Arbitrator rights and duties in Saudi Arabia and the United States

Arbitrator's comparative study between Saudi Arabia and the U.S. A.

Historically, the technique of arbitration as a means to resolve disputes in Saudi Arabia has been underused. But, since no proper system for reporting cases of arbitration exists in the country, statistical information on number of such cases and nationality of involved parties is virtually unobtainable. Several arbitration cases comprising Saudi parties occur outside of the country -- foreign arbitration laws administer them (Zegers & Elzorkany 1; Janahi 43).

In the U.S., statutory framework for enforcing arbitration awards and arbitration agreements is provided by the American Arbitration Act (AAA). U.S. Supreme Court rulings in the past numerous decades see to it that the pro-arbitration directive of the AAA should be construed broadly and applied universally by federal as well as state courts. Parties looking for arbitral award or arbitration agreement enforcements in the nation need not worry themselves with regards to the prior opposition of judiciary in regard to arbitration or state arbitration decrees' failure to mandate arbitration agreement enforcement, as these will no longer hinder their ability of resolving disputes. Parties engaged in arbitration and bound by the Panama or New York Arbitration Convention must also take into account the possible advantages accorded by these Conventions (Salomon and de Villiers 1; Gibson 101).

Issues pertaining to the arbitration structure's application, jurisdiction, and effectiveness still call for greater focus and work. This paper will follow a critical analysis of arbitrators' rights and duties in the U.S. as well as Saudi Arabia, while at the same time exploring the manner in which cultural, legal and practice-related differences can provoke numerous negative views regarding the arbitration system in the country (Bin Zaid 5; Almutawa and Maniruzzaman 7).

Significance of the study

The significance of this study arises out of arbitration's import as a more peaceful and reasonable mode of international-trade-related dispute settlement. Foreign arbitration's utilization, in fact, gives rise to many issues that affect freedom of concerned parties, thereby, leading many parties to avoid seeking arbitration, and causing them to incur substantial financial damage (Rubenstein 42). Furthermore, different accession dates of the 1958 New York Convention (also merely called 'the Convention',) regarded as the most notable global effort towards recognizing and enforcing foreign arbitration awards, is a key factor that benefits consideration regarding how the Convention's provisions have been employed in the U.S. Also, major differences in laws and traditions between Saudi Arabia and USA makes a comparative research very valuable, since it reveals differences and draws attention to the weaknesses and strengths of each country's laws (Salomon and de Villiers).

Further, lack of comparative research on Saudi Arabia's international trade-related arbitration and the chasm in legal literature in the nation ordinarily accords great importance to such a research, enriching the legal literature database with an up-to-date comparative work (Ed Brunet 43). American legal literature, in contrast, presents multiple researches into the topic, addressing arbitration theory and debating on substantive necessities (e.g. need for public policy); it can, however, be maintained that no thorough, in-depth analysis exists of all substantive and formal requisites for implementing foreign arbitration award provisions. Also, no research work is available that compares courts' role in regard to implementing Saudi-U.S. foreign arbitration (Gary Born 56; Zegers & Elzorkany 34).

Statement of the problem

Swift adoption of the option of arbitration raises several questions and challenges concerning laws governing the use of arbitration, as well as those that govern performance of arbitration procedures (Malintoppi 354). One of the challenges is the difference in interpretation of different nations' legal systems by the parties involved, especially if they are foreign to the nations involved, rousing mistaken international and public views about those nations. This is what happens in case of Saudi Arabia; this can be ascertained through multiple prior researches performed by different researchers, or via thoughts voiced by prominent authorities (Bin Zaid 5; Buys 1). This necessitates a pressing need to analyze such provisions, for unearthing practical application in experienced courts in implementing foreign arbitration-award provisions.

Literature review

Clearly, globalization in the commercial context has led to globalization in the legal context as well. There has been an increasing trend in parties turning to the peaceful method of arbitration for dispute resolution, (and to circumvent the rather expensive and long-drawn affair that is a facet of courtroom proceedings). This, as a result, has caused the legal community to realize the significance of appreciating arbitration. The method has many advantages: it ensures continuance of a healthy business relationship between parties involved in dispute, when it is seldom possible to continue business dealings with each other in the course of, or after, a legal case (Walde 205). Moreover, the parties are accorded various alternatives for ensuring application of a law selected by the parties themselves (Bin Zaid 187).

The growing adoption of arbitration for dispute resolution sparks enhanced interest in the technique by governments and lawmakers across the globe, aiming at systematizing laws governing arbitration processes. Hence, the UN conducted a number of international conferences and meetings, as well as numerous conventions organized, towards organizing resort to arbitration; examples of these include the Convention (pertaining to foreign arbitration awards' acknowledgment and execution) and the 1985 United Nations Commission on International Trade Law (UNCITRAL) (United Nations 4). In addition, on June 10, 1974, a historic signing of the 'Convention on the Settlement of Investment Disputes between Host States of Arab Investments and Nationals of Other Arab States' took place among Arab States. The Council of the League of Arab States settled on and sanctioned the Convention on the Enforcement of Judgments and Arbitral Awards September 14, 1952 (George 905; Almutawa and Maniruzzaman).

'The Economics of Justice' by Posner relates the concepts of efficiency and justice (Walde 205). In generic terms, as well as in the discussion on the philosophical roots of law's economic analysis, two assertions in the book: '(1) The legal rules of common law are actually effective; and (2) These rules should be effective are significant. The term effective in both of the above statements implies a maximization of society's readiness to pay (Orucu 31). Posner further insists that the specific manner of efficiency which must be supported by law is maximization of wealth, which offers the most sensible ethical grounds for social institutions' establishment and running (Bin Zaid197).

Bromley, in contrast, has employed the word efficiency for a neutral truth rule; he is of the view that efficiency remains nothing but the economist's (by whom it was recommended) value judgment. Some experts in the field of law however, have, applied efficiency in the form of a yardstick. For instance, in Fisch's 'Measuring Efficiency in Corporate Law: the Role of Shareholder Primacy' work, regulatory efficiency has been addressed (Ambrus 353); here, the efficiency is defined quite broadly, far removed from the standard (the standard being that shareholder wealth is used to define regulatory efficiency).

Fisch disputes this, citing her main reason behind contending the standard as: the interests of other stakeholders must also be accorded some value. Typically, the base for determining efficiency of a regulatory policy is shareholder wealth. In view of that, several empirical researchers evaluate laws' efficiency with regard to their impact on wealth of shareholders (Dahan and Simpson 133). According to Fisch, maximization of shareholder wealth is not compulsory, especially if done without regard for other stakeholders; this is established by current legal policy. Here, the chief idea derived is that efficiency is not simply emphasis on, or creation of, wealth as an efficiency measure. There are other elements involved as well, that are limited to the study's purpose of identifying whether or not any policy/law is efficient.

The research brings to light the debatable theory of economic analysis influencing the adoption of shareholder priority for determining effective regulatory policy, and infers that distinct justifications should be present for dependence on wealth of shareholders and the reasons for it dictating regulatory policies (Ambrus 354).

Research question, aim, and objectives

This study will deal with the following issues for recognizing and assessing the separate roles of U.S. and Saudi courts in the approval/rejection of arbitral award implementation:

1. What duties and rights do arbitrators in the Kingdom of Saudi Arabia have?

1. What duties and rights do arbitrators in the U.S. have?

1. What are the similarities and differences between American and Saudi Arabian laws of arbitration?

1. What is the reason behind the popularity of arbitration in commercial dispute resolution? What are its advantages over litigation? Precisely how does arbitration, in the global commercial trade setting, benefit both disputing parties?

1. What are the specific legal barriers that obstruct recognition or enforcement of an arbitration award made by a certain nation within another nation?

1. Which regional or international conventions have countries joined for overcoming the challenges defined in (4)? Of these, the 1958 New York Convention is the most significant; why?

1. How have USA and Saudi Arabia, adopted the Convention's provisions? Do we find any considerable textual differences in how these nations have adopted the Convention? Can any constitutional problems be associated with administering implementation of foreign arbitration awards' provisions?

1. After looking at a Saudi Grievances Board decision-review, are there any characteristic applications or interpretations of the Convention under the law of Saudi Arabia, especially pertaining to the legal matters of: (a) public policy; (b) the constitutionality of regulations that apply the foreign arbitration awards' provisions; (c) reciprocity principle; (d) the possibility of dissolving the decision if an element of it is deemed as conflicting with public policy (the provision, however, must be severable) and (e) how far the judge is authorized to deal with the case's subject matter?

1. After assessing U.S. superior courts' decisions (i.e. of State Supreme Courts and Federal Court), are there any characteristic applications or interpretations of the Convention under U.S. law, especially pertaining to the legal matters of: (a) public policy; (b) the constitutionality of regulations that apply the foreign arbitration awards' provisions; (c) reciprocity principle; (d) the possibility of dissolving the decision if an element of it is deemed as conflicting with public policy (the provision, however, must be severable) and (e) how far the judge is authorized to deal with the case's subject matter?

1. What can one deduce after comparing the approaches of USA and Saudi Arabia? If considerable differences are present, can one justify them with regard to conflicting importance accorded to the contending ideals of: (a) societal values, (b) efficiency, and (c) justice to involved parties in specific cases?

Research methodology

This research will follow an analytical, comparative and descriptive methodology, and investigate judicial provisions regulating U.S. Federal Court and Supreme Court verdicts and Saudi Arabia's Grievances Board in arbitration award handling (Vadi 69).

1. Study design (type of study)

i. Comparative Law as a Research Method

The comparative research technique is utilized quite frequently, and is deemed important for many reasons. Comparisons are actually crucial and valuable in researches in the field of law for the purpose of determining systematic differences and similarities among observed regulations and, probably, for formulating and testing models and postulations on their causative relationships. Therefore, the method of comparative research denotes a distinctive, methodical, and jurisprudential technique that can be utilized for furthering new knowledge in relation to what is applied in legal systems and how it is applied (Orucu 30). Acquiring knowledge of the differences and similarities in legal systems under comparison helps achieve the above aim. This spells out precisely why comparative technique has been chosen for this study -- it will explore the similarities and dissimilarities between Saudi and U.S. courts' role in enforcement of foreign arbitration awards, and may be utilized for determining the best means of implementation of foreign arbitration award provisions. A comprehension of Saudi's system and recognizing the underlying factors contributing to its difference from other systems is particularly crucial in this regard (Ambrus 353).

As this study intends to determine U.S. and Saudi arbitrators' rights and responsibilities, a comparative mode will be most effective in fulfilling the aforementioned objectives. Furthermore, the U.S. is deemed as a 'pro-arbitration' nation; thus, employing the comparative technique for studying arbitration-related regulations and rules will prove considerably beneficial, since one can view it as an appropriate yardstick. In fact, America's pro-arbitration policy renders it an ideal standard for comparing with an unfamiliar system (about which many Western as well as Eastern researchers know little or nothing, and what they know may likely be incorrect) (Vadi 67).

Hence, comparison can offer a suitable way to explain Saudi's arbitration process, by delivering a familiar and standard 'pro-arbitration' prototype that will indicate whether Saudi's courts and rules are pro-arbitration. Adoption of comparative technique provides further information to facilitate an understanding of Saudi Arabia's outlook on foreign arbitration compared with U.S. laws. Also, a better grasp of why there are certain laws in Saudi, and what they intend, will be facilitated; lastly, it will foster development of respective national regulations by way of enhanced mutual access to correct information and more accurate interpretation (Vadi 70).

Comparison will prove helpful as it is founded on the court's actual role, by examining court provisions pertaining to foreign arbitration in both nations. This renders adoption of a comparative approach highly valuable, particularly in connection with understanding international arbitration-related international principles and rules, in case both countries involved are presently party to the Convention. Indeed, the method of comparative assessment has attained universal approval and application, and has demonstrated many advantages. In other words, this mode has offered information, which facilitates legal systems' differentiation, generally as well as specifically. Common laws applicable in a majority of nations are identified via the method of comparative law. Kiekbaev demonstrated this process's application; he further suggested that the method can be regarded both as an academic discipline and a science (Kiekbaev 17; Orucu 30).

ii. Case Studies

This study will delve into court cases for ascertaining judiciary's position in both Saudi and U.S. in relation to foreign arbitration award; every publicly accessible case from 1983 through 2012 (relevant to the study) will be gathered from both nations. Saudi Arabia's accession to the Convention took place in the year 1994; therefore knowing the position of the court prior to, and after, becoming party to the Convention is imperative. The aforementioned subjects will assist with evaluating the actual position of U.S. and Saudi Arabian courts from 1983-2012 (Obioha 184).

1. Study population and sampling

The two nations, Kingdom of Saudi Arabia and United States, have been chosen as this study's population for the following reasons;

The U.S. was one of the first nations to sign and accede to the New York Convention -- the greatest effort on an international scale concerning foreign arbitration award approval; in contrast, Saudi Arabia can be considered a fairly newer signatory and can possibly profit from taking into consideration how the Convention's provisions have been put into operation in the U.S. Thus, it is vital to scrutinize U.S. and Saudi judicial framework and stakeholders regarding the Convention's implementation. Moreover, both the nations may gain significantly from this comparative study, which will offer judges in the two countries an example of their counterparts' experience of their in a different jurisdiction. Further, comparison of a Western nation's experiences (U.S.) with the experiences of a Muslim nation (Saudi) is crucial for discovering similarities and dissimilarities. There may be a possibility of enabling arbitration implementation between the two nations, particularly with the upsurge in arbitration being used as a dispute settlement means, and with growing economic significance of Middle Eastern countries (especially Saudi Arabia). Also, looking into developed countries' experiences, (U.S.) is vital to locating their laws' strengths and shortcomings, as well as strengths and shortcomings in their application, in regard to their judicial system, for being able to gain information and understanding from these experiences and transmit this knowledge to developing nations. Hence, case studies relating to foreign arbitration awards approval will be employed comprehensively in this study (Baamir 18; Park 25).

One must bear in mind that, as per Chapter III Part III Article 13(g) of the 2007 Saudi Grievances Board System, the Board handles foreign arbitration awards and foreign courts' rulings in an identical way. A much higher number of overseas court decisions are presented before the Board compared to that of foreign arbitration awards; consequently, there are numerous decisions not relevant to business (e.g. family cases), which this research will evaluate, as it reveals trends of the Board in implementation of substantive and formal conditions in application of foreign arbitration awards (Ligeti 35; Lalive 55).

Lastly, this study will also produce and explore a few findings of Western researchers on implementation, by Saudi courts, of foreign arbitration awards provisions, where the research scholars have a major misunderstanding of Saudi courts' functions in relation to this matter. Such a step is essential for ascertaining Saudi courts' real role in implementing foreign arbitration awards provisions, as well as identifying the reasons behind such misinterpretations and hitches in these researches (Alibekova and Carrow 275; Lalive 63).

1. Data collection methods and instruments

This study necessitated an evaluation of judicial and legal rulings issued by U.S. and Saudi courts on foreign arbitration awards enforcement from 1983 to 2012. Regrettably, no judicial Saudi Grievances Board publication series could be found. Owing to absence of officially issued rulings, judicial orders of the nation will be obtained from libraries and other resources. One can hope to obtain information on substantial number of judicial rulings from judges and the Grievances Board's old library. Unissued 1407 AH Provisions Set will be utilized, as will provisions extracted from Grievances Board Library archives (Unissued Commercial Audit-Circuit Principles: Guideline Principles and Case Law, from 1987 (1407 AH) to 1999 (1419 AH)). Besides, there is a dearth of Saudi Arabian court decisions in this particular field of law, leading to utilization of sources from jurisdictions that have similar legal systems to Saudi (Alibekova and Carrow 280; Zekos 53).