to the decisions made by governmental agencies and other public judicial persons. It also deals with some type of contracts dealing with public works and concessions.

Large commercial disputes tend to be settled through arbitration, following implementation of the Arbitration Law (Law No. 27 of 1994). However, the settlement of large commercial disputes through court litigation remains common.

COURT LITIGATION Limitation periods

2. What limitation periods apply to bringing a claim and what triggers a limitation period?

Various limitation periods apply to bringing a claim, for example:

• For disputes relating to the termination of a commercial agency, an agent must start an action within 90 days.

• Claims relating to sellers' warranties on hidden defects must be brought within one year of delivery.

• In construction contracts, the employer must start an action based on decennial liability (that is, the contractor remains liable for the collapse or serious defects affecting the safety of the structure for ten years following the construction's completion) within three years of the defect becoming apparent or the collapse occurring.

• Various periods apply to actions on commercial instruments (for example, cheques, bills of exchange and promissory notes).

• Tort liability is generally subject to a three-year limitation period, from the date of knowledge of the damage and the identity of the person responsible for it.

Court structure

3. What is the structure of the court where large commercial disputes are usually brought? Are certain types of dispute allocated to particular divisions of this court?

Large commercial disputes in civil and commercial matters are heard before the First Instance Full Court. The relevant branch of the First Instance Full Court is that with local jurisdiction over the place of the defendant's domicile (for example, Cairo, Giza and Alexandria).

In 2008, special economic courts were set up to expedite litigation in commercial disputes relating to specific activity involving commercial agencies, IP and other matters (Law No. 120 of 2008). These courts became active towards the end of 2008 and the progress to date is rather positive. Commercial disputes arising from administrative contracts (that is, contracts concluded with governmental authorities relating to public works) are heard, in the first instance, before the Administrative Court (equivalent to the Court of Appeal in the civil and commercial jurisdictions). Conflicts in jurisdiction and contradictory judgments (between the civil and commercial court system and the administrative court system) are resolved before the Constitutional Court.

The answers to the following questions relate to procedures applicable in the First Instance Full Court and the Court of Appeal.

Rights of audience

4. Which types of lawyers have rights of audience to conduct cases in courts where large commercial disputes are usually brought? What requirements must they meet? Can foreign lawyers conduct cases in these courts?

Rights of audience/requirements Egyptian lawyers are progressively licensed to attend before various levels of courts, from the Small Claims Court up to the First Instance Full Court, the Court of Appeal and finally the Court of Cassation. However, it still takes a lawyer at least 17 years from registering as a trainee lawyer to obtain rights of audience before the Court of Cassation.

Foreign lawyers

Except for lawyers from some Arab-speaking countries who are registered with the Egyptian Lawyers Syndicate, foreign lawyers cannot conduct cases in Egyptian courts.

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FEES AND FUNDING

5. What legal fee structures can be used? Are fees fixed by law?

The legal fee structures are very flexible. Lawyers can charge by the hour or by the case, and can ask for contingency or success fees.

Contingency fees are not regulated but have a maximum limit of 20% of the value of the claim and are usually charged as a fixed percentage of the damages recovered, or as a fixed pre-agreed success fee.

6. How is litigation usually funded? Can third parties fund it? Is insurance available for litigation costs?

Funding

The parties usually fund their litigation directly. It is very rare for third parties to fund litigation.

Insurance Insurance for litigation costs is rare and may not be available in the Egyptian insurance market.

COURT PROCEEDINGS Confidentiality

7. Are court proceedings confidential or public? If public, are the proceedings or any information kept confidential in certain circumstances?

Court proceedings are public. However, only the parties and their lawyers can access court files.

Pre-action conduct

8. Does the court impose any rules on the parties in relation to pre-action conduct? If yes, are there penalties for failing to comply?

Courts do not impose any rules on the parties in relation to pre-action conduct. However, abuse of judicial process (for example, bringing a claim without good reason) can be grounds for a compensation claim.

Main stages

9. What are the main stages of typical court proceedings?

Starting proceedings

In contractual or commercial claims, the claimant (using a court process server) must first serve notice on the defendant, giving an opportunity to comply with the claim (usually one week).

Notice to the defendant and defence

If the defendant does not comply within the time given in the notice, the claimant can start an action by registering a statement of claim with the court clerk. A court process server then serves the statement on the defendant.

If the defendant is abroad (not domiciled in Egypt), service is through diplomatic channels, and is effected by submitting the notice to the Public Prosecution in Egypt.

Subsequent stages

After the defendant receives the statement of claim, the case progresses with adjournments, to allow the parties to submit their arguments (mainly through written memoranda and dockets of documents). There is no requirement that the defendant files a defence on receiving a statement of claim. The process of submitting a defence is regulated by court hearings, during which the judge invites the defendant to submit its statement of defence.

Oral pleadings before the First Instance Full Court are generally quite brief. Adjournments generally range from a few weeks to several months. The court usually refers complex accounting and most technical issues to an expert or a panel of experts, who are typically employees of the Ministry of Justice. First instance proceedings usually take two to three years. Appeals are considered as de novo proceedings (findings of fact can be changed and even new experts appointed) and could take up to two years. In commercial and civil matters a further appeal may be made on errors of law to the Court of Cassation.

INTERIM REMEDIES

10. What actions can a party bring for a case to be dismissed before a full trial? On what grounds must such a claim be brought? What is the applicable procedure?

Summary judgment for dismissal is very rare, and only available if the claimant fails to submit any evidence. If the claimant fails to attend any hearing, in practice, the case is struck out. However, the case can be renewed within 60 days. If the case is struck out again, it will be deemed to be null and void from the beginning. This can have serious consequences if limitation periods apply, as the right of claim may be lost.

11. Can a defendant apply for an order for the claimant to provide security for its costs? If yes, on what grounds?

Security for costs is not available, except when an injunction or interim order is requested (see Question 14).

12. What are the rules concerning interim injunctions granted before a full trial?

Availability and grounds

Interim attachment orders are available (against appropriate security), but are very rarely granted.

Prior notice/same-day

Interim injunctions can be obtained without notice to the defendant in urgent matters, but again are very uncommon.

Mandatory injunctions Mandatory interim injunctions are available in addition to restraining injunctions.

Rights of Appeal

There is a right to appeal interim orders.


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13. What are the rules relating to interim attachment orders to preserve assets pending judgment or a final order (or equivalent)?

Availability and grounds

Interim attachment orders are very rarely granted, and the applicant must establish the risk of the respondent not having the assets to satisfy a prima facie favourable judgment.

Prior notice/same-day

An order can be obtained ex parte and on an urgent basis.

Main proceedings

The main proceedings do not have to be in the same jurisdiction.

Preferential right or lien The attachment creates a preferential right in favour of the claimant.

Damages as a result

The claimant, if it loses its main proceedings for the claim, is liable to compensate the defendant.

Security

The court may require the claimant to provide security, as a condition of granting the attachment.

14. Are any other interim remedies commonly available and obtained?

There are no other interim remedies commonly available

FINAL REMEDIES

15. What remedies are available at the full trial stage? Are damages just compensatory or can they also be punitive?

At the full trial stage all remedies are available, including:

• Monetary compensation.

• Specific performance.

• Declarations.

Damages are generally compensatory, but the court may, in rare cases, impose penalties for non-compliance with court orders.

EVIDENCE Disclosure

16. What documents must the parties disclose to the other parties and/or the court? Are there any detailed rules governing this procedure?

Discovery in the common law sense (that is general and enabling the parties to go on "fishing expeditions") is not available. However, any party can request the court to order disclosure of a specific document, provided that:

• The document is identified in reasonable detail.

• The requesting party shows that it is material and relevant.

Privileged documents

17. Are any documents privileged? If privilege is not recognised, are there any other rules allowing a party not to disclose a document?

Privileged documents

Privilege is not recognised in Egypt. General discovery is not allowed and the parties cannot go on fishing expeditions (see Question 16). Internal confidential documents are therefore protected to a certain extent, as the opposite party may be unable to access these documents.

Other non-disclosure situations

Confidential documents between a party and a third party (see Question 16) are not ordered for disclosure, unless the requesting party shows that they are material and relevant.

Examination of witnesses

18. Do witnesses of fact give oral evidence or do they just submit written evidence? Is there a right to cross-examine witnesses of fact?

Oral evidence

Witnesses of fact must appear in court and are generally questioned by the court and can also be questioned by counsel.

Right to cross-examine

Both parties' counsel can ask witnesses some questions but not to the extent of examination-in-chief and cross-examination. The Courts generally do not allow extensive examination.

Third party experts

19. What are the rules in relation to third party experts?

Appointment procedure

Experts are appointed by the court at its own discretion, or at a party's request. However, parties can also submit expert evidence. Court-appointed experts are normally appointed from a roster of experts at the Ministry of Justice. However, in certain cases where special expertise is required, experts can be appointed from universities and other institutions.

Role of experts Experts appointed by the court are independent of the parties and are accountable to the court. However, when parties submit their own expert evidence, the experts can represent that party's interests.

Right of reply

Experts' findings of fact and reports can be challenged, and the court can refer issues back to the same experts or re-assign them to different experts. However, the parties cannot directly cross-examine the expert.

Fees

The expert fees for referral requested by one of the parties are usually paid by the requesting party (the court determines this in its preliminary judgment appointing the expert). Fees for experts appointed at the court's initiative must usually be divided equally between the parties. If a party fails to make the payment, the other party can make the full payment after first obtaining the court's permission.


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APPEALS

20. What are the rules concerning appeals of first instance judgments in large commercial disputes?

Which courts Appeals from the First Instance Full Court are to the Court of Appeal. The relevant branch of the Court of Appeal depends on the defendant's domicile. Further appeals can be made before the Court of Cassation.

Appeals from the Administrative Court are to the High Administrative Court.

Grounds for appeal

Appeals to the Court of Appeal can be based on alleged errors of fact or law (the incorrect application of law or inadequate reasoning). Further appeals to the Court of Cassation are possible on alleged errors of law.

Time limit

First instance decisions can be appealed to the relevant Court of Appeal within:

• 40 days from the first instance judgment.

• 15 days in the case of appeals in summary proceedings.

A Court of Appeal's judgment may be appealed before the Court of Cassation within 60 days of the Court of Appeal's decision.

Oral pleadings before the Court of Appeal are generally very brief. In appeals to the Court of Cassation, the parties have greater flexibility for more extensive oral pleadings.

Appeals from First Instance Judgments are in effect new trials (that is, all issues of fact can be reconsidered, although no new claims are allowed) and usually take from one to two years. Appeals to the Court of Cassation take much longer, unless a stay of execution request is made (to stay execution of a Court of Appeal decision), which is generally heard within a few months to a year.

CLASS ACTIONS

21. Are there any mechanisms available for collective redress or class actions?

Class actions are recognised in collective relationships such as collective labour agreements. Labour law provides procedures for settlement of collective labour disputes between employers and all employees or a group of employees. Other than labour disputes there is no mechanism for class actions.

COSTS

22. Does the unsuccessful party have to pay the successful party's costs and how does the court usually calculate any costs award? What factors does the court consider when awarding costs?

The unsuccessful party is liable to pay court fees and costs. The court fees may be substantial and are determined as a percentage of the final award. Payment of costs is enforced by the court against the unsuccessful party. In 2009, the Ministry of Justice raised court costs to prevent frivolous proceedings.

Legal (lawyer fees) costs awarded to the successful party are only nominal (nearly negligible) and are enforced as part of the award.

23. Is interest awarded on costs? If yes, how is it calculated?

Interest may apply to costs, if the party against which costs are awarded fails to pay or object within the specified period. The interest rate would then be limited to 4% (Civil Code).

ENFORCEMENT OF A LOCAL JUDGMENT

24. What are the procedures to enforce a local judgment in the local courts?

A writ of execution is obtained from an execution judge, and the judgment is enforced through court bailiffs. Numerous methods are available to delay execution, including a contestation case (which stops execution for a few months) and third party recovery claims in relation to attached assets.

CROSS-BORDER LITIGATION

25. Do local courts respect the choice of governing law in a contract? If yes, are there any areas of law in your jurisdiction that apply to the contract despite the choice of law?

Local courts respect and apply valid choice of law provisions. However, mandatory statutory provisions of Egyptian law (as part of public policy) cannot be contracted out of, even if a foreign law is chosen. For example:

• The right of a commercial agent to receive compensation for unjustified termination or non-renewal of the agency cannot be derogated from.

• Egyptian law has mandatory application in relation to technology transfer agreements

26. Do local courts respect the choice of jurisdiction in a contract? Do local courts claim jurisdiction over a dispute in some circumstances, despite the choice of jurisdiction?

Egyptian courts have mandatory jurisdiction in all claims (except for those relating to real property abroad) against Egyptian citizens and foreign persons domiciled in Egypt. In addition, Egyptian courts have jurisdiction in claims relating to property in Egypt or contracts that are implemented in Egypt. Courts will decline to review cases where the parties have agreed to resort to arbitration. This is unless the arbitration provision is waived or deemed to be waived if the defendant has not raised this issue before dealing with the merits.

27. If a foreign party obtains permission from its local courts to serve proceedings on a party in your jurisdiction, what is the procedure to effect service in your jurisdiction? Is your jurisdiction party to any international agreements affecting this process?

Foreign proceedings and documents can generally be validly served by formal notice through a court process server.


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28. What is the procedure to take evidence from a witness in your jurisdiction for use in proceedings in another jurisdiction? Is your jurisdiction party to an international convention on this issue?

Generally, sworn statements can be made by a witness in Egypt before a notary public (a governmental official with authority to certify statements and contracts). Whether the sworn statements are admissible in foreign proceedings depends on the courts in the foreign jurisdiction. In practice, sworn statements given before a consular office at the embassy of the country where the case is being heard can also be acceptable.

Enforcement of a foreign judgment

29. What are the procedures to enforce a foreign judgment in the local courts?

Egypt is a party to the 1965 HCCH Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters. There are also a number of bilateral treaties between Egypt and some countries (for example, France) and multilateral treaties (for example, the Arab League) that relate to judicial enforcement. Generally the enforcement of a foreign court judgment would require:

• Valid jurisdiction by the court issuing the award.

• Reciprocity.

Unless there is a treaty that allows for direct enforcement, a court case must be initiated to obtain a judgment for enforcement.

ALTERNATIVE DISPUTE RESOLUTION

30. What are the main alternative dispute resolution (ADR) methods used in your jurisdiction to settle large commercial disputes? Is ADR used more in certain industries? What proportion of large commercial disputes is settled through ADR?

Apart from arbitration, which is fairly developed and is subject to the Arbitration Law (see Question 1), there is no formal statutory recognition of other ADR mechanisms (for example, mediation). The Cairo Regional Centre for International Commercial Arbitration (CRCICA) has rules for mediation and conciliation, but these have no mandatory application and are subject to contractual agreement.

Interest in mediation has recently grown and the Egyptian ADR Association was established in 2007. However, mediation remains subject to contractual agreement, and is not formally regulated by legislation, although the Ministry of Justice is currently working on a draft law for mediation.

Arbitration is prevalent in construction disputes, oil and gas, shipping and hotel management contracts. Major public private projects usually provide for several stages of ADR, including mandatory negotiations and arbitration.

31. Does ADR form part of court procedures or does it only apply if the parties agree? Can courts compel the use of ADR?

ADR does not form part of court proceedings. ADR can apply as a matter of contractual agreement, and can only be enforced contractually. Courts cannot compel the use of ADR.

32. How is evidence given in ADR? Can documents produced or admissions made during (or for the purposes of) the ADR later be protected from disclosure by privilege? Is ADR confidential?

Evidence, confidentiality or privilege in ADR are subject to contractual provisions in the ADR agreement (for example, an agreement to mediate). Confidentiality in ADR can only be enforced as a contractual obligation.

33. How are costs dealt with in ADR?

There is no statutory framework for ADR costs.

34. What are the main bodies that offer ADR services in your jurisdiction?

The Cairo Regional Center for International Commercial Arbitration (CRCICA) offers arbitration, mediation and conciliation services, and has adopted rules to regulate these procedures. The Egyptian ADR Association (set up in 2007) has a roster of qualified bilingual mediators.

The CRCICA provides a competitive alternative to foreign arbitration and mediation centres for Egyptian and regional disputes. The CRCICA's rules are based on the UNICTRAL rules for arbitration (with some amendments).

The CRCICA's contact information is as follows:

W www.crcica.org.eg

E [email protected]

PROPOSALS FOR REFORM

35. Are there any proposals for dispute resolution reform? If yes, when are they likely to come into force?

The Code of Civil Procedures is periodically subject to review and reform. The arbitration process was radically reformed in 1994, and may be further reformed. ADR mechanisms are attracting interest and may be officially introduced in statutory provisions. The introduction of the new Economic Courts in 2008 and the increase of court costs in 2009 can be seen as important steps towards a reform of the judicial system.


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Practical Law Contributor profile

Khaled El Shalakany, Managing Partner

Shalakany Law Office T +202 2728 8888 F +202 2737 0661 E [email protected] W www.shalakany.com

Professional qualifications. Lawyer, 1985

Areas of practice. Arbitration

Non- professional qualifications. University of Cairo, BSc Electronics engineering; University of Toronto, LLB Law; Cambridge University, LLM Law; IBM Professional Excellence award, 1982

Recent transactions. Acted as arbitrator, advocate and expert in over 70 commercial arbitrations (including ICC, DIAC, LCIA and ICSID arbitrations).

Professional associations/memberships. Registered Arbitrator with the Cairo Regional Centre for International Commercial Arbitration and the Egyptian Ministry of Justice; Fellow of the Chartered Institute of Arbitrators.