International commercial arbitration enjoys great importance as it is one of the most significant alternative means for settling commercial disputes. It plays an expanding role in achieving justice and reducing the negative effects arising from the slowness and complexity of judicial litigation (1).
Arbitration takes multiple forms. On the one hand, it may be arbitration in law or amiable composition (arbitration with the power to settle). On the other hand, it may be national or international arbitration. From yet another perspective, arbitration may be private or ad hoc, or it may be institutional arbitration (2).
Arbitration is divided into institutional or administered arbitration on the one hand, and ad hoc or private arbitration on the other. The basis of this distinction lies in the fact that institutional arbitration is administered by international or national arbitration bodies or centers in accordance with pre-established rules and procedures set by international agreements or the establishing decisions of such bodies (3). As for private arbitration, it is the arbitration conducted by an arbitrator or arbitrators appointed for a specific dispute, who abide by the procedural or substantive rules agreed upon by the parties, and whose mandate ends upon issuance of their award in the dispute (4).
The Saudi regulator has recognized both types; for Article (4) of the Arbitration Law issued pursuant to Royal Decree No. (M/34) dated 24/5/1433H provides that: “In cases where this Law permits the parties to arbitration to choose the procedure to be followed in a specific matter, this includes their right to authorize a third party to choose such procedure. For the purposes of this paragraph, a third party is any individual, body, organization, or arbitration center within the Kingdom of Saudi Arabia or abroad.”
Ad Hoc Arbitration
Ad hoc arbitration refers to arbitration in which the parties themselves, pursuant to the authority granted to them by the law, select the arbitrators and choose the rules and procedures of arbitration (5). It is arbitration that is not bound by any particular arbitral framework; rather, the parties agree to regulate it in a manner suitable to their situation (6).
Furthermore, ad hoc arbitration historically preceded institutional arbitration in its emergence; however, it remains less favored than institutional arbitration, which has become more aligned with the circumstances of international trade (7). Third-world States often prefer to resort to this type of arbitration because it accommodates State interests, does not raise concerns relating to State sovereignty, and avoids institutional arbitration due to the prevailing belief that arbitral institutions are biased toward the State of their seat (8). States and their entities often resort to ad hoc arbitration because they accept only rules that serve their interests and to which they contribute in drafting (9).
Ad hoc arbitration has advantages derived from the trust placed by the parties in the arbitrator they select, and from their ability to agree on arbitral procedures appropriate to the dispute (10). Parties also frequently choose it because it provides the desired confidentiality in certain competitive fields, such as arbitration between companies and in patent matters and technology transfer contracts (11).
Institutional Arbitration (Arbitrage Institutionnel)
Institutional arbitration is arbitration administered by specialized arbitration centers, bodies, or institutions in accordance with organized rules and procedures. Their regulations exist in advance, and they determine how arbitrators are selected, the procedures to be followed, the authority of arbitrators, and other services provided to facilitate arbitral proceedings.
The parties to arbitration may not appoint arbitrators outside the list prepared by these centers, although they have the right to select whomever they wish from among the approved names on the list. Arbitral institutions are not limited in number (12).
It is noted that institutional arbitration rose to prominence after the Second World War, with the proliferation of arbitral centers both in domestic and international arbitration. Its importance increased particularly in the field of international arbitration in free-economy States and even in socialist States. Arbitral centers are described as specialized because arbitration is their sole function, and they are described as permanent because they do not stop at a single arbitral process but remain continuously available to receive and administer arbitral cases (13).
Institutional arbitration has now become the norm in international trade due to the financial and administrative capabilities of permanent arbitral centers, which enable them to provide substantial administrative, financial, and logistical services and facilities in this field. All of this has contributed to the popularity and dominance of institutional arbitration, making it — truly — a means for resolving international commercial disputes (14). For this reason, the Kingdom established the Saudi Center for Commercial Arbitration pursuant to a Council of Ministers’ decision in 2014.
However, institutional arbitration is criticized for the expenses and fees required by the arbitral center, which may at times be excessive. Moreover, the parties may agree to refer their dispute to a particular arbitral center without prior knowledge of its rules or procedures, which may cast doubt on the consensual basis of such arbitration (15).
Points of Agreement and Difference Between Institutional and Ad Hoc Arbitration
Institutional arbitration and ad hoc arbitration both agree in that resorting to either of them is based on party autonomy (16).
The fundamental differences between the two lie in several major aspects related to administration and procedure. In institutional arbitration, the arbitral institution assumes full administrative and financial oversight of the process, provides logistical support, and applies its predetermined procedural rules, which all parties must adhere to.
In contrast, in ad hoc arbitration the parties themselves bear full responsibility for organizing and managing the arbitral process.
As to cost, institutional arbitration is generally more expensive than ad hoc arbitration due to institutional fees and arbitrators’ and lawyers’ fees, while ad hoc arbitration tends to be less costly.
Regarding time, both are faster in resolving disputes compared to ordinary litigation, although ad hoc arbitration may be delayed due to procedural disputes or the difficulty of agreeing on every detail of the process (17).
Finally, it should be noted that private arbitration is the default, and institutional arbitration is the exception. If the parties do not agree on specific arbitration rules or regulations, the arbitration shall be considered ad hoc. Likewise, when the parties agree on arbitration in general terms without specifying the procedures to be applied — such as agreeing that disputes arising from the contract shall be resolved by arbitration — the arbitration in this case is also ad hoc. Institutional arbitration is deemed an exception, and the rules and regulations of a particular arbitral center shall not apply unless the parties have agreed to their application (18).
Accordingly, the Saudi Center for Commercial Arbitration seeks to become the preferred option for providing alternative dispute resolution services in the Middle East and North Africa region by 2030, as one of the leading arbitral centers worldwide (19).
What are the primary differences in how institutional arbitration and ad hoc arbitration are administered and managed?
The primary differences in how institutional and ad hoc arbitration are administered and managed center on the level of organizational support, the source of procedural rules and the responsibility for overseeing the process.
Entity Responsible for Management
Institutional Arbitration: This form is administered by specialized, permanent arbitration centers or institutions. These bodies are described as specialized because arbitration is their sole function, and permanent because they remain available to receive and manage cases continuously. The institution assumes full administrative and financial oversight of the proceedings.
Ad Hoc Arbitration: In contrast this is a private arrangement where the parties themselves bear full responsibility for organizing and managing the arbitral process. There is no external body overseeing the case; instead, the arbitrators are appointed for that specific dispute and their mandate ends once they issue an award.
Rules and Procedures
Institutional Arbitration: Proceedings are conducted according to pre-established rules and regulations set by the institution. These rules dictate how arbitrators are selected, their authority, and the specific procedures to be followed. Parties must adhere to these predetermined procedural rules once they agree to use the institution.
Ad Hoc Arbitration: This form is not bound by a particular arbitral framework. Instead, the parties exercise their autonomy to select the rules and procedures they believe are most suitable for their specific situation.
Logistics and Administrative Support
Institutional Arbitration: The centers provide logistical support and facilities, utilizing their financial and administrative capabilities to provide services that facilitate the proceedings.
Ad Hoc Arbitration: Because there is no central institution involved, the parties must handle all logistical arrangements themselves. While this allows for greater flexibility, it can sometimes lead to delays if the parties cannot agree on every procedural detail.
Arbitrator Selection
Institutional Arbitration: Institutions often maintain pre-approved lists or panels of arbitrators. While parties can select their preferred arbitrator, they are generally required to choose from the names approved by the center.
Ad Hoc Arbitration: The parties have the direct authority to select any arbitrators they choose, based on the trust they place in those specific individuals
Why is ad hoc arbitration considered the “default” form of arbitration, and under what conditions does an agreement become institutional?
Ad hoc arbitration also referred to as private arbitration is considered the default form of arbitration because it is the baseline state of the process unless parties explicitly choose a different path.
Why Ad Hoc is the Default
Absence of Specific Rules: If the parties agree to resolve their disputes via arbitration but do not specify any particular rules or regulations, the arbitration is automatically categorized as ad hoc.
General Agreements: When a contract contains a general arbitration clause—for example, simply stating that “disputes arising from the contract shall be resolved by arbitration” without naming a governing body—the law treats this as an ad hoc arrangement.
Legal Standing: In the legal hierarchy of these two types, institutional arbitration is viewed as the exception, while private (ad hoc) arbitration is the standard.
Conditions to Become Institutional
An arbitration agreement only becomes institutional when the parties take active steps to move away from the ad hoc default. The following conditions must be met:
Explicit Agreement: The rules and regulations of a specific arbitral center will not apply unless the parties have expressly agreed to their application.
Selection of a Center: The parties must agree to refer their dispute to a particular specialized arbitration center, body, or institution.
Adoption of Pre-established Rules: The agreement must stipulate that the process will be administered according to the pre-existing rules and procedures set by that institution.
Authorization of a Third Party: Under the Saudi Arbitration Law, parties can authorize a third party, such as an arbitration center or organization, to choose the procedures to be followed in their specific case.
Once these conditions are met, the institution takes over the administrative and financial oversight of the process, and the parties must adhere to that institution’s predetermined procedural framework.
Overview of Ad Hoc Arbitration and Institutional Arbitration
The text examines international commercial arbitration, contrasting institutional arbitration with ad hoc or private methods of dispute resolution. Ad hoc arbitration allows parties to design their own procedures and select independent arbitrators, offering a high degree of confidentiality and sovereignty that is often favored by states. Conversely, institutional arbitration is managed by established organizations, like the Saudi Center for Commercial Arbitration, which utilize pre-defined rules and offer significant administrative support. While institutional frameworks are praised for their reliability and permanence, they can be more expensive than private arrangements. Ultimately, the sources highlight that while both forms rely on party autonomy, ad hoc arbitration remains the legal default unless specific institutional rules are formally adopted by the disputing parties.
Sources:
- Dr. Mahmoud Mustafa Younis, The Reference in the Principles of Arbitration, Dar Al-Nahda Al-Arabia, 2009, p. 11.
- Dr. Ahmed Hassan Hafiz Matawa’, Arbitration in International Construction Contracts, PhD Thesis – Faculty of Law, Cairo University, 1998, p. 43.
- Dr. Mahmoud Hashim, The General Theory of Arbitration in Civil and Commercial Matters, Part I: The Arbitration Agreement, Dar Al-Fikr Al-Arabi, 1990, pp. 48–49.
- Dr. Ezz-El-Din Abdullah, Private International Law, Part II — Conflict of Laws and International Jurisdiction, Egyptian General Book Authority, 9th ed., 1986, p. 12.
- Dr. Fathi Wali, Arbitration in National and International Commercial Disputes — Theory and Practice, 1st ed., Manshat Al-Maaref, Alexandria, 2014, p. 56.
- Dr. Mahmoud Mustafa Younis, The Reference in the Principles of Arbitration, previously cited reference, p. 206.
- Dr. Ahmed Hassan Hafiz Matawa’, Arbitration in International Construction Contracts, previously cited reference, p. 50.
- Dr. Mohamed Naeem Aliwa, International Commercial Arbitration, 1st ed., Vol. 12, Al-Halabi Legal Publications, Lebanon, p. 45.
- Dr. Manani Farah, Arbitration as an Alternative Method for Dispute Resolution, 2nd ed., 2010, Dar Al-Huda for Printing, Publishing and Distribution, Algeria, p. 168.
- Dr. Mahmoud Mustafa Younis, The Reference in the Principles of Arbitration, previously cited reference, p. 206.
- Dr. Abu Zeid Radwan, General Principles in International Commercial Arbitration, Dar Al-Fikr Al-Arabi, 1981, p. 22.
- Dr. Mahmoud Mustafa Younis, The Reference in the Principles of Arbitration, previously cited reference, p. 206.
- Dr. Ezz-El-Din Abdullah, Private International Law, Part II — Conflict of Laws and International Jurisdiction, previously cited reference, pp. 12–13.
- Dr. Abu Zeid Radwan, General Principles in International Commercial Arbitration, previously cited reference, pp. 21–22.
- Dr. Fathi Wali, Arbitration in National and International Commercial Disputes — Theory and Practice, 1st ed., Manshat Al-Maaref, Alexandria, 2014, p. 59; and Dr. Mohamed Abu Al-Enein, Arab Arbitration Journal, Issue No. 5, pp. 14–15.
- Dr. Ahmed Hassan Hafiz Matawa’, Arbitration in International Construction Contracts, previously cited reference, p. 50.
- Dr. Mina Faiq, Institutional Arbitration and Ad Hoc Arbitration, published on the website of Institutional Arbitration and Ad Hoc Arbitration – Dr. Mina Faiq. Access date: 28/10/2025 at 8:30 PM.
- Dr. Hossam Reda Al-Sayed, Truncated Arbitration: Tribunal and Agreement, published at: article_173370_1b814cf74249b54a8cd4056a48b74c13.pdf — Access date: 28/10/2025.
- Please see the website of the Saudi Center for Commercial Arbitration: https://www.sadr.org — Access date: 29/10/2025.
