2. Introduction
2.2 International Arbitration in Arab Countries
2.2.1 The First Phase
The first phase was from the end the Second World War to the 1970s. This was a period when Arab countries were not doing very well while at the same time there was a lack of respect for Islamic jurisprudence internationally, and the only real arbitrations that took place in the Islamic world at this time were those that arose from disputes about oil concessions.100 Before 1973, these concessions basically allowed foreign oil companies the right to access and control the oil supplies of these states for periods of 50 years or even more which also involved a freeze on the law which was achieved through clauses that were referred to as stabilisation clauses which meant that these concessionaries could secure their investments effectively for a lifetime.101 Any arbitration that came as a result of a dispute between these parties was
98 Ibid p.202
99Charles N. Brower and Jeremy K. Sharpe, "International Arbitration And The Islamic World: The Third Phase" (2003) 97(3) The American Journal of International Law.
100 Ibid 101Ibid
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characterised by the use of domestic Islamic law and general principles of law which had their foundations in Western jurisdictions which meant that they were often more beneficial to foreign claimants, and the western principles of law were found to be more elevated in this case102. From the perspective of Muslims or from the Islamic perspective, this experience of arbitration at that time would have seemed to be redolent or even an extension of the historic system where extra-territorial courts103 from the European courts exercised their powers in other Islamic lands as a throwback to the days of colonialism. A classic situation that illustrates this situation at that time was the era where there was arbitration related to oil with Abu Dhabi. In 1939, a 75- year oil concession which had a specified geographic scope was awarded to the Petroleum Development (Tru- cial Coast) Ltd by the Sheikh although it was a British protectorate at that time. When it came to the law that would govern the contract, it was acknowledged by Lord Asquith that due to the fact that the contract was formed in Abu Dhabi and would also be carried out in that country, the local system of law would be applicable and would take priority, which was in fact grounded in Islamic law.104 One of the issues that has been raised about Islamic law in relation to its use in international arbitration, specifically, its use in public policy to refuse to recognise and enforce foreign arbitral awards, is that it is something which is open to interpretation by Islamic jurists at a particular time and a particular place and there is a resulting need for the codification of Islamic law that is related to international arbitration. The codification of Islamic law has been addressed by more recent
102Charles N. Brower and Jeremy K. Sharpe, "International Arbitration And The Islamic World: The Third Phase" (2003) 97(3) The American Journal of International Law.
103Ibid 104Ibid
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scholars and it is not considered to be contrary to Islamic law in principle. These ideas are relevant to the present study because of the perception by western commercial parties that Islamic jurisprudence is not contained in a codified legal body leading to the suspicion that Sharia principles can be used to refuse foreign arbitral awards in order to achieve other political or national interests that are not related to the protection of Sharia law and similar public policy concerns such as public morality. It seems that these suspicions related to arbitration in the region, and in the case of this study, Saudi Arabia, are well founded in consideration of the perceptions at this first phase of arbitration development in the region.
The above argument is clearly illustrated in the first phase situation that involved Abu Dhabi and foreign oil companies. Where it was considered that local law in Abu Dhabi had to be the primary law by Lord Asquith, it is also important to remember that at that time, the Sheikh who offered the concessions to Petroleum Development (Tru- cial Coast) Ltd was an absolute feudal monarch that carried out justice using discretion with consideration of the Holy Quran and that it would be a fanciful idea that in a region that was primitive, there would be a body of legal principles that could be used together with the application of commercial instruments from a more modern time.105 Therefore, as a result of this situation, it was decided that it would be best if the terms of the contract were founded on common sense and common practice that was found generally in what were considered to be civilised nations, which was referred to as a ‘modern law of nature’.106 Although it is also important to note that Lord Asquith did concede that English municipal laws were also not suitable in some circumstances, however, where English laws were applied as being principles of
105Charles N. Brower and Jeremy K. Sharpe, "International Arbitration And The Islamic World: The Third Phase" (2003) 97(3) The American Journal of International Law. P.644
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international law, it was said by Lord Asquith that Petroleum Development (Tru- cial Coast) Ltd had the right to take oil from the sub-soil and seabed that were subjacent to the territorial waters of Abu Dhabi but not from beyond those waters.107