Arbitration in the Middle East – an update
by Shahed Ahmed, Senior Associate, and Natalie Mackay, Associate
In a further step to promote the Middle East as a global hub for arbitration, both the Kingdom of Saudi Arabia (“KSA”) and the United Arab Emirates (“UAE”) have recently made changes to their arbitration framework, modernising and strengthening arbitration in the region.
Shahed Ahmed and Natalie Mackay provide a summary of the key changes.
The Saudi Centre for Commercial Arbitration (“SCCA”) announced the publication of its revised arbitration rules (“New SCCA Rules”) on 1 May 2023, introducing significant changes and bringing the SCCA in line with other major arbitral institutions and international best practice.
More recently, the UAE amended its Federal Law No. 6 of 2018 (“Arbitration Law”) via Federal Law No. 15 of 2023 (“Amendment”), in an effort to regulate the appointment of arbitrators and to streamline the onshore arbitration process with a view to saving costs.
KSA – New SCCA Rules
SCCA Court
Of the changes introduced in the New SCCA Rules, one of the most notable is the establishment of an SCCA Court, which replaced the SCCA Committee for Administrative Decisions. In a move reflective of other arbitral institutions, the SCCA Court will effectively assume the administrative role of the SCCA and will be in charge of administering matters related to arbitrations and mediations conducted under the auspices of the New SCCA Rules, including:
- the appointment of arbitrators and emergency arbitrators;
- challenges of arbitrators; and
- determining both the administrative fees and those of the arbitral tribunal.
Reliance on technology and the environmental impact of arbitration
An overarching and new feature of the New SCCA Rules is the promotion of the use of technology to file documents and manage cases. By way of example, the New SCCA Rules:
- allow for and encourage the electronic transmission of documents and submissions;
- permit arbitral awards to be signed electronically by the arbitrators; and
- provide that the administrative conference shall be held remotely by video conference, telephone, or any other appropriate means of remote communication, unless otherwise agreed, and further acknowledges that hearings may also be conducted remotely, or in a hybrid format.
Further, the New SCCA Rules expressly encourage the use of technology to not only optimise efficiency, but to minimise environmental impact, with arbitrators being encouraged to reduce the environmental impact of the arbitration when establishing arbitral procedures. Given the heightened global focus on sustainability and environmental impact, such changes offer a welcome move in the right direction.
Choice of law
The New SCCA Rules no longer make express reference to Shari’ah principles and only refer to the applicable law chosen by the parties. Whilst there is still the implication that Shari’ah would apply as a matter of law and public policy, this change is perhaps unsurprising given the recent announcement of the new Civil Transactions Law in the KSA which suggests that the KSA may be moving away from strictly applying Shari’ah to civil and commercial transactions.
Efficiency of proceedings
The New SCCA Rules place an important emphasis on the efficiency of the arbitration process, with the need for an efficient and cost-effective arbitration being referenced several times throughout:
- emergency arbitrators are required to issue interim awards within 15 days from the date on which the case file was transmitted to them;
- specific timeframes are granted, i.e., (i) 30 days from the commencement of the arbitration for the parties to nominate the arbitral tribunal, and (ii) the CMC is to be held within 30 days from constitution of the tribunal;
- the tribunals are granted discretionary powers to efficiently conduct the arbitration, including limiting the length of written submissions, encouraging parties to settle and striking out claims if made manifestly without merit;
- subject to certain conditions, where claims arise under multiple contracts / arbitration agreements, parties may issue a single request for arbitration;
- subject to certain conditions being met, it is permitted to consolidate two or more arbitrations; and
- unless otherwise agreed, the tribunal is to issue its award within 75 days from the date of close of proceedings.
Third-party funding
In line with both the ICC Rules 2021 and the DIAC Rules 2022, the New SCCA Rules require parties relying on litigation funding to disclose the identity of third-party funders. This is a welcome addition, both in respect of transparency and in protecting the financial interests of the parties, especially where third-party funding is becoming more prominent in the region.
UAE – Arbitration Law
Regulation of arbitrators
Previously, the Arbitration Law prohibited those sitting on the board of trustees or the administrative bodies of arbitral institution from being nominated as an arbitrator. Whilst the Amendment has extended this prohibition to include members of the executive management of the arbitral institution, the Amendment now provides exceptions to this via Article 10 bis, namely where:
- the regulations of the relevant arbitral institution do not prohibit the appointment;
- the competent institution has governance rules in place to (i) regulate the work of the arbitrator and ensure the segregation of duties and impartiality and prevent conflicts of interest, and (ii) regulate the appointment, dismissal and withdrawal of the arbitrator if such conditions are met;
- the arbitrator is not a sole arbitrator or chairperson;
- the parties declare in writing their knowledge of the arbitrator’s membership with the arbitral institution and they have no objection or reservation;
- the relevant arbitral institution has a mechanism for the safe reporting of violations committed by arbitrators;
- the relevant arbitrator does not sit on more than five cases per year; and
- the arbitrator undertakes in writing not to exploit their capacity in a manner that may create a conflict of interests and not to participate, deliberate, or influence the proceedings.
Further, and in a move that is reminiscent of the IBA Guidelines on Conflict of Interest, the Amendment prohibits arbitrators from having any direct relationship with the parties, which could impact their impartiality and/or independence.
Remote/virtual hearings
Similar to many other jurisdictions, following Covid-19, the UAE adopted the use of virtual hearings for arbitrations. Whilst the Arbitration Law provided the possibility of virtual hearings, the Amendment followed in the steps of many arbitral rules, including DIAC, in expressly acknowledging the use of virtual proceedings, confirming that parties can now agree on the seat of arbitration “in reality or virtually through means of modern technology”.
Further, Article 28 now imposes an obligation on arbitral institutions to provide the technology necessary for conducting virtual hearings in accordance with the standards and controls applicable in the State. This is likely to include e-services, such as virtual hearing platforms and online e-bundling, which are usually outsourced by the parties.
Confidentiality and evidence
Whilst the Arbitration Law previously only applied confidentiality restrictions to hearings and arbitral awards, the Amendment has extended these requirements to the entirety of the proceedings, unless otherwise agreed by the parties.
Further, the amendments under the Federal Law reinforce the tribunal’s discretionary power to determine the rules of evidence, but with certain qualifications. That is, the discretionary power applies (i) “unless otherwise agreed by the parties”, (ii) there is no “evidence within the law applicable to the dispute”, and (iii) the “rules do not prejudice public order.”
Closing remarks
The arbitration landscape is rapidly developing in both the KSA and the UAE, and, overall, the changes introduced over the course of the past year demonstrate further positive steps forward for arbitration in the region. It is, of course, early days and whilst it remains to be seen how the changes may impact the practice of arbitration in KSA and the UAE, these changes are a welcome addition and consistent with the region’s forward-thinking approach to arbitration.