June 2010

Until recently, the lack of sophisticated and developed laws on alternative dispute resolution in the Middle East and North Africa (‘MENA’) meant there is no substantive or procedural framework, or a court annexed system and refusal by a party to obey mediation settlements are treated like any other breach of contract.

However, laws in relation to mediation have been enacted in the UAE (Dubai’s Law No 16 of 2009) where the mediation centre is annexed to the Dubai Courts (see also UAE Federal Law No 26 of 1999); Morocco (Law No 08-05 of 2007); Algeria (Law No 08-09 of 2008) has compulsory court-annexed mediation, except in matters pertaining to family law, labour law and public order issues; Tunisia (Law No 2002-3158) which regulates mediation in disputes involving public sector contracts; Egypt (Law No 7 of  2000) relating to disputes with ministries and public entities; and Jordan (Law No 12 of 2006).

With respect to arbitration awards, there are established legal mechanisms within the MENA for recognising and enforcing an award. Notwithstanding, there are continued challenges which must be met by governments and require a comprehensive statutory revision.

There are other impediments, some cultural and practical, which can be met by the contracting parties. There is a rich tradition and strong cultural and religious precepts of parties to amicably settle differences. This brings both positive and negative elements to dispute resolution in the region.

One of the common challenges in dispute resolution is a misunderstanding of what ‘mediation’ and ‘arbitration’ really mean. These terms are often confused, but to an attorney there is a world of difference.

Arbitration, which has become the norm rather than the exception in construction contracts, is a binding process with well defined rules for the determination of a dispute with specific outcomes. Like the court trial it is designed to replace, its purpose is to resolve disputes but it often leaves one of the parties dissatisfied with the whole experience.

Mediation is much closer to the traditional process, where an impartial person, the mediator, facilitates communication between the parties to promote reconciliation, settlement or a common understanding.  The mediator may not make any determination or impose his or her own judgment. Mediation is well-regarded in Sharia law with the aim of bringing the parties together with the goal of both being satisfied.

The process and final outcome of arbitration and mediation are very different. The first challenge is for parties to understand these distinctions before signing a contract. It needs to be understood that initiating arbitration should not be envisaged until other forms of dispute resolution have been exhausted such as negotiation, expert determination, statutory or private adjudication, and international adjudication also known as dispute boards.

Construction disagreements, like any other disputes, are resolved in various ways every day. In the MENA seeking a compromise and finding a mechanism to settle matters with a minimum of adversarial feeling is the norm. In this region there is no loss of face if in the early stages of a dispute the parties come together to settle any issues to maintain good relations and keep a project on schedule, even if it means finding a trusted "wise man" acceptable to the parties to mediate.

Following on from this, the local culture places a reliance on mediation through a trusted mediator which leads to problems because individuals raised in this environment think that this is also how arbitration works.  An arbitrators mission is to weigh the facts and evidence to make a binding decision which may not necessarily bring the parties together. Whereas a mediation settlement usually leaves the parties relationship intact, the same cannot be said for an arbitrators ruling, where the outcome can be very one-sided which need not surprise the aggrieved party who then refuses to recognise and fulfill its obligations under a reasoned award.

Finally, another issue is who should be selected as arbitrator or mediator? Although the world, particularly North America, Europe and Australasia, is littered with many institutions regulating accreditation, qualification and continued education of an arbitrator and mediator, sadly the same cannot be said of the MENA. With the very exacting and technical needs of the construction industry, nowadays having just a trusted "wise man" is not sufficient. An honest and well intentioned person, but technically unqualified will not suffice so as to discern fault and legal responsibility. Often these highly skilled specialists must to be flown into the region and this may result in substantial costs.

The contents of this article is intended to provide a general guide to the subject matter and does not constitute legal advice. Ferrer Lawyers always recommend that you obtain legal advice. If you’re seeking a mediator or require representation at an upcoming mediation call (02) 8823 3588 or email us with your enquiry at This email address is being protected from spambots. You need JavaScript enabled to view it. for further information, guidance or assistance.