Saudi Arabia
In your jurisdiction, are there any formal ADR procedures available for resolving commercial disputes other than litigating (or arbitrating) to a final hearing?
Parties invariably informally negotiate to some degree at the outset of a dispute in an attempt to resolve the dispute amicably. However, there are some ADR processes (notably mediation and conciliation) that can be – in some cases – compulsory on the parties to commercial disputes as stipulated in the commercial courts law. A new draft mediation law has already been prepared and is currently being considered for final review and promulgation. The new mediation law is expected to address the definition of mediation and the relevant procedures. Conciliation is governed by the Operating Rules and Procedures of Reconciliation Office. Conciliation is defined as a consensual method to resolve disputes which is conducted through conciliation offices for the purpose of settling disputes in whole or in part. A conciliator does not enjoy the power to issue binding decisions. However, it shall endeavor to resolve the dispute amicably between the parties. Generally, the conciliation process shall not take longer than 30 days as from its initiation.
The commercial disputes that shall be referred to mediation and conciliation under the commercial courts law are: 1) shareholder disputes; 2) disputes between merchants so long as the amount of the claim is less than SAR 1 million 3) claims filed against a merchant and arising out of a commercial contract so long as the amount of the claim ranges between SAR 100,000 and SAR 1 million; 4) claims related to court receivership, liquidation etc so long as they relate to the categories of the claims listed under points 2 and 3 above; 5) damages claims which were previously considered by the commercial court so long as they relate to the categories of the claims listed under points 2 and 3 above; 6) disputes between spouses or relatives up to the fourth degree; 7) disputes arising out of contracts which include a clause obliging its parties to resort to mediation and conciliation before resorting to litigation.
Does engaging in ADR have any effect on potential or existing litigation or arbitration?
Engaging in an ADR suspends the time limit (limitation periods) for hearing the claim. In the context of commercial disputes, mediation or conciliation (where compulsory as stipulated above) shall stay the litigation procedures until the ADR process is concluded. As for arbitration, staying the arbitration process as a result of ADR is not automatic, and the decision to stay the arbitration process is exercised by the competent arbitral tribunal. If the mediation or conciliation is compulsory, the case cannot progress to be heard before the competent court or the arbitral tribunal until such mediation or conciliation has been initiated.
Is ADR compulsory and if so are there any consequences if a party fails to engage in ADR? If it is not compulsory are there any plans for this to change?
Conciliation and mediation are compulsory in some cases, as elaborated above. In cases where conciliation is compulsory, litigation will automatically be stayed and the commercial court will not start considering the case until the conciliation is concluded. In the context of litigation, there are no clear consequences for failing to engage in compulsory conciliation. As for arbitration, refusing to mediate or enter the conciliation process may have cost implications.
Can the parties agree, in advance of any potential dispute, to engage in ADR?
Yes. The parties can agree in advance that they will or may try one or more ADR methods to resolve any dispute that may arise and many commercial contracts will include dispute resolution clauses, involving one or more of these methods. This has the advantage of putting ADR automatically “on the agenda” in the event of a dispute and providing a mechanism for reaching a quick solution. If a party ignores a contractual ADR clause, it is likely that the dispute will be prevented from being heard.
When does ADR generally take place?
When the ADR is compulsory as elaborated above, it shall take place before the case is considered by the commercial court. However if the ADR is not compulsory, the parties can agree on resorting to ADR at any stage before a final decision is issued by the court.
Is ADR subject to without prejudice privilege and/or confidential? If not, is there any other means to protect confidential information?
The Operating Rules and Procedures of Reconciliation Office clearly stipulate that the conciliation process shall be confidential (with few exceptions). Also the draft mediation law stipulates that the mediation process shall be confidential (with few exceptions). Additionally, parties to an ADR process can sign a Non-disclosure agreement (NDA) which is recognized under the Saudi law.
Does the output from ADR create precedents?
As ADR is private, it does not create a precedent and helps avoid adverse publicity associated with a court judgment. A settlement achieved through ADR is usually recorded in a written agreement which will be enforceable between the parties. It is generally not binding on third parties.
Who bears the costs of ADR?
Compulsory conciliation is generally conducted for free. However, parties usually share the costs of ADR (where applicable), albeit it is open to the parties to agree something different as part of the settlement terms.
Is your jurisdiction subject to any specific rules for cross border ADR?
In April 2020, the Kingdom of Saudi Arabia (KSA) signed the United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention). KSA had a reservation on the Singapore Convention, namely to exclude settlement agreements to which any KSA government body is a party.
The draft mediation law and its implementing regulations (both yet to be issued) are expected to address how settlement agreements arising out of mediation falling under the Singapore Convention will be enforced.
Are there any particularly unusual features of ADR in your jurisdiction that you are aware are different to other jurisdictions?
There is no obligation for conciliators in Kingdom of Saudi Arabia to be legally qualified.
Some cases (such as criminal cases) cannot be resolved through ADR, and require a judicial decision to be made.
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