Even though the Council of Ministers approved a new arbitration law on April 16, 2012, commercial arbitration in Saudi Arabia is still considered weak and ineffective by companies and lawyers. For the past 30 years, traditional methods have been used to deal with commercial disputes.
Some lawyers and businesspeople have only recently become aware of the need for commercial arbitration, said Majed Qaroub, a member of the consultant arbitration committee at the Saudi Justice Ministry, and head assistant of the Arab Chamber of Arbitration and Documentation.
“Although the business community is now more aware of the importance of arbitration, and the need to have it in the Saudi market, it is still too early to judge the recent update on the commercial arbitration law in the Kingdom,” he said. According to Qaroub, the Saudi government has promulgated the law, but it has not been implemented yet.
“Unfortunately, the commencement has not been initiated by anyone yet. We have not seen any event, conference or workshop to announce the new commercial arbitration law. This wavering start is one of the main obstacles facing us in the arbitration sector,” said Qaroub.
The Council of Saudi Chambers has to start holding sessions and workshops to bring together the business community and lawyers, to introduce the new law, said Qaroub.
“We don’t know if the new commercial arbitration law is effective or not, because we haven’t tested it yet. Once we test the new law, we can decide whether to keep it as is or update it. I think the Kingdom needs between seven and 10 years to test the new arbitration law,” he said. Secondly, the commercial judicial system has not reacted to any commercial case either by implementing or opposing any case.
“We need to see at least 10 implemented or opposed judicial statements, to test the efficacy of the new arbitration law,” said Qaroub.
He said that an arbitration case could be a prolonged process in Saudi Arabia, since the business community needs seven years to start the process, three years to process the arbitration and between three to 10 years to implement or oppose the judicial sentence. When asked about data on the number of arbitration cases, Qaroub said that there was none. However, he added: “Out of a total of an estimated 200,000 commercial cases a year, only 75 have been registered in court.” Despite the Kingdom having joined the World Trade Organization (WTO), its economy is still not impacted by the laws used worldwide.
“As Saudi Arabia is considered one of the most rapidly growing countries in terms of its economy, local and international companies depend on foreign arbitration centers if needed,” he said. According to Qaroub, international companies operating in Saudi Arabia do not use local arbitration centers for several reasons.
Qaroub said this is because there is a lack of local arbitrators, no lawyers’ syndicate, the weak language skills of most Saudi lawyers, the absence of arbitration centers, and no list of lawyers who are violators.
Qaroub said businesswomen are only involved in name in arbitration in the Saudi business community, which is another problem facing commercial arbitration.
“Saudi businesswomen don’t have the right to manage their businesses without a male agent, so there is no real Saudi businesswomen community. I would say that 99 percent of women’s businesses are small, micro projects that don’t extend beyond boutiques and restaurants which are operated from homes,” he said.
Dr. Nasser K. Al-Bilbissi, an international adviser of the arbitration committee at the International Court of Justice in The Hague, believes that a "journey of a thousand miles begins with a single step."
“It’s a good step as a beginning, but we have to wait until the implementation starts. The Saudi business community hasn’t accepted the new changes yet. This is because the arbitration culture is not widespread in Saudi Arabia yet and there is a lot of confusion on many points such as the similarities and differences between the arbitrator and the judge, legal requirements and the conventions that should be used by the judicial arbitrator. This is in addition to issues related to the arbitrator such as eligibility, impartiality and independence."
According to Al-Bilbissi, Saudi businesspeople and foreign companies are not benefiting from the new arbitration law in Saudi Arabia.
“After the Kingdom joined the WTO, I and other arbitrators had hoped to see distinguished Saudi arbitrators carrying out their tasks. To achieve this, we need to have training courses for arbitrators and novice trainees, knowledge to identify arbitration and spread the arbitration culture in Arab societies,” he said. Arab News spoke to a spokesman from MAERSK LINE shipping company in Saudi Arabia, who confirmed that his company uses foreign arbitration centers. “Whenever we are approached with an arbitration request, we revert to the P&I club to checks with its representative in Saudi Arabia and agree on how we should proceed,” said Hakim Darwish, campaigns and communication manager at MAERSK LINE.
Arbitration laws still considered weak, ineffective in Kingdom
