The legal and economic system in the Kingdom of Saudi Arabia has witnessed remarkable development in recent years, particularly in the field of commercial dispute resolution, where arbitration has become one of the main tools for resolving disputes quickly and effectively.
In this context, institutional arbitration plays a fundamental role in enhancing the business environment and attracting domestic and foreign investments to the Kingdom. Accordingly, Council of Ministers’ Decision No. 851, issued on 29/11/1446H, was adopted to regulate institutional arbitration in the Kingdom.
The Impact of the Council of Ministers’ Decision on the Arbitration System in the Kingdom:
The decision aims to regulate the institutional arbitration sector in the Kingdom by providing that no new arbitration centers may be established in the Kingdom while maintaining the validity of the existing licenses of arbitration centers not affiliated with the Federation of Saudi Chambers, with the suspension of issuing new licenses for such centers pursuant to Council of Ministers’ Decision No. (68) dated 21/1/1445H establishing the Permanent Committee for Saudi Arbitration Centers.
As for arbitration centers affiliated with the Federation of Saudi Chambers, they shall continue carrying out their activities and issuing licenses, unless their activity is suspended by the Permanent Committee for Saudi Arbitration Centers. (1)
Provided that the above does not prejudice the initiative to establish arbitration centers in special economic cities and zones, which is one of the initiatives of the National Investment Strategy, approved by Council of Ministers’ Decision No. (134) dated 28/2/1443H. (2)
Features of Licensing Arbitration Centers Affiliated with the Federation of Saudi Chambers:
The Licensing Rules Bylaw for Arbitration Centers Affiliated with Saudi Chambers regulates the procedures and provisions for licensing such centers, beginning with applying for a preliminary license, then procedures related to the final license and its financial fees, passing through the license duration and renewal procedures, and finally license cancellation, as follows:
1- Submitting the Preliminary License Application:
It is required to obtain the preliminary approval of the Permanent Committee for Saudi Arbitration Centers – established by Council of Ministers’ Decision No. (68) dated 21/1/1445H – to establish an arbitration center affiliated with the Federation of Saudi Chambers by submitting an application in the form prepared by the stated Committee along with the required documents, in addition to payment of a non-refundable financial amount equal to 25% of the license fee in return for reviewing the application. The Committee shall study the application and decide thereon within sixty business days from the date the requirements are completed. (3)
2- Requirements for the Center’s Premises:
The premises must include at least one arbitration hall equipped with appropriate furniture and all necessary modern technology, in addition to an office for the Center Director, an office for working staff, and a dedicated room for keeping dispute files. (4)
3- License and Renewal Fees:
Category One: 100,000 Saudi Riyals for licensing the center affiliated with a chamber whose Board of Directors has eight members or fewer.
Category Two: 200,000 Saudi Riyals for licensing the center affiliated with a chamber whose Board of Directors has more than eight members and not more than twelve members.
Category Three: 350,000 Saudi Riyals for licensing the center affiliated with a chamber whose Board of Directors has more than twelve members and not more than fifteen members.
Category Four: 500,000 Saudi Riyals for licensing the center affiliated with a chamber whose Board of Directors has more than fifteen members. (5)
4- Final License to Establish the Center:
The applicant must – upon obtaining the Committee’s preliminary approval – review the relevant authorities to complete the statutory procedures in this regard and apply to the Committee for the final license to establish the center within a period not exceeding ninety business days from the date of issuance of the preliminary approval; otherwise, the application and preliminary approval shall be deemed void. (6)
5- License Duration and Renewal Procedures:
The license duration shall be four Hijri years, renewable if an application to renew the license is submitted to the Committee at least ninety business days prior to the end of its validity period, provided the Committee verifies the continued fulfillment of the licensing requirements and conditions. (7)
6- License Cancellation:
The Permanent Committee for Saudi Arbitration Centers has the authority to cancel the license of any licensed center in case it violates the Licensing Rules Bylaw or submits incorrect data or information to the Committee or provides forged documents. (8)
In case a final decision is issued by the Committee approving the cancellation of the license, the licensee shall remain subject to the Committee’s jurisdiction and liable before it for a period of one year from the date of the final cancellation decision for any violations or acts committed by the licensee that create rights for others. (9)
What is the first step in the licensing process for an arbitration center affiliated with a Saudi chamber?
The first step in the licensing process for an arbitration center affiliated with a Saudi chamber is submitting an application for a preliminary license,.
To complete this initial step, the following requirements must be met:
- Submission of Application: The applicant must use the specific form prepared by the Permanent Committee for Saudi Arbitration Centers.
- Documentation: All required documents must be submitted alongside the application.
- Financial Requirement: A non-refundable financial amount equal to 25% of the total license fee must be paid to cover the cost of reviewing the application.
Once the application requirements are fully completed, the Committee is tasked with studying the application and making a decision within sixty business days
Which entity is responsible for the suspension of activities or issuing licenses for centers affiliated with the Federation of Saudi Chambers?
The Permanent Committee for Saudi Arbitration Centers is the entity responsible for both issuing licenses and suspending the activities of arbitration centers affiliated with the Federation of Saudi Chambers.
Key details regarding its authority include:
- Suspension and Licensing: Centers affiliated with the Federation of Saudi Chambers continue their activities and license issuance unless the Committee decides to suspend their activity.
- Establishment Approval: To establish a new center, preliminary approval must be obtained from this Committee after submitting a specific application form and paying the required fees.
- Final Licensing: Once preliminary approval is granted, the applicant must apply to the Committee for the final license within ninety business days.
- Cancellation Power: The Committee has the authority to cancel a license if a center violates the Licensing Rules Bylaw, submits incorrect data, or provides forged documents.
The Committee itself was established pursuant to Council of Ministers’ Decision No. (68), dated 21/1/1445H.
Overview of What About the Council of Ministers’ Decision on Regulating Arbitration Centers?
The provided text details the regulatory framework established by the Saudi Arabian government to oversee and standardize institutional arbitration centers. These mandates, specifically Council of Ministers’ Decision No. 851, restrict the creation of new independent centers while maintaining existing ones and promoting growth within special economic zones. A central focus is placed on centers affiliated with the Federation of Saudi Chambers, which must navigate a rigorous two-stage licensing process involving preliminary and final approvals. The guidelines specify mandatory facility standards, such as technological requirements, and outline a tiered fee structure based on the size of the chamber’s board. Licenses remain valid for four years and are subject to renewal or cancellation by the Permanent Committee if regulatory violations occur. Ultimately, these measures aim to create a stable business environment by ensuring that commercial dispute resolution is handled by qualified, officially recognized entities.
Sources:
(1) Paragraph (First) of Council of Ministers’ Decision No. 851 issued on 29/11/1446H.
(2) Paragraph (Second) of Council of Ministers’ Decision No. 851 issued on 29/11/1446H.
(3) Article (5) of the Licensing Rules Bylaw for Arbitration Centers Affiliated with the Saudi Chambers, issued by the Federation of Saudi Chambers.
(4) Article (6) of the Licensing Rules Bylaw for Arbitration Centers Affiliated with the Saudi Chambers.
(5) Article (7) of the Licensing Rules Bylaw for Arbitration Centers Affiliated with the Saudi Chambers.
(6) Article (8) of the Licensing Rules Bylaw for Arbitration Centers Affiliated with the Saudi Chambers.
(7) Article (9) of the Licensing Rules Bylaw for Arbitration Centers Affiliated with the Saudi Chambers.
(8) Paragraph (1) of Article (10) of the Licensing Rules Bylaw for Arbitration Centers Affiliated with the Saudi Chambers.
(9) Paragraph (4) of Article (10) of the Licensing Rules Bylaw for Arbitration Centers Affiliated with the Saudi Chambers.
