The concept of the Saudi arbitration system and its importance in resolving commercial disputes

Arbitration is the ideal way to avoid resolving judicial and commercial disputes through the courts and the lengthy, complex litigation process. It is the preferred method for disputing parties to resolve disputes related to their investments unilaterally. The most important feature of the arbitration system is that its procedures are agreed upon before initiation, as well as the selection of the arbitration panel, its scope, the venue, and its duration. This is what we will explain in this article.

What is the Saudi Arbitration System?
The Saudi Arbitration System is an agreement between two or more parties to refer all or some disputes that have arisen or may arise between them in a legal relationship, whether contractual or non-contractual, to arbitration. This arbitration agreement can be in the form of an arbitration clause included in the contract or an independent arbitration agreement. Here are the procedures followed in the Saudi Arbitration System.

What are the Arbitration Procedures in the Saudi Arbitration System?
The Saudi Arbitration System includes a set of steps regulating the arbitration process in the Kingdom of Saudi Arabia. The parties to the arbitration may agree on the procedures to be followed by the arbitration tribunal, including the possibility of subjecting these procedures to the laws in force in any arbitration body, whether inside or outside the Kingdom, provided they are consistent with the principles of Islamic Sharia. In the absence of an agreement, the arbitration tribunal may take appropriate measures based on the provisions of Sharia and the arbitration law, provided that the parties to the arbitration are notified of these procedures at least ten days prior to the commencement of their implementation. The following are the most important steps in Saudi commercial arbitration.

First: The Arbitration Tribunal
The arbitration tribunal is the body competent to resolve disputes under the Saudi arbitration law. Arbitration is decided by a sole arbitrator or a panel of arbitrators. The competent body for resolving the dispute is the court with legal jurisdiction.

Formation of the Arbitration Tribunal
The arbitration tribunal shall consist of one or more arbitrators. The number shall be odd, otherwise the arbitration shall be void.

The arbitrator must be fully qualified and of good conduct.

The arbitrator must hold a university degree in Sharia or legal sciences.

If the arbitration tribunal consists of more than one arbitrator, the chairman of the tribunal must hold this university degree.

Second: Jurisdiction of the Arbitral Tribunal
The arbitral tribunal shall have jurisdiction to adjudicate objections related to its lack of jurisdiction, including objections based on the absence, nullity, invalidity, or non-coverage of the subject matter of the dispute.

The arbitral tribunal shall adjudicate objections related to its lack of jurisdiction before adjudicating the subject matter. It may combine these objections with the subject matter to adjudicate both. If it rejects the objection, it may only be appealed by filing a lawsuit to annul the arbitral award that terminates the entire dispute.

The appointment of an arbitrator by either party to the arbitration, or participation in the appointment of an arbitrator, does not waive the party's right to raise objections regarding the arbitral tribunal's lack of jurisdiction. However, objections regarding the non-coverage of the arbitration agreement regarding issues raised by the other party during the consideration of the dispute must be raised immediately, otherwise the right to raise them shall be forfeited.

In all cases, the arbitral tribunal may accept a late objection if it deems the delay to be justifiable.

Third: Controls for Selecting the Arbitration Panel
First:
The two parties to the arbitration have the right to agree on the arbitrators. In the event of a disagreement:

If the arbitration panel consists of a single arbitrator, the competent court shall select him.

If the arbitration panel consists of three arbitrators, each party shall select one arbitrator, and the two arbitrators shall agree on the third arbitrator.

If one party fails to appoint its arbitrator within 15 days of receiving a request from the other party, or if the two appointed arbitrators fail to agree on the third arbitrator within 15 days of the appointment of the last of them, the competent court shall select the arbitrator based on the request of the interested party. The arbitrator selected by the two appointed arbitrators or selected by the competent court shall preside over the arbitration panel.

If the arbitration panel consists of more than three arbitrators, the same applies as in the case of two or three arbitrators.

Second:
If the two parties to the arbitration do not agree on the procedures for selecting arbitrators, or if one of the parties violates them, or if the appointed arbitrators fail to agree on matters that require agreement, or if a third party fails to fulfill their mandate:

The competent court shall undertake this task upon the request of the party interested in expediting the agreement on the arbitration procedures, unless the arbitration agreement provides for another method for doing so.

The party requesting the competent court to appoint an arbitrator must attach to its request a copy of the arbitration award and the arbitration agreement.

Third:
The competent court must observe the conditions stipulated in the arbitration agreement and Saudi law when selecting the arbitrator. The court shall issue its decision on the selection of the arbitrator within 30 days from the date of submission of the request.

Fourth:
The decision of the competent court appointing the arbitrator shall not be subject to appeal.

Arbitrator Challenge Procedures Under the Saudi Arbitration Law
Article 17 of the Saudi Arbitration Law, issued by Royal Decree No. M/39 dated 24/5/1433 AH, stipulates that:

If the two parties to the arbitration do not agree on the procedures for challenging an arbitrator, a challenge request shall be submitted in writing by one of the parties to the arbitration tribunal, explaining the reasons for the challenge within 5 days from the date the challenger learns of the composition of the tribunal or the circumstances of the challenge. If the challenged arbitrator does not withdraw or the other party does not agree to the challenge request within 5 days from the date of its submission, the arbitration tribunal shall decide on the matter within 15 days from the date of receipt. If the challenge request is rejected, the challenger may appeal to the competent court within 30 days. The court's decision shall not be subject to appeal by any means.

A challenge request shall not be accepted from a party who has previously submitted a challenge request to challenge the same arbitrator in the same arbitration for the same reasons.

Submitting a challenge request to the arbitration tribunal shall suspend the arbitration proceedings, and an appeal against the arbitration tribunal's ruling rejecting the challenge request shall not suspend the arbitration proceedings.

If the arbitrator is dismissed, whether the award is issued by the arbitration panel or the court competent to hear the appeal, the arbitration procedures and the arbitration award shall be deemed null and void.

Features of the Saudi Arbitration System
The arbitration system is characterized by its speed in resolving disputes and conflicts between parties, as it does not require specific dates or adherence to official working hours. Furthermore, arbitration emphasizes the flexibility of sessions, as sessions are scheduled to suit the parties' schedules and needs, whether during the day or night, with the aim of expediting the dispute resolution process.

The arbitration system allows the parties freedom to choose the arbitrator and arbitration panel. The arbitrator, whether an individual or an arbitration panel, is chosen with the consent and acceptance of the parties, increasing the chances of reaching an amicable settlement.

The arbitration system allows the parties to exercise confidentiality as they wish, in contrast to court hearings, which are usually public. As a result, arbitration is less tense and less contentious between the parties.

The arbitration system works to enhance the parties' acceptance and satisfaction with the award, as they are the ones who choose or approve the arbitrator.

Arbitration offers greater flexibility in choosing the laws and regulations upon which the parties rely, while adhering to the principles of Islamic Sharia and local legislation. Article 5 of the Arbitration Law in the Kingdom of Saudi Arabia stipulates adherence to the provisions of any document agreed upon by the parties, provided it does not conflict with the provisions of Islamic Sharia.

Frequently Asked Questions

When does an arbitrator have an interest in the dispute?

The arbitrator must not have an interest in the dispute until the arbitration proceedings are completed.

The arbitrator is obligated to notify the parties in writing of all circumstances that may raise doubts about his impartiality and independence, unless he has previously informed them of such circumstances.

The arbitrator is prohibited from hearing and considering the case in the same circumstances in which a judge is prohibited, even if the parties do not request this.

When is an arbitrator dismissed?

An arbitrator is dismissed when doubts arise about him that may affect his impartiality and independence.

If he does not hold a university degree in Sharia or legal sciences.

If he is incapable or of bad character and conduct.

Neither party to the arbitration may request the recusal of the arbitrator they appointed or participated in appointing except for reasons that become apparent after the arbitrator's appointment.

An arbitrator may withdraw from the dispute if requested to withdraw without stating the reasons for their withdrawal. This does not constitute an admission of the validity of the reasons relied upon by the requester of the recusal. A request to withdraw an arbitrator shall not be accepted after the closing of the pleadings.

If the arbitrator's mandate has ended, except by the recusal, the arbitration proceedings shall be suspended until a replacement arbitrator is appointed.

In conclusion:
The arbitration system is an effective means of resolving disputes, whereby the parties appoint an arbitrator who issues a final decision in the dispute between them. This process is characterized by speed and efficiency in resolving disputes, while adhering to the principles of Islamic Sharia and local laws. At our law firm, we pride ourselves on our ability to provide legal advice and answer all inquiries related to the Saudi arbitration system. We are committed to providing support and assistance to our clients in understanding and implementing this system in an effective and innovative manner. We can provide tailored and specialized legal advice to meet your needs and ensure your rights and interests are protected during arbitration proceedings. Please feel free to contact us for assistance and guidance regarding the Saudi arbitration system and any other legal matters related to your business.