Saudi Arabia and international arbitration: modern and ambitious

The growth of new centers of international arbitration in areas of the world not historically associated with this form of cross-border dispute resolution has been a key trend in the evolution of international arbitration over the last 20-30 years. The Kingdom of Saudi Arabia (KSA) has emerged as a country to watch in an increasingly competitive global marketplace for arbitration work. This article discusses the key features of the 2023 Arbitration Rules of the Saudi Center for Commercial Arbitration (SCCA).

 

Key takeaways

• Emerging arbitration hub – KSA is positioning itself as a potential competitor in the regional and global arbitration landscape.
• Legal framework – The 2023 SCCA Arbitration Rules have been drafted to align with international best practices, incorporating principles from the UNCITRAL Arbitration Rules and the establishment of the SCCA Court.
• Technological innovation – The establishment of an online dispute resolution platform for certain lower-value disputes aligns with SCCA's vision to be the preferred ADR choice in the region by 2030.

 

Rapid progress for KSA arbitration

In 2012 the KSA enacted a new arbitration law under KSA Royal Decree No. M/34 (2012) (KSA Arbitration Law). Modelled on the UNCITRAL Model Law on International Commercial Arbitration (1985), the law was instantly recognizable, bringing KSA in line with arbitral best practice.

The establishment of the SCCA quickly followed in 2014 to administer alternative dispute resolution procedures, such as mediation and arbitration, aimed at resolving commercial disputes within the region. In an unprecedented step for KSA dispute resolution, the SCCA operates in both Arabic and English.

November 2022 saw the announcement of the creation of an independent SCCA Court to make key administrative and procedural decisions relating to SCCA administered arbitrations. The SCCA Court has been stacked with international arbitrators, former leaders of arbitral institutions, academics, and high-profile practitioners from a range of both KSA-based and international law firms.  

Initially, Shari'a principles were mandatory in any SCCA arbitration notwithstanding the parties' selection of applicable law, however a vision “to be the preferred ADR choice in the region by 2030”, and to align KSA Arbitration with the best international standards, saw the 2023 SCCA Arbitration (SCCA Rules) modifying the requirement so as to honor the parties' choice of law, so long as it does not contradict Shari’a and public policy.

The Rules introduced other new features, which are compared and contrasted with the approach taken by some familiar, longstanding institutions below. 

 

Comparing the SCCA Arbitration Rules 2023 with the LCIA Rules 2020 and the ICC Rules 2021

As a recently established arbitral institution, the SCCA had the advantage of observing, adopting and adapting the practices of more established institutions to meet the standards of international best practice expected of parties, counsel and arbitrators. The SCCA Rules were modelled on the UNCITRAL Arbitration Rules.

The London Court of International Arbitration (LCIA) and the International Chamber of Commerce (ICC) (based in Paris) are two leading, trusted arbitral institutions

In the table below, we compare and contrast features of the SCCA Rules with the arbitration rules of the ICC and LCIA.

 

Online dispute resolution platform for lower-value disputes

A distinguishing feature of the SCCA is their online dispute resolution platform (ODR). While both the LCIA and ICC accept documents and fees can be paid and received by way of an electronic filing platform, neither offer an online dispute resolution platform such as the SCCA ODR.

The SCCA ODR is a major key feature of the SCCA's new 2023 Rules. Appendix IV specifically provides for the ODR.

Where the value of the dispute does not exceed SAR200,000 (approximately USD53,000), parties are able to elect to resolve their dispute using the ODR. The ODR uses technology in a virtual format to deal with the dispute in a time and cost-efficient manner.

Under Appendix IV, one arbitrator only will be promptly appointed by the SCCA.

The arbitrator will make their decision based on written submissions only, meaning no oral submissions are heard, unless the parties agree otherwise, or the arbitrator finds it necessary. A hearing, if necessary, would take place virtually, typically being held via phone or videoconference.

The arbitrator shall then issue a final award within 30 days from the date of their appointment.

The ODR is not the only way the SCCA are optimising and encouraging technology to ensure an efficient arbitration process. Article 4.1 provides that a Notice of Arbitration can be served by email or by way of other electronic means with a record of its transmission (a shared similarity with the LCIA). Article 25.2 provides that the arbitral tribunal and the parties are encouraged to consider how technology can be used to assist with case management and discovery/disclosure obligations. Ultimately, the tribunal has the discretion to determine the extent to which technology will be used. Finally, Article 36 provides that by default all awards are to be signed electronically.

 

Enforcement of awards

The UK, France, and KSA are all parties to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Convention).

The Convention applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration and states bound by the Convention agree to recognise and enforce awards made in other states, subject to specific limited exceptions.

KSA has declared that it restricts the application of the Convention to the recognition and enforcement of arbitral awards made in the territory of a contracting state. The reciprocity condition is satisfied where the country of origin of the award is a signatory to the Convention. In order to enforce an arbitral award in KSA, it can be enforced through the local enforcement court.

The SCCA survey of Saudi case law from 2017 to 2021 revealed that 603 applications were filed with the KSA appeal courts; two thirds of those applications were for enforcement or nullification of arbitral awards. By 2022, the survey data indicated that 522 domestic and foreign arbitral awards had been enforced.

Parties with arbitrations seated in KSA, or parties seeking an award enforceable against assets in KSA, must ensure the arbitration agreement, the proceedings, and the award are compliant with the KSA Arbitration Law and with Shari’a principles, as to not contravene public policy. KSA will not enforce the interest portion of an award as awards of interest are prohibited under Shari'a. This is governed by the KSA Enforcement Regulations.

 

Concluding remarks

The evolution of the SCCA and its arbitration rules is good news for parties, counsel and arbitrators in the region and beyond. Selecting the most appropriate arbitration rules, administering institution and seat of arbitration, among other matters, is an important exercise, and what will be appropriate will depend on the parties, their contract(s), and many other facts and circumstances. Our team can help you navigate these important decisions, so please get in touch with the authors of this article, or your regular DLA Piper contact.