Comparison on the arbitration laws in Saudi Arabia and United States

Arbitration

The newly passed laws of arbitration in Saudi Arabia continue to be the generally applicable arbitrations and all parties involved uphold its use in the international commercial arbitrations processes and proceedings which are conducted out of Saudi territory. Arbitration in Saudi Arabia has not been very popular since time in history in terms of dispute resolution in this great kingdom (Stone et al., 2015). The dispute and distrust involving the parties in the use of arbitration in solving the differences were never upheld or supported by the courts during the arbitral process and the many uncertainties which surround the use and enforcement of the arbitral laws. Since time in history, the arbitral laws which have tried to be enforced in Saudi have been the victims by the courts in the willingness to consider the general jurisdictions and merits of each case presented and also the wide application and interpretations of the public policy (Medallah, 2015). In many cases, the courts in Saudi Arabia have denied the chance of using the arbitral awards on the generic grounds and even gone ahead to conduct a hearing of the dispute without the use of the laws. However, after the arbitration law was passed together with enforcement laws which are both new and passed in the year 2012, there are some reasons of being a little bit happy since this indicates that the landscape in arbitration law is slowly improving.

The newly opened center for commercial arbitration together with the arbitration rules in Riyadh in the year 2016 also seemed very promising for the society. In 2017, implementation rules for the arbitration laws were done to the official gazette which made a clarification on some of the controversial laws in the new laws. However, there requires some level of caution in most of the clauses since the laws remain unknown in terms of application and in particular the issue of whether the judicial body will continue using the pro-arbitration laws which have been recently passed into law by the legislature (Demeter & Smith, 2016). 

In Saudi Arabia, there is a law that is very similar to the arbitration law in the United States. Commercial arbitration is one of the oldest and most relied on a type of practice in solving the disputes between the international and national corporations and companies. The modern development of the international arbitration can be related to jay treaty of 1794 between the United States and Great Britain whereby three arbitral commissions were formed in the settlement of claims and questions which arose from the American Revolution. Arbitration is currently acceptable in the legal community as the alternative method of dispute resolution which is also used in many contexts, for example, the disputes involving the employment relations, consumer transactions, and commercial transactions. The arbitration practice in the United States occupies a very exceptional position in the global international system of arbitration and also in the historic advancement of arbitration (Baamir, 2016). In American Revolution practice of the law, the doctrine of freedom of contract has been the driving force since time in history. In United States, arbitration laws and practice derived from at least five sources which are: statutes, appellate opinions, international treaties, regulations by administrative agencies and constitutions. Federal arbitration act (FAA) is basically the controlling body to the arbitration laws in both the federal and state levels in United States. FAA in most cases subjects the arbitrations into a single standard for the judge to review regardless of if the dispute is international or domestic.

This was enacted by the Congress in the year 1925 with the aims of overcoming the judicial level of reluctance in enforcing the agreements to arbitrate and which consists of 3 chapters. The first chapter contains the provisions of acts regarding the construction of arbitration agreements and its enforcement of the required awards (Stone et al., 2015). The second chapter involves the implementation of the New York convention while the third chapter involves the implementation of the Panama Convention. Both chapter 3 and 2 are referred as international FAA through the international arbitration will also be a subject to the domestic application to the point where it does not bring any kind of conflictions. The set rules may be used at the national level where the arbitral tribunal finds a conflicting issue while using any law. Procedural rules are used in the proceedings so long as the international arbitration rules do not conflict with the Shariah laws and the policy of Saudi Arabia (Medallah, 2015). If the parties do not come to an agreement, the arbitral tribunal has the legal authority to step in and select any procedural rules. In such a case, the new arbitration laws give a detailed arbitration procedure which is applied as a default. They include the witness statements, hearings, pleadings and expert reports.

Since time in history, the arbitration laws in solving disputes in Saudi Arabia have been rendered useless. The numerous numbers of cases involving arbitration outside the Kingdom of Saudi Arabia have caused the country to rethink on its applications. When it comes to the United States, the enforcement of the arbitration agreements and awards is wholly granted by American arbitration act (AAA). The United States government ensures that the laws are used in solving both the federal and state cases. In Saudi Arabia, the laws have started to be used in the recent times compared to the United States which have been applying the laws for long periods now.

Appointment of an arbitrator in Saudi Arabia and United States

In Saudi Arabia, the new laws of arbitration provide the default provisions with regards to the choosing of the arbitrators and also their removal from office. The involved parties have the right and freedom to agree the best procedure in choosing the arbitrators which include the adoption of certain institutional rules that address the issue which includes: If there is only one arbitrator in the arbitral tribunal, then a competent court will have the arbitrator chosen (Fossum, 2014). In the case the arbitral tribunal has 3 arbitrators, all parties will have the honor of choosing only 1 arbitrator and the chosen arbitrators will now appoint a third arbitrator who will be the representative of the president or chairman to the tribunal. In the case there is no institution that is appointed for the choosing of the arbitrator process, the court assumes the responsibility of choosing the arbitrator if the party-appointed arbitrators or parties have failed to appoint one according to article 15. Any of the decisions by the competent court with regards to the choosing of the arbitrators according to article 15 can never be appealed except in a case where the party has filed an application of having the arbitral tribunal award quashed in accordance to article 49 and 50 (Demeter & Smith, 2016).

Implementing rules offer more guidance on the issue. In article 10, it is stated that in the case of the arbitral tribunal has to be of one arbitrator and the parties have failed to agree on the selection, the competent court has the authority of choosing one arbitrator within the next 15 days of getting the request from either party. In article 4, any party making a request has to have a requested copy for arbitration and also a copy of the agreement of arbitration (Baamir, 2016). The united states also use a similar method of appointing an arbitrator. Both the United States and Saudi Arabia have a common method of choosing an arbitrator and in the case, none of the parties chose a single arbitrator, then the court has the mandate of choosing and this will be indicated as a choice of the parties through writing. The law of Saudi Arabia permits the parties to apply a competent court for the cases with regards to the precautionary or temporary measures such as prior to the start of arbitral process and injunctions or the freezing orders. The parties are allowed to chose the arbitrator in Saudi Arabia and in the case there is no conclusion or an agreement, then the competent court has the authority to dictate the exercise by choosing the most suitable to represent the arbitration.          

Influence of Shariah laws on arbitration

Over the years, the world economies have grown in most parts of the world especially in Saudi Arabia, Turkey, and Indonesia which are all Muslim states. The commercial and business transactions done in this states are from different societies, faiths, cultures and political system. In this globalized age where the economies of the world are developing to be very vibrant, it is very important to have a level of appreciation about the issues facing either party in doing business (Stone et al., 2015). During the conducting of business from various cultural, financial, political, legal, and social background differences are very possible to occur and it is therefore important to have some level of understanding on each opposing party in order to solve a dispute. There is no doubt that the business environment today has no boundaries in the cases where international transactions have been converted virtually into a regular operation. With such facts, the arbitration is the exceptional method of solving any disputes in the industry since it has been established to remove any jurisdictional borders in an outstanding way while still maintaining an enforceable and binding outcome in the long run. Many states exercise a very significant control in the arbitration laws and proceedings either through the supervision and assistance, mandatory rules or the enforcement of the award. Sharia laws in Saudi Arabia have been the driving force and the ultimate source of legislation (Medallah, 2015). The government of Saudi Arabia issues the regulations and laws with regards to the level of conflicting interests with the in place Islamic laws as they are regarded as sacred and preeminent. The laws and regulations enforced must not be against the sharia laws which are much respected in Saudi Arabia. With this concept, the sharia laws are regarded as the rulings of God and the Saudi Arabian government forbids anyone from going against them especially the Arabs. Therefore, these sharia laws are regarded as the highest laws above any extra rule which is given by the kingdom of Arabia.

With such capacity, the obligatory provisions of sharia laws are part of the Saudi public policy. This means that the policy of Saudi has the principles of Sharia laws as a mandatory part in the rules generated (Demeter & Smith, 2016). Therefore,  sharia laws in article 55 is only an indication compared to it being prescriptive due to the inclusion of the sharia laws as a mandatory act in the public policy in Saudi Arabia. With this sense, if a person considers that the wording on article 55 to be a setback against enforcing the arbitral award in the kingdom of Saudi Arabia, then there lacks resolution which can be obtained as the  law provides itself as a resolute in this kingdom meaning it cannot be changed by whatever means. Therefore, some of the existing prohibitions on Islamic commercial laws for example the avoidance of excessive risks, interest, and avoidance of any transactions on the basis of chance or luck can be very challenging in relation to the legal system since they all are based on specific reasons and which include the Saudi Arabia rules and regulations. Hence, the problem in this case is not the rules but the application of sharia laws and rules as being public policy (Baamir, 2016).  The main consideration can be about how rules on the policy are seen and implicated to enforce the system of the arbitration internationally.

There are calls to have the kingdom employ a transparent law and modify the customary sharia laws category in practice. This is to enable the avoidance of arbitrary practices, secure the legal certainty and have a consistent ruling. If all these rules are applied persistently and in a manner that is transparent, the necessary precautions can be undertaken by arbitrators like depiction an award which can be broken into parts which are possibly a violation of the Saudi Arabian policies and in this way the award is executable. The sharia laws remain very intact to the arbitration laws today and this affects the application of the laws in this state and other Muslim states. Saudi Arabia expects that the arbitration laws applied in that kingdom are in accordance with the public policy which is only a hidden expression of the sharia laws (Fossum, 2014). While using the arbitration laws in this country one has to be of respect to the concept that the policies are Gods words to the people of this kingdom and they are expected to be followed accordingly.

Arbitration control in Saudi Arabia

The court of appeal in Saudi is the competent court which handles cases to do with arbitration and any challenge that is forwarded with regards to the issue. In the case that the court of appeal does not deal with the issue, then the Supreme Court becomes the dispute solver in this case. According to article 15, the competent court is termed as the appointing body for the process of the arbitral tribunal where the parties have failed to agree on formation (Demeter & Smith, 2016). The competent court is also responsible for the making of an order of listening to the witness and also the production of any documents as requested by the arbitral tribunal according to article 22. After the implementation of the new laws in 2017, the court of appeal was granted the mandate of dealing with the issues arising from the arbitration such as the appointment of an arbitrator in case the parties do not come to a consensus and also dictate some of the vital regulations in the process.  The regulations opened a way for the Saudi government to be able to enhance the business environment and make the country laws conducive and attractive to investors. Under the kingdom of Saudi Arabia, the courts have been mandated to make orders with regards to the preliminary matters and also the injunctive cases including the orders which the judge considers to be very vital in nature to solving a dispute (Baamir, 2016). The arbitration laws also allow the tribunals to issue the partial awards or provisional awards unless the parties have an agreement on the issue. Considering the absence of any agreement between parties due to the duration of arbitration, the tribunal has the obligation of issuing awards in less than 12 months to the start of the proceedings and a six months allowance as an extension. If the time expires for granted by the competent court, any of the parties can apply for the termination of the arbitration. When any decision has been issued, it must be filed at the competent court within the kingdom by the tribunal for arbitration together with the certified Arabic translation if the language used is not Arabic in a period of 15 days (Stone et al., 2015).

Though the tribunal of arbitration must file the documents with the competent court rather than enforcing the party, the timing and the control of the filing for the award is practically within the control of the party. This is one of the factors that the parties must put into consideration during the determination of the arbitration on the basis of subject to the arbitration laws. After the filing, the award has the legal authority of the judicial ruling and therefore it becomes enforceable only to the extent where the sharia laws are not tampered with and also the public policy (Medallah, 2015). The law provides that if there is any possibility of separating the noncompliant aspect of an award, then it can be possible for the enforcement of the compliant part of the portion of the award. The necessity of complying with the sharia laws and public policy is considered to be an all-pervasive necessity which is clearly stated by the laws of the land and must be taken into account by the parties during the process of deciding whether to be in agreement with the arbitration requirements. The government does play a very important role in the arbitration laws since it is the body which ensures that the sharia laws are followed effectively. The sharia laws are controlled by the government through the courts and this implicates the process of arbitration in Saudi Arabia (Stone et al., 2015). The courts are the general handlers of the arbitration laws specifically the court of appeal which has the main duties in dealing with arbitration.

Hearing arbitration

Article 26 of the latest arbitration laws in Saudi Arabia states that the proceedings of an arbitral commence the moment the request by any party has been received by the opposite party unless there is an agreement between the parties. In the case of multi-party, according to article 11, the proceedings commence beginning the last day when the parties received the arbitration request. The new law was incomplete with regards to the request for arbitration, according to article 9 of the rules of implementation, the matter is deemed to be included in the request for arbitration.  The new arbitration laws according to article 25 uphold certain principles such as the party autonomy which provides that the parties can have an agreement on the procedure to be used by the tribunal during the conduction of the proceedings (Medallah, 2015). The parties can come to an agreement to form the subject for the proceedings to any rules of an organization, arbitration center or agency either abroad or inside Saudi Arabia. To a certain extent for any inconsistency between the rules which have been agreed upon by the parties involved, the rules hereby accepted must prevail unless there is a violation of the mandatory Saudi law. Any developed rules must not be in conflict with the sharia laws. With regards to this clause, it is therefore very important for the parties to choose a person who is very conversant with the sharia laws. The arbitrator has to have the capability of providing the required guidance to the tribunal with regards to if the application of any rule can be conflicting with the sharia laws (Fossum, 2014). The new law contains certain procedural rules that must be applied to any arbitration in the absence of the party agreements.

According to article 25, the tribunal has the capacity to determine the type of procedure to be used with regards to the new law and sharia laws. The implementing rules mandate that where the tribunal has been involved in the formulation of the procedure to be used, the parties, in this case, must be notified about the procedure in 10 days or less before commencement. Default procedure rules in arbitration laws are mostly based on the UNCITRAL model law though there are some differences which are present. For example, the new law requires the written statements of the involved case and also the holding of hearings and the proceedings in a piece of paper (Baamir, 2016). The new law also requires the tribunal to have a recorded summary of the hearing in the minute's form that is to be duly signed by the present participants including the experts, witnesses, agents of attending parties and the members of the tribunal. The signed document must be produced a copy and which is given to every party unless the parties do not want any copy. This is a reflection of the practice in the region where a signed transcript of the hearings is a satisfactory document.

The rules or hearing arbitration in the United States are different to the ones used in Saudi Arabia to some points. The FAA does not contain the default rules that regulate the commencement of the arbitral hearing and proceedings. The courts generally indicate that the parties are responsible for the dispute resolution and they have to agree on a mechanism which best works for all. In many cases, the parties can fail to designate the most appropriate rules and in such instances, the arbitrators are seen as the main bodies for the applicable procedures (Stone et al., 2015). The person chosen to be arbitrator must be a good understanding of the sharia laws. The need of having the knowledge of sharia laws is to ensure that any procedure made or any application made is in accordance with the sharia laws failure to which the request will be denied. The arbitrator must have a full understanding of the legal capacity. This is to enable the smooth running and proceedings of the arbitration. The arbitrator must be a university degree holder in the sharia law which is legal sciences. This is all measures to ensure that the person has the full capacity of dealing with any issues arising from the processes and the creation of future laws if need be. Certain procedures are to be followed when delivering a ruling with regards to arbitration in Saudi Arabia. The arbitrator must have full consent of the case according to the law and deliver judgment according to the provided evidence (Medallah, 2015). In the United States, as long as the parties have come to an agreement on the best mechanism to apply in arbitration, the arbitrator has the right of giving the results accordingly. There are no rules to be followed since the only requirement is to have the evidence well placed. If the evidence presented is detailed and very convincing, then the arbitrator gives the final decisions. The arbitrator in United States does not have to be qualified in any manner to be chosen as arbitrator. The parties are responsible for coming up with the best mechanism for choosing the arbitrator who will be among the three required arbitrators. A tribunal can be formulated by the United States courts if the required parties do not make a decision on who to be chosen as arbitrator (Demeter & Smith, 2016). Such an appointment by the courts is not obligated to follow any means and therefore the courts are at free will to choose the best suitable means of choosing the arbitrator.     

Appealing to arbitration

Any decisions made by the arbitrator have zero chances of being appealed considering the traditional sense. According to article 49 of the new laws in Saudi Arabia, it is mandated that the arbitral awards cannot be appealed unless any party makes an application in order to have the award nullified according to the law of arbitration (Medallah, 2015). The directives on challenging the awards are clearly indicated in article 50 of the new laws in Saudi Arabia and they are based on the grounds of UNCITRAL laws. In the case where the tribunal has not observed the conditions set with regards to the award or is the award was primarily based on irregularities in the procedural. The competent court with the capacity on its own basis can be able to nullify the award if there is a violation of the sharia or the public policy laws. This is where the professional level of the arbitrator is tested in the arbitration. During the rendering of the decision by the competent court after an application to have nullification, the court has no obligation of looking into the facts of the dispute involved (Stone et al., 2015). If the court has upheld the decision made, then there is no chance of having the decision averted by any means possible. Any application to appeal the decision made, it must be filed within sixty days or two months and the challenge must be notified to all the parties involved. Documents must be filled out according to article 18 of implementing rules. In the case of the competent court upholding the award given, an order of enforcing the decision is provided and this can never be appealed again (Baamir, 2016). Any decision to appeal to the decision by the competent court can be made within the next one month or 30 days. Implementing rules indicate that the appeal will only be presented to the Supreme Court and which will listen to the request made.

            In the United States, there is no legal right of making an appeal on the decisions made in an ordinary sense. The decision can only be nullified on limited grounds which are set out by the FAA. Such grounds include the emergence of new evidence that there was some level of corruption, undue means, and fraud (Demeter & Smith, 2016). The arbitrators were involved in some level of corrupt activities during the decision making or any of them was involved in corrupt activities. If the arbitrators made a certain decision which is above their power is also a ground on which the decision could be appealed. The procedure for making an appeal is to file a petition of requesting the vacation of the decision using the appropriate courts inside the country or any other country where the decision was made. A notice must be provided to the involved parties and which will have an opportunity to make a response. The application to have the modification or nullification of the decision under the FAA must be presented at least 3 months after when the delivery of the award was made.    

 

 

 

 

 

 

 

 

 

 

 

 

 

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