Claudia Pharaon August 30 2019 Resolving telecoms disputes involving state entities in the Middle East Obeid Law Firm | Tech, Data, Telecoms & Media - International Claudia Pharaon Tech, Data, Telecoms & Media IntroductionPPPs and ADRTreaty-based dispute resolution mechanismsCommentIntroductionMiddle Eastern countries boast some of the highest penetration rates of mobile telephony in the world. In 2016 the Middle Eastern mobile-broadband subscriber base exceeded 1 billion, representing approximately 20% of the industry's global economic profit pool.(1)Since then, however, market saturation has caused a noticeable slowdown in the industry.(2) In turn, recent social and political crises have created an unfavourable climate for telecoms businesses in several countries of the region and have been the source of numerous disputes, some of which have involved state entities.(3)Further, as the economy becomes increasingly data focused, telecoms markets across the Middle East are changing considerably. The policy framework has not always kept pace with this rapid change, and aspects of telecoms regulations are now outdated.(4) However, personal data protection(5) and public-private partnership (PPP) laws are starting to affect telecoms contracts and investments. Specifically, PPP laws are enabling recourse to alternative dispute resolution (ADR) methods, including arbitration.(6) Negotiation and mediation, which have always been the norm in the Middle East, are also regularly used and encouraged for the resolution of disputes between private actors and states in the region.(7)This article provides an overview of the legislative framework available for the resolution of telecoms disputes involving state entities in the Middle East, with a focus on PPP and treaty-based dispute resolution mechanisms.PPPs and ADRGovernments have traditionally played a central role in the provision of public infrastructure and services. However, in recent years, PPPs have been increasingly used to invest in infrastructure and services globally, including in the telecoms field.(8) PPPs are seen as an innovative tool for remedying the lack of dynamism and unreliability of some government-led projects.Middle Eastern governments have followed this movement towards PPPs, which they have endorsed to protect and promote telecoms investments. By way of illustration, the Lebanese Ministry of Telecommunications built a mobile telecoms network and provided mobile services through build-operate-transfer (BOT) contracts(9) with private investors.(10)This transfer of traditionally state-led activities to private actors has been accompanied by a movement towards private means of dispute resolution, including for disputes with state entities. Such occurrence is reflected in the fact that PPP laws in the region generally authorise recourse to arbitration or other ADR mechanisms.While opening the door to the private resolution of disputes under PPPs, a number of Middle Eastern countries circumscribe their use, perhaps due to scepticism. For instance, the Dubai PPP Law 2015(11) provides that disputes arising out of a partnership contract may be referred to arbitration, but only if such arbitration is seated in Dubai and subject to Dubai laws and rules. This is a mandatory legal provision, and any agreement to the contrary is void.(12) Under the Egyptian PPP Law 2010 (currently being revised),(13) disputes resulting from PPP contracts can be resolved through arbitration or any other non-judicial means of dispute resolution, but only with the approval of the Egyptian Supreme Committee for Public Private Partnership Affairs.(14) Similarly, the Kuwaiti PPP Law 2014(15) permits the use of arbitration, but requires that agreements for PPP projects and all related agreements be subject to the applicable laws in Kuwait.(16) Recourse to arbitration must also be approved by the Higher Committee for Public-Private Partnership Projects,(17) a state organ established by a decree and chaired by the minister of finance.(18)Other countries in the region are more liberal in their approach to ADR in PPP laws. For example, the Lebanese PPP Law 2017(19) provides that partnership contracts between public and private entities must specify the chosen dispute resolution mechanism, which can include mediation and domestic or international arbitration, with no restriction as to the applicable law or procedure.(20) Under the Jordan PPP Law 2014,(21) the parties may agree to resolve any dispute relating to the PPP contract through ADR, in accordance with the parties' agreement in the partnership contact. The only requirement is that the contract must be governed by Jordanian law.(22)Treaty-based dispute resolution mechanismsIn addition to providing national legal frameworks for cooperation between telecoms investors and states, Middle Eastern countries have concluded a number of treaties aimed at promoting a favourable investment climate in their territory. Foreign investors in the Middle Eastern telecoms market benefit from the protection of a network of more than 600 legal instruments (ie, bilateral investment treaties (BITs) and other regional multilateral investment agreements such as the Organisation of Islamic Cooperation Agreement 1981 (OIC Agreement)).(23) Further, Middle Eastern countries have widely ratified the International Centre for Settlement of Investment Disputes (ICSID) Convention.(24) These instruments typically contain a dispute resolution clause providing for a cooling-off period, during which the claimant and host state will attempt to resolve their dispute amicably.(25) Claimants may also be required to exhaust domestic remedies during this period.(26) Once the cooling-off period has expired, and assuming no other pre-conditions apply, claimants can commence arbitration.The diverse international agreements concluded by Middle Eastern countries have been the basis of a number of claims brought by telecoms investors in the region, notably against Saudi Arabia,(27) following the 2017 Qatar diplomatic crisis, and against Iraq, in the context of the country's post-war transition.(28)CommentWhile the economic climate is currently challenging for actors in the Middle Eastern telecoms industry, countries in the region are increasingly establishing a more favourable legal framework for operators which allows recourse to ADR, including for the resolution of disputes with state actors. It remains to be seen how operators in the region will adapt their business models to the demand for data services and benefit from potential further legislative developments.For further information on this topic please contact Claudia Pharaon at Obeid Law Firm by telephone (+961 1 36 37 90) or email ([email protected]). The Obeid Law Firm can be accessed at www.obeidlawfirm.com.Endnotes(1) Daniel Boniecki and Chiara Marcati, "Winning the rush for data services in the Middle East and Africa," McKinsey Quarterly, May 2016.(2) Analysys Mason, Middle East and North Africa telecoms market: trends and forecasts 2018-2023, December 2018.(3) GSM Association, The Mobile Economy – Middle East and North Africa, 2017, p 13.(4) Ibid, p 5.(5) For example, the Lebanese Law Relating to Electronic Transactions and Personal Data (81/2018), the Bahraini Personal Data Protection Law (30/2018) and the Qatari Law Concerning Privacy and Protection of Personal Data (13/2016).(6) ADR is generally enjoying growing recognition globally for the resolution of telecoms disputes. See Queen Mary University London and Pinsent Mason International Dispute Resolution Survey, Pre-empting and Resolving Technology, Media and Telecoms Disputes, 2016, "Section 3: TMT Disputes: Dispute Resolution Mechanisms in Practice", p 22.(7) For example, in answer to the high number of claims that it has been facing, Egypt has introduced new policies focused on settlement or containment. Egypt's efforts to settle investor-state disputes are visible through a clear augmentation of settlement rates in the recent years. See, for example, Nayla Comair-Obeid, "Around the Belt & Road Initiative—Opportunities in the MENA Region and Dispute Resolution", 35th PMG Anniversary Book, 2018.(8) Kate Bayliss and Elisa Van Waeyenberge, "Unpacking the Public-Private Partnership Revival", The Journal of Development Studies (27 March 2017).(9) BOT contracts are a form of PPP used to finance large-scale projects, typically infrastructure projects. Under a BOT contract, a public entity – usually a government – grants a concession to a private company to finance, build and operate a project. The company operates the project for a period of time with the goal of recouping its investment, and then transfers control of the project to the government.(10) Hadi Melki, "Lebanon" in Bruno Werneck and Mário Saadi (eds), The Public-Private Partnership Law Review (Edition 5, April 2019).(11) Dubai Law on Public-Private Partnerships (22/2015) (Dubai PPP Law).(12) Article 35(b), Dubai PPP Law.(13) Egypt Law on Public-Private PartnershipsPPP Law (67/2010) (Egypt PPP Law). With regard to current revisions of the law, see "Egypt's Finance Ministry finalizes PPP law amendments", Enterprise – The State of the Nation, June 2019.(14) Article 35(2) of the Egyptian PPP Law. Article 190 of the current Egyptian Constitution of 2014, however, requires the submission of any administrative dispute to the exclusive jurisdiction of the State Council. The State Council's exclusive jurisdiction may cast doubts as to the arbitrability of disputes arising out of government contracts, including project contracts concluded between the granting authority and the project company pursuant to the PPP Law, since such disputes are administrative in nature. The Law Library of Congress, Global Research Centre, Egypt: Legal Framework for Arbitration (August 2014).(15) Kuwaiti Law Concerning Partnerships Between the Public and Private Sectors (116/2014) (Kuwaiti PPP Law) and its Executive Regulations.(16) Article 29 of the Kuwaiti PPP Law.(17) Ibid.(18) Article 2 of the Kuwaiti PPP Law.(19) Lebanese Law 48, Regulating Public Private Partnerships, passed on 7 September 2017 (Lebanese PPP Law). The Lebanese PPP Law was enacted ahead of the Conference for Economic Development (CEDRE) hosted in Paris on 6 April 2018, in support of Lebanon's development and reforms. See France Diplomatie, Lebanon – CEDRE Conference (6 April 2018), available here.(20) According to Article 10(15) of the Lebanese PPP Law, "the Partnership Agreement shall include the following:... 15- The dispute resolution mechanism, which can include mediation and domestic and international arbitration".(21) Jordan Law Concerning Public-Private Partnerships (31/2014) (Jordan PPP Law).(22) Article 16 of the Jordan PPP Law.(23) Agreement on Promotion, Protection and Guarantee of Investments among Member States of the Organisation of the Islamic Conference, which entered into force on 23 September 1986.(24) See Database of ICSID Member States, available here.(25) Almost all Middle Eastern BITs expressly envisage that consultation or negotiation should precede arbitration proceedings. Most of them provide for a six-month minimum period from the notification of the claim before arbitration proceedings may be started (eg, Article 8 of the Israel-South Africa BIT). Some of them do not provide for a prior consultation at all (eg, Article 9 of the Jordan-Netherlands BIT 1997 and Article 7 of the Yemen-United Kingdom BIT 1982). Others provide for a consultation period of only three months (eg, Article 9(2) of the Bahrain-Thailand BIT 2002, Article 6(3) of the Jordan-Malaysia BIT 1994 and Article 8(1) of the Bahrain-United Kingdom BIT 1991) or of up to 24 months (eg, Article 9(3) of the United Arab Emirates-Switzerland BIT 1998). See Robert T Greig, Claudia Annacker and Roland Ziadé, "How Bilateral Investment Treaties Can Protect Foreign Investors in the Arab World or Arab Investors Abroad", Journal of International Arbitration, Volume 25, Issue 2, 2008, pp 257-273.(26) See, for example, Article 8 of the Egypt-Sweden BIT 1978.(27) beIN Corporation v. Kingdom of Saudi Arabia, UNCITRAL (claim brought under the OIC Agreement).(28) Agility Public Warehousing Company KSC v Republic of Iraq, ICSID Case ARB/17/7 (claim brought under the Iraq-Kuwait BIT) and Itisaluna Iraq LLC, Munir Sukhtian International Investment LLC, VTEL Holdings Ltd, VTEL Middle East and Africa Limited v Republic of Iraq, ICSID Case ARB/17/10 (claim brought under the OIC Agreement).