On 14 April 2014, the Council of Ministers approved the formation of the Saudi Centre for Commercial Arbitration, which will be based in the capital city, Riyadh.
It will operate under the auspices of the Council of Saudi Chambers, a federation of chambers of commerce, and will handle international commercial arbitrations.
The minister of culture and information has said that the centre will have a board of directors who will serve three-year terms. The centre will, interestingly, also have branches outside of Saudi Arabia.
The public sector continues to be the driving force behind the Saudi economy, yet government procurement laws mandate that disputes must be referred to local courts, even in relation to contracts involving complex projects or large values. International experience suggests that arbitration leads to better outcomes than local court litigation for all concerned, and the new centre will hopefully promote greater awareness and trust in the arbitration process in Saudi Arabia.
At the very least, the new Saudi centre will likely provide state-of-the-art facilities in which arbitrations can physically be held.
This development is one in a series of demonstrations by the Saudi government of its commitment to offering Saudi Arabia as an inviting venue for parties choosing international commercial arbitration as their dispute resolution mechanism.
The decision to form an arbitration centre comes two years after Saudi Arabia approved a new arbitration law. Based on the UNCITRAL Model Law, the law provides for party autonomy and limited oversight by the courts by excluding judicial review of awards on the merits, which had been common in Saudi Arabia.
Such a decision is good news for clients with disputes in Saudi Arabia. Under the new Saudi Arabian arbitration law, decisions can be annulled if they are not compliant with Sharia law, and this development should decrease the risk of this happening.