Following Mayer Brown and Al Akeel & Partners’ alliance in May 2022, we are delighted to launch this joint series about arbitration in the Kingdom of Saudi Arabia.
Part 3: Arbitration in Saudi Arabia - The SCCA Arbitration Rules 2023
Following our detailed Legal Update on the Saudi Center for Commercial Arbitration (“SCCA”) in Part 2, in this Part 3, we examine the SCCA’s recently published arbitration rules (the “2023 Rules”), which came into force on 1 May 2023.
The 2023 Rules:
- are part of the SCCA's vision "to be the preferred ADR choice in the region by 2030";
- have been issued in the wake of the SCCA's first regional office in the DIFC, which opened in February 2023;
- seek to modernise the SCCA's procedures to be “in conformity with the latest international standards in the arbitration industry and take into account the best practices followed by other eminent arbitral institutions”; and
- apply to all arbitrations filed on or after 1 May 2023.
This Legal Update highlights ten key changes to the 2023 Rules, when compared to their predecessor rules, implemented in 2016 and subsequently revised in 2018 and 2021.
1. Establishment of a new SCCA Court
The 2023 Rules provide for the establishment of an SCCA Court that will make administrative decisions in relation to arbitrations administered under the SCCA rules. The SCCA Court is independent from the SCCA, in line with international standards. Other leading institutions such as the ICC, LCIA, DIAC, and SIAC also have an equivalent supervisory court.
The SCCA Court itself is composed of 15 judges with diverse backgrounds, including academics, arbitrators, practitioners, and retired appeal court judges. Professor Jan Paulsson has been elected as the Court President, while Mr. James Hosking and Dr. Ziad Al-Sudairy will serve as Vice Presidents of the Court.
The role of the SCCA Court includes:
- the appointment of emergency arbitrators (Article 7);
- determining objections to multi-contract arbitrations and consolidating arbitrations (Articles 11 and 13);
- the appointment of arbitrators (Article 16);
- deciding challenges to arbitrators (Article 18);
- determining the place of arbitration (Article 22);
- reviewing and approving awards (Article 36); and
- determining administrative and arbitrator fees (Articles 41 and 42).
2. Application of Sharia rules limited to Saudi-seated arbitrations
In the 2021 Rules, Article 31 on the "Applicable law" stated: "Without prejudice to the rules of Sharia, The Tribunal shall apply the rules of law designated by the parties as applicable to the substance of the dispute." The 2023 Rules have removed the reference to the rules of Sharia in Article 37, therefore clarifying that arbitral tribunals will apply the law designated by the parties. However, it is important to note that for arbitrations seated in Saudi Arabia, Sharia principles will nonetheless apply. Further, Sharia principles will continue to apply to the enforcement of awards in Saudi Arabia.
3. A default law of the arbitration agreement
Article 37(4) provides that the law applicable to the arbitration agreement shall be the law applicable at the place of arbitration, unless the parties have agreed in writing on the application of other laws or rules of law. This provides a useful default rule in circumstances where it (i) still remains uncommon to see the governing law of the arbitration agreement specified in arbitration clauses, and (ii) risks ensue when this law is not expressly provided for in an arbitration clause or the rules incorporated by reference into it (see our earlier Legal Update on this issue).
4. Increased use of technology in case management
- Online Dispute Resolution
The SCCA is at the forefront in the region with its advanced Online Dispute Resolution (ODR) system. ODR has proven to be an effective means of resolving low-value disputes, particularly those stemming from e-commerce consumer claims. In the recently released 2023 Rules, the SCCA has included the third edition of its ODR Procedure Rules in Appendix IV. These rules apply when the parties agree in writing and the disputed amount falls below SAR 200,000, excluding arbitration costs.
Should any conflicts arise between the 2023 Rules and the ODR Procedure Rules, the latter will prevail. This ensures that the ODR process remains consistent and reliable in resolving disputes. To ensure a swift resolution, the appointed arbitrator must issue the final award within 30 days, unless extended by the SCCA (which will only apply on an exceptional basis). The award is primarily based on written submissions, unless the parties mutually agree otherwise or the arbitrator deems a remote hearing necessary.
- Electronic Evidence, Cybersecurity, Privacy and Data Protection
The 2023 Rules also allow for submissions to be filed electronically and allow for the electronic signature of awards. Article 46 also provides guidance on cybersecurity, privacy and data protection, confirming the SCCA's forward-thinking and comprehensive approach to the revision of the 2023 Rules. Over the past few years, there has been an increasing awareness regarding the need to prioritize and advocate for arbitration practices that are more environmentally sustainable. It is encouraging to see that the 2023 Rules are proactively seeking to minimize the ecological footprint associated with the arbitration process by promoting the utilization of technology and electronic evidence.
5. Arbitral tribunals' enhanced discretionary powers
The 2023 Rules provide several measures aimed at expanding the discretionary powers of arbitral tribunals. In particular, they provide that the arbitral tribunal:
- has the ability to encourage parties to resort to mediation where appropriate (Article 25);
- may limit the length of written submissions and requests for document production (Article 27); and
- may determine the most effective format for hearings, including remote hearings (Article 29(2)).
Under Article 9(3), the arbitral tribunal is also empowered to refuse to allow a change to a party's representative(s) if it considers it necessary to safeguard the composition of the arbitral tribunal or the finality of the award, the most likely scenario being that such a change may give rise to conflicts of interest.
6. Increased predictability of procedural timetables
The 2023 Rules provide timelines for certain procedural steps with the aim of increasing the predictability of the length of the arbitration. For example, the case management conference ("CMC") must be conducted within 30 days of the arbitral tribunal's constitution (unless the arbitral tribunal considers a CMC unnecessary). The 2023 Rules also provide a 75-day deadline after the close of the proceedings to issue the award (Article 33), subject to a further 75-day extension. Moreover, emergency arbitrators are required to issue their interim award no later than 14 days from receiving the file from the SCCA (Article 7(8)).
7. Multi-party and multi-contract arbitrations
The 2023 Rules address multi-party and multi-contract arbitrations by way of consolidation, joinder and the coordination of proceedings.
In relation to multi-contract arbitrations, Article 11 provides that parties may issue a single request for arbitration for claims arising out of more than one contract or arbitration agreement where:
- the relief sought arises out of the same transaction or series of related transactions;
- a common question of law or fact arises under each arbitration agreement giving rise to the arbitration; and
- if applicable, the multiple arbitration agreements under which the claims are made are compatible.
In relation to multi-party arbitrations, Article 13 provides for a new consolidation procedure enabling the SCCA Court to consolidate two or more arbitrations where:
- the parties agree to consolidate the arbitrations;
- all the claims are made under the same arbitration agreement(s); or
- the disputes in the arbitrations arise in connection with the same legal relationship, and the SCCA Court finds the arbitration agreement(s) to be compatible.
If consolidation takes place, all parties are deemed to have waived their right to nominate an arbitrator and the SCCA Court appoints the tribunal in the consolidated arbitration.
The 2023 Rules permit joinder of additional parties prior to the tribunal's appointment, but they only allow joinder after an arbitrator has been appointed in specific circumstances set out at Article 12.
Under Article 14, there is also the ability to coordinate two or more arbitrations which have identical tribunals and share a common question of law or fact provided that “coordination will assist in resolving the dispute(s) in an expeditious and cost-effective manner” (for example, the procedural steps may be aligned and/or a single award may be issued in such arbitrations).
8. Early disposition
Article 26 provides for the early disposition of jurisdictional and admissibility issues, as well as issues of legal merit. Examples of instances in which an application for early disposition may be made include:
- an allegation of fact or law material to the outcome of the case is manifestly without merit;
- even if the facts advanced by the other party are assumed to be true, no award could be issued in that party's favor under the applicable law; or
- any issue of fact or law material to the outcome of the case is, for any other reasons, suitable for determination by way of early disposition.
Accordingly, Article 26 provides a mechanism for arbitral tribunals to dispose of certain types of claims or issues by way of summary judgment without having to follow every step that would otherwise be taken in the ordinary course of an arbitration. This may be appealing to financial institutions seeking to enforce payment obligations.
9. Challenge to arbitrators
The 2023 Rules provide parties with two additional grounds for challenging arbitrators. Whereas the 2021 Rules referred to justifiable doubts as to impartiality and independence as a ground for challenge (Article 14), the 2023 Rules also include (1) the failure to perform his or her duties, and (2) the arbitrator manifestly does not possess the qualifications agreed to by the parties (Article 18). The latter stands the 2023 Rules apart from most other institutional rules and it will be interesting to see how frequently challenges are brought on this basis.
10. Third-party funding
Article 17(6) requires that each party must promptly disclose to the arbitral tribunal, the parties, and the SCCA, the identity of any non-party who has an economic interest in the arbitration's outcome, including any third-party funder. Other institutional rules in the region – such as DIAC's 2022 Rules – and internationally include similar provisions which may help further develop the arbitration funding market in the Middle East.
The 2023 Rules are to be welcomed given that they are in line with the standards and best practices espoused by the leading international arbitration institutions, promote efficiency and cost-effectiveness and provide greater powers to tribunals while respecting party autonomy. They are well designed for modern arbitrations particularly in the way they promote the use of technology. The 2023 Rules should also make SCCA arbitration ever-more suited to multi-party and multi-contract cases. We look forward to seeing if parties in the region increasingly provide for SCCA arbitration in their contracts.
The SCCA’s 2023 Rules are accessible here.
This article is available in Arabic.