In line with its desire to be at the forefront of arbitral developments, on 1 May 2023 the SCCA published its revised SCCA Arbitration Rules (the "2023 Rules"), which the SCCA states have been "developed in accordance with international best practices". The 2023 Rules update and replace the 2018 Rules and will apply to all SCCA arbitrations filed on or after 1 May 2023.
Although arbitration and arbitration clauses pursuant to the LCIA or ICC Rules, with seats in traditional jurisdictions such as London, Hong Kong, Paris, Singapore, or New York, are often only given a cursory glance when contracts are drafted, our experience is that parties active in the Kingdom take an acute interest in dispute resolution clauses that include reference to SCCA arbitration.
For this reason, the 2023 Rules will be of interest to all parties active in KSA.
Key changes in the 2023 Rules
In line with international best practices, the 2023 Rules introduce several key changes intended to improve the efficiency, flexibility, and transparency of the SCCA's administration and procedures:
Introduction of the SCCA Court
The SCCA Committee for Administrative Decisions has now been replaced with the SCCA Court, which is independent from the SCCA and comprises 15 eminent international arbitration practitioners. The SCCA Court will benefit from greater powers than its predecessor, including the power to appoint and/or remove arbitrators, fix costs, and determine disputes relating to the place of arbitration.
The scope for challenging the appointment of an arbitrator has now been expanded with the introduction of two new grounds. Whilst the appointment of an arbitrator could previously be challenged on the ground of justifiable doubt as to impartiality and independence, the 2023 Rules also allow challenges on the basis of an arbitrator's failure to perform their duties and/or their manifest lack of party-agreed qualifications.
Increased use of technology
Under the 2023 Rules, the Tribunal may utilize technology to increase the efficiency and reduce the environmental impact of proceedings – for example, by requiring hearings to be held remotely, limiting the length of written statements and document requests, permitting the electronic transmission of notices and signing awards electronically. Claims with a value not exceeding SAR 200,000 (approximately USD $53,000) can also be managed via the KSA's Online Dispute Resolution Protocol. Accordingly, the 2023 Rules adopt relevant measures in respect of data protection, privacy and cybersecurity.
Provision for multi-faceted proceedings
To address the multi-contract and/or multi-party nature of many disputes, the 2023 Rules make provision for the joinder, consolidation and coordination of parallel arbitrations. In recognition of the growth in third-party funding, non-parties with an economic interest in the outcome of the proceedings must now be disclosed.
Raising the international profile of arbitration in KSA
As noted above, the introduction of the 2023 Rules is the latest of the SCCA's efforts to develop its arbitration offering in the region, with a view to meeting its target of becoming the Middle East's preferred ADR provider by 2030.
The publication of the 2023 Rules follows the SCCA's announcement in November 2022 that it had opened an office in Dubai's DIFC, thereby giving parties a neutral venue from which to conduct proceedings and allowing it to establish a presence in a leading global financial centre. This move, which may be seen as attempting to plug the gap left by the closure of the DIFC-LCIA, has positioned the SCCA as a competitor to DIAC, which itself introduced revised Arbitration Rules in 2022. Such competition can only be a positive step in the development of international arbitration in the region.
The SCCA and the KSA courts have also taken steps to dispel concerns about the enforceability of arbitral awards in KSA, which may have previously dissuaded parties from attempting dispute resolution in the jurisdiction. Parties can take some comfort that the Kingdom is a signatory the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the "New York Convention"), and recent annual data presents a positive picture of an increasing pro-arbitration friendly jurisdiction. For example, in 2021, the KSA courts enforced 204 domestic and foreign awards, with an aggregate value of USD2.1 billion. Similarly, of 131 motions to annul awards made between 2017-2022, only 8 percent succeeded.
Looking to the future
The 2023 Rules are a timely update given a recent increase in SCCA case registrations, arising from the unprecedented levels of foreign investment and development seen in the KSA at present. Of the 200 cases registered with the SCCA since its establishment in 2016, 70 percent of those cases were filed in 2020-21. There can be little doubt that uptake of the SCCA's services will rise significantly as investment and development activity continues exponentially.
The SCCA states that its goal "is to create a safe environment that attracts both foreign and domestic investment to the Kingdom by eliminating obstacles and difficulties related to ADR between investing parties". Its recent updates are consistent with that objective, providing a modern and robust set of rules that will help to secure investor confidence and promote the KSA's international arbitration capabilities.
Authored by Emerson Holmes, Patrick McPherson, Randall Walker, and Jessica Quinlan.