Research Paper Compare arbitration and negotiation between the United States and Saudi Arabia

Research Paper Compare arbitration and negotiation between the United States and Saudi Arabia

· Introduction

Arbitration refers to dispute resolution is it is a sort of private judicial determination of a given dispute usually by an independent third party. It can involve independent arbitrators or a tribunal that has any given number of arbitrators although in some legal systems, recommend that arbitrators be of an odd number so that they cannot tie. The parties that are disputing normally hand their powers to the arbitrators who should decide on dispute. In one hand, arbitration can be an alternative to a court action. It is also wise to note that arbitration process is so binding. The main aim of arbitrating is to get just and fair resolution of disputes by a third party who are impartial with no delay or much expense. The parties that are involved in a dispute also have to agree on the process of the dispute resolution and courts are not allowed to interfere. These are some principles of arbitration.

Negotiation on the other hand is a dialogue between two or more parties or individuals with the intention of reaching a beneficial outcome on any dispute or conflict(Derains & Schwartz, 2015). In negotiation, the parties should allow each other enough opportunities to be heard so that the conflict can be solved peacefully without involving the courts.

· Arbitration of disputes in Saudi Arabia

In Saudi Arabia, the body that paramount in law is the Shariah. This is a collection or principles that are founded from different given sources such as from the Islamic Holy Quran as well as from the Sunnah that are also based on four Islamic school of jurisprudence; the Hanbali, Hanafi, Maliki and Shafi. There are some statutory enactments that are not present in Saudi Arabian law, such as the law that governs mortgages and other security interests. Shariah Law is also founded from legislation that is adopted in different forms ranging from royal decrees, Council of Ministers resolutions, ministerial resolutions, and even departmental circulars. However, it is good to note that these laws and regulations are in most cases in conflict with the provisions of Shariah because their applications do not align with Islamic principles.

The Basic Law for instance came into action in 1992 and the King during this time dealt with any matter that arose in society. Both the Basic Law, the Consultative Law, the Council of Ministers Law as well as the Provincial Councils Law were all done by the royal king and he also had powers to removal any of them when he decided. In addition, the royal decrees were used in approving any international treaty or concession, amendments or any other enactments that were recommended by the council of ministers(Baamir, 2016). This same council of ministers is given the permission to adopt any resolutions that regulate given issues without any decree from the royalking. On the other hand, resolutions of ministers can be used by any minister according to the power given to then by the given law. These are also the resolutions that are in most cases used to set rules and regulations leading to the implementation of the specific law.

All the courts and any adjudicatory body need to interpret the government legislation, according to the Shariah principles as well as the Board of Grievances. This is what Shariah courts will rather do naturally. In fact, the Board of Grievances Law gives the board jurisdiction over administrative law matters that also comprise of challenges and disputes relating to claims of compensation from the government.

In Saudi Arabia, arbitration was not very popular and it was not supported at all by the courts. This is because there was so much uncertainty when it came to enforcement of arbitral awards because they are quite questionable to their application of the constitution, whether the case merited and whether the interpretation of the constitution was applicable. With the new Law of arbitration as well as the enforcement law that was passed in 2012, it is clearthat the arbitration atmosphere in Saudi Arabia is taking a good direction and it is helping reduce the congestion of cases in courts.

The Saudi Center for Commercial Arbitration in Riyadh is the year 2016 and the publication of the SCAA Arbitration Rules that are founded on UNCITRAL Arbitration Rules is one of the reasons why arbitration is improving and it is in fact changing for the better. In the following year, the Implementing Regulations of the new Arbitration Law were also published and so many provisions which had question marks were clarified in the Official Gazette.

· Arbitration in the United States

In the United States, things are quite different although some parts are the same. For instance, the arbitrators and tribunal members are in most cases appointed by any of the following ways;

1. It can be directly by the disputing parties such as if they both agree mutually or even each party choosing its arbitrator

2. Arbitration can be handled by the existing tribunal members such as while the warring parties choose an arbitrator each, the appointed arbitrators will appoint the third arbitrator

3. Arbitrators can also be chosen by an external third party, such as a court or any individual who has been nominated by the warring parties(Shore, Schaner, & Chiusa, 2018).

Arbitration in the United States is under the governance of the state and federal law and while each state has its own rules on the processes and procedures of arbitration, the federal law also has provisions on what it expected from the procedures. Each state also has its own procedures regarding conformation of arbitrators’ awards- this being a step that gives power to the award’s judgment after a court trial. However, almost all the states have come to adopt the Uniform Arbitration Act and are applying it besides some state rules and regulations of arbitration.

There are three classes of arbitration in the United States;

i. Commercial arbitration which offers the highest percentage of cases and disputes and it presents a dispute between two enterprises in commerce.

ii. The second one is consumer arbitration which is normally regarding conflicts between consumers and suppliers

iii. The last one is the Labor arbitration which is normally aimed at resolving disputes that are related to employment; such as between employers and employees. This class can also be categorized into two sets; Rights arbitration which concerns the rights of employees and employers and interest arbitration. There are many sorts of labor arbitration and they can be regarding decisions as well as the actions of employers, trade unions and even employees take and the grieving side can either be an individual or groups of people such as all employees in a given company. These sort of disputed can also be said to apply the `med/arb’ methods to negotiate on their disputes which means that before arbitration begins, the disputing parties have to agree that if mediation process does not succeed then the arbitrator or any other mediating party will be allowed to reach a binding decision to end the dispute.

· Choosing of arbitrators and the arbitration process in Saudi Arabia

When there is a given dispute that needs to be resolved, arbitration should be used with consent by both parties involved. This can be as a result of execution of given contracts or any other matter that cause conflict. However, it is good to note that arbitration will not be accepted in disputes that do not permit conciliation and only the legal parties have the capacity to agree on arbitration depending on the weight of the case at hand. This includes the government bodies that are not allowed to intervene in the arbitration process except when they are given a go ahead by the President of the Council of Ministries.

When choosing an arbitrator, the qualities that are so much considered among others are: people of good conduct and reputation as well as people who have full legal capacity. The people should be Muslims, men and Saudi Arabians. The number of arbitrators should be odd just like it is in the United States so that they cannot tie(Sheikh, 2013). This is true especially when there are multiple arbitrators. The parties that are concerned can be allowed to choose arbitrators and shall file an arbitration instrument with the authority that is known for competency of hearing a dispute. This same document will have to be signed by both parties in the dispute or their delegated attorneys as well as by the arbitrators. The arbitration should be able to answer the following questions: What is the subject matter of the dispute? What are the names of the parties involved? What are the names or arbitrators and have they given consent? When all these have been covered, the copies of the arbitration documents are attached.

The competent authority shall then record all the applications of the arbitration that have been submitted to them and it is upon their power to give a decision of either approving or disproving the arbitration. There are times when the subject matter of the arbitration will only be heard according to the provision of the arbitration law. This is especially in cases where the parties that are involved in the dispute agree to the process of arbitration before even the dispute arises and at times when there are sanctions of arbitration instrument is a given conflict. According to this law of arbitration, the clerk in charge of and who is competent and who is originally supposed to hear the dispute is to be in charge of any notification as well as all the notices that are legal under this law.

In case the case is not given the end decision on the indicated date that is given in the arbitration instrument, the parties can agree to extend the time. In matters regarding time allocation to the hearing and decision making in the arbitration, the parties first have to fix the arbitration time limit for decision making but the arbitration team will offer their award exactly 90 days from the day when the arbitration instrument was accepted and approved. The litigants are in fact allowed to take the matter to the authorities who were originally supposed to hear the dispute so that they can present the subject matter or if they want to; they can also extend the time limit for the dispute: Time is thus another very important time that matters when it comes to arbitration by the governments of Saudi Arabia as well as in the United States.

In the case when the parties involved fail to choose arbitrators or in the case where one party in the dispute does not appoint the arbitrators chosen by him; or in the case where one or more arbitrators withdraws from the arbitration process or refuses to work due to any contingency arising thus preventing him from undertaking the hearing or the whole process of arbitration, the parties have to stipulate on what to do next(Najjar, 2017). There are also times when the arbitrator may be dismissed before the arbitration process is over, the, the authority that is originally competent for hearing arbitration cases will have to appoint the arbitrators who will continue with the process with the request of the parties that have interest in the expedition the arbitration of course with the parties concerned present or absent when they are called to a hearing to be held for this same reason. The arbitrators to be chosen should match or should be complimentary in number to the number that was agreed upon by all the parties and the decision that will be given here will be final and binding.

In fact, arbitrators are only dismissed with the consent of the parties otherwise they will continue to arbitrate whether they are competent or not. When an arbitrator is dismissed, he has the right to claim for compensation in the case where he had started work prior to dismissal if the dismissal is not his fault. The same will not be removed from the judgment except for purposes that arise after filing the arbitration instrument. There is also a procedure that is followed when an arbitrator is to be dismissed.

For instance, a request to dismiss the arbitrator will be made for purposes that are equal to those that can make a judge to be dismissed and the request is given to the authority that is originally purported to hear the arbitration in five days starting from the day when the party is given a notification or appointed date by the arbitrator or starting from the days when signs and reasons for disqualification occur(Najjar, 2017). At a hearing that is made for these reasons, a ruling on the same issue of disqualification will be made and the parties and the arbitrator whose dismissal is made are summoned. With reasons which are given, the ruling decides whether the reasons are enough for dismissal or what next they can do. If the reasons are attributed to the arbitrator, there is no compensation that can be given. However, if the reasons for dismissal are not attributable to the arbitrator, then there will be compensation as will be decided at the hearing.

In case one of the arbitrators die before the process of arbitration is completed, the arbitration will not expire and the time of the award will be extended by thirty days. However, the arbitrators may with reasons decide to extend the time of the award to be longer than just thirty days. This is the same extension- 30 days- that is given when an arbitrator is newly appointed to replace a dismissed arbitrator or to replace an arbitrator who has withdrawn.

Due to any circumstances that pertain the dispute subject matter, the arbitrators may extend the time for an award; but they need to have majority required for making the award and they have to give grounds for this action. The majority opinion of the arbitrators can be given them the award and in case they are permitted to settle, then the award has to be given without any other considerations ever. The document of award has among other items an instrument of arbitration, summary of the statements of all the parties that are involved in the dispute as well as the documents that are supportive together with the reasons for the award and its text, date and issue. It should also have the signatures of all the arbitrators(Born, 2015). In case any of the arbitrators refuse by any reasons to sign the award, the same needs to be recorded in the award document together with reasons.

Under an investigation procedure, all awards that have been passed by the arbitrators have to be filed in five days with the authority who is originally capable to hear the dispute. The parties will be notified with copies of the awards. The parties are then allowed to either submit their rejections and objections against what has been issued by the arbitrators to the authority where the award is filed within fifteen days from the day when they are notified about the arbitrators’ award. If they do not do so within this stipulated time; the award will be final.

In case one or more parties are not satisfied with the award of the arbitrators within the specified period in the preceding article, the authority originally competent for hearing the dispute will have to decide whether they will reject it or issue an order so that the award is executed. When the authority who is originally competent to hear the dispute gives an order to enforce the arbitrators’ award, it becomes an order. This also means that the order will be executed when any of the concerned parties requests is and also when there is no factor that can prevent its execution and subsequent enforcement in the Shari’ah. This is also where Shari’ah come sin and its influence in the arbitration process.

When the award is made by the arbitrators with the order of execution in accordance with the preceding article has the same weight and force as a judgment that has been made by the authority that had given the order(Greenberg, Kee, & Weeramantry, 2014). After the arbitration process is finally over, the fees to be given to arbitrators will be reached from a combined agreement of both parties involved in the dispute. After the approval of the arbitration documents, the authority who is purported to hear the arbitration case deposits the sum amounts that are not paid to the arbitrators. The arbitrators will then be paid one week from the date of the order for the award enforcement.

In case there is a dispute regarding the arbitrators’ fees or where there was no prior agreement regarding the same topic, the authority competent of hearing the dispute shall come in to decide on the matter and in this case, its judgment will be taken as final.

· How sharia law influences arbitration in Saudi Arabia

Shari’s Law comprise of introduced and comprehensive set of arbitration rules that give arbitration a force that is similar to that of the official litigation. The Sharia Law also is responsible for the regulation of all the procedures and steps of the arbitral process starting from the time when agreements are done until the time when the awards are enforced. In Saudi Arabia, the history of Sharia Law dates back to 1931 coming with provisions of the Code of Commercial Courts of 1931. However, it is noted that during this time, the Code of Commercial Courts was not perfect and sharia courts greatly failed to recognize any arbitration clauses.

This can be attributed to the fact that the arbitration awards and their enforcements were voluntary. In addition, sharia Law had a wrong interpretation regarding the recognition of arbitration clauses and the awards that were given by arbitrators affected the arbitration process in Saudi Arabia for a long time(Greenberg, Kee, & Weeramantry, 2014). This made arbitration only a theory in Saudi Arabia for long but it was not practiced. Later in 1983, Saudi Arabia enacted the Arbitration Code of 1983 and this tried to outdo many challenges that were related to the first code in many ways but still, it did not give the clear and ultimate solution to the issue of arbitration in banking arbitration. Thus, it was only applicable in some arbitration and not applicable in others.

Arbitration has become a very popular dispute settlement method in Saudi Arabia, especially after succeeding to remove many jurisdictional boundaries so that they left a binding and a core binding outcome. Sharia- Law is used as the principal source of legislation in Saudi Arabia with Saudi Arabian Government issuing laws as well as regulations that do not conflict with the established laws and principles of Islamic Law. In Saudi Arabia, Islamic laws are so much respected and almost every activity and action rotates around the Islamic law because the nation is Islamic with a belief that the principles are the rulings of God as opposed to the creation of man. This means that Sharia Law is held higher than any other rule of law in the nation.

This is also meant to say that in Saudi Arabia, the public policy includes the compulsory terms of Sharia Law. Looking at it keenly, then it can be noted that the wording of article 55 is a total setback against the Saudi Arabia’s enforcement of arbitral awards and there is no resolution can be given because the Sharia Law is resolute in the nation and there are no expectations that it will be changed. There is no way this can be changed because people live with the principles of Islamic religion. For instance, in Islamic religion, there are some prohibitions in the Islamic commercial law like the interest laws or the riba, gharar or the avoidance of transactions based on luck and chance and even maisir and these will be hard to connect to other legal systems (Baamir, 2016).

However, it is clear that all these are founded on a given special rationale and it is part of the nation’s public policy rules. Sharia Law such to a very great extent influence and impact the arbitration process in Saudi Arabia making it quite different from what happens in the United States which has mixed religions. It is noted that these influences are originating from their religious beliefs that are rioted in Islamic teachings about relationships between man and God and amongst mankind.

It is also important to note that the rules and regulations on public policy are perceived and applied in the arbitration procedures of an international award. Saudi Arabia in most cases use a more transparent case law and codifies the Sharia Laws that are established categorically. Those that align with their principles are acceptable while those that are against their principles and the principles of Islamic religion are left out. They aim at encouraging consistent rulings and while they protect their religious principles, they also secure the legal certainty. When rules are applied in a transparent manner, there is a possibility that precautions are taken by arbitrators like offering rendering of awards, it is a potential way of considering the avoidance of violation of Saudi Arabian public policy rules and this can allow the rest of the award executable.

Unlike in Saudi Arabia, the United States recognizes and enforces the foreign arbitral awards. In the United States also, they understand that in order to perform better in arbitral awards and to offer legal channels that are standard, they have to enforce the needs of the respective state so that the services can be within the jurisdiction of that nation or state. This is the main reason why each of the state in the US is given jurisdiction according to its own respective needs, besides the existence of the federal law. In most cases, the natural and substantive power requires a framework in order to ensure that there are no unpredictability and different practices. Thus, the New York Convention which has within it 149 states acts as the core international legal instrument when it comes setting international standards for the enforcement of foreign arbitral awards.

Article V [5] of the New York Convention notes that there are given situations where the arbitral award may be rejected especially when there is a violation of the public policy of the state from where enforcement is sought. The grounds that in most cases considered in order to reject should be non-recognition in the enforcement of arbitral awards. Because of the fact that there are many states and each one of them is different in terms of social organization and structure, economic and legal background, application of the same legal law will bring different outcomes some which will be negative and others positive(Derains & Schwartz, 2015). In order to avoid discrepancies, there should be a big need to observe the differences and ambiguities that exist in each of the states. This also takes into consideration the many differences that are in the states. This is quite different in Saudi Arabia where there is no consideration of any other differences but the Islamic principles in all nation.

· Arbitration and Saudi Arabian Women

If there is one nation that really discriminates women is Saudi Arabia. In Saudi Arabia, women are not allowed to anything that regards law. However, it is true that in the current century, so many women are learned and they can successfully go through these processes. The problem is that they are not given any opportunity to do anything that can be called bringing the society together. It is also clear that in the past centuries, they were not even allowed to go to school or even drive. It is only a year ago when Saudi Arabian women were allowed to drive and in the last year also, they were allowed to start attending football matches.

To the Saudi Arabians, this is neither discrimination nor segregation, but adhering to the rules and regulations of their Islamic principles. These principles do not allow women to participate in such public social areas that are not within the home environment. A woman is in most cases made to do works that are related to their gender such as taking care of the family and not in works that are related to men such as office works!

Looking at the procedure of choosing an arbitrator in Saudi Arabia, some of the characteristics they use are: the person must be a Saudi Arabian, must be a male citizen, must be a Muslim, must be eighteen years and above and must be of good conduct. In addition, he should be trained in the arbitration process such that he understands all the arbitration processes in and out. From these considerations, it is clear that the women are not given the opportunities to arbitrate but only men(Greenberg, Kee, & Weeramantry, 2014). This is also not bound to change easily because the principles which governed them from the past are still principles that govern them today and there are no expectations to change.

The person must also be a Saudi Arabian because he could have understood the policies and regulations of the nation and will thus have to problem especially in applying the Shariah Law. Looking at the procedure of choosing an arbitrator, one will clearly see that women are not likened in such professions and they are also not allowed. The customs that are followed must conform to the principles of the Islamic religion and in most cases, it is about principles by which people live. They should also be acceptable not only in the community or society but also before God who is taught to be the creator of everything and whose intentions are that man should relate well with each other and should not use each other for personal gains.

Unlike Saudi Arabia, in the United States women are given equal opportunities as long as they are educated and they know the arbitration procedures. When choosing arbitrators also, they do not consider only people from the United States because there are far many races and the nation will not depend on a single race for such processes. In addition to being any member who is able to arbitrate, the women are given chances of arbitrating and they normally do very well.

Even though someone is not formally trained to arbitrate in Saudi Arabia, the person needs to have the knowledge and skills especially about Shariah and the arbitration process. As they arbitrate more and more cases, their knowledge grows more and more until they become experts. The most important issue in Saudi Arabia is to understand the basic principles of Islam and the Shariah law.

· Negotiation in the U.S and Saudi Arabia

Just like the arbitration situation, Saudi Arabia is very rigid when it comes to negotiation. Whatever subject matter is in place, Saudi Arabia so much observes their principles that have to align with the Islamic principles. On the other hand, the U.S recognizes that cultural differences can affect negotiations and therefore, the first step in any negotiation is to look and search for the cultural differences between the parties that are involved. However, it is clear that Saudi Arabia is so much ahead in uncertainty avoidance due to the fact that they adhere to their beliefs and principles, something absent in the American politics. Both countries have almost the same measure when it comes to long term orientation, which translates to why the negotiating persons should be selectively chosen. While the U.S is leading in individualism and a search for individual gains in the negotiations, Saudi Arabia is against the principle of individualism and therefore, they have to look at the matter from the roots of its conflicts and ensure that the decision befits all parties involved in the negotiation.

There are four steps of negotiation in the U.S; non-task sounding which is also touching on the activities related to the actual negotiation. A person has to be trusted until proven wrong which a non-task sounding process is. This is not true in Saudi Arabia where people depend on strong relationships and where trust has to be given before even the negotiation starts. This is a simple way to say that Saudi Arabia has a polychromic nature and a diffuse culture that integrates with work and individual life. In addition, it is clear that Saudi Arabia has a culture that is synchronic and although they might be involved in more than one activity, all the activities including schedules and appointments are to be based and are subordinate to relationships.

· Conclusion

Arbitration and negotiation are terms that can be used interchangeably because they all denote the same meaning, of tackling a conflict and reaching an outcome. The arbitration procedures and processes are quite different in United States and Saudi Arabia. In the United States, one has to arbitrate based on legislated laws and regulations while in Saudi Arabia, the arbitration is based on the principles of Islamic teaching that are believed to be God’s teachings. This means that in Saudi Arabia, the government and everything else is ruled by Shariah which is also borrowed from the Holy Quran while in the U.S arbitration founded from the constitution. In addition, in the United States, the women are allowed and anyone can arbitrate as long as the person qualifies, but in Saudi Arabia, there are conditions that apply only to Saudi Arabians male citizens.

References Baamir, A. Y. (2016). Shari’a Law in Commercial and Banking Arbitration: Law and Practice in Saudi Arabia. Routledge, 2016. Born, G. (2015). International Commercial Arbitration:International and USA Spectscommentary and Materials. Kluwer Law International, 2015. Derains, Y., & Schwartz, E. A. (2015). A Guide to the ICC Rules of Arbitration. Kluwer Law International, 2015. Greenberg, S., Kee, C., & Weeramantry, J. R. (2014). International Commercial Arbitration: An Asia-Pacific Perspective. Cambridge University Press, 2014. Najjar, N. (2017). Arbitration and International Trade in the Arab Countries. BRILL, 2017. Sheikh, F. E. (2013). The Legal Regime of Foreign Private Investment in Sudan and Saudi Arabia. Cambridge University Press, 2013. Shore, L., Schaner, L., & Chiusa, J. L. (2018). International Arbitration in the United States. Wolters Kluwer Law & Business, 2018.

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