19 May 2014
The establishment of Saudi Arabia's first commercial arbitration centre is considered a milestone for the development of arbitration in the kingdom, by far the largest economy in the Gulf Cooperation Council (GCC).
Arbitration has historically been underutilised as a method of dispute resolution in Saudi Arabia. However, a number of legislative developments in the last two years, including the new Arbitration Law (Royal Decree No. M/34) and the new Enforcement Law (Royal Decree M/53), have given impetus to the use of arbitration.
Another major step was taken on 14 April 2014, when the Council of Ministers issued a resolution establishing the Saudi Centre for Commercial Arbitration (the "Ministerial Resolution"). The Centre will be headquartered in the capital Riyadh, although the resolution envisages the possibility of branches being established in other parts of the kingdom and outside Saudi Arabia.
The Centre will fall under the umbrella of the Council of Chambers of Commerce and Industry and will be run by a board of directors chosen by the Council in conjunction with the minister of justice, minister of trade and industry and the governor of the General Investment Authority.
The board is expected to promulgate a set of arbitral rules, put together a list of arbitrators from which parties utilising the Centre may chose, and produce guidelines to determine the fees and expenses of arbitrators appointed pursuant to the rules.
In addition to the Centre, the ministerial resolution creates a standing committee within the Ministry of Justice, which will be responsible for, amongst other things, approving the issuance of licenses for Saudi arbitration centres and their branches.
Saudi-British Arbitration Centre
The Financial Times had reported in 2012 and 2013 that Saudi Arabia planned to set up an arbitration centre in the United Kingdom, which would decide cases under English Law and whose panel would include former English judges. At this stage it is unclear precisely how, if at all, the ministerial resolution will impact the planned Saudi-British arbitration centre.
In particular, it will be interesting to see whether the planned Saudi-British arbitration centre will be a branch of the Saudi Centre for Commercial Arbitration, or an entirely separate centre. The ministerial resolution provides that the Saudi Centre for Commercial Arbitration will represent the kingdom internationally in relation to commercial arbitration, in coordination with the Ministry of Justice.
Publicly funded arbitration?
The ministerial resolution also includes a curious innovation; whereby the Centre would be endowed with a fund to provide "arbitral aid", following introduction of additional regulation. On the face of it, this seems to suggest that a future regulation may provide for funding (in an appropriate case) to be made available for parties wishing to bring or defend claims. If this is the intention, it will certainly be interesting to see how it is implemented in practice, and what funding criteria are adopted by the Centre.
The future
The Centre appears to enjoy the support of the private sector as well as of the Ministry of Justice, Ministry of Trade and Industry and the General Investment Authority. This is of particular importance in an economy which is driven by the public sector, and the greatest vote of confidence would be using the Centre for contracts entered into by government and quasi-government bodies.
Whether the Centre's potential is fully realised will also depend on other factors. In order to attract international parties to adopt its arbitration rules, the Centre will need to ensure that its rules are user-friendly and that they adopt international best practice.
The rules are expected to have a built-in mechanism to prevent awards from contravening sharia law. This could, for example, be implemented by stipulating that a draft of the award be submitted to the Centre for scrutiny before the award is issued, as is the practice adopted by the ICC.
The credibility of the Centre can also be boosted by the inclusion of prominent international arbitration practitioners to its board, a step taken by some of the more successful arbitration centres in the Gulf, such as Dubai International Arbitration Centre and the DIFC-LCIA Arbitration Centre.
Given the stakeholders supporting the Saudi Centre for Commercial Arbitration, it is not beyond the realms of possibility that it may in due course become a popular centre for parties wishing to resolve their commercial disputes in the kingdom.
About the author
Raza Mithani leads the Commercial Disputes Practice in the Dubai office of King & Spalding. He is recognised as one of the leading experts in the Middle East on international commercial arbitration and cross-border litigation. He regularly acts on behalf of clients in high value and complex disputes arising out of business conducted in Saudi Arabia and for Saudi based clients in disputes with an international element.
Celebrating more than 125 years of service, King & Spalding is an international law firm that represents a broad array of clients, including half of the Fortune Global 100, with 800 lawyers in 17 offices in the United States, Europe, the Middle East and Asia. More information is available at www.kslaw.com.
© Special Contributions 2014
The establishment of Saudi Arabia's first commercial arbitration centre is considered a milestone for the development of arbitration in the kingdom, by far the largest economy in the Gulf Cooperation Council (GCC).
Arbitration has historically been underutilised as a method of dispute resolution in Saudi Arabia. However, a number of legislative developments in the last two years, including the new Arbitration Law (Royal Decree No. M/34) and the new Enforcement Law (Royal Decree M/53), have given impetus to the use of arbitration.
Another major step was taken on 14 April 2014, when the Council of Ministers issued a resolution establishing the Saudi Centre for Commercial Arbitration (the "Ministerial Resolution"). The Centre will be headquartered in the capital Riyadh, although the resolution envisages the possibility of branches being established in other parts of the kingdom and outside Saudi Arabia.
The Centre will fall under the umbrella of the Council of Chambers of Commerce and Industry and will be run by a board of directors chosen by the Council in conjunction with the minister of justice, minister of trade and industry and the governor of the General Investment Authority.
The board is expected to promulgate a set of arbitral rules, put together a list of arbitrators from which parties utilising the Centre may chose, and produce guidelines to determine the fees and expenses of arbitrators appointed pursuant to the rules.
In addition to the Centre, the ministerial resolution creates a standing committee within the Ministry of Justice, which will be responsible for, amongst other things, approving the issuance of licenses for Saudi arbitration centres and their branches.
Saudi-British Arbitration Centre
The Financial Times had reported in 2012 and 2013 that Saudi Arabia planned to set up an arbitration centre in the United Kingdom, which would decide cases under English Law and whose panel would include former English judges. At this stage it is unclear precisely how, if at all, the ministerial resolution will impact the planned Saudi-British arbitration centre.
In particular, it will be interesting to see whether the planned Saudi-British arbitration centre will be a branch of the Saudi Centre for Commercial Arbitration, or an entirely separate centre. The ministerial resolution provides that the Saudi Centre for Commercial Arbitration will represent the kingdom internationally in relation to commercial arbitration, in coordination with the Ministry of Justice.
Publicly funded arbitration?
The ministerial resolution also includes a curious innovation; whereby the Centre would be endowed with a fund to provide "arbitral aid", following introduction of additional regulation. On the face of it, this seems to suggest that a future regulation may provide for funding (in an appropriate case) to be made available for parties wishing to bring or defend claims. If this is the intention, it will certainly be interesting to see how it is implemented in practice, and what funding criteria are adopted by the Centre.
The future
The Centre appears to enjoy the support of the private sector as well as of the Ministry of Justice, Ministry of Trade and Industry and the General Investment Authority. This is of particular importance in an economy which is driven by the public sector, and the greatest vote of confidence would be using the Centre for contracts entered into by government and quasi-government bodies.
Whether the Centre's potential is fully realised will also depend on other factors. In order to attract international parties to adopt its arbitration rules, the Centre will need to ensure that its rules are user-friendly and that they adopt international best practice.
The rules are expected to have a built-in mechanism to prevent awards from contravening sharia law. This could, for example, be implemented by stipulating that a draft of the award be submitted to the Centre for scrutiny before the award is issued, as is the practice adopted by the ICC.
The credibility of the Centre can also be boosted by the inclusion of prominent international arbitration practitioners to its board, a step taken by some of the more successful arbitration centres in the Gulf, such as Dubai International Arbitration Centre and the DIFC-LCIA Arbitration Centre.
Given the stakeholders supporting the Saudi Centre for Commercial Arbitration, it is not beyond the realms of possibility that it may in due course become a popular centre for parties wishing to resolve their commercial disputes in the kingdom.
About the author
Raza Mithani leads the Commercial Disputes Practice in the Dubai office of King & Spalding. He is recognised as one of the leading experts in the Middle East on international commercial arbitration and cross-border litigation. He regularly acts on behalf of clients in high value and complex disputes arising out of business conducted in Saudi Arabia and for Saudi based clients in disputes with an international element.
Celebrating more than 125 years of service, King & Spalding is an international law firm that represents a broad array of clients, including half of the Fortune Global 100, with 800 lawyers in 17 offices in the United States, Europe, the Middle East and Asia. More information is available at www.kslaw.com.
© Special Contributions 2014
