SCCA Arbitration Rules 2023 – a further step in the right direction?

August 2023 | EXPERT BRIEFING | LITIGATION & DISPUTE RESOLUTION

financierworldwide.com

The last decade has seen the Kingdom of Saudi Arabia implement a number of legislative reforms in seeking to position itself as a regional leader for arbitration. The catalyst for these reforms has been the country’s ‘Vision 2030’ initiative, an ambitious programme to, among other goals, diversify the Saudi economy and increase direct local and foreign investment.

In large part, key to achieving these aims has been a desire, if not a necessity, to rebuild investor confidence in the finality and enforceability of arbitral awards in the Kingdom following what was previously a well-documented and unpredictable relationship with arbitration as a form of dispute resolution.

Development started with the enactment of a new arbitration law in 2012 (Royal Decree No. M/34) which was based on the UNCITRAL Model Law, and was followed shortly thereafter in 2013 with a new enforcement law (Royal Decree No. M/53), which introduced a specialist enforcement court with simplified procedures for the enforcement of arbitral awards, both domestic and foreign. Changes have not been limited to legislative reform and in 2014, the Kingdom’s first arbitration institution was established, the Saudi Center for Commercial Arbitration (SCCA), which formally commenced operations in October 2016.

Between October 2016 and April 2022, the SCCA reported that 211 filings had been registered with total claims in excess of $1bn. Such growth prompted the SCCA to open its first regional office outside of the Kingdom. Earlier in 2023 ‘SCCA Dubai’ became operational, located in the Dubai International Financial Centre.

In line with its pursuit to provide an institutional offering reflective of international best practice, the SCCA has recently published the second version of its Arbitration Rules which came into effect on 1 May 2023 (2023 Arbitration Rules), and apply to all arbitrations filed with the SCCA on or after that date. The 2023 Arbitration Rules have been developed over the course of a 20-month public consultation undertaken by the SCCA and the SCCA Rules Advisory Committee – a body comprised of 16 international industry experts.

One of the most notable developments is the establishment of the SCCA Court, which operates independently of the SCCA, and is tasked under the 2023 Arbitration Rules with various supervisory functions relating to technical and administrative matters. These include determining arbitrator challenges and appointments, determining consolidation applications, reviewing emergency applications, resolving disputes related to the place of arbitration or the number of arbitrators, setting advance deposits on costs, determining fees and scrutinising awards prior to issue.

The SCCA Court is itself comprised of 15 international arbitration experts drawn from around the globe.

Those familiar with the international arbitration landscape will recognise the utility in having an independent arbitration court address such issues. This development also moves the SCCA in line with other major arbitral institutions which also have independent supervisory courts, such as, for example, the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), the Singapore International Arbitration Centre and the Dubai International Arbitration Centre.

In addition to the establishment of the SCCA Court, the 2023 Arbitration Rules herald further developments on various issues. One issue is the removal of the previous mandatory applicability of Sharia law principles in relation to the parties’ choice of law. Article 37(1) now requires the tribunal to apply the rules of law chosen by the parties, removing the previous qualification that in doing so it must be “without prejudice to the rules of Sharia”.

Parties looking to enforce an award in Saudi Arabia need to be aware that Sharia law remains a relevant consideration in that context. For example, the Kingdom’s enforcement law permits the annulment of arbitral awards (or the offending parts of the same) on the basis that they violate the rules of Sharia and public policy. However, recent data released by the SCCA for the period 2017 to 2021 reveals that the exercise of this power is restrained.

Of 131 judgments which considered a request to annul an arbitral award, only 3.8 percent of those were granted on the basis of a breach of public policy and Sharia.

Article 37(4) of the 2023 Arbitration Rules also confirms that, separate from the governing law of any underlying agreement, the law applicable to the arbitration agreement itself shall be the law of the place of arbitration (i.e., the seat), unless otherwise agreed by the parties. This provision, which was omitted from the previous arbitration rules, brings the rules in line with other institutions, such as the LCIA, which contain a similar default provision.

Updated disclosure rules now also require the prompt disclosure of the identity of any ‘non-party’ having an economic interest in the arbitration’s outcome, including any third-party funder (article 17(6)). This was not a requirement of the previous arbitration rules, and again is in line with the rules of other institutions, such as the 2021 ICC Rules of Arbitration, reflecting the growing prevalence of third-party funding.

The 2023 Arbitration Rules also deal with certain issues which the previous arbitration rules did not, such as where multiple contracts or arbitrations may exist in respect of connected disputes. For instance, article 11 addresses the circumstances where claims which arise out of multiple contracts or arbitration agreements are permitted to be heard as a single arbitration – those circumstances being where the relief sought arises out of the same transaction or series of transactions, where a common question of law or fact arises, and provided the arbitration agreements are compatible. Article 13 further addresses the circumstances in which two or more arbitration proceedings are on foot and when it will be permissible to consolidate them; specifically, where parties agree, or where the claims are made under the same arbitration agreements, or where the disputes arise in connection with the same legal relationship and the arbitration agreements are compatible.

Tribunals are also granted additional express discretionary powers of determination under the 2023 Arbitration Rules in relation to issues intended to both safeguard the integrity of the proceedings and to maintain efficiency and economy. By way of example: (i) article 25(7) permits the tribunal, at any time during the arbitration, to encourage the parties to consider settling all or part of the dispute by negotiation or amicable dispute resolution such as mediation; (ii) article 27 permits the tribunal to limit the length of, or dispense with, written submissions and witness testimony, and to limit requests for document production; and (iii) article 9(3) permits the tribunal to reject any change or addition to a party’s representation where necessary to safeguard the composition of the tribunal or the finality of the award in the case of conflicts.

Certain of the developments also seek to improve efficiency with respect to the process of the parties pleading their claims. For example, the tribunal is also now empowered to seek security from any party seeking to amend or supplement its pleadings after the tribunal has been constituted, as a condition of it granting its permission to the sought amendment (article 8(2)). The tribunal is also empowered under the 2023 Arbitration Rules to, at the request of a party, dispose of issues of jurisdiction, admissibility or legal merit early in the proceedings (article 26). Where the tribunal allows an application for early dismissal to proceed, it is required to issue an order or award on the same within 30 days.

Article 9(1) also expressly notes that any party may be represented by the counsel of its choice, including foreign legal practitioners. The reference to foreign legal practitioners was omitted from the previous version of the rules and follows confirmation provided by the SCCA in 2022, as a result of a joint study by the SCCA and the Ministry of Justice, that representation by foreign legal counsel was not a legitimate ground for annulment of an award.

In relation to emergency measures and relief, the 2023 Arbitration Rules also impose a 14-day timeframe in which an emergency arbitrator is required to issue an interim award, the timeframe commencing from the date on which the file is transmitted to him or her (article 7(8)). The inclusion of this timeframe, where the previous rules were silent, will assist in ensuring parties can access emergency relief in a timely fashion.

The 2023 Arbitration Rules also highlight the importance of using technology to administer arbitrations so as to increase efficiency and reduce environmental impact. Some examples include article 4(1) which permits the service of documents electronically, article 25(2) which encourages the tribunal and parties to consider how best to utilise technology to establish procedures for the arbitration, and article 29(2) which permits the tribunal the discretion to determine whether hearings will be conducted remotely or “in a hybrid format”. The above is not intended to be an exhaustive list of changes made, but those referred to are demonstrative of the significant steps taken within the Kingdom to create a favourable environment for the resolution of disputes through arbitration.

James Bremen and James Mayers are partners and Brittney Nash is a senior associate at Quinn Emanuel Urquhart & Sullivan. Mr Bremen can be contacted on +44 (0)20 7653 2270 or by email: jamesbremen@quinnemanuel.com. Mr Mayers can be contacted on +974 6620 6649 or by email: jamesmayers@quinnemanuel.com. Ms Nash can be contacted on +44 (0)20 7653 2257 or by email: brittneynash@quinnemanuel.com.

James Bremen, James Mayers and Brittney Nash

Quinn Emanuel Urquhart & Sullivan