Developing a Culture of Arbitration in Syria

The trend for settling disputes by arbitration has grown significantly in the Arab world in recent years. Interestingly, Syria was among the first countries that took an early lead in recognizing it as a legitimate alternative form of dispute resolution. In fact, it has been part of the Syrian legal framework for decades. It was initially governed by Articles 506-534 of the previous Civil Procedure Code, which dates back to 1953. It has since faced an overhaul with the passage of the stand-alone Arbitration Law in 2008, which is based on the UNCITRAL Model Law on International Commercial Arbitration.

On the international and investment arbitration side, Syria acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. It was one of the first countries to ratify the New York Convention back in 1959. It is also a member of the International Centre for Settlement of Investment Disputes (ICSID). The ICSID Convention of 1965 entered into force in Syria in early 2006. More recently in 2015, Syria signed the Mauritius Convention on Transparency in Treaty-based Investor-State Arbitration of 2014.

In spite of the progress made in arbitration on the legislative front in recent times, the irony is that Syria still lacks a culture of arbitration. A closer analysis reveals that it is not a common method of dispute resolution. While parties include arbitration clauses in contracts from time to time, it is not a regular occurrence. As for international arbitration, it is rarely opted for in practice. Domestic arbitral awards are easier to enforce than foreign arbitral awards despite the fact that Syria is a signatory to the New York Convention. With the exception of a few conditions including a stipulation that there be no conflicts with Syrian court judgments or the public order, foreign arbitral awards should be enforceable in Syria. While the Convention is applied satisfactorily, there is still room for improvement.

The attitude of the judiciary towards arbitration should also not be underestimated. There is a general consensus that the courts view arbitral tribunals as competing with their authority and attempting to supplant their constitutional role in the dispute resolution process. As such, more attention is being directed towards this sensitive issue and an initiative is underway to bolster the position that the workings of arbitral tribunals rather complement the activities of the judiciary. Moreover, arbitration has the added value of reducing workload burdens on the courts.

Another major obstacle hindering progress towards an emerging culture of arbitration is quite visibly the ongoing conflict in the country since 2011. The rationale behind enacting the Arbitration Law in 2008 was an attempt to instill confidence among foreign investors who were taking notice of Syria at the time. It was evident that Syria’s economic prospects were on the rise in the previous decade right before the war. Companies from around the world, particularly from the Gulf region, were pouring capital into the country. As arbitration was becoming a credible alternative to litigation in the Arab world, the UNCITRAL Model Law was perceived to be the most appropriate template to follow not least because it adopts business-friendly provisions.

What is clear is that the new Law at the time established a catalyst to develop a culture of arbitration at a faster pace. Foreign investors were cognizant of the legislative reforms in this respect as they sought to avoid potential disputes being litigated in a local court, a forum with which they had little familiarity. The concepts of confidentiality surrounding proceedings, party autonomy and a certain degree of control over disputes appealed far more to them. It would have been these investors and their reliance on the Law who would have eventually influenced the judiciary to accept arbitrators as partners in the dispute resolution process.

It is worth taking note of some of the main provisions of the Law. It governs any arbitration conducted in Syria and any international commercial arbitration administered abroad if the parties agree to apply its provisions. Arbitration proceedings are in Arabic unless the parties or the arbitral tribunal agree to use another language. The parties to an agreement are free to determine the law that the arbitral tribunal shall apply. Moreover, the law of another country may be followed, which means its substantial rules may be applied during proceedings. The parties are also free to determine the procedures that the tribunal will adhere to and the location whether in Syria or abroad where the arbitration will take place. Contracting parties in practice usually do not select any arbitral institution and instead resort to an ad hoc process. They mainly choose to conduct arbitration under the rules provided for in the Law. Arbitral awards are considered final and not subject to judicial appeal by the courts unless there is evidence of procedural irregularities or public order violations during the arbitration.

The Arbitration Law also provides for the establishment of private arbitration centers in Syria. Up to 54 aspiring centers sought licenses to operate following the passage of the Law but none are functioning at the present time due to the conflict. The Ministry of Justice and the Syrian Investment Agency are however studying plans for the formation of international arbitration centers to consider the claims of Syrian investors who are based overseas. It is a fundamental precondition that arbitration centers accumulate sufficient experience in the years to come if they intend to market their services as reliable adjudicators.

While the gradual push for arbitration slowed down significantly in 2011 with the onset of unrest, it returned to the spotlight in early 2016 when Syria’s Public-Private Partnership (PPP) Law was enacted after a five-year delay. The PPP Law was originally slated for passage in early 2011 but was overtaken by events on the ground at the time. Article 78 of the Law deals specifically with the resolution of disputes and provides options for parties to settle them by reference to domestic and international arbitration. While Syria’s PPP program will be slow to take off, one of its byproducts when it does is expected to be a corollary rise in arbitral adjudications.

Promoting a culture of arbitration must start with legislative action and follow through with appropriate judicial enforcement by the courts. The laws and treaties mentioned above are testament to Syria’s desire to position itself as an arbitration-friendly jurisdiction in a post-conflict era if not at the present time. The war itself has given stakeholders the time to consider their strategy in this regard. In addition, the local business community is starting to do its part as well in raising greater awareness of what arbitration can offer.

On the governmental side, the Ministry of Justice is advocating for more acceptance of arbitration by parties as a means to settle contractual disputes that may arise. It has already formed a special committee and tasked it with studying possible amendments to the Arbitration Law. The Ministry has acknowledged that Syria is seeking a modern law that incorporates global legislative standards in an attempt to suit the needs of the post-war period. In this respect, the focus on the development of arbitration is being shaped to an extent by the prospective requirements of the reconstruction phase. The committee is also concentrating on ways to enhance the relationship between the courts and arbitral tribunals so that both these bodies complement each other. Furthermore, the controversial exclusion of administrative contracts from the Arbitration Law is also being reviewed as part of efforts to alter the public sector mindset to be more accommodating of private sector interests.

With respect to the local business community, the Damascus Chamber of Commerce is hosting lectures and seminars to discuss how to cultivate a culture of arbitration that Syrian businesses can resort to when settling trade disputes. It recently joined the Damascus Center for Studies and Research for a seminar on legal and practical perspectives on commercial arbitration. For its part, the Damascus Securities Exchange wants to make use of arbitral proceedings instead of litigation to settle potential disputes that may arise on the stock market.

Developing a culture of arbitration in Syria will go a long way to satisfying the intense demands of the post-conflict reconstruction phase. Foreign investors will appreciate a dispute resolution process that they are already familiar with rather than a court system with which they have little or no knowledge of in the event of a contractual disagreement. Legal reform should concentrate on current shortcomings that include improved enforcement of the New York Convention. Legislative developments are a helpful start but greater awareness and stronger inputs from vested stakeholders in the public and private sectors are essential factors as well. The judiciary must also be guided to see the complementary benefits of arbitration as opposed to a competitive force challenging its authority. If all these issues are addressed appropriately, it may be within reach for Syria to continue the progress on arbitration it started in 2008.