Buying a Franchise in Egypt: Reviewing the Dispute Resolution Clause Before Signing

The phrase ‘disputes shall be referred to arbitration’ may seem like a minor legal detail when buying a franchise. Yet it can determine your practical ability to enforce your rights, where a dispute is heard, the language used and the cost. In franchising, mutual trust alone is not enough: you need a clear, enforceable process if the parties disagree. This guide helps you review the dispute resolution clause before committing to the contract.

1. Understand Egyptian rules before accepting a standard contract

Egypt has no standalone, comprehensive franchise law, nor a general franchise-specific regime requiring a standard disclosure document or a fixed pre-signing disclosure period. Do not assume that a template used in another country automatically gives you the same rights in Egypt, or that a disclosure document removes the need to review the contract.

The relationship is governed by general legal rules, including Civil Code No. 131 of 1948, Commercial Law No. 17 of 1999 and Intellectual Property Rights Protection Law No. 82 of 2002, depending on the obligation concerned. Arbitration Law No. 27 of 1994 governs arbitration in civil and commercial matters within its scope.

One point is crucial: if the agreement qualifies as a technology transfer contract, the special provisions in Articles 72–87 of the Commercial Law may apply. Not every trade mark licence amounts to technology transfer; what matters is the substance of the technical know-how transferred and the actual obligations involved.

Article 87 gives Egyptian courts jurisdiction over disputes arising from the technology transfer contracts concerned. It permits arbitration provided that it takes place in Egypt in accordance with Egyptian law, with Egyptian law also governing the substance of the dispute. Seek legal advice on how the agreement should be classified before accepting arbitration abroad or a foreign governing law—not after a problem arises.

2. Distinguish between governing law, courts and the seat of arbitration

A contract may make three separate choices: the law governing the parties’ rights and obligations, the forum that will decide disputes, and the legal seat of arbitration if arbitration is chosen. The words ‘governed by Egyptian law’ do not necessarily mean that a dispute will be heard by an Egyptian court.

When reviewing the draft, ask for written answers to these questions:

• Will disputes go to court or arbitration? Does the wording make that choice clear, without conflicting clauses?
• If arbitration is chosen, which institution and rules are specified, or will it be ad hoc arbitration?
• Where is the legal seat of arbitration, and what language will be used?
• How will arbitrators be appointed, and what happens if one party refuses to co-operate?
• Does the clause cover schedules, guarantees and related agreements?

The seat of arbitration is not simply a venue for meetings; it has legal implications for court supervision of the proceedings and the arbitral award. Equally, choosing a well-known institution does not fix an incomplete clause that fails to specify how the tribunal will be constituted or the scope of its jurisdiction.

3. Assess the cost of bringing a claim before choosing a route

Arbitration is not always cheaper or faster than litigation. Costs vary according to the rules chosen, the value of the claim, the number of arbitrators, and the need for experts and translation. Payments may include advances on costs payable before an award is made, as well as lawyers’ fees and enforcement costs.

Ask your lawyer for an indicative estimate for two scenarios: a modest claim for an unpaid sum, and a major dispute that disrupts the operation of your outlet. You do not need an exact figure, but you do need to understand whether the claims process is proportionate to your investment and available cash.

Discuss whether you can agree on a sole arbitrator or expedited procedures where the rules and the nature of the dispute allow. Scrutinise any provision that makes you solely responsible for all costs, or gives the franchisor alone the right to choose the forum after a dispute arises. These are matters for negotiation and legal review, not details to overlook on the strength of a verbal promise.

4. Make negotiation and notice procedures workable

The process may begin with written notice, followed by negotiations between authorised representatives and perhaps mediation, before court proceedings or arbitration. However, the start and duration of each stage, and how its completion is evidenced, must be defined. A vague requirement to ‘seek an amicable settlement first’ can become a further source of disagreement.

Specify the addresses and email addresses for notices, who should receive them, when they are deemed received, and how contact details must be updated. Check that the settlement steps do not prevent either party from seeking urgent interim relief from the competent court or tribunal when needed, to the extent permitted by law.

Do not assume that negotiations automatically suspend limitation periods or other time limits for bringing claims. Ask your lawyer what steps are needed to protect your position, and keep the contract, earlier versions, correspondence, invoices and meeting minutes in an organised file. Evidence of compliance and breach is essential to enforcing your rights.

5. Review enforcement, not just the decision

Ask which party is actually bound by the obligations and where its assets are located. A familiar brand name on the documents does not mean that the parent company guarantees the obligations of the company signing the contract, or that a judgment against one can automatically be enforced against the other.

If the other party is based abroad, ask for an assessment of the process for recognising and enforcing a court judgment or arbitral award where its assets are located, including likely requirements and costs. Check that the dispute resolution clauses in the main contract and any separate guarantee are consistent, so that your claim is not split across conflicting procedures.

Practical takeaway: Before signing, prepare a one-page summary: whom you would claim against, which court or tribunal would hear the claim, which law and language would apply, the likely cost as far as it can be estimated, and where enforcement would be possible. If you cannot answer these questions, your review of the dispute resolution clause is not yet complete.