First Ever Ruling for Inter-Arab Court

The Arab League's Investment Dispute Settlement Court looked into its first case in 20 years last week. Although the court was originally established in the mid-1980s, it only became operational in 2003, when the League's Economic and Social Council decided to activate it. The court's role is to judge on conflicts that arise between Arab governments, corporations and individuals from differing Arab states.

The first case involved a lawsuit filed by the Saudi Arabian company Tanmiah for Consultancy Management & Marketing (TC) against the Tunisian government. First filed in January 2003, the case involves a dispute over the sponsorship of the Mediterranean Games that were held in Tunisia in 2001. The court determined that the Tunisian government had done nothing wrong.

Representatives of the Saudi Arabian company said that in 1999, TC signed a contract with the Tunisian government giving the company the exclusive right to market the Games. A few months later, however, the company said they found out that the Tunisian government had signed a similar contract with Tunisair.

According to the company's summary of the case, this was only the beginning of a "chain of violations" by the Tunisian government. As a result, TC was demanding some $79 million in compensation for the harm incurred. The Tunisian government, in return, filed a counter suit.

"None of these accusations is true. Bad intentions were evident from the very beginning," said Mohamed Al-Haj Al-Tayeb, a Tunisian government representative. "We [the Tunisian government] never signed a contract with Tunisair. The Tunisian government merely asked the Tunisian company to support Tunisia's big event at that time," Al-Tayeb said.

He said that soon thereafter, "we stopped any cooperation with the Tunisian airline." Furthermore, said Al-Tayeb, TC did not spend any money, nor did they make any of the regular payments stipulated by the contract. "It broke the very essence of the contract, and therefore, the Saudi Arabian side can not claim that Tunisia violated any of the Saudi Arabian company's rights."

In its summary, TC claimed that it had invested about 30 per cent of the total amount agreed upon in the contract.

Tunisia was pleased with the court's decision. "The real winner in this case is the Arab League's investment court," said Tunisian government representative Abdul-Majid Al-Turki. The dispute settlement process, he said, "is good news for investors".

TC CEO Adel S Al-Maddah -- who had high hopes of winning the case -- was much more sceptical about whether the court could play a crucial role in "truly" solving investment disputes between Arab governments and Arab citizens. "We could have appeared before the Paris International Chamber of Commerce," he said, "but we preferred to put our case before the Arab League's investment court." In hindsight, he said, "it was not advisable for any investor to do so. All Arab investors have been waiting for this arbitration [vehicle]; if this is it, then they [the investors] have to reconsider. Our investment rate in Tunisia has noticeably declined because of the many obstacles that confront us there. This arbitration will bring it down even more," said Al- Maddah.

Prior to the court's activation, ''around 90 per cent of Arab investors submitted their investment disputes to the International Chamber of Commerce in Paris, because it provides smooth settlements," said one investor, who preferred to remain anonymous.

Although it has finally been activated, it seems the new court may have a way to go before gaining widespread acceptance as an efficient means of resolving disputes.