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Cablegate: The King, the Courts, and the Rise of Arbitration

VZCZCXRO7263
RR RUEHBC RUEHDE RUEHDH RUEHKUK RUEHROV RUEHTRO
DE RUEHCL #0198/01 2951333
ZNR UUUUU ZZH
R 221333Z OCT 09 ZDK
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC 8541
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHMD/AMEMBASSY MADRID 3905
RUEHFR/AMEMBASSY PARIS 0727
RUCNMGH/MAGHREB COLLECTIVE

UNCLAS SECTION 01 OF 02 CASABLANCA 000198

SIPDIS
SENSITIVE

STATE FOR NEA/MAG
COMMERCE FOR NATHANIEL MASON
DEPT FOR EB/IFD/OIA
STATE PASS TO USTR
TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: EINV ETRD EFIN ELAB PGOV MO
SUBJECT: THE KING, THE COURTS, AND THE RISE OF ARBITRATION

REF: RABAT 0719

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1. (SBU) Summary: With only 150 judges in the entire commercial
judiciary and close to 100,000 pending cases, Morocco's slow and
often inept judicial system has made international firms
increasingly skittish about investments and business transactions.
In his major annual youth day address in late August, King Mohammed
VI outlined a roadmap for "the in-depth, comprehensive reform of the
judicial system", citing among the priority areas improving
Morocco's business environment. For the time being, more and more
local and foreign firms are turning to Alternative Dispute
Resolution services in an effort to circumvent the long delays in
the commercial dispute process. End Summary.

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It's A Numbers Game
-------------------

2. (SBU) In his major annual youth day address in late August, the
King drew up a roadmap for "the in-depth, comprehensive reform of
the judicial system," providing details as to how judicial reform
should proceed. Among the King's six priority areas were improving
the business environment and the conditions for fair trials
(reftel). The King's emphasis is well placed, as recent UN and World
Bank studies highlight Morocco's shortcomings in this area,
indicating that the inefficiency of the country's judicial system is
hampering economic development.

3. (SBU) Morocco's judicial system perceived as flawed both
domestically and abroad, with excessive bureaucratic red tape and a
slow and often uncertain judicial process, which at times deters
both local and foreign investment. Reda Oulamine, a corporate
lawyer who does legal consulting for foreign clients seeking to
invest in Morocco's retail sector, told Econoff that his clients'
primary concern is the state of the legal system. "Morocco loses
foreign investment due to the blatant inefficiencies of its
commercial court system. Worried, some clientele simply choose to
invest elsewhere." Such concern is well founded. According to the
World Bank's 2010 Doing Business publication, Morocco ranks 128 out
of 183 countries for ease of doing business, with its overall
position dragged down by poor rankings in protecting investors (165
out of 183) and in enforcing contracts (108 out of 183).

4. (SBU) "The country's judicial shortcomings are largely
mathematical. A numbers game if you will," explained Oulamine.
Morocco's commercial courts are simply overwhelmed by the volume of
cases, requiring judges to deliberate on multiple motions and dozens
of cases in the same sitting. With nearly 150 judges in the
commercial judicial system and close to 100,000 cases on file, on
average (theoretically) each judge would have to hear an estimated
600 cases per year in order to keep up with this workload. (Note:
There are close to 3,300 judges in the judicial system overall and
an estimated three million cases of all types pending. End Note.)
Commercial litigation is often more time consuming than disputes in
other areas as judges face complex legal issues and large financial
stakes.

5. (SBU) Investors are also concerned about the perception of
corruption among the country's magistrates (reftel) and difficulties
in enforcing judgments. According to data from the Casablanca
Commercial Court, the resolution of a commercial dispute on average
takes 615 days. "The slow deliberation of courts and the subsequent
difficulties in enforcing their judgment leads international firms
to undertake fewer investments and business transactions," says
Abdallah Chater of Casablanca's Regional Investment Center. Over 60
percent of commercial cases are heard by the Casablanca Commercial
Court.

-----------------------
The Rise of Arbitration
-----------------------

6. (SBU) To circumvent the long delays in the commercial dispute
process, more and more local and foreign firms are turning to
Alternative Dispute Resolution (ADR) services. Arbitration, in
particular, is increasingly being used in Morocco today. Since the
implementation of the 2007 Arbitration Law, the number of national
organizations dealing with arbitration has increased. The General
Federation of Moroccan Businesses (CGEM) has a mediation
organization and encourages its members to use arbitration, and the

CASABLANCA 00000198 002.2 OF 002


Casablanca Chamber of Commerce recently created an arbitration and
mediation section. "Arbitration, which typically deals with complex
legal disputes, is well suited to succeed in Morocco," explained
CGEM's President Mohamed Horani, one of the leading forces behind
arbitration in Morocco today. Close to 90 percent of CGEM members
have used arbitration at some point to resolve a commercial dispute.
The Ministry of Justice in particular has been a staunch supporter
of ADR in commercial disputes, as it would provide much needed
relief to their overwhelmed commercial courts.

7. (SBU) Professor Azzedine Kettani, one of Morocco's pre-eminent
arbitrators explained, "While trials are public in Morocco,
arbitration can be done discreetly, saving firms from potentially
costly and embarrassing disclosures." Moreover, parties can select
arbitrators who are technical experts in the field of dispute, added
Kettani.

---------------
The Limitations
---------------

8. (SBU) While nothing prevents parties from appointing foreign
arbitrators, one area of concern is the dearth of qualified local
arbitrators. Further, the use of arbitration can be costly, as
clients have to pay not only for their lawyer's fees but also
arbitrator's fees. "Unfortunately, arbitration remains a service
for the well-to-do in society. Small and Medium Enterprises (SME)
will continue to face an inept court system. Institutional change
is what Morocco needs," confided Hammad Kassal, the former president
of the SME Federation.

-------
Comment
-------


9. (SBU) Reforming the country's commercial legal framework will be
essential in promoting the growth of competitive businesses and
supporting foreign investment in Morocco. Arbitration and other
alternative dispute services should figure prominently in Morocco's
judicial reform and may be a promising area for future activities
supported by the Middle East Partnership Initiative (MEPI) and/or
USAID. Success, however, will depend on the resources allocated to
the task, and ultimately the leadership's long term commitment to
comprehensive reform of the judicial system.

© Scoop Media

 
 
 
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