SCCA Praises Saudi Ministry of Finance Adoption of Arbitration Submission Agreement
Published Date: 12/07/2023
A Step Toward Reinforcing Confidence in Institutional Arbitration
The Saudi Center for Commercial Arbitration (SCCA) praised the decision by the Saudi Ministry of Finance to adopt a model arbitration submission agreement for submitting disputes to SCCA. The decision is another step by the Saudi government that reinforces confidence in institutional arbitration and SCCA, the national beacon for institutional arbitration.
The latest issue of Umm Al-Qura, the official gazette of the Kingdom of Saudi Arabia, includes Minister of Finance Mohammed bin Abdullah al-Jadaan’s resolution No. 1321 of 6 June 2023. The resolution approves a model general arbitration submission agreement and a model SCCA arbitration submission agreement, based on Article 13 of the Government Tenders and Procurement (GTP) Law and on the replacement provisions of articles 113 and 154 of the implementing regulations for the GTP law.
The Model SCCA Arbitration Submission Agreement stipulates that SCCA will be the supervisory authority that manages the resolution of disputes between government agencies and contractors in accordance with the provisions of the GTP law, so that SCCA manages the resolution in accordance with the arbitration rules in force at the beginning of the proceedings.
This step follows several other steps Saudi Arabia has taken in the past few years to foster arbitration as an alternative means of resolving disputes between government agencies and contractors. Most notably, Royal Order No. 28004 of 28 January 2019, directed government agencies and state-owned companies seeking to settle their disputes with foreign investors to do so through arbitration and stipulated that the arbitration should take place in Saudi Arabia, providing specifically for SCCA-administered arbitration.
In addition, the new GTP Law and its implementing regulation, both issued in 2019, allowed government agencies to agree to arbitration with the Minister of Finance approval. This was a major step that facilitated the inclusion of arbitration clauses in contracts by providing for Minister of Finance approval rather than requiring Council of Ministers approval.
Minister of Finance resolution No. 402 of 19 October 2022, replaced the provisions of articles 113 and 154 of the implementing regulations for the GTP law, creating an exception for work and purchases tendered and contracted before the new law took effect. This solidified the legal and statutory grounds for resorting to arbitration by submission agreement in connection with contracts where one of the parties is a government agency, even contracts that provide for litigation, if the parties to the contract conclude an arbitration submission agreement.
After the issuance of the GTP law, the Minister of Finance approved 14 standardized government procurement contracts, all of which include a model dispute resolution clause that provides for SCCA-administered institutional arbitration in accordance with the SCCA Arbitration Rules.
The Arbitration Rules in Privatization Contracts, issued by the National Center for Privatization’s Board of Directors on 5 December 2022, appointed SCCA as an arbitration entity in disputes arising out of privatization contracts or any subsidiary contracts.
The State Property Rental Regulation, issued by the General Authority for State Properties General Authority’s Board of Directors on 28 September 2022, stipulates that arbitration between the disputing parties within Saudi Arabia will take place through SCCA or another licensed arbitration center.
On this occasion, SCCA Chairman Dr. Walid bin Sulaiman Abanumay said: “the Saudi government’s confidence in institutional arbitration generally and SCCA in particular sends a clear message to local and foreign investors that the Saudi government is steadfast in its efforts to cultivate the investment environment and facilitate business in Saudi Arabia.”
Dr Abanumay added: “It comes in the context of the development of the entire arbitration and alternative dispute resolution ecosystem in Saudi Arabia, which includes legislative development, judicial integration, government support, the development of local specialists, and the empowerment of the Saudi Center for Commercial Arbitration as one of the region’s most important arbitration and alternative dispute resolution centers. The SCCA provides an integrated package of services in accordance with international best practices and the highest standards of governance, neutrality, and independence.”