Law

The simplest way to settle a commercial dispute is through the initiation of dispute between the parties involved or their advisers. Negotiation requires the parties to be objective and have the desire to compromise. In human life, it is very hard to find such elements and this leads to failure when it comes to handling of business disputes. Failure to come to consensus requires the intervention of a third party that has no interest in the case or an expert. The disinterested party is called an arbitrator or mediator in formal intervention or honest broker in informal system of arbitration. The law of arbitration in general terms can be described as the intervention of a third party that has no interest in the dispute to settle a particular claim.

In the Kingdom of Saudi Arabia, the law of arbitration has been significant in settling commercial disputes. This has been applicable for the last two decades and effective results have been achieved in this field. During this period of time, the level of foreign trade in the Kingdom of Saudi Arabia has been very high. This led to adoption of arbitration law as means of resolving commercial disputes between traders. Arbitration law in the Kingdom of Saudi Arabia was not recognized as one of the ways of resolving disputes for a long period of time. The adoption of the law in the past two decades changed the lives of many traders although it was received with a lot of resistance. Today, the growth of trade has seen rise of arbitration law and many traders have acknowledged its importance. Arbitration law in the Kingdom of Saudi Arabia was accompanied by establishment of internally accepted rules and standards that remain to be tangible.

Arbitration law in the recent past, especially involving Emaar properties is a clear demonstration of the rule as is applied to settle domestic commercial disputes. It was also used in enforcement of arbitral awards in Saudi Arabia foreign trade counterparts. The law has been very instrumental in Saudi Arabia to a level that parties involved in any commercial transaction in Saudi Arabia should be guided by provisions of arbitration law. The first Saudi Arabian arbitration regulation was signed in 1983 and the rule to implement it was signed by Council of Ministers Resolution that corresponded to May 1985.

The first article of the law provides that arbitration may be agreed to settle specific disputes that have been in existence. It is also agreed in advance to apply arbitration law in advance that may result due to execution of a particular contract. This therefore means the law of arbitration in the Kingdom of Saudi Arabia can be used to resolve any actual dispute without limitation to commercial issues. Article two of arbitration regulations on the other hand limits the application of such laws to certain matters. The law does not extend to administrative matters, civil status, criminal offences, public issues, and marital disputes, mistakes that are punishable by provisions of Quran and inheritance issues.

Arbitration law was not very much recognized before signing the 1983 act and many traders had a lot of unresolved commercial disputes. After signing the Act, the law was official and could be used in resolving business disputes. To date, the position of arbitration law is far stronger than it was in the past. Many people recognize the importance of the law as has been used by different parties to resolve commercial disputes. Parties engaged in commercial disputes must first agree to use arbitration law in case a dispute happens while in business.

History of Arbitration in KSA
The Kingdom of Saudi Arabia is one of the best known trading centers in the Middle East. Foreign nations consider Saudi Arabia as a country that meets the demands of many western countries concerning investment. The history of arbitration law in KSA is linked to business opportunities of oil and other basic commodities. Being one of the biggest producers of oil, Saudi Arabia found itself in many commercial disputes that could not be handled by Sharia. Arbitration in the Kingdom of Saudi Arabia started from the early days of oil exploration. This went on until 1950 when the government of Saudi Arabia drastically changed its attitude towards arbitration.

Failure of ARAMCO arbitration in 1958 resulted to change in the mode of resolving commercial disputes. Decision in the case made the government of Saudi Arabia to forbid government agencies from arbitration without Council of Ministers approval. This policy was implemented in1963 and it is effective to date.  In 1980, International Convention for Settlement of Investment Disputes (ICSID) was ratified. The arbitration aimed at resolving disputes between states and citizens of another state which was a World Bank provision. However, this arbitration has never received Council of Ministers approval. All these commercial arbitrations were not protected by strong rules until 1983 when the Act was signed. KSA during this time was faced by many commercial disputes and revenues reported from oil business were very low. Lack of clear procedures and the support of judicial systems led to implementation of 1983 act.

Arbitration rules provided by parties in advance were not enforceable and the major challenge was how to enforce awards. The argument of the government to implement arbitration was due to the fact of enforcing rewards particularly outside Saudi Arabia. The government introduced arbitration to resolve problems of trade between Saudi Arabia and other foreign nations. Business communities in Saudi Arabia supported the move of government to implement arbitration because their trade disputes could be resolved easily. The strong support was however, due to the fact of getting rewards in the most compliant manner.

Foreign companies and their legal systems were unhappy about uncertain legal system of arbitration. The official comments of government for implementing 1983 arbitration act were negative. The government was very much categorical about implementation of arbitration act inside and outside Saudi Arabia. The issue of rewards was delicate because many traders were forced to forego their business opportunities at the expense of arbitration act. After implementing the 1983 act, business was promoted to a higher level because disputes could be handled easily. The only background information about implementation of arbitration act is provided in the case of Saudi Arabia versus Arab American Oil Company (Aloufolawfirm.com, n.d). In this case, the arbitral tribunal made an award in favor of Arab American Oil Company. This ruling created bad relationship between foreign traders and Saudi Arabia.

The government of KSA enacted ministerial ruling that protected government agencies from entering arbitration agreement. It provided that any contract made with Saudi government should be under the provisions and guidelines of Saudi Arabian Law. Economic boom and increased levels of foreign investment in the Middle East, especially in Saudi Arabia, have had significance in arbitration law. Arbitration institutions have been established in many parts of Saudi Arabia to resolve business disputes. This can be associated with rapid globalization of world economy and fair international trade. Many Gulf Cooperation Council states have accepted New York Convention of 1958 and this is one example to show how arbitration has had impact on the Kingdom of Saudi Arabia.

The commercial arbitration code of 1985 was based on international trade and the government adopted the law to protect parties involved in business. Before the law was enacted, KSA had many disputes that were created by 1983 arbitration act. The government decided to implement policies that led to establishment of good trade environment. The provisions of the act are guiding principles of trade between Saudi Arabia and foreign countries. Many foreign countries invested in Saudi Arabia and did not want to follow the rules and regulations as were provided by arbitration.
The government had to intervene to salvage the trade affairs between two foreign nations that resulted to creation of conflicts. In any trade affair, there must be dispute due to economic challenges that leads to bargain. Implementation of commercial regulations is the most important element in any business entity. The 1985 act of arbitration had a lot of impact on the Kingdom of Saudi Arabia. The government had to work towards achievement of certain goals of making profits and creating strong relationship between foreign traders and businessmen in the Kingdom of Saudi Arabia. The control of business in any given economic sector is initiated by provision of trade terms that favor both sides. However, some parties take advantage of the underlying situations, resulting to commercial disputes. Arbitration is used to resolve such conflicts and it requires the courage of a third party to intervene in resolving such matters.

The 1985 arbitration act has contributed very much to the success of trade in Middle East, especially Saudi Arabia. The country is best known for its production of oil that creates a good environment for foreign investors. Arbitration provides that any foreigner who engages in trade with members of Saudi Arabia should be ready to work under business laws of KSA. Some of the trade partners think that these laws are not friendly thus they call for further implementation and any other form of action should be considered to favor them.

Arbitration act of 1985 is reciprocity to reservations that applied in New York Convention that represented a significant arbitral awards made in any business conflict. The accession of this law is a significant development in the application of arbitration laws. The act basically deals with business awards that relate to foreign commercial trade affairs.  A foreign award should be ratified by an authority that is mandated to enforce foreign judgments. The procedure involves passing the petition to the authorities that review the awards and then call the parties involved to make representation orally. Enforcement of such laws is very difficult and it requires the implementation of Sharia law. The board of grievances may refuse to foreign arbitration awards because it is considered to be against public policy. The provisions of the board such as an arbitrator should be male have made it hard for some groups to get represented thus making it difficult to implement arbitration.

The provision of arbitration between 1983 and 1985 should be made viable so as to reflect the common interests of people involved in trade affairs. One of the major changes in arbitration is representation of marginalized groups like females to act as arbitrators.  This is one area of improvement in arbitration and it resulted to resolution of commercial disputes. Another area of improvement is having business contract to be governed by Saudi Arabia laws. This is very important because it protects the people of Saudi Arabia from exploitation by foreign investors. Failing to have strong rules means dumping of substances that are illegal due to many investors in the region. For instance, drug trafficking in many parts of Saudi Arabia was controlled due to enforcement of strong laws. Every foreigner who has invested in KSA should be in a position to follow provisions of arbitration laws.

Arbitrators have no interest in the dispute they resolve and this calls for accuracy and commitment so as to come up with good ruling. The arbitration act in KSA had no place in the past but for the last two decades many traders can testify that it is a good way of resolving commercial disputes. Implementation of the act has led to its success. The official argument of the 1983 act can be based on information as is provided by business newsletters as well as in newspapers. The same applies to 1985 act that has seen improvement in trade between Kingdom of Saudi Arabia and foreign countries to date. The background information about arbitration act in 1983 and 1985 can be traced via different internet sites and newspapers.