Formation of the arbitration panel: steps and controls necessary to ensure fairness and transparency

The formation of the arbitration panel is vital in the arbitration process, as it involves appointing arbitrators who will independently and fairly consider the dispute. This article discusses the process of forming the arbitration panel under the Saudi arbitration system, focusing on the controls that must be followed in selecting arbitrators and how to ensure their impartiality and professionalism in issuing their decisions.

How is the arbitration panel formed?
Under the Saudi arbitration system, the process of forming the arbitration panel follows specific procedures aimed at ensuring the integrity and efficiency of the arbitration process. The arbitration panel is typically formed by the disputing parties, either by prior agreement on its members or by following the procedures specified in the law. These procedures are as follows:

Selection of Members:
The first step in forming the arbitration panel is to select appropriate members who have experience and competence in the disputed area. These members may be lawyers specializing in arbitration or experts in the field of dispute between the parties.

Appointment of the Chairman of the Arbitration Panel:
A chairman is appointed for the arbitration panel, who plays a vital role in conducting the sessions and guiding the arbitration process. The president of the arbitration panel must be a professional with extensive experience in the field of arbitration and the laws of the Kingdom of Saudi Arabia.

Determining the Remaining Procedures
After the arbitration panel is formed, the necessary procedures for the case are established, including setting legal deadlines, summoning witnesses, and presenting evidence. The arbitration process must proceed fairly and impartially, while ensuring the rights of all parties involved.

Thus, the formation of the arbitration panel under the Saudi arbitration system ensures integrity and transparency, contributing to the successful and fair resolution of disputes between parties.

Controls for Arbitration Agreement
Articles 9 and 10 of the Saudi Arbitration System, issued by Royal Decree No. M/39 dated 24/5/1433 AH, stipulate that:

An agreement to arbitrate may be entered into prior to the dispute arising in a specific contract or independent agreement, or subsequent to the dispute even if a lawsuit has been filed before the competent court, provided that the agreement specifies the issues covered by arbitration; otherwise, the agreement shall be void.

An arbitration agreement must be in writing, otherwise it is void.

An arbitration agreement is considered written if it includes a document issued by the two parties to the arbitration, or if it includes an exchange of authenticated correspondence, telegrams, or other electronic or written communication between the two parties. A reference to, or reference to, a document containing an arbitration clause in a contract constitutes an arbitration agreement. Any reference in a contract to the provisions of a standard contract, international agreement, or any other document containing an arbitration clause shall be considered a written arbitration agreement if such reference clearly indicates that such clause is part of the contract.

An arbitration agreement may only be entered into by a natural or legal person who has the authority to dispose of their rights.

Government entities may not enter into an arbitration agreement except with the approval of the Prime Minister, unless a specific provision permits it.

If a dispute is brought before a court and there is an arbitration agreement, the court must rule that the case is inadmissible if the defendant raises this issue before submitting the claims and defenses in the case. This does not prevent the initiation or continuation of arbitration proceedings or the issuance of an arbitration award.

If an agreement is reached regarding arbitration while the dispute is being heard before the competent court, the court must rule that the dispute be referred to arbitration.

The Authority of the Competent Court and the Arbitral Tribunal to Take Interim or Precautionary Measures
Articles 22 and 23 of the Saudi Arbitration Law, issued by Royal Decree No. M/39 dated 24/5/1433 AH (1953 CE), stipulate that:

The competent court may order interim or precautionary measures upon the request of one of the parties to the arbitration, prior to the commencement of the arbitration proceedings, or upon the request of the arbitral tribunal during the arbitration proceedings. These measures may be revoked in the same manner, unless the parties to the arbitration agree otherwise.

The competent court may, upon the request of the arbitral tribunal, order a judicial delegation.

The arbitral tribunal may request the relevant party to assist it in the arbitration proceedings as it deems appropriate for the proper conduct of the arbitration, such as summoning a witness or expert, ordering the submission of a document, a copy thereof, or review thereof, or otherwise, without prejudice to the arbitral tribunal's right to do so independently.

The two parties to the arbitration may agree that the arbitral tribunal (upon the request of one of them) may order either party to take any interim or precautionary measures it deems necessary given the nature of the dispute. The arbitral tribunal may require the party requesting such measures to provide an appropriate financial guarantee for the implementation of such measures.

If the party against whom the order was issued fails to implement the order, the arbitral tribunal may, upon the request of the other party, authorize that party to take the necessary measures to implement it, without prejudice to the right of the tribunal or the other party to request the competent authority to instruct the party against whom the order was issued to implement it.

Arbitrator's Fees
The arbitrators' fees shall be agreed upon by the two parties to the arbitration. If no agreement is reached, they shall be determined by the court competent to adjudicate the arbitration in a non-appealable decision. If the arbitrators are appointed by the competent court, their fees shall be determined accordingly.

Arbitration Procedures
Arbitration proceedings shall commence from the day on which one of the parties to the arbitration receives the request for arbitration, unless the parties to the arbitration agree otherwise.

The arbitration procedures to be followed by the arbitration panel shall be agreed upon by the two parties to the arbitration, including the right of both parties to have these procedures subject to the rules in force in any arbitration organization, body, or center in the Kingdom of Saudi Arabia or abroad, provided they do not contravene the provisions of Islamic Sharia.

In the absence of an agreement, the arbitration panel shall choose the arbitration procedures it deems appropriate, provided they comply with the provisions of Islamic Sharia.

Equality shall be maintained between the two parties to the arbitration, and they shall be given the opportunity to present their case or defense.

The location of the arbitration shall be agreed upon by the two parties to the arbitration, whether inside or outside the Kingdom. In the absence of an agreement, the arbitration panel shall determine the location of the arbitration, taking into account the circumstances of the case and the suitability of the location for both parties. This shall not prejudice the arbitration panel's authority to select an appropriate location for deliberations, hear the statements of witnesses, experts, or the parties to the dispute, inspect the disputed property, or examine or review the documents.

Arbitration Language
Arbitration shall be conducted in Arabic unless the arbitral tribunal decides or the parties agree to another language. The agreement or decision shall apply to the language of written statements, memoranda, oral pleadings, all decisions taken by the arbitral tribunal, communications sent by the arbitral tribunal, or the award it issues, unless the parties agree otherwise or the arbitral tribunal decides otherwise.

The arbitral tribunal has the right to attach a translation into the language used in the arbitration to all or some of the written documents. In the event of multiple languages, the arbitral tribunal may limit the translation to some of them.

Filing a Claim Before the Arbitration Panel and Presenting Defenses and Requests
Articles 30, 31, and 32 of the Saudi Arbitration Law, issued by Royal Decree No. M/39 dated 24/5/1433 AH, stipulate that:

The claimant shall send, within the period agreed upon by the parties, or the period specified by the arbitration panel, to the defendant and each arbitrator, a written statement of the claim, including the claimant's name and address, the defendant's name and address, an explanation of the facts of the case, its claims and grounds, and any other matter that the parties agree to include in the statement.

The defendant shall send, within the period agreed upon by the parties, or the period specified by the arbitration panel, to the claimant and each arbitrator, a written response to the contents of the statement of claim. The claimant may include in his response any request related to the subject matter of the dispute, or assert a right arising therefrom with the intent to plead set-off. He may do so even at a later stage of the proceedings if the arbitration panel deems the circumstances justify the delay.

Each party may attach to the statement of claim or its response copies of the documents it relies on, and may indicate all or some of the documents and evidence it intends to submit. This does not prejudice the arbitration tribunal's right, at any stage of the case, to request the submission of originals or copies of the documents or documents relied upon by either party.

A copy of the memoranda, documents, or other papers submitted by one party to the arbitral tribunal shall be sent to the other party. Both parties shall be sent a copy of everything submitted to the arbitral tribunal, including expert reports, documents, or other evidence upon which the tribunal bases its award.

The parties to the arbitration may amend or supplement their claims or defenses during the arbitration proceedings, unless the arbitral tribunal decides not to do so in order to prevent delaying the resolution of the dispute.

Arbitral Tribunal Hearings
Arbitral hearings shall be held to enable the parties to present the merits of the case, present their arguments and evidence, and submit written memoranda and documents, unless the parties to the arbitration agree otherwise.

The parties to the arbitration shall be notified of the dates of the oral hearing, the date of the award, and any arbitral tribunal meeting to inspect the disputed property, other property, or documents, with sufficient advance notice.

The hearing shall be recorded in minutes signed by the witnesses, experts, or other parties present from both parties to the arbitration, their representatives, and the members of the arbitral tribunal. A copy of the minutes shall be delivered to the parties, unless the parties to the arbitration agree otherwise.

If the claimant fails to submit a written statement without an acceptable excuse, the arbitral tribunal shall terminate the arbitration proceedings, unless the parties to the arbitration agree otherwise.

If the respondent fails to submit a written defense, the arbitral tribunal shall continue the arbitration proceedings, unless the parties to the arbitration agree otherwise.

If the parties to the arbitration fail to appear at the pleading sessions or to submit their requests and documents, the arbitral tribunal may continue the arbitration proceedings and issue an award on the dispute based on the evidence before it.

The arbitration tribunal's authority to appoint experts
The arbitration tribunal has the right to appoint one or more experts to submit reports on specific issues in the minutes of the session, and to notify both parties unless they agree otherwise. The arbitration parties are obligated to provide the expert with all information related to the dispute and to enable the expert to examine the documents, goods, or property related to the dispute. The arbitration tribunal shall decide on any dispute between the expert and either party in this regard by a non-appealable decision.

The arbitration tribunal shall send a copy of the expert's report to both parties as soon as it is submitted, providing them with the opportunity to express their opinions on it. Both parties to the arbitration have the right to review and examine the documents on which the expert based his report. The expert shall issue the final report after reviewing the statements of both parties to the arbitration.

After submitting the expert's report, the arbitration tribunal may, on its own initiative or at the request of either party to the arbitration, decide to hold a hearing to hear the expert's statements, allowing both parties to hear and discuss the contents of the report.

If the arbitral tribunal lacks jurisdiction over a matter presented to it during the arbitration proceedings, or if a document submitted to it is challenged as forged, or if criminal proceedings are initiated for its forgery, or for any other criminal act, the arbitral tribunal may continue to consider the dispute if it deems that a decision on this matter is not necessary to decide the subject matter of the dispute. Otherwise, it may suspend the proceedings until a final judgment is issued in this regard. This will result in the suspension of the deadline for issuing the arbitral award.

The extent of the arbitral tribunal's compliance with the provisions of the Saudi system and Islamic law
Article 38 of the Saudi Arbitration Law, issued by Royal Decree No. M/39 dated 24/5/1433 AH, stipulates that:

Without prejudice to the provisions of Islamic law and public order in the Kingdom, the arbitral tribunal shall, during its consideration of the dispute, do the following:

Apply the rules agreed upon by the parties to the arbitration regarding the subject matter of the dispute. If they agree to apply the law of a particular state, the substantive rules therein shall be followed, excluding the rules pertaining to conflict of laws, unless otherwise agreed.

If the parties to the arbitration do not agree on the applicable rules of procedure, the arbitral tribunal shall apply the substantive rules of the system it deems most relevant to the subject matter of the dispute.

When deciding the subject matter of the dispute, the arbitral tribunal must take into account the terms of the contract in question, the prevailing customs applicable to the type of transaction, the prevailing practices, and the established practices between the parties.

If the parties to the arbitration expressly agree to authorize the arbitral tribunal to mediate, it may issue a ruling in accordance with the rules of justice and fairness.

Issuance of an arbitral award by the arbitral tribunal

The arbitration award shall be issued by a majority of the members of the arbitral tribunal, which consists of more than one arbitrator, after confidential deliberations.

If the arbitral tribunal has multiple opinions and cannot reach a majority, the arbitral tribunal may choose an outright arbitrator within 15 days of its decision that a majority cannot be reached; otherwise, the competent court shall appoint an outright arbitrator.

Decisions on procedural matters may be issued by the presiding arbitrator if both parties to the arbitration so authorize him in writing, or if all members of the arbitral tribunal authorize him to do so, unless the parties to the arbitration agree otherwise.

If the arbitral tribunal is authorized to mediate, the award must be issued unanimously.

The arbitral tribunal may issue interim awards or awards on part of the claims before issuing the final award, unless the parties to the arbitration agree otherwise.

The arbitral tribunal shall issue the final award within the period agreed upon by the parties to the arbitration. In the absence of an agreement, the award must be issued within 12 months from the date of commencement of the arbitration proceedings.

The arbitral tribunal may decide to extend the arbitration period, provided that the extension does not exceed six months, unless the parties to the arbitration agree to a longer period.

If the arbitral award is not issued within six months, either party to the arbitration may request the competent court to issue an order specifying an additional period or terminating the arbitration proceedings. Either party to the arbitration may file a claim before the competent court.

If an arbitrator is appointed in place of an arbitrator in accordance with the provisions of Saudi law, the period specified for the award shall be extended by thirty days.

The arbitral award shall be issued in writing, reasoned, and signed by the arbitrators. If the arbitral tribunal is composed of more than one arbitrator, the signatures of the majority of the arbitrators shall suffice, with the absence of the signatures of the others being recorded in the case file.

The arbitral award must include the names and addresses of the parties, the place and date of issuance of the award, the names, addresses, nationalities, and capacities of the arbitrators, a summary of the arbitration agreement, the statements, the parties' requests and pleadings, the documents submitted, the expert report, if any, the operative part of the award, the determination of the arbitrators' fees and arbitration expenses, and the manner in which they shall be distributed between the parties to the arbitration. The arbitral tribunal shall deliver a true copy of the arbitral award to both parties within 15 days of its issuance.

The arbitral award, or part thereof, may not be published without the written consent of both parties.

The arbitral tribunal shall deposit the original award, or a signed copy thereof in the language in which it was issued, with the competent court within 15 days of its issuance, along with an Arabic translation certified by an accredited authority if the award is issued in a foreign language.

Termination of Arbitration Procedures and Termination of Dispute
The arbitral proceedings shall terminate with the issuance of the award ending the dispute, or with the arbitral tribunal's decision to terminate the arbitration proceedings, by agreement between the two parties to the arbitration, or by the claimant abandoning the arbitration dispute, unless the arbitral tribunal decides, upon the request of the respondent, that it has a serious interest in continuing the arbitration proceedings until the dispute is resolved. The arbitral proceedings shall terminate if the arbitral tribunal deems it futile or impossible to continue the arbitration proceedings, or if the arbitral tribunal orders the termination of the arbitration proceedings due to the claimant's or respondent's failure to present their defenses and requests.

Arbitration proceedings shall not terminate upon the death or loss of capacity of either party to the arbitration, unless the party with standing in the dispute agrees with the other party to terminate the arbitration. The arbitration period shall be extended for thirty days unless the arbitral tribunal decides to extend the period for a similar period or the parties to the arbitration agree otherwise.

In all cases, the arbitral tribunal's mandate shall terminate upon the conclusion of the arbitration proceedings.

If the parties to the arbitration agree to a settlement to terminate the dispute during the arbitration proceedings, they shall have the right to request confirmation of the terms of the settlement before the arbitral tribunal. The latter shall issue an award containing the terms of the settlement and the termination of the proceedings. This award shall have the force of execution of the arbitration awards.

The Authority Competent to Interpret Arbitration Awards
Either party to the arbitration may submit a request to the arbitral tribunal within the thirty days following receipt of the arbitral award to interpret any ambiguity in the award's text. The party submitting the request must notify the other party at the address specified in the arbitral award of this request before submitting it to the arbitral tribunal.

The interpretation shall be issued in writing within the thirty days following the date of submission of the request for interpretation to the arbitral tribunal. The ruling issued with the interpretation shall be deemed complementary to the arbitral award it interprets and shall be subject to its provisions.

The arbitral tribunal is obligated to correct material errors contained in its award by a decision issued on its own initiative or upon the request of one of the parties. The arbitral tribunal shall make the correction without pleading within 15 days following the issuance of the award or the filing of the request for correction, as the case may be.

The arbitral tribunal shall issue its decision to correct the award in writing and shall notify the parties to the arbitration within 15 days of its issuance. If the arbitral tribunal exceeds its authority to correct, the decision may be declared invalid by filing a claim for annulment.

Are the parties to the arbitration permitted to submit additional claims after the issuance of the arbitral award? Either party to the arbitration may, even after the expiry of the arbitration period and within thirty days of receipt of the arbitration award, submit a request to the arbitral tribunal to issue an additional arbitral award on claims submitted during the arbitration proceedings and omitted from the arbitral award. The other party must be notified of this request at the address specified in the arbitral award before submitting it to the arbitral tribunal.

The arbitral tribunal shall issue its award within 60 days from the date of submission of the request, and may extend the period by an additional thirty days if necessary.

Action to Invalidate the Arbitral Award
The principle: Arbitral awards may not be appealed by any means, except by filing an action to invalidate the arbitral award.

Articles 50 and 51 of the Saudi Arbitration Law, issued by Royal Decree No. M/39 dated 24/5/1433 AH, stipulate that:

First:
A claim for the annulment of an arbitration award shall only be accepted in the following cases:

If there is no arbitration agreement, or if such agreement is void, voidable, or terminated upon expiration.

If one of the parties to the arbitration was, at the time of concluding the arbitration agreement, incapable of or partially incapacitated, according to the law governing such capacity.

If one of the parties to the arbitration was unable to present its defense due to failure to properly notify the appointment of an arbitrator or the arbitration procedures, or for any other reason beyond its control.

If the arbitration award excludes the application of the statutory rules that the parties to the arbitration agreed to apply to the subject matter of the dispute.

If the arbitral tribunal was constituted or the arbitrators were appointed in a manner contrary to the law or the agreement of the parties.

If the arbitral award decides on matters not covered by the arbitration agreement. However, if it is possible to separate the parts of the award relating to matters subject to arbitration from the parts relating to matters not subject to arbitration, the annulment shall only apply to the parts not subject to arbitration. If the arbitral tribunal fails to meet the conditions required for the award, which affects its content, or if the award is based on invalid arbitration procedures that affect it.

Second:
The court competent to hear the annulment claim shall, on its own initiative, declare the arbitration award invalid if it contains provisions that contravene the provisions of Islamic Sharia and public order in the Kingdom, or if the parties to the arbitration have agreed upon it, or if it finds that the subject matter of the dispute is not subject to arbitration under this Law.

Third:
The arbitration agreement shall not expire upon the issuance of a ruling by the competent court declaring the arbitration award invalid, unless the parties to the arbitration agree otherwise, or a ruling is issued stating the invalidity of the arbitration agreement.

Fourth:
The competent court shall hear the annulment claim without examining the facts and subject matter of the dispute.

Fifth:
The annulment claim shall be filed by either party to the arbitration within sixty days following the date on which that party is notified of the award. The waiver by the party claiming the annulment claim before the issuance of the arbitration award shall not preclude the claim from being accepted.

Sixth:
If the competent court upholds the arbitration award, it must order its enforcement. Its ruling is not subject to appeal by any means. However, if it rules that the arbitration award is invalid, its ruling is subject to appeal within 30 days from the day following notification.

The filing of a claim for invalidity does not suspend the enforcement of the arbitration award. The competent court may order a stay of enforcement if the party claiming invalidity requests it in the statement of claim, stating the serious reasons for his request.

The competent court is obligated to rule on the request for a stay of enforcement within 15 days from the date of filing the request. If it orders a stay of enforcement, it may order the provision of a bond or financial guarantee. If it orders a stay of enforcement, it must rule on the claim for invalidity within 180 days from the date of issuance of the order.

The Court with Jurisdiction to Consider the Arbitration Annulment Claim
The Court of Appeal with jurisdiction over the dispute shall have jurisdiction to consider the annulment of the arbitration award. If the arbitration is an international commercial arbitration, whether within the Kingdom or abroad, jurisdiction shall be vested in the Court of Appeal with jurisdiction over the dispute in Riyadh, unless the parties to the arbitration agree to another court of appeal within the Kingdom.

Enforcement of the Arbitration Award
First:
The arbitration award shall have the force of res judicata and shall be enforceable. The competent court or its delegate shall issue an order to enforce the arbitrators' award. The request for enforcement of the award shall be submitted along with the following:

The original award or a certified copy thereof.

A true copy of the arbitration agreement.

A certified translation of the arbitration award into Arabic, if issued in another language.

Evidence of the deposit of the arbitration award with the competent court.

Second:
A request for enforcement of an arbitration award shall not be accepted unless the deadline for filing a claim for annulment of the award has expired. An order for enforcement of an arbitration award may only be issued after ensuring the following:

The arbitration award does not conflict with a ruling or decision issued by a court, committee, or body with jurisdiction over the subject matter of the dispute in the Kingdom of Saudi Arabia.

The arbitration award does not contain anything that violates the provisions of Islamic Sharia and public order in the Kingdom. If the award can be divided into parts, the remaining non-violent portion may be ordered to be enforced.

The arbitration award was properly notified to the judgment debtor.

Third:
An order to enforce an arbitration award may not be appealed. However, an order refusing enforcement may be appealed to the competent authority within 30 days of its issuance.

Finally:
We emphasize the importance of paying attention to the process of forming an arbitration panel in the arbitration system, as these steps and controls are essential for ensuring fairness and transparency in dispute resolution.

As an international law firm, we pride ourselves on our extensive experience and knowledge in the field of arbitration. We offer our services to guide clients through all the necessary steps to establish an arbitration tribunal in a way that ensures fair and transparent results. If you need legal advice or have any questions, please do not hesitate to contact us. We are here to serve you and help you achieve your goals with precision and professionalism.