The author in this piece sheds light on the efforts of the Kingdom of Saudi Arabia in adopting Alternative Dispute Resolution as a way of conflict management, with emphasis on mediation.
One of the key challenges facing businesses today is conflict management. Good company governance involves applying the appropriate method to resolve business disputes. While family businesses make up 90% of the businesses in Saudi Arabia, only 30% survive until the second generation, with only 12% surviving until the third generation.
Since the Kingdom aims to be an investment powerhouse for a diverse and sustainable economy, it recognized the importance of alternative dispute resolution (ADR), offering Mediation and Arbitration as effective methods businesses can utilize. The Saudi Center for Commercial Arbitration (SCCA) was established to “create a safe investment environment that attracts both domestic and foreign investments.” It does so by providing mediation and arbitration services.
This has been something the Kingdom has been striving to enact in the form of various developments and strategies that include the following:
Establishment of the Conciliation Center and ‘Taradhi’
The establishment of the Conciliation Center (“Mosalaha”) under the auspices of the Ministry of Justice (MOJ) to promote, support, and develop the Kingdom’s mediation centers across the country. The MOJ has set up a remote platform for mediation called ‘Taradhi’ that enables parties to a dispute reach a settlement with enforceable bonds.
The Taradhi platform received over 207,000 mediation requests since its launch recently. This large number of requests indicates the need for such a service and the willingness of people to resort to a litigation alternative that is not only amicable, but also cost- and time-effective.
There have been over 17,000 applicants to the MOJ looking to certify as mediators from various backgrounds such as medicine, education, and engineering. Out of these, over 46% were female. This platform will assist in resolving commercial, civil, and family disputes.
SCCA Partnerships and the EMP Platform
The Saudi Center for Commercial Arbitration entered into various partnerships to offer the best training programs, as well as groom domestic and international mediators. SCCA also launched a practical cost-effective virtual platform called the Emergency Mediation Program (EMP). This was done to support the increasing number of dispute cases during the COVID-19 pandemic. A diverse list of highly experienced local and international mediators, with various backgrounds on SCCA’s roster, were trained on this platform.
SCCA identified an opportunity during the pandemic to promote mediation. This displayed the center’s vital role in dispute resolution. The EMP provided credibility and certainty, as the parties had the option of converting their settlement agreement into an enforceable bond. Enforcement of a mediation settlement agreement was a challenge in the past, which was usually resolved to ensure business continuity.
Ratification of the Singapore Convention on Mediation
On May 5, 2020, Saudi Arabia became the fourth country in the world to ratify the United Nations Convention on International Settlement Agreements resulting from Mediation, known as the Singapore Convention on Mediation. It will enter into force within the Kingdom of Saudi Arabia on November 5, 2020.
This demonstrates that Saudi Arabia maintains a firm and strong commitment to becoming an investment hub in the region. The Singapore Convention, which has been signed by over 50 countries, aims to support international trade and encourage the use of mediation when dealing with cross-border commercial disputes. This will assist in overcoming the hurdle of enforcement within different jurisdiction.
According to the Ministry of Commerce, the Singapore Convention on Mediation provides a unified and effective framework for the enforcement of the World Trade Dispute Settlement Agreements. This is all based on Mediation, which will enable all relevant parties to make their arguments based on such agreements. It is worth mentioning that Singapore Convention framework provides similar facilities as the New York Convention.
The Singapore Convention has been designed to become an essential tool for facilitating world trade, and for promoting mediation as an alternative and effective way of settling world trade disputes. The Convention also ensures and guarantees that the settlement reached by the concerned parties is binding and enforceable.
Approval of the Judicial Costs System
The recent approval of the Judicial costs system by the Shura Council (Consultative Council) aims to promote mediation and conciliation, while also limiting malicious claims and lifting the burden off of the courts. This approval arrives at a very crucial time, and compliments all the efforts that have been made towards setting up the SCCA and Taradhi platform, along with the ratification of the Singapore Mediation Convention.
What is currently imperative is the support of the business community in promoting mediation. This can be done by incorporating a well-drafted dispute resolution clause into their contracts. This will provide the parties the opportunity to carry out a dispute that is mediated as a first step before arbitration and litigation. This will enable them to protect the business relationship. It will also foster and cultivate a peace-building culture and mindset within the Saudi community. It is important to reflect healthy business dealings and preserve commercial relationships, while also boosting personal skills in terms of managing challenges and disputes more effectively. This can be achieved once entities from both the government and private sectors adopt the inclusion of mediation as a valuable, as well as necessary, tool for the resolution of disputes.
Having the freedom to choose your preferred dispute resolution method in Saudi Arabia as an investor, multinational company, family business, or even SME is a great advantage. The promotion and practice of mediation in Saudi Arabia has led to immediate approval and adoption of mediation. This soon be reflected with a shift in the community’s mindset when it comes to dealing with disputes in a more effective and practical manner. Ultimately, this will result in a more healthy and sound business environment.