Commercial Arbitration in Saudi Arabia: An Overview of the Saudi Center for Commercial Arbitration's Role
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Businesses sometimes include a clause in their commercial contracts referring disputes falling within its scope to arbitration rather than the courts. Understanding what that means in practice, and the role the Saudi Center for Commercial Arbitration plays in that framework, helps a business handle that clause knowledgeably when it appears in its contracts.
What Commercial Arbitration Is
Arbitration is a private method of resolving disputes in which the parties agree to refer to an arbitrator or arbitral tribunal, instead of the courts, all or some of the disputes that have arisen or may arise between them concerning a defined legal relationship. The agreement may be a clause in the contract made before any dispute, or a separate submission agreement made after a dispute arises, which must then specify the matters covered or it is void. The arbitration agreement must be in writing or it is void, and only a person with capacity to act may validly agree to arbitrate. This agreement is the foundation the entire arbitration rests on.
The Role of the Saudi Center for Commercial Arbitration
When a contract provides for arbitration under the rules of the Saudi Center for Commercial Arbitration, the Center administers the arbitration; among other things, the SCCA Court appoints the arbitrators where the parties do not nominate them within the applicable time limit, and reviews the draft award as to its form before it is issued. The Center is an institutional body that administers private commercial arbitration, and its rules are institutional rules the organization issues to govern its own process, not a government statute or regulation issued by a regulatory authority.
How Institutional Arbitration Differs From Court Litigation
Arbitration differs from litigation in several respects: it is generally a private process, with hearings kept private unless the parties agree or applicable law requires otherwise, and the Rules also contain separate provisions on the confidentiality of information relating to the arbitration. The parties generally have greater procedural autonomy in arbitration than in ordinary court litigation, within the framework of the arbitration agreement and the applicable Rules, and the process is more flexible, since the arbitral tribunal can tailor it to the nature of the dispute. The Center's Rules provide that awards are final and binding on the parties. Awards made under the Saudi Arbitration Law cannot be challenged by any means other than an annulment action on the grounds listed in Article 50, which must be filed within sixty days of the party being notified of the award, and the court does not re-examine the facts or merits of the dispute.
What Businesses Should Pay Attention to When an Arbitration Clause Exists
When a company's contract contains an arbitration clause, it is important to understand what that clause means in practice: where a dispute falls within the scope of the arbitration clause, arbitration is the agreed path under that agreement and the applicable rules. If a claim is nonetheless filed in court, the court will rule it inadmissible if the defendant invokes the arbitration agreement before making any other request or defense, so a party sued on such a dispute needs to raise this at the outset. Reviewing the wording of the clause carefully at the time of contracting, rather than after a dispute arises, helps reduce uncertainty later.
Why the Governing Contract and Arbitration Clause Matter
The arbitration agreement is a central reference for determining the disputes the parties agreed to submit to arbitration and the procedural framework they selected, subject to applicable law. Any ambiguity or gap in how that clause is drafted can itself become a source of dispute over whether arbitration is even the right path, which is why getting its wording right from the outset matters a great deal.
Frequently asked questions
Arbitration is a private method of resolving disputes in which the parties agree to refer to an arbitrator or arbitral tribunal, instead of the courts, all or some of the disputes that have arisen or may arise between them concerning a defined legal relationship. Businesses sometimes include a clause in their commercial contracts referring disputes falling within its scope to arbitration. The arbitration agreement is the foundation the entire arbitration rests on.
An arbitration clause is an agreement included in the contract before any dispute arises, under which the parties refer to arbitration, instead of the courts, all or some of the disputes that may arise between them concerning a defined legal relationship. The arbitration agreement must be in writing or it is void, and only a person with capacity to act may validly agree to arbitrate. The agreement may also take the form of a separate submission agreement made after a dispute arises, which must then specify the matters covered or it is void.
When a contract provides for arbitration under the rules of the Saudi Center for Commercial Arbitration, the Center administers the arbitration. Among other things, the SCCA Court appoints the arbitrators where the parties do not nominate them within the applicable time limit, and reviews the draft award as to its form before it is issued. The Center is an institutional body that administers private commercial arbitration, and its rules are institutional rules the organization issues to govern its own process, not a government statute or regulation issued by a regulatory authority.
Arbitration is a private process, with hearings kept private unless the parties agree or applicable law requires otherwise, and the Center's Rules also contain separate provisions on the confidentiality of information relating to the arbitration. The parties have greater procedural autonomy in arbitration than in ordinary court litigation, within the framework of the arbitration agreement and the applicable Rules. The process is also more flexible, since the arbitral tribunal can tailor it to the nature of the dispute.
The Center's Rules provide that awards are final and binding on the parties. Awards made under the Saudi Arbitration Law cannot be challenged by any means other than an annulment action on the grounds listed in Article 50, which must be filed within sixty days of the party being notified of the award. In that action, the court does not examine the facts or merits of the dispute.
Where the dispute falls within the scope of the arbitration clause and a claim is nonetheless filed in court, the court will rule it inadmissible if the defendant invokes the arbitration agreement before making any other request or defense. A party sued on such a dispute therefore needs to raise this at the outset.
