Enforceability of Arbitral Awards Containing Interest - a Comparative Study Between Sharia Law and Positive Laws
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Enforceability of Arbitral Awards Containing Interest - A Comparative Study between Sharia Law and Positive Laws Mohammad Motlg Althabity (2110104) 29 Jan 2016 A Thesis submitted for the degree of Doctor of Philosophy in law (PhD) School of Law University of Stirling Abstract The dynamics of our globalised world open the way for international trade and transactions between different countries; this may lead to conflicts in laws where transactions and trade may be subject to different legal systems. One of the biggest issues in international commercial law is disputes over the charging of interest, for example with regard to late payment, interest-based loans, or compensation for damages. Interest disputes are considered to be a complex area of law and even more complex in the international field. At the international level, interest claims may be connected to many areas of commerce and thus governed by various laws, which are different from one country to another; moreover, each country has its own interest rate and such rates are changeable according to the nature of law and economics under some jurisdictions. Furthermore, the concept of interest itself is affected by influences such as religious beliefs and economic, political and cultural trends. Interest can be treated as a substantive or a procedural matter. The settlement of these disputes therefore faces difficulties. Arbitration, as a method for settlement of disputes, is characterised by special features that assist in resolving these issues; but it faces some obstructions, especially in international commercial arbitration. The practices of arbitral tribunals and national courts in this regard are different. The results of different interpretations, approaches, and theories with regard to arbitration, at the pre-arbitration, during arbitration and post-arbitration stages, may also differ widely due to the diversity of financial and legal systems such as Common Law, Civil Law and the Islamic legal system – Sharia Law – across different countries. Each legal system has a different methodology and theories, even within an individual country under one legal system, and a state within a federal system has its own laws, which may have different interpretations in this respect. The New York Convention of 1958 on enforcing foreign arbitral awards was established in favour of arbitral awards and for the purpose of unifying international rules of arbitration. This Convention provides some procedural and substantive rules for the enforcement of foreign arbitral awards, but also provides some grounds for refusal. These rules have been affected by different interpretations under different jurisdictions and legal systems, which lead to different perspectives on the matter of charging interest and settlement by arbitration. The outcome of applying the NYC under these interpretations often has the opposite of its intended effect: the rejection of foreign arbitral awards. Due to such ambiguities, courts occasionally intervene in arbitration in all its stages. The interventions of national courts occur in three stages: enforcement of the arbitration agreement, enforcement of the contract under the applicable law to the agreement, - i - and enforcement of the foreign arbitral award. The confusion between substantive and procedural laws also creates confusion with respect to public policy, non-arbitrability and enforceability. In addition, there may be a lack of clarity on the scope of arbitration with respect to the parties’ agreement, whether or not the parties have agreed to the interest rates and periods and whether or not they have agreed to the authority of the arbitrator. These issues affect the enforceability of an arbitration agreement, the law applicable to the disputed contract, the freedom of parties, the authority of the arbitrators and the enforceability of the awarded interest. The thesis studies how arbitral awards containing interest have been interpreted across the three aforementioned legal systems under the NYC 1958 in Saudi Arabia, Egypt, the UAE, England, France, and the US and the enforceability of such awards. ii Attestation I understand the nature of plagiarism, and I am aware of the University’s policy on this. I hereby declare that no portion of the thesis is the work of others, and I clearly acknowledge that no part of the thesis has been submitted elsewhere in support of an application for another degree or qualification. Signature Mohammad M Althabity Date 29/01/2016 - iii - Acknowledgements I thank my greatest God Almighty "Allah" for his guidance and help through this research. My thanks to my parents, my wife and my daughters for their patience and for believing in me, my friends for encouraging me. I would like to give a special thanks to my supervisor Dr. Hong-Lin Yu for her guidance and appraisal of this work, and to the University of Stirling staff for everything I needed in this work. iv Abbreviations CISG United Nations Convention on Contracts for the International Sale of Goods NYC The New York Convention 1958 (UN) The United Nations (UN) UNCITRAL United Nations Commission on International Trade Law FAA The Federal Arbitration Art ICC The International Chamber of Commerce ICSID The International Centre for Settlement of Investment Disputes WIPO The World Intellectual Property Organization PECL The Principles of European Contract Law UCC The Uniform Commercial Code AAA The American Arbitration Association LCIA The London Court of International Arbitration UCTA The Unfair Contract Terms Act 1977 UTCCR The Unfair Terms in Consumer Contracts Regulations 1999 UAE United Arab of Emirates U.S. United States GCC The Gulf Cooperation Council ILA The International Law Association SAMA The Saudi Arabian Monetary Agency Sharia law A law based on the Islamic sources Riba Extra, charging illegal interest Gharar Uncertainty Fiqh’ Islamic Jurisprudence Qiyas Analogy Ijtihad Human activity and independent judgment Ijma Consensus by collective reasoning by qualified scholars fa’ra New case a’s l Legal precedent Furu al Fiqh The second branch of Fiqh Usul al Fiqh The first branch of Fiqh Quran The Holy book of Islam Hadith The sayings and practices of the Prophet Muhammad Lex arbitri The law of the place where arbitration is to take place Lex contractus The law governing a contract lex fori The laws of a forum lex trans The transnational law usura Latin the word of use intereo To be lost Istihsan To consider something good Istidlal A method of juristic deduction not falling within the scope of analogy Istishab Islamic legal term for the presumption of continuity Il’lah The effective cause Majalla The Ottoman State’ Legal Provisions Maqasid In harmony with reason Tahkeem Arbitration in Arabic Fatwa An Islamic ruling Ma’taoum Any eaten Althmnyah A value shart-jazai A penalty clause Asl Fundamentals Wasf Components - v - Ijab The offer qabul The acceptance Riba Al-Fadl Fadl’ means increasing or excess Riba Al-Nasiah Nasiah’ means delay, rescheduling or defer for an addition Diwan Al-Mazalim The Board of Grievances pacta sunt servanda Latin – ‘promises must be kept’ vi Table of Contents Abstract ........................................................................................................................ i Attestation .................................................................................................................. iii Acknowledgements ................................................................................................... iv Abbreviations ............................................................................................................. v Table of Contents ..................................................................................................... vii Chapter 1. Introduction ........................................................................................ 1 1.1 The complexity of the issues ................................................................................. 2 1.1.1 The impacts different legal systems may have on arbitration ............................. 2 1.1.2 The complexity of the concepts and the issues arising from usury and interest . 4 1.1.3 The general perceptions of the nature of arbitration ........................................... 7 1.1.4 Putting the issues into the context of arbitration ................................................. 8 1.2 Scope and Objectives ........................................................................................... 11 1.2.1 Specific Objectives ........................................................................................... 12 1.3 Research Question ............................................................................................... 12 1.4 The reasons for selecting the topic ..................................................................... 12 1.5 Research Methodology ........................................................................................ 13 1.5.1 Gap in the current research on awarding Riba and the academic contributions of the thesis .................................................................................................................... 14 1.6 Overview of Thesis .............................................................................................. 15 Chapter 2. International Arbitration and Arbitration under Sharia law ..... 16 2.1 Introduction ......................................................................................................... 16 2.2 International Arbitration