Category Archives: Dispute Resolution

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Dispute Resolution in a Modern Economy

Posted on September 5, 2022 - 8:41 am by

Saudi Arabia, the world’s largest oil producer, has been undergoing a major transformation in recent years as it looks to diversify its economy and reduce its reliance on petroleum revenues. As part of this process, the government has laid out a plan to transform Saudi Arabia into a more business-friendly environment. Part of this transformation includes reforming the legal system with respect to commercial law.

Dispute resolution is a key area of commercial law, and Saudi Arabia’s legal system is currently undergoing a process of reform in this area. As the nation begins to attract significant Foreign Direct Investment (FDI), international businesses are set to benefit from greater transparency and confidence in the legal system with respect to disputes.

 

KSA’s Economic Changes & the Legal System

Saudi Arabia’s legal system is based on Islamic law (sharia) and is therefore distinct from the common law systems of many Western nations. The government has been working to standardise the legal system in recent years, and this process has accelerated in light of the Kingdom’s plans to diversify its economy. These changes are designed to make Saudi Arabia a more attractive destination for Foreign Direct Investment (FDI) and to create a more business-friendly environment.

Some of the key changes that have been made in recent years include:

 

E-Commerce Licencing

As part of a move to provide greater protection to consumers, the government has informed e-commerce enterprises that they must now apply for a licence in order to operate in Saudi Arabia. Online retailers can either make this application via the Ministry of Commerce or the Freelance Platform. This registration can be performed entirely electronically, removing barriers to entry for businesses.

 

New Companies Law

In 2022, the Saudi government signed off on a new companies law, which is designed to make it easier for businesses to set up and operate in the Kingdom. The law includes a number of key reforms, such as the introduction of a new type of company called a Simplified Joint Stock Company with an aim to meet the needs of entrepreneurs.

This new law also addresses ownership, governance and employment to help simplify the process of setting up a business while also regulating the business landscape. Speaking to Asharq Al-Awsat, Osama al-Obaidi, Professor of Commercial Law at the Institute of Public Administration (IPA), said that these legal changes will “boost corporate governance principles, facilitate regular procedures, and reduce disputes.”

 

Commercial Arbitration

The Saudi government has also been working to promote arbitration as a means of dispute resolution and this is an area where businesses can expect to see further reform in the future. The Saudi Center for Commercial Arbitration (SCCA) was established in 2014 and is working to promote the use of arbitration among businesses operating in the Kingdom. It provides training and education on the benefits of arbitration and assists businesses amid disputes.

 

The Impact on Dispute Resolution

The reforms to Saudi Arabia’s legal system will have a significant impact on commercial disputes. Businesses operating in the Kingdom will benefit from greater clarity and certainty with respect to their legal rights and obligations. While Saudi’s business leaders are still slightly hesitant to engage with arbitrators, there is a growing recognition of the benefits of arbitration as a means of dispute resolution.

This will position Saudi Arabia as a more attractive destination for investment since foreign enterprises will be afforded greater protection thanks to the recognition of transnational arbitration awards and the availability of impartial dispute resolution. It removes an element of risk for international businesses and will encourage more companies to invest in Saudi Arabia.

As Saudi Arabia continues to evolve as an economy, businesses can expect to see further reform in the legal system. Overall, these reforms are proving to be a positive development for businesses operating in the Kingdom and will help transform the nation into a safe and profitable destination for FDI.

Changes to Saudi Arabia’s Dispute Resolution Regulations

Posted on November 9, 2022 - 10:41 am by

Dispute resolution is a growing industry in Saudi Arabia, and over the past 18 months, there have been some changes to its regulations. These changes aim to maintain high levels of efficiency and bring the system in line with international best practices.

Another significant change concerns the power of KSA’s enforcement courts. In this article, we will outline what these courts are, and what they can do to help ensure the efficient resolution of disputes.

Updates to the Dispute Resolution Framework

Dispute resolution was not a particularly well-developed area of law in Saudi Arabia until recently. In 2012, the government passed the Saudi Arbitration Law, which introduced a new framework for resolving disputes in the Kingdom. The introduction of this law was in response to growing levels of international arbitration, and it is part of a wider plan by the government to improve its legal infrastructure. Since then, a number of changes have been made to this framework to keep pace with international best practices, including the ones outlined below.

Electronic submissions

The introduction of an online dispute resolution system allows businesses to submit and manage disputes electronically. Since the COVID-19 global pandemic, this has become increasingly popular as it allows disputes to be dealt with remotely at a much faster pace than traditional face-to-face proceedings.

New Fee Structure

A new fee structure is one of the most recent changes to Saudi Arabia’s dispute resolution framework. Under this structure, parties who lose in court will be required to pay a fee of 2-5% of the claim value. This is intended to discourage frivolous claims and ensure that disputes are not being pursued to simply pressure the other party.

Saudi Arabia’s Enforcement Court

Saudi Arabia’s enforcement court has considerable power and is responsible for dealing with a wide range of disputes. These include:

  • Enforcement of court judgments from other countries that apply to people or entities resident in Saudi Arabia.
  • Enforcement of arbitration awards issued in accordance with the new arbitration law.
  • Enforcing family law judgments concerning the division of assets and child custody.
  • Ensuring that financial obligations (such as debts or alimony) are met following a divorce.
  • Enforcing intellectual property rights, such as trademarks, patents, and designs.

The role of the enforcement court is to ensure that these disputes are resolved in a fair and timely manner, which benefits businesses and individuals alike. With its extensive power, it is an important facet of the Saudi legal system.

In the case of arbitration and dispute resolution, the enforcement court has the power to enforce arbitration awards issued under the new arbitration law. This means that, should one party fail to comply with the award, the other party can seek enforcement of it in court. This gives businesses a level of security and ensures that any awards are respected.

Overall, the changes to Saudi Arabia’s dispute resolution framework have introduced higher levels of efficiency and international best practice to the legal system. This has benefited businesses and individuals alike, making Saudi Arabia a more attractive region for investment and entrepreneurship.

Managing Construction Disputes in Saudi Arabia

Posted on February 28, 2023 - 1:51 pm by

The construction industry in Saudi Arabia has experienced significant growth in recent years, with numerous infrastructure projects and real estate developments underway across the Kingdom. From tourist attractions to transport projects, the Kingdom is undergoing a transformation fuelled by rapid infrastructure development.

While this trend presents significant opportunities for investors and developers, it has also given rise to its fair share of challenges, including construction disputes. These disputes can occur due to a variety of reasons and can often lead to costly and time-consuming legal proceedings.

Effective management of construction disputes is therefore crucial for the success of any construction project in Saudi Arabia. This article will provide an overview of common types of construction disputes in the Kingdom and examine the available dispute resolution methods.

Common Types of Construction Disputes in Saudi Arabia

It’s an unfortunate reality of the construction industry that disputes are a frequent occurrence. However, the root cause of many of these disputes can be narrowed down to several common issues. Here are the main types of construction disputes, which commonly arise in Saudi Arabia.

  • Design Faults and Errors. These types of disputes may arise when the construction design does not meet local regulations or when the design fails to match the specifications agreed upon in the contract.
  • Delay Claims and Disputes. Delays can be triggered by a range of issues, such as adverse weather conditions, modifications to the scope of work, or the late delivery of equipment or materials. This can impact the timeline of a project and lead to claims for compensation or other remedies.
  • Scope of Work Disagreements. Disagreements about the scope of work can lead to disputes during the completion of construction projects. These disputes can occur when relevant parties disagree over the interpretation of the contract, or when there is unclear contract language, or an unexpected change in the scope of work.
  • Payment and Billing Disputes. Disagreements over payment are common in Saudi Arabia’s construction industry, with contractors and subcontractors sometimes coming into conflict over compensation for unpaid work or additional work that was not included in the original contract.
  • Contractual Obligation Disputes. Finally, contractors and developers may disagree about the terms of a contract, such as payment schedules or other contractual obligations, leading to costly and time-consuming disputes.

Dispute Resolution Methods in Saudi Arabia

When construction disputes arise in Saudi Arabia, there are a variety of dispute resolution methods available for the parties involved to resolve their disagreements. These methods can include litigation in the courts or alternative dispute resolution (ADR) methods, such as mediation, arbitration, and expert determination. Here’s a brief overview of each of these dispute resolution methods:

  • Litigation in the Courts. The most traditional method of resolving disputes is through litigation in the courts. The dispute is presented before a judge, who decides on the outcome of the case. Litigation can be a time-consuming and expensive process and may not always result in a favourable outcome for all parties.
  • Mediation is an ADR method in which a neutral third party, the mediator, assists the parties in reaching a mutually acceptable solution. Mediation is voluntary and confidential and can often result in a faster and more cost-effective resolution to the dispute.
  • Arbitration is another ADR method in which a neutral third party – the arbitrator – listens to both sides of the dispute and renders a binding decision. Arbitration can be faster and less expensive than litigation, but it can also result in a limited ability to appeal.
  • Expert Determination. Expert determination is an ADR method in which an independent expert is appointed to determine the outcome of a dispute. The expert’s decision is binding, and the process is often faster and less formal than other ADR methods.

Resolve and Prevent Disputes for a Stronger Construction Industry

Construction disputes in Saudi Arabia can be costly and disruptive for all parties involved, delaying the completion of projects, and causing financial losses. However, construction disputes in the Kingdom are an unfortunate but common reality for stakeholders within the industry. By understanding the common types of construction disputes, stakeholders can take proactive steps to mitigate the risk of disputes occurring in the first place.

Additionally, by utilising the appropriate dispute resolution methods available, such as mediation or arbitration, stakeholders can resolve disputes more efficiently and effectively than through traditional litigation. If you need help with a construction dispute in Saudi Arabia, it is best to seek legal advice from a qualified expert who can guide you through the process and help you reach a resolution.

A Summary of Saudi Arabia’s Mediation Draft Law

Posted on March 14, 2023 - 12:50 pm by

Saudi Arabia recently introduced a draft law introducing mediation as an alternative way to resolve disputes. This law is currently in the 30-day public consultation phase, and once implemented, it will apply to all legal entities registered with the Ministry of Commerce who are engaged in commercial disputes.

The law defines mediation as a process in which two or more parties come together to resolve their disputes with the assistance of a neutral third party (the mediator). It is intended to provide a more efficient and cost-effective method for resolving disputes between parties outside of the court system while ensuring that their rights are protected.

What Does the Law Mean for Parties Involved in Disputes?

The law lays out a framework for mediation and outlines the requirements that parties must meet in order to participate in this process. Here are some key takeaways from the new draft law below.

Confidentiality and Privacy

Mediation must be conducted in a confidential setting, which includes both in-person and virtual sessions. The mediator is bound by a duty of strict confidentiality and all parties involved in the mediation session must agree to maintain a similar standard of confidentiality. This means that the mediator and all participants must agree not to disclose any confidential information obtained during the mediation process and nothing that is discovered during mediation may be used as evidence in court.

Selecting a Mediator

The mediator must be approved by the Saudi Centre for Commercial Arbitration, with the appropriate qualifications and accreditation. The mediator will act as an impartial arbiter and facilitate communications between the parties in order to reach a resolution that is acceptable to everyone involved. The parties involved in the mediation session are responsible for paying the mediator, and the mediator’s fees should be agreed upon before the mediation session begins.

Terminating Mediation

If one of the parties decides to terminate the mediation, the law states that all information discussed during the session must remain confidential and may not be used in any subsequent legal proceedings. Failure to appear for a mediation session will also result in a termination of the mediation, and any expenses incurred in relation to the session will be borne by the party that failed to appear.

Mediation Agreements

The agreement reached through the mediation session must be recorded in writing and signed by both parties. This agreement will be enforceable by law and the parties are expected to abide by the terms of the agreement. There are a few exceptions to this, such as cases in which one or both parties are discovered to have been fully competent at the time of the agreement or if the mediator seriously violated their duties during proceedings.

How Does This Law Benefit Businesses in Saudi Arabia?

The introduction of this draft law is a positive development for those seeking to resolve disputes through mediation. Not only does it bring the Kingdom in line with international best practices for commercial mediation, but it also facilitates a more business-friendly environment. It creates a framework that ensures fairness, transparency, and privacy for all parties involved.

The law provides legal certainty and clarity, which should encourage more individuals and entities to explore mediation as an alternative dispute resolution method. As a result, businesses will benefit from a faster and more cost-effective way to settle disputes and will benefit from greater peace of mind while operating in Saudi Arabia.

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