The new SCCA Rules – Strengthening arbitration in Saudi Arabia

The changes mark a significant improvement and bring the region in line with international best practice

On 1 May 2023, the Saudi Centre for Commercial Arbitration (SCCA) announced the publication of its revised SCCA Arbitration Rules (the new Rules). The new Rules apply to all arbitrations filed on or after 1 May 2023.  The new Rules replace the first edition of the Rules, which were published in 2016.

One of the main driving factors behind the new Rules is the SCCA’s aim of becoming not only a major arbitration centre, but the preferred choice in the region by 2030.  Indeed, the new Rules are intended to demonstrate that the KSA is an arbitration-friendly jurisdiction, with a centre and set of Rules that is on a par not only with other centres in the Middle East, but also those around the world.

To this end, the new Rules include a number of significant changes.  In particular, the new Rules introduce the new SCCA Court, include new provisions to ensure that the new Rules are aligned with international best practice, and act to streamline the arbitration procedure.

We discuss the most important of these changes below.

The SCCA Court

Probably the most important change is the introduction of the new SCCA Court, which brings the SCCA into line with other institutions such as the ICC and LCIA.

The SCCA Court is responsible for making key administrative decisions in relation to SCCA administered arbitrations, including the appointment, challenge and removal of arbitrators, reviewing draft awards, and fixing the SCCA’s administrative cost, and arbitrator fees.  Its decisions are expressly stated to be final and binding and not open to appeal or review.

The SCCA Court itself is made up of 15 experienced international arbitration practitioners, led by Jan Paulsson as President, adding a further international element to SCCA arbitration.

Discretionary Powers

Another important change is to the Tribunal’s discretionary powers.  These will give Tribunals more power over proceedings, allowing them to ensure that they remain efficient and cost-effective.

For example, Article 25 sets out the Tribunal’s discretionary powers for conducting the arbitration, which include determining the most effective format for hearings, the ability to encourage parties to attempt mediation, limiting the length of written submissions, deciding preliminary issues, bifurcating proceedings, directing the order of proof and excluding irrelevant testimony or other evidence. In addition, Article 9.3 provides the Tribunal with the ability to reject changes in party representation where necessary to safeguard the arbitration procedure.

Early disposal of claims and defences

In addition, the SCCA has introduced new procedures for the early disposal of claims and defences, which should also ensure that claims can be disposed of efficiently.

The new procedures, contained in Article 26, allow the Tribunal to dispose of jurisdiction, admissibility or legal merit issues raised in a claim or defence without needing to follow every step that would otherwise need to be taken in the arbitration.  This essentially amounts to a form of summary judgment and allows the Tribunal to deal with issues such as claims that lack merit, or those where no award could be issued under the applicable law, to be dealt with in a timely manner.

Consolidation and multi-contract arbitration

The new Rules now include consolidation and multi-contract provisions, which are particularly useful for disputes relating to large construction and infrastructure projects that typically involve a number of related contracts on the same project.

In particular, Article 11 allows for claims arising out of or in connection with more than one contract or arbitration agreement to be referred to a single arbitration.  Article 13 contains provisions in relation to the consolidation of two or more arbitrations commenced under the same arbitration agreement, where the disputes arise from the same legal relationship, or the parties agree to consolidation.

For completeness, Article 12 contains similar joinder provisions to those in the previous Rules.

Removal of reference to Sharia

While the previous Rules provided that parties had to comply with the rules of Sharia in any SCCA arbitration, irrespective of the applicable law chosen by them, the new Rules have removed this provision.

Instead, Article 37 of the new Rules provide that the Tribunal must apply the law designated by the parties, and if none has been designated, that the most appropriate law should be applied.  In terms of the law applicable to the arbitration agreement, which arbitration clauses often omit, Article 37.4 provides that the law of the seat will apply unless the parties expressly agree otherwise.

This change brings the new Rules in line with best practice and will ensure more certainty for international parties looking to include the SCCA in their contracts. Parties will still need to ensure that their arbitration proceedings are conducted so as to minimise the risk of the resulting award not being enforceable due to non-compliance with Sharia principles.

Use of technology

The SCCA has also been keen to promote the use of technology in the new Rules.  Given the increased use of technology that has pervaded the arbitration community in recent years, and the importance of initiatives such as the campaign for greener arbitrations, such encouragement is welcome.

Changes include Article 4.1, which allows notices of arbitration to be served by email, and Article 25.1, which provides the Tribunal with the power to determine the extent to which technology shall be used.  Article 27.1 also allows the Tribunal to require that all written submissions are filed by email or other electronic means.

The SCCA has also updated its Online Dispute Resolution (ODR) Procedure Rules (contained at Appendix IV of the new Rules), which are specifically tailored to small disputes where the amount in dispute does not exceed SAR 200,000.  Under the ODR, the SCCA will appoint a sole arbitrator, who will issue a final award within 30 days of appointment.  The award is usually based on written submissions, unless otherwise agreed.

Third-party funding

Article 17.6 of the new Rules provide that a party that is relying on litigation funding must identify the third-party funder.  Given the rise of third-party funding arrangements, the inclusion of such a provision is not unexpected, and is a welcome and proactive approach to promoting transparency in proceedings.

Conclusion

The new Rules are clearly intended to bring SCCA arbitration into line with international best practice and are a significant improvement over the previous Rules.  They provide parties with a greater degree of clarity on the procedure, while also ensuring efficiency. Combined with the encouraging supervision of arbitration and treatment of awards in the KSA courts, this will continue to enhance the standing of both the SCCA and the KSA in international arbitration. This development is positive news for those doing business in Saudi Arabia since it is expected to become the default dispute resolution option in Saudi Arabian government tendered contracts.

For more information, please contact Stuart Paterson, Partner, Nick Oury, Partner, Sean Whitham, Of Counsel, or your usual Herbert Smith Freehills contact.