Decisions of two Lebanese Courts on the Arbitrability of Disputes arised from Commercial Agency Agreements.

Silvia BORTOLOTTI | LEBANON | 2005-12-14


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In fact, on the one hand, Lebanon is part of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which obliges national courts to decline their jurisdiction where the parties agreed to submit to arbitration possible disputes between them. On the other hand, Article 5 of Decree – Law No. 34 of August 5, 1967, which regulates commercial representation in Lebanon, states that: «Notwithstanding any agreement to the contrary, the courts of the place where the commercial representative exercises his activity are competent to adjudicate disputes arising from the contract of commercial representation».

The first decision was issued by the 9th Chamber of Beirut Court of Appeal on October 7, 2004 and was published in Al Adl review 2005, Vol. 3, p. 540.
In the said case the Court stated that, when the 1958 New York Convention considers the validity of an arbitration clause, it requires that the subject matter of the dispute is capable of settlement by arbitration: this should mean that the dispute should be subject to arbitration according to the laws of the court before which the arbitration clause is raised.
According to the Court, Article 5 of Decree-law No. 34/67 declares all disputes arising from contracts of commercial representation as not capable to be submitted to arbitration and, therefore, such provision is not in contrast with the New York Convention, which only applies to disputes capable of settlement by arbitration.
Therefore, the Court stated that the arbitration clause included in the agency agreement was null and void and recognised its own jurisdiction on the case.

The second decision was issued by the 5th Chamber of the Supreme Court on January 11, 2005, decision No. 4/2005 and was published in Ad Adl Review 2005, Vol. 2, p. 285 and the Lebanese review of internal and international arbitration 2005, Vol. 3, p. 62.
The Court made a distinction between the arbitral clause, which is accepted at the signature of the agency agreement (or during its execution) and the arbitration agreement, which is accepted after the arising of the dispute.
As far as the arbitration clause is concerned, the Court deemed that it must be considered null and void as in contrast with Article 5 of Decree-law No. 34/67. The main reason, according to the judge, is that, at that time, the Lebanese representative is to be considered the weakest party in the contractual relation and Article 5 of Decree-law No. 34/67 aims at protecting him from any renunciation of his rights.
By way of contrast, the arbitration agreement shall be considered as valid, since the dispute is already arisen and, at that time, the representative is able to assert his rights notwithstanding the provisions of Article 5. According to the Supreme Court, after the conflict arises, the representative frees himself from his dependence toward the principal and the protection granted by the said rule is no longer necessary.


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