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Navigating Mediation for Commercial Disputes in Saudi Arabia

Even the best-laid plans go awry. While most companies enter into business relationships with the best of intentions, conflicts do occasionally arise. Pursuing resolution through traditional litigation in the courts can be a slow and contentious process. Parties involved in commercial disputes are more and more frequently utilizing mediation to settle their disputes.
Read on to understand more about mediation and the accompanying legal framework in Saudi Arabia.

What is Mediation?

Mediation is a voluntary, alternative form of dispute resolution where the parties discuss their dispute with the assistance of a neutral third party whose goal is to assist them in reaching a settlement. Mediators are individuals trained in negotiation techniques, listening skills, and conversation facilitation. The primary responsibility of the mediator is to:
• Provide an established process for the parties to privately discuss concerns;
• Assist in communicating each party’s point of view;
• Keep meetings focused; and
• Strive to help the parties agree on a resolution to be documented in a binding settlement agreement
Mediation has numerous benefits for the parties involved in the dispute. It is often a more affordable and efficient path to resolution. Mediation is a confidential process that avoids the public spectacle and resulting PR implications of a trial. Mediation is also more likely to preserve the relationship of the disputing parties, as it is more collaborative and less contentious than litigation. An additional benefit of mediation is that it is a preferred method of dispute for international investors. Proactively agreeing to first attempt mediation to resolve commercial disputes can make a business relationship more attractive to foreign entities.

What Rules Govern Mediation in Saudi Arabia?

The rules and procedures governing mediation in Saudi Arabia are defined primarily by (1) the Saudi Center for Commercial Arbitration (SCCA); and (2) Saudi Arabia’s ratification of the Singapore Convention on Mediation.

Saudi Center for Commercial Arbitration

The Saudi Center for Commercial Arbitration (SCCA) is a not-for-profit organization established to administer arbitration procedures for civil and commercial disputes. The parties must agree to refer their dispute to SCCA. SCCA is considered the preferred method of dispute resolution for investors based on its work to create a safe dispute resolution environment for Saudi Arabian nationals and foreign investors.
The SCCA has produced a comprehensive document detailing the rules for mediation performed by SCCA. The parties are authorized to agree on specific mediation rules, but in the absence of such an agreement, the mediation will be governed by the SCCA mediation rules. Notable mediation rules include:
• Appointment of Mediator. The parties can agree to the appointment of a specific mediator. If they do not agree on a mediator, each party shall strike unacceptable names from the list and order the remaining names by preference. The administrator shall then select a mediator based off those lists.
• Mediator Impartiality. The chosen mediator must follow the Code of Ethics for Mediators. Among other things, this requires the mediator to ensure there are no facts that would create a conflict of interest before agreeing to serve as mediator. During the course of mediation, the mediator must disclose any facts they become of aware of that could create a conflict.
• Process. The parties and mediator will conduct a preliminary conference to determine the manner in which the mediation will be conducted, including the mediation timetable. The mediator is authorized to conduct separate meetings with each party and/or their representatives. The parties should voluntarily exchange relevant documents, but the mediator can request that they exchange additional information.
• Settlement. The mediator does not have the power or authority to impose a settlement. Their role is to facilitate agreement between the parties.
• Confidentiality. Mediation conferences and communications are private. Outside parties may only attend with the permission of the parties. The mediator must keep any information divulged throughout the process confidential. The mediator cannot be compelled to share confidential information in any adversarial proceeding or judicial forum. The parties are also required to maintain the confidentiality of the mediation.
• Termination. A mediation is considered termination if:
o The parties sign a settlement agreement;
o The mediator declares that further efforts are not likely to achieve resolution;
o The party declares the mediation proceedings are terminated;
o The administrator provides written notice to the parties of delinquency of payment; or
o Where there has been no communication between the mediator and any party for 21 days after a mediation conference.
The SCCA has been quick to react to changing circumstances, as exemplified by its issuance of a COVID-19 Emergency Mediation Program to ensure prompt and fair resolution of business disputes. Our firm is experienced in representing clients in mediation proceedings in Saudi Arabia in compliance with the SCCA rules and regulations.

Singapore Convention

On May 5, 2020, Saudi Arabia ratified the United Nations Convention on International Settlement Agreements Resulting from Mediation (the “Singapore Convention”). The requirements of the Singapore Convention will enter into force in Saudi Arabia in November 2020.
The Singapore Convention requires signatories to enforce international settlement agreements. The convention details the requirements necessary to establish a valid settlement agreement and instances where a signatory can refuse to enforce. The Singapore Convention is an important missing piece to the international dispute resolution enforcement framework.
Becoming a party to the Singapore Convention is a significant step for Saudi Arabia, demonstrating its commitment to international commercial relationships. When a Saudi Arabian entity seeks mediation with an international entity, it is important to understand the implications of the Singapore Convention and to ensure any written settlement agreement qualifies for international enforcement.

Whether you are drafting a contract that includes a requirement for mediation or you are already embroiled in a dispute, it is important to work with an attorney skilled in representing clients in mediation. The Hammad & Al-Mehdar law firm is a leading legal service provider in Saudi Arabia with over 35 years of experience. We have a long history of successfully assisting clients throughout mediation of commercial disputes. Contact us today to learn how we can help you with your commercial business matters in Saudi Arabia.