Commercial arbitration (التحكيم التجاري) is a way of resolving disputes between businesses outside the courts, before an arbitrator or arbitral tribunal chosen by the parties, ending in a binding and enforceable award. Companies use it for speed, confidentiality and specialist expertise. In Saudi Arabia it is governed by the Arbitration Law (نظام التحكيم), issued by Royal Decree No. (M/34) dated 24/5/1433H. This guide explains when arbitration is a good fit, how to write an arbitration clause, and how an award is enforced.
Arbitration or court?
| Arbitration | Court | |
|---|---|---|
| Who decides | An arbitrator chosen by the parties, often a specialist in the field | A judge appointed by the court |
| Confidentiality | Hearings and the award are confidential in principle | Hearings are public in principle |
| Duration | Set by the agreement or the rules, and usually shorter | Follows the court's schedule and levels of appeal |
| Cost | Arbitrators' fees and the arbitration centre's fees | Usually lower fees |
| Challenge | An annulment action, in specific cases only | Appeal and cassation |
The arbitration agreement: the clause that decides everything
There is no arbitration without a written arbitration agreement: either a clause in the main contract before a dispute arises, or a separate submission agreement afterwards. A well-drafted agreement specifies:
- The forum: institutional arbitration at a centre, such as the Saudi Center for Commercial Arbitration (SCCA), or ad hoc arbitration.
- The number of arbitrators and how they are chosen.
- The seat and language of the arbitration.
- The law that applies to the substance of the dispute.
A vague or incomplete arbitration clause is one of the most common causes of disputes about the arbitration itself, so time is lost arguing over the route before getting to the claim. For foreign parties, agreeing the language of the arbitration in advance matters especially.
The stages of arbitration in brief
- Request for arbitration and notice to the other party.
- Forming the arbitral tribunal.
- Exchanging submissions and documents, and hearing witnesses and experts.
- Issuing the arbitral award.
- Applying to the competent court for an enforcement order, then enforcing the award as an enforceable instrument.
Can an arbitral award be challenged?
An arbitral award cannot be appealed on its merits. But an annulment action can be filed within the statutory period, in an exhaustive list of cases, such as the absence of a valid arbitration agreement, the award conflicting with Sharia or public order, or a breach of the right of defence.
A model arbitration clause for a commercial contract
The bracketed terms are for negotiation. A vague clause (such as «disputes shall be settled by arbitration» alone) opens a new dispute about the arbitration itself.
Frequently asked questions
Can every dispute go to arbitration?
No. Matters that cannot be settled by compromise, such as some personal status matters and public rights, cannot be arbitrated.
Is arbitration possible if the contract has no arbitration clause?
Yes, if both parties agree in writing, after the dispute arises, to refer it to arbitration.
Can a foreign arbitral award be enforced in Saudi Arabia?
Yes, subject to the statutory conditions and the international conventions the Kingdom has joined.
Need an arbitration clause drafted, or representation in an arbitration?
The team at Usus Law Firm handles arbitration cases, drafting arbitration agreements and commercial contracts, from its offices in Riyadh and Tabuk. We advise in English.
This article is general legal information and is not a substitute for advice on your specific case. Court proceedings in Saudi Arabia are in Arabic; the official Arabic text of each law prevails.
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