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 
 
CASABLANCA 00000198  001.2 OF 002 
 
 
¶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. 
 
------------------- 
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.