Arbitration at the Saudi Center for Commercial Arbitration or the Courts?

Where a construction dispute is decided is settled by a clause signed years earlier. What each route asks of the parties, and what to think about before choosing one.

A construction contract has to say where disputes will be decided, and the two main routes are arbitration, often administered by the Saudi Center for Commercial Arbitration, or the competent courts. The choice is made when the contract is drafted and is difficult to change afterwards, which is why it deserves attention at a point when nobody expects a dispute. The specific answer for your contract is a question for a licensed Saudi legal adviser.

Arbitration administered by the Saudi Center for Commercial Arbitration at a glance

The parties agree that disputes will be resolved by one or more arbitrators under institutional rules, with the centre administering the process. The parties have a say in the composition of the tribunal, which allows construction experience to be a selection criterion, and the proceedings are private. The rules govern the timetable, the appointment process and the fees, and both the rules and the fee schedules are revised periodically, so the current versions have to be checked rather than assumed.

The competent courts at a glance

Disputes are decided by the court system, under its own procedures, with the structure and the specialisations the system provides. There are no institutional or tribunal fees of the kind an arbitration carries, and the process does not depend on the parties agreeing on appointments. Court procedures, filing arrangements and the electronic systems that support them develop over time, so the practical experience of litigating now should be confirmed with a local adviser rather than inferred from past practice.

Who decides

Arbitration administered by the Saudi Center for Commercial Arbitration: A tribunal the parties participate in selecting, which allows construction and delay experience to be a criterion.

The competent courts: The court, allocated under its own system, with the specialisation that system provides.

Privacy

Arbitration administered by the Saudi Center for Commercial Arbitration: Proceedings are generally private, which matters where the dispute touches reputation, pricing or commercially sensitive information.

The competent courts: Court proceedings follow the rules of the court system on access and publication.

Cost structure

Arbitration administered by the Saudi Center for Commercial Arbitration: Institutional and tribunal fees are payable in addition to each party own legal and expert costs, and they commonly scale with the amount in dispute.

The competent courts: No tribunal fees of that kind, though each party still bears legal and expert costs.

Control over procedure and timetable

Arbitration administered by the Saudi Center for Commercial Arbitration: Significant, within the institutional rules. The parties can agree on a documents only process, the scope of expert evidence and the hearing arrangements.

The competent courts: Limited. The court procedure applies and the timetable follows it.

Suitability for technical construction issues

Arbitration administered by the Saudi Center for Commercial Arbitration: Strong, because the tribunal can be chosen for relevant experience and the procedure can accommodate programme and quantum evidence.

The competent courts: Depends on the forum and the way technical evidence is handled within the court procedure.

Language and documents

Arbitration administered by the Saudi Center for Commercial Arbitration: The parties can address language in the clause and the procedure, which matters where the project documents are bilingual.

The competent courts: The language and document requirements of the court system apply, which may mean certified translation of a large document set.

Multi party and chain disputes

Arbitration administered by the Saudi Center for Commercial Arbitration: Possible but dependent on the drafting and the rules, since a tribunal derives its authority from the agreements of the parties before it.

The competent courts: Handled according to the court procedure on joining related claims.

When arbitration administered by the saudi center for commercial arbitration wins

• Technically complex disputes where an arbitrator with construction experience materially improves the quality of the decision.
• Parties that want the proceedings and the outcome kept private.
• Contracts involving a foreign party, where neutrality of procedure matters to the commercial relationship.
• Disputes where the parties want some control over the timetable and the procedure.
• Situations where enforceability of the eventual award across borders is a consideration.

When the competent courts wins

• Lower value disputes where the cost of an arbitral tribunal would be disproportionate.
• Straightforward claims, such as a clear debt for a certified and unpaid sum.
• Situations where one party will not cooperate in constituting a tribunal.
• Cases where a party prefers the structure and the review mechanisms of the court system.
• Disputes where the parties have no cross border enforcement concern.

How to decide

Choose the route when drafting the contract, on the basis of the likely size and nature of a dispute on this project rather than on general preference. For a large, technically complex contract, particularly one with a foreign party, institutional arbitration with a construction experienced tribunal is a common choice and usually worth its cost. For a small contract where the realistic dispute is an unpaid certified sum, an arbitration clause can make a modest claim uneconomic to pursue. Whatever you choose, make sure the clause is internally consistent and that the subcontract clauses align with it.

Before signing, have a licensed Saudi legal adviser confirm that the dispute clause is valid and workable as drafted, that it is consistent with the governing law provision, and that the subcontract clauses do not create a conflicting route for the same facts. Also ask what the institutional rules and fee schedules currently provide, and how a claim of the size you might realistically face would proceed. Rules, fees and procedures in this area change, and a clause copied from an earlier contract may refer to a framework that has since moved on.

Domira builds and supervises projects across Saudi Arabia, and the commercial discipline above is how its projects stay inside their budget and their programme. Send the drawings, the contract or the site and Domira will tell you where the risk actually sits.