Description of the Saudi Arbitration Law and its Importance in Resolving Commercial Disputes

Arbitration is the optimal exceptional method to resolve judicial and commercial disputes which avoids the prolonging litigation characterized by slowness and complexity. It is the chosen means for the disputing parties to resolve the disputes related to their investments or any other relationship by unilateral undertaking. The most important thing that distinguishes the Arbitration Law is that its procedures are all agreed upon, as the arbitral tribunal is chosen, its scope, the seat of arbitration and its duration; which is what we shall explain in this article.

What is the Saudi Arbitration? 

The Saudi Arbitration is the agreement concluded between two or more parties to refer all or some of the disputes that have arisen or may arise in a legal relationship, whether contractual or non-contractual, to arbitration. The arbitration agreement may be in the form of a clause included in the contract, or an independent arbitration agreement. In all cases, the arbitration clause must be in writing. Here are the procedures followed in the Saudi Arbitration Law.

The Procedures pursuant to the Saudi Arbitration Law

The Saudi Arbitration Law includes a set of steps regulating the arbitration process in the Kingdom of Saudi Arabia. The disputing parties may agree on the procedures to be followed by the arbitral tribunal in conducting the proceedings, including their right to subject such proceedings to the enforced rules of any organization, agency, or arbitration center within the Kingdom or abroad, provided that said rules are not in conflict with the provisions of Islamic Shariah. Without prejudice to the Arbitral tribunal's right to adopt the arbitration proceedings it deems fit based on the provisions of Islamic Shariah and the Arbitration Law, provided that the parties to the arbitration are notified of these procedures at least ten days before the start of their implementation. Below are the most important steps of Saudi Commercial Arbitration.

1- The Arbitral Tribunal

It is the competent authority considering disputes as per the Saudi Arbitration Law. Arbitration is decided by a single arbitrator or by an arbitral tribunal. The competent authority to decide the dispute is the Court that has the legal jurisdiction.

Formation of the Arbitral Tribunal

1. The arbitral tribunal shall consist of one arbitrator or more, provided that the number of arbitrators is an odd number; otherwise, the arbitration shall be void.
2. The arbitrator shall be of full legal capacity, good conduct and reputation. 
3. The arbitrator shall be a holder of at least a university degree in Shariah or law. 
4. If the arbitral tribunal is composed of more than one arbitrator, it shall be sufficient that the chairman of the tribunal meets the above requirement (holder of a university degree).

2- Jurisdiction of the Arbitral Tribunal

1. The arbitral tribunal shall decide on any pleas related to its jurisdiction, including those based on the absence of an arbitration agreement, expiry or nullity of such agreement, or non-inclusion of the subject-of dispute in the agreement.
2. The arbitral tribunal shall decide on pleas referred to above prior to deciding on the subject of dispute. However, it may join said pleas to the subject and decide on both. If the arbitral tribunal decides to dismiss the plea, such plea may not be raised except through the filing of a case to nullify the arbitration award ending the entire dispute.
3. The appointment or participation in the appointment of an arbitrator by either party shall not preclude his right to file any such pleas. The plea that the arbitration agreement does not include matters raised by the other party while the dispute is being reviewed must be raised immediately; otherwise, the right to raise such plea shall terminate. 
4. In all cases, the arbitration tribunal may accept a late plea if it deems the delay justified.

3- Controls for selecting the Arbitral Tribunal

First:

The two parties to the arbitration have the right to agree on the arbitrators, and in the event of a failure to agree:

1. If the arbitral tribunal is composed of one arbitrator, the competent court shall appoint said arbitrator.
2. If the arbitral tribunal is composed of three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the umpire. 
3. If a party fails to appoint his arbitrator within 15 days following the receipt of a petition to this effect from the other party, or if the two appointed arbitrators fail to agree on the appointment of the umpire within 15 days from the date of appointment of the last arbitrator, the competent court, pursuant to a petition filed by the party seeking to expedite the arbitration, shall appoint the umpire within 15 days from the date of submission of the petition. The umpire, whether selected by the two appointed arbitrators or appointed by the competent court, shall preside over the arbitration tribunal. 
4. These provisions shall apply to cases where the arbitration tribunal is composed of two or three arbitrators.

Second:

If the two parties to the arbitration fail to agree on the procedures for the appointment of arbitrators, if one of the parties fails to adhere to such procedures, if the two appointed arbitrators fail to agree on a matter that requires their agreement, or if a third party fails to perform a function entrusted thereto under such procedure:

1. The competent court shall, pursuant to a petition filed by the party seeking to expedite the arbitration, take the necessary measure or action unless there is an agreement indicating other means for completing such measure or action.
2. 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 take into account the conditions stipulated in the arbitration agreement and the Saudi Arbitration Law when selecting the arbitrator. The court shall issue its decision selecting the arbitrator within 30 days from the date of submitting the request.

Fourth:

The decision of the competent court to appoint the arbitrator shall not be subject to appeal.

Procedures for disqualifying an arbitrator under to the Saudi Arbitration Law

Article (17) of the Saudi Arbitration Law issued by Royal Decree No. (R/39) dated 24/05/1433 AH stipulated that: 

1. If the two parties to arbitration fail to agree on a procedure for disqualifying an arbitrator, the party who seeks to disqualify an arbitrator shall, within five days from the date of knowledge of the formation of the arbitration tribunal or of any circumstances justifying such disqualification, submit a written statement giving grounds for the disqualification to the arbitration tribunal. If the arbitrator sought to be disqualified did not step down or the other party rejects the petition for disqualification within five days from the date of submission thereof, the arbitral tribunal shall decide on the disqualification within 15 days from the date of receipt of such petition. If the disqualification is rejected, the party seeking disqualification may petition the competent court within 30 days, to decide on the disqualification. The said court’s decision shall not be subject to any form of appeal.
2. A disqualification petition may not be accepted from a party who has previously submitted a petition to disqualify the same arbitrator in the same arbitration on the same grounds. 
3. Submission of a disqualification petition before an arbitration tribunal shall result in suspension of the arbitration proceedings. An appeal against the arbitration tribunal's decision rejecting the disqualification petition shall not result in suspension of the arbitration proceedings.
4. If the petition to disqualify an arbitrator is accepted, whether by the arbitral tribunal or by the competent court when considering an appeal, all previous arbitration procedures, including the arbitration award, shall be deemed null and void.

Advantages of the Saudi Arbitration Law

• Arbitration is characterized by its speed in resolving disputes and conflicts between the disputing parties, as it does not require setting specific dates or adhering to official working hours. In addition, arbitration is concerned with the flexibility of hearings which are determined in accordance with the dates and needs of the parties, whether at night or during the day, with the aim of expediting dispute resolution.
• Arbitration grants the parties freedom in choosing the arbitrator and the arbitral tribunal. The arbitrator is chosen with the consent and acceptance of the parties, whether an individual or tribunal, which increases the chances of reaching an amicable settlement between the parties. 
• Arbitration grants the parties confidentiality, in contrast to court hearings which are usually public. As a result, arbitration is less tense and fraught to the parties.
• Arbitration enhances the acceptance and satisfaction of the parties to the final award, as they are the ones who choose or agree to the arbitrator. 
• Arbitration is characterized by greater flexibility in choosing the laws and regulations that the parties rely on, while adhering to the principles of Islamic Shariah and local legislation. Article (5) of the Saudi Arbitration Law also stipulates adherence to the provisions of any document agreed upon by the parties, as long as it does not contradict the provisions of Islamic Shariah.

Frequently Asked Questions

When does the arbitrator have an interest in the dispute?

1. The arbitrator shall have no vested interest in the dispute until the arbitration proceedings are completed.
2. The arbitrator shall also disclose to the arbitration parties in writing, from the time of his appointment and throughout the arbitration proceedings, any circumstances likely to give rise to justifiable doubts as to his impartiality or independence, unless he has already informed them thereof.
3. An arbitrator shall be barred from considering or hearing a claim for the same reasons for which a judge is barred, even if neither arbitration party so requests.

When will the arbitrator be disqualified?

1. In case there are justifiable doubts as to his impartiality or independence
2. If he does not hold a university degree in Shariah or law. 
3. If he is not of full legal capacity, good conduct and reputation. 
4. Neither party to disqualify the arbitrator he appointed or participated in appointing except for reasons that become evident after the appointment of this arbitrator.
5. The arbitrator may withdraw from the dispute if his disqualification is requested without stating the reasons for his withdrawal. This shall not be considered an admission of the validity of the reasons on which the requester of the disqualification relied. The request to disqualify the arbitrator shall not be accepted after closing of the pleadings.
6. If the arbitrator’s mission ends, the arbitration proceedings shall be suspended until an alternative arbitrator is appointed.

Conclusion: 

The Arbitration Law is an effective means of resolving disputes, whereby the disputing parties appoint arbitrators who issue a final award ending their dispute. This process is characterized by speed and effectiveness in resolving disputes, while adhering to the principles of Islamic Shariah and local Laws. 

We at our Law Firm are proud to be able to provide legal consultation and answer all inquiries related to the Saudi Arbitration Law. We are committed to providing support and assistance to our clients in understanding and applying this Law in an effective and innovative manner. 

We can provide customized and specialized legal consultation to meet your needs and ensure that your rights and interests are protected during the arbitration proceedings.  Do not hesitate to contact us for assistance and guidance regarding the Saudi Arbitration Law and any other legal matters related to your business.