A Comparative Study of Arbitration Law in
the People's Republic of China and the Royal Kingdom of Saudi Arabia
Arbitration is a device used for the settlement
of questions or issues that is of interest to two or more parties through the
intervention of an individual or group, called an arbitrator or arbitrators. The
arbitrator derives authority and decides the case from the private agreement of
the parties involved in the dispute and not from the authority granted by a
state. Arbitration also pertains to the mechanism exercised in the settlement of
disagreements between parties through the process of appointing an arbitrator
with the acquiescence of the parties or by depending upon the procedures or
institutions selected by the parties. (1998) In this sense, arbitration is
similar to litigation because of the intervention of a third party in the
settlement of the dispute, subject to the limitations on the power and extent of
intervention set out in the agreement of the parties.
Arbitration has certain essential
characteristics. One of the foundations of arbitration is the consensual nature
of the mechanism. The common or mutual intention of the parties reflected in
their agreement determines the authority and jurisdiction of the arbitrator. The
limit of the power of the arbitrator is drawn from the words of the agreement
for arbitration. The consensual nature of arbitration directs it to fall under
the private system of adjudicating disputes, especially since the parties
control the powers and obligations of the arbitrators instead of the state.
(2001)
However, the determination of the powers and
obligations of the arbitrators is not exclusively determined by the parties, but
is also augmented by the national legal system, especially in the enforcement of
ensuing awards. Moreover, the effectiveness and value of the process of
arbitration is guaranteed by the support of national courts. The stature of
arbitration resulting to its acceptance as a legitimate dispute resolution
mechanism is partly based upon its ties to the national legal system. The
national legal system provides the standards for the minimum requirements of
justice and fairness. Compliance with these minimum standards is made by the
imposition of the duty to follow due process by the national legal system,
although indirectly. Awards made during the conclusion of the arbitration
process cannot be enforced if there is non-compliance with due process. (2000)
Another characteristic of arbitration is that
the disputing parties choose the arbitrator, and the parties have the option to
delegate the responsibility to arbitration institutions. However, despite
whichever option is chosen by the parties, they equally have the right to
participate in the selection of a preferred number of arbitrators who will
intervene in the case or who will select the final arbitrators. ( 1998)
Arbitration has made its mark as a significant
and indispensable alternative dispute resolution mechanism in both national and
international arenas. The dispute resolution system has become so pervasive that
it is being included in contracts as the channel or venue for the settlement of
disputes arising from the exercise of the rights and obligation in the
agreement. Its significance determines its persistence as a dispute resolution
process, despite changes in the structure and nature of international relations.
Arbitration, as a dispute resolution tool, is also used as an initial system for
settling civil and criminal complaints prior to litigation proper. In some
instances, it is only after the arbitration system has been exhausted, without
the issue or dispute being settled, that the courts may allow the case to
proceed.
Although arbitration is an internationally
accepted dispute resolution system, the particular processes and rules
surrounding arbitration in different states differs depending upon the
foundations of the dispute resolution system of each state. The historical
context and dynamics of a society determines the development and persistence of
the particular aspects of the dispute resolution system. This paper explores the
similarities and differences in the arbitration systems that evolved in The
People's Republic of China and Saudi Arabia, two countries with very different
historical roots and cultures, and will show that although arbitration is
accepted in these nations, there are vast differences in the manners in which
these systems were established and utilized.
Arbitration Law in the People’s Republic of
China
Arbitration in China has
developed from the country’s rich traditions and philosophies on human
relations, as well as the influence of the more recent socialist and communist
ideologies. The
development of arbitration in China dates back to centuries since the
establishment of the Chinese civilization, between the 18th and 12th
century B.C. Its persistence and contemporary practice was influenced by great
thinkers and historical events that occurred in the country, from the constant
cycle of war and peace during its earlier periods to the development, to the
creation of a unified state, then the influence of socialism and communism, and
the eventual dominance of democracy and capitalism.
(2002)
Cultural & Religious Context of the Chinese
Arbitration System
In relation to philosophy, there are
three great sages considered to have influenced the Chinese tradition on human
relations and dispute resolution. The first of these is Confucius. Although
Confucian philosophy was remotely influential during his time, the teachings of
Confucius became a state philosophy in the second century AD. Confucian
philosophy revolved around the achievements of peace, order and stability in
society. To achieve these goals, Confucius advocated virtue and ethics that
emphasized the importance of duty, honor, loyalty, filial piety, sincerity,
kindness and respect for seniority. Society’s compliance with these virtues
created a code of conduct applicable to day-to-day life. (1999)
A significant impact of Confucian
philosophy on Chinese society was the development of a hierarchical relationship
since “the entire Chinese social system is based on existential inequality”
(1998). This is reflected in the expectation that people belonging to the
various social classes should comply with their appropriate roles in society. To
achieve social order, there is a hierarchy of fixed moral and social rules where
lower classes obey higher classes. These social rules pervade the different
aspects of behavior and social interaction, and are expressed by the adage that
“let the ruler be a ruler, the subject a subject, the father a father, and the
son a son” ( 1998). Hierarchical etiquette was important during the time of
Confucius and in the development of a unified Chinese society because of the
historical lack of centralized leadership, resulting in wavering social order.
Due to this historical context, Confucian philosophy aimed at facilitating a
system of self-governance and self-regulation. The underlying principle is that
if people comply with social rules, then the rule of man is adequate.
Confucian philosophy influenced not
only Chinese human relations practices, but also dispute resolution systems, by
advocating a system of self-governance through the recognition and compliance
with social rules. It is the social rules that govern human relations, and
society’s goals of achieving peace and order are attained if every person knows
his place and sticks to the rules that coincide with his place in society.
Consequently, the manner of settling disputes also depends upon compliance with
social rules, so that a person not complying with the rules governing his place
in society is the person who has wronged the other party, and the extent of
liability depends upon the extent of non-compliance of the parties with the
social rules. ( 1999)
The legal implication of Confucian
teachings is that the rule of law is needed only in instances where the party’s
actions extend beyond their role in society, as when every person complies with
the hierarchical social roles legal, rule of law is not needed. In contract law,
the implication is that a contract creates a relationship between the parties,
but the relationship is dependent upon the role of the parties in society. There
is always an underlying consideration of social rules in contractual agreements.
The second major philosophical
influence on Chinese society was , author of the Tao Te Ching, which
covers laws of virtue and ethics. His work constitutes the foundation of Taoism,
both a tradition and philosophy, which has had a huge influence on Chinese
culture. Although Taoist philosophy comments on various aspects of society, the
general idea accepted by Taoist believers is that there is a single,
encompassing way that covers all things in the universe, with the main goals
being harmony and stability. When contrasting Taoism with Confucianism, it can
be seen that while the former stresses the individual quest for self-fulfillment
by rejecting false desires, the latter stresses hierarchical social rules.
(1999)
These goals are achieved by finding
and practicing integrity, righteousness, humaneness and etiquette. When a person
strays from these disciplines, disorder ensues. When disorder occurs, it is only
then that the need for law arises. Similar to Confucianism, there is an
insistence upon non-interference or minimal control in Taoism. According to both
philosophies, the best way of attaining control is by practicing minimal
interference. In conjunction with minimal interference is the task of
maintaining simplicity in society through the discouragement of desires. ( 1999)
The implication of Taoist philosophy
in Chinese society is that state intervention through the implementation of laws
is not necessary and is even detrimental to society. This puts contractual
relations into the realm of the metaphysical world, achieved through
self-realization and not based on the Western concept of negotiation. This means
that people enter into human relations and fulfill their obligations through the
self-realization of the humane and righteous ways of action, and when
arbitration occurs between parties who fulfill these obligations, the result is
the self-acceptance of responsibility and the voluntary settlement of the
dispute.
The third major influence on Chinese
thinking was Sun Tzu, who authored The Art of War, which deals with
military warfare strategies. The military warfare strategies advocated by Sun
Tzu were based on the Taoist philosophy of achieving more by doing less. A
translated passage of The Art of War states, “To win without fighting is
best”. This implies that the achievement of one’s goals is best attained through
psychological tools such as deceiving opponents, translating weaknesses into
strengths, encouraging loyalty and cohesion in the group. Sun Tzu’s philosophy
has influenced modern Chinese society in many different areas, including dispute
resolution. ( 1999)
The implication of Sun Tzu’s
philosophy to law is that disputes or legal problems should be tackled in an
indirect manner by deceiving the other party to believe what one wants them to
believe using psychological maneuvering, as well as the subversion of individual
to group needs. These may also exist in Western rules on human relations and
legal systems, but the strict enforcement of these rules is different from the
Western practice because compliance with legal obligations is based upon the
incentive of not wanting to end up in litigation while the concept of litigation
is non-existent in Sun Tzu’s philosophy.
Contemporary Chinese Arbitration Law
The three traditional philosophers previously mentioned, Confucius, Lao
Tzu and Sun Tzu, have incalculably influenced the development of contemporary
Chinese society and the development of non-adversarial methods of settling
disputes such as Chinese arbitration law. As a result, Chinese arbitration law
endorses the use of the arbitration system to resolve disputes. In practice,
there is also a strong preference for arbitration of disputes that arise out of
business transactions. However, due to the strong influence of the philosophies
against law and interference and the intervention of socialist or communist
rule, the National People’s Congress began enacting arbitration law in China
only in August 1994, during the time that China was opening to the outside
world. The Chinese Arbitration Act of 1994 is applicable to both international
and domestic disputes. This statute integrates both the international principles
of arbitration and the basic principles of the Chinese society. (2002)
Based on the provisions of the
Chinese Arbitration Act 1994, arbitration is the legal arrangement between the
disputing parties to submit voluntarily the dispute to a third party for
resolution. This is commonly a non-governmental activity because it constitutes
a private action. However, it is subject to supervision by the state. Thus,
arbitration has become a part of the judicial regime of China. The Chinese
Arbitration Law also provides a unified system of dispute resolution applicable
to different sectors of the Chinese society and applying international standards
for arbitration. ( 2002)
Chinese arbitration law embodies
different fundamental principles such as voluntarism, independence, and legality
and impartiality. Voluntarism refers to the willingness of the parties to reach
an agreement for the resolution of their dispute through arbitration. This means
that the arbitrator will not consider any case for arbitration without the
application of the parties to the dispute. Independence pertains to the
non-interference from any administrative body, social organization or
individuals not party to the dispute. An independent arbitration system in China
exists because: 1) the arbitration agency is not part of the administrative
mechanism; 2) arbitration agency offices are established according to
geographical location and exercise independence from each other; 3) arbitration
committees, associations and tribunals are also independent from each other; 4)
arbitration is not dependent on adjudication or on the courts, even if the
courts are accorded supervisory responsibility over arbitration activities.
Legality and impartiality pertains to the application of reasonable practice in
arbitration so that the flow of the process should consider facts and laws. (
2001)
In China, there are three
arbitration bodies. First is the Chinese Arbitration Association, constituting
the organization of arbiters applying self-disciplinary measures to its members.
The China Arbitration Association supervises the arbitration committees and the
individual members and ensures their compliance with the association’s
constitution, which was drafted by the National Congress. The association also
creates arbitration rules and regulations consistent with arbitration law and
civil procedural law. Second are the Arbitration Committees, which are executive
bodies, established in the provincial, municipal and autonomous regional
capitals, as well as in other cities as the need arises. The membership of
arbitration committees comes from the members of the government departments and
chambers of commerce who are registered with the judicial administration of the
geographic location where they conduct arbitration. One chairperson, two to four
vice chairpersons and seven to eleven members comprise an arbitration
association. The chairperson and vice chairpersons should be experts in law and
trade and individuals with arbitration experience. Depending upon the trade
from which the dispute arises, different people with the appropriate expertise
make-up the arbitration committee. Third are the Arbitration Tribunals. After a
dispute has been raised and accepted by an Arbitration Committee, the committee
forms an arbitration tribunal to settle the case. The created arbitration
tribunal may be composed of a single arbitrator or a panel of arbitrators,
composed of three members including the chief arbiter. If the disputing parties
want to create a panel of arbitrators, both parties choose the two arbiters
respectively, with the third member chosen by both parties. Both parties also
designate the chief arbitrator and the arbitrator in case of a single
arbitrator. ( 2001)
In
China, there are two essential components of arbitration. First is the
arbitration or adjudication practice that respects the choice of the parties to
settle the dispute through non-adversarial means, meaning that after the
decision to arbitrate has been reached, the jurisdiction of the court is
removed. However, there are certain instances where the court may still retain
jurisdiction over the case, even though the arbitration agreement is not valid
or has already expired. If, for example, despite the arbitration agreement, a
party to the dispute files a case with the court which the other party answers,
the effect is a renunciation of the arbitration agreement.
Second is the component of final ruling. This
means that upon the pronunciation of the arbitration decision, the decision
takes effect immediately. This is so even if one or both parties are not
satisfied with the pronunciation. However, the unsatisfied parties may seek the
intervention of the court to review or verify the decision. The court may
overthrow the arbitration decision only if the court is convinced that the
decision is wrong, provided the conditions for legal revocation exist. (2001)
Arbitration in China follows a
process. The initial requirement is the existence of a valid arbitration
agreement that constitutes the signal for the arbitration bodies to take
cognizance of the case. During the arbitration process, the arbitration tribunal
may also apply conciliation depending upon the agreement of the parties. After
the deliberations, the tribunal pronounces its decision, which has automatic
execution. The decision may be executed through a court intervention, especially
if a party fails to comply with obligations. However, in case the parties are
not satisfied with the decision, they may also seek court intervention to review
the tribunal decision subject to certain rules and limitations. (2006 ) This
complies with the Chinese Arbitration Act’s underlying principle of the court
offering maximum court assistance by applying minimum interference. Thus, even
if contemporary arbitration has been made subject of a statute, the principle of
non-interference has been integrated but modified into minimal interference to
provide maximum assistance.
Frequency of Arbitration Use in China
Arbitration in China is the preferred method of dispute resolution since
ninety percent of disputes arising in the country are resolved through
arbitration. However, the arbitration agreement should be entered into by the
parties in anticipation of any disputes arising from their agreement. In
agreements, particularly those revolving around business arrangements, the
parties should have an arbitration agreement before the commencement of their
obligations because it is difficult to arrive at an arbitration agreement after
a dispute has already arisen. There are three areas where arbitration law is
frequently applied. The first of these is arbitration in labor disputes,
governed by the rules of labor arbitration issued by the Ministry of Labor of
the Central Government in 1950, and which have been expanded in the succeeding
years. In July 1993, the State Council issued the Regulations on Settlement of
Labor Disputes in Enterprises, which made labor dispute arbitration applicable
to all enterprises. In July 1994, the Standing Committee of the Eight National
People’s Congress enacted the labor law of the People’s Republic of China that
supports the arbitration of labor disputes and established the labor dispute
arbitration system. At present, labor disputes are settled primarily through the
labor dispute resolution system. (2006)
The second area of arbitration
application is in economic disputes, and has developed through four stages of
change. The initial stage covered the early days of the founding of the People’s
Republic of China in 1949 until 1966, a period characterized by arbitration
without litigation, when any economic dispute had to be resolved through
arbitration because the parties were not allowed to bring cases to the People’s
Court. The second stage covered the period between 1978 until the middle of
1982, where the dispute resolution system applied the principle of arbitration
prior to litigation. Disputing parties who passed through arbitration without
achieving a satisfactory resolution had the option of filing a case in the
People’s Court within a limited time and subject to limitations.
The third stage covered the period starting
from the development of economic contract law
in the mid-1980s
emphasizing the use of both arbitration
and litigation in dispute resolution. Contracting parties facing a dispute had
the option to file a case in the People’s Court or to agree to settle the
dispute through arbitration. The fourth stage, commencing in the
mid-1990s with the Chinese Arbitration Act of 1994 and still in effect, allows
freedom for parties to choose either arbitration or litigation. ( 2006)
Contracting parties with a previous agreement to arbitrate or a subsequent
arbitration agreement may either comply with the agreement in case of disputes,
or the parties may seek court intervention through litigation if there is no
arbitration agreement. ( 2003)
As of the end of 2005, there were
more or less one hundred and seventy arbitration commissions established
throughout China that complied with the Chinese Arbitration Act 1995. Based on
the available 1994 data, the Beijing Arbitration Commission alone has already
accepted more than one thousand cases for arbitration. The Beijing Arbitration
Commission has also accepted thirty-three foreign-related cases, proving that
arbitration in China is starting to develop consistency with international
arbitration standards. (1996,)
Arbitration Law in the Royal Kingdom of Saudi
Arabia
The population of Saudi Arabia experiences a
high level of cultural homogeneity that unifies the various aspects of society,
such as religion, politics, family relationships, social values and law (i.e.
litigation and arbitration). As the kingdom is strongly theocratic, arbitration
law is inextricably linked to the Islamic traditions of the country.
Cultural & Religious Context
The homogeneity of Saudi Arabian society
is attributed to the popular adherence to Sunni Islam. It is the principles of
Sunni Islam, strongly adhered to and promoted by the Saudi royal family, which
have fostered the social, political and legal cultures of Saudi Arabia. Cultural
homogeneity in Saudi Arabia is largely founded upon the circulation of values
and attitudes observable in family relationships and the relationships between
families within the tribal society. To form tribal societies, families align
themselves with other families with similar principles and lifestyles.
Individual family members have the tendency to engage in various social,
economic and political relations within the family alliances, and allied
families serve as social nets for each other. Families in Saudi Arabia are
commonly patrilineal, so that the structure of the family is traced through the
male descendants. Although links to maternal relatives are given importance, the
identity of the entire family still rests upon the father’s bloodline. (2000)
Values and
practices that have developed from the basic principles surrounding the family
and adherence to Islam are reflected in the value given by society to displays
of generosity, selflessness, and hospitality. Further displays of these values
are the common deference to the family hierarchy, independence from other people
and the mastery over one’s emotions, and a loyalty to family members so strong
that family members will automatically assume accountability not only for
individual relatives but also for family actions. This implies that in
arbitration, the parties to the dispute resolution consist of the entire family,
due to the close link between family traditions and dispute resolution systems.
Islam is both a
religion and a lifestyle. Sunni Muslims live by Islamic teachings, and the
arbitration of disputes is based upon the same teachings. Acts of worship not
only reflect the affirmation of a person’s faith and recognition of the
teachings of Muhammad, but also encompass and set the standards for civil
and personal actions. Therefore, it is only through evaluation and action based
on the tenets of Sunni Islam that arbitrators will determine which party acted
wrongfully and the extent of the extent of damage caused.
One of
the basic principles of Sunni Islam is that things are assumed to be pure and
true, unless there is proof showing otherwise. This means that in arbitration,
there is that assumption of correct or regularity of action and it is up to the
complaining party to prove the commission of a wrong or damaging action, causing
injury or loss. ( 2002, 1999) This is critical to understanding contemporary
arbitration law in Saudi Arabia, as it clarifies a fundamental aspect of the
arbitration process, namely the party on whom the burden of proof rests.
The Koran
identifies three objectives for an Islamic government and society: believe in
Allah, enjoy good behavior and forbid wrongdoing. Although these objectives
imply the importance of prevention rather than post-dispute resolution, these
objectives also imply that in cases of dispute resolution, these objectives are
the standards from which the issue is to be resolved. Muslim teachings put
emphasis on conformity in external appearances and actions as manifestation of
inward faith. Thus, the public or the Islamic community becomes the judge of the
extent of a person’s affirmation of Islam and public opinion serves as regulator
of individual behavior. This means that in the settlement of disputes, every
member of the community is a party because they are given the responsibility
over each other’s actions and ensure compliance with the Islamic faith.
Contemporary Saudi
Arabian Arbitration Law
The development of contemporary
arbitration law in Saudi Arabia is based on Islamic law and traces its roots
back to the founding of Islam. There are many examples of dispute resolution
using arbitration in Islamic history. After the founding of Islam, the Treaty of
Medina was created in 622 A.D. This treaty, one of the earliest examples of
Islamic arbitration law, involved Muslim and non-Muslim Arabs and Jews agreeing
to raise disputes for arbitration to the Prophet Mohammad. (2003) The present
system of arbitration law in Saudi Arabia is strongly based on Islamic teachings
and uses historical examples as precedents.
Arbitration in Saudi Arabia is a dispute
resolution system linked to the Shari’a, or Islamic Law. The legal system
in Saudi Arabia is managed by the Ministry of Justice, which has jurisdiction
over civil and criminal matters. Disputes on commercial and labor issues are
handled through a Board of Grievances. The Board of Grievances also manages any
disputes between the Saudi government and private parties, including matters
covered by special codes particularly bribery, forgery and trademarks. The
Commission for the Settlement of Labor Dispute deals with disputes arising in
employer-employee relations, as well as criminal violations of labor laws. The
various Government Administrative Judicial Committees decide on matters covering
any insurance disputes, disputes on unlicensed foreign capital investment, and
custom duties violations. Most of the cases or disputes raised are decided
independently and based on merits according to Shari'a, so that judges
are not bound by the rules of legal precedent. ( 2003)
Most of Saudi
Arabia's historical experience with dispute resolution revolves around the
judicial system and the Shari’a Court. However, as the need to contract with
foreign investors became increasingly important due to globalization, the state
started to develop a system of commercial law with rules on the uses and terms
of commercial contracts. As early as 1983
Saudi Arabia enacted its initial Arbitration Regulations through
Royal Decree M/46 and the corresponding implementing rules in 1985 through
Council of Ministers Resolution No. 7/2021/M, so that arbitration contained in
contractual provisions increased in popularity. Instead of raising the
settlement of disputes to the judicial system or the Shari’a Court, parties can
now agree to settle disputes through the intervention of a third party, mutually
agreed to by both disputing parties. ( 2003) In Saudi Arabia, this development
is a major progress in resolving the backlog of commercial disputes pending
before its judicial system. Moreover, the arbitration law provides allowance for
the application of Saudi law in dispute resolution of private commercial
disputes. However, in practice, this new arbitration system experienced
drawbacks when the courts applied Saudi law in dispute resolution, despite
provisions on the contract providing for alternative methods.
Another major
development in Saudi Arabian arbitration law occurred when the Saudi government
established the Saudi International Arbitration Commission in 2005. This body
represents the first formal arbitration program beneficial to the business
community, and falls under the supervision of the International Chambers of
Commerce, Saudi Chapter. Moreover, the government has also expressed its
willingness in establishing various arbitration bodies in city centers around
the kingdom to handle both domestic and international commercial trade disputes
covered by arbitration agreements.
Frequency of Arbitration Use in Saudi
Arabia
In the past two decades, arbitration as
a system of dispute resolution increased in significance due to the rising
number of new areas and issues of disputes. In response to this developing
situation, the Saudi government enacted the Arbitration Regulations of 1983,
together with its corresponding rules in 1985. Article 1 of the regulations
contains the provision on the arbitration agreement that may be created in a
contractual agreement, or as disputes arise. This offers validation to
arbitration as a dispute resolution system. The general language of the
provision also allows coverage of various forms of dispute. The second article
provides limitations to the matters covered by arbitration. In line with its
implementing rules, disputes not qualifying for conciliation do not also qualify
for arbitration, such as criminal offenses, issues concerning public
administrative law, civil status, inheritance and some marital disputes. The
degree of allowance in scope and the limitations are based on the Islamic
tradition of the country. Arbitration regulations in Saudi Arabia do not specify
the law to be applied in the process. However, based on the implementing rules
and regulations, the application of the dispute resolution system should be
consistent with Islamic laws and appropriate regulations. (2003)
Apart from the
regulations and the implementing rules and regulations, the arbitration process
in Saudi Arabia is subject to the rules derived from the international
agreements to which the state is a party. The country is a party to the
Agreement on the Reciprocal Enforcement of Judgments among the members of the
League of Arab States. This means that arbitral awards ordered in the
territories of any signatory state are enforceable in all the territories
with a block to the reexamination of the issue of
the arbitrated dispute. However,
this agreement is subject to various limitations, such as when the law of a
state does not allow certain issues to be settled through arbitration, when
there is no valid arbitration agreement, when the arbitrators are found to have
no jurisdiction over the issues of the dispute, if the disputing parties were
not notified of the commencement and conclusion of the process, if the award is
determined to be inconsistent with public policy and the principles of morality,
and if the award is not yet final. ( 2003)
Apart from its
acquiescence of the reciprocal enforcement of awards, Saudi Arabia is also a
signatory of the Washington Convention on the Settlement of Investment Disputes,
which provides for the utilization of either conciliation or mediation in
investment disputes between the signatory states. The agreement covers
investment disputes between state governments or state governments and nationals
of other states. These developments in the arbitration system of Saudi Arabia
marked the strengthening of the position of the country in international
political and trade relations. ( 2003)
Although, there
are no clear statistics on the number of arbitration cases in Saudi Arabia, this
dispute resolution system has been used in various areas of disputes for a
number of centuries. Domestic arbitration covers family relations subject to the
limitations of Islamic norms and moral rules. It also covers inter-family
disputes and local business disputes. International arbitration refers to
dispute resolution that covers disputes arising between Saudi nationals and
entities or the Saudi government with foreign nationals or governments.
Arbitration as a preferred mode of dispute settlement in both domestic and
international disputes serves as a convenient, accessible and efficient mode of
settling family, inter-family and local business disputes and an incentive for
foreign investors to engage in contractual relations with the Saudi government
and its nationals. The success of the arbitration system of Saudi Arabia is
subject to mixed assessments from international players. However, arbitration
has become a popular dispute resolution system in Saudi Arabia.
Advantages /
Disadvantages of the Chinese Arbitration System
The Chinese arbitration system offers several
advantages in terms of both the development and the dynamics of the system. In
relation to the development of the Chinese arbitration system, its advantages
rest upon the philosophies that influenced arbitration. One advantage is the
link between arbitration and the code of virtue recognized by the Chinese
society in general. The code of virtue includes loyalty, kindness and respect in
human relations. This results to an ordered society because every person knows
his boundaries for human action and as long as the person sticks to that limit
there is co-existence with other people resulting to peace and order. An ordered
society translates not only to minimized disputes requiring arbitration but also
to an ordered arbitration system based on the code of virtue.
Another related
advantage is the influence of class roles to arbitration. Normally, class roles
are frowned upon by democratic states due to its implication on discrimination.
However, in the Chinese society the inherent inequality of people are
recognized, especially by Confucian philosophy. Based on the class distinctions,
there are corresponding moral and social rules to be followed. These rules are
commonly accepted and recognized so that this implies the presence of a clear
standard for determining fault and accountability. There is no need for court
determination when the people themselves can delineate acceptable action from
wrongful action and nobody can deny accountability.
Still another
related advantage is the link between arbitration and the Taoism philosophy of
self-governance. Self-governance implies that the people are aware of the moral
and social rules so that they accept accountability and the corresponding
reparation needed. This implies ease and efficiency in arbitration because the
parties cooperate and act in an orderly manner due to the value given to the
code of virtue. Thus, if one commits a wrong to another person, then the
wrongdoer has to admit accountability and cooperate in an arbitration system if
one wants to maintain an honorable or respectable status in society.
In relation to
the dynamics of the arbitration system, the advantages revolve around the legal
principles governing this Chinese dispute resolution system. One advantage is
the primary role that arbitration plays in dispute resolution. This allows the
parties freedom to determine and direct the resolution of the dispute because
they can agree on the limit of the accountability and reparation, the manner of
deciding the case, and the third party to arbitrate the dispute. It also means
that the process may be applied privately to protect the status of the parties.
Apart from these advantages to the parties, the state also gains by minimizing
the cost of the number of litigations in court and other related state
interventions, which would be much higher if they were not settled through
arbitration and / or other dispute resolution systems.
Another
advantage is the implementation of a unified arbitration in China. This offers
not only credibility but also a basis for persistence of arbitration as a viable
dispute resolution system. A unified arbitration system means that arbitration
is an accepted and recognized venue of resolving disputes so that the people
have a common understanding of the purpose, coverage and the ideal result of
arbitration. In this light, the people respect the arbitration process and the
resolution of the case by arbitrators. The common understanding and recognition
of arbitration then ensures that the system continues to be utilized.
Still another
advantage in terms of dynamics is the establishment of specialized arbitration
tribunals, organized according to different areas of human relations. After a
case has been recognized by the Arbitration Association established in the
location where the disputing parties reside or agreed to settle the dispute,
then an arbitration tribunal is formed composed of a person or a group of people
with experience or knowledge about the issue raised by the parties. This ensures
that the tribunal has a sufficient grasp over the issues between the disputing
parties before a resolution is rendered.
Another
important advantage is the independence of the arbitration system from state
interference. The Chinese arbitration system runs independently from the Chinese
government subject only to the supervisory responsibility that the government
has over the system in ensuring a fair resolution of the dispute. This implies
the lack of politicization of the arbitration process, resulting to its
credibility as a dispute resolution system.
Advantages /
Disadvantages of the Saudi Arabian Arbitration System
Similar to the
Chinese arbitration system, the advantages of the Saudi Arabian arbitration
system can be more clearly understood by examining first the foundations of the
system, and then how it works. The foundation of the Saudi Arabian arbitration
system is Islam, and it offers certain advantages. The first of the advantages
is that arbitration takes place in the context of a homogenous social and
religious system. This means that the people have a clear understanding of the
social system of proper values and attitudes as well as the rules on violations
and penalties. The recognition of these values and their corresponding penalties
strengthens the arbitration system by giving it a recognized standard for
determining violations and accountability. There is an efficient disposition of
disputes with the cooperation of the parties. Apart from this, the homogenous
social and moral system also encourages arbitration because of the similar
context from which the issues raised by the parties are based. The resolution of
the dispute would only revolve around the admission of evidence and the
determination of wrongful action without the complexity that a different social
context of the disputing parties would entail.
Another
advantage is linked to the relationship between arbitration and the
self-sustaining and independent character of the Saudi family. This implies that
families are in themselves political units with their own decision-making
mechanisms. Since strong interference in the family is not popular, families
tend to prefer resolving their disputes by themselves through the intervention
only of an arbitrator to ensure that both sides are heard. This is true whether
the dispute is within a family or between families. As independent units,
families opt to settle disputes by themselves without unnecessarily involving
other parties. This protects the privacy and status of the family as well as
provides an efficient venue for dispute resolution.
Still another
advantage relates to the Islam influence to the arbitration system. Sunni Islam
teaches habitual but meaningful compliance to one’s duties to God and to people.
Wahhabi Islam teaches the responsibility of every member of society of ensuring
that one’s actions and the behavior of others comply with the social and moral
values. These teachings developed discipline in Saudi Arabian society, which
provides arbitration with the advantage of developing rules governing the
process that the parties recognize and accept.
In terms of
dynamics, the Saudi arbitration system holds the advantage of having a context
for the dispute resolution process, which is the assumption of good behavior
subject to the presentation of evidence to the contrary. This designates the
evidential standing of the disputing parties.
Disadvantages of Each
System
The primary disadvantage of the Chinese
arbitration system is its relations to existential inequality. This implies the
recognition of the inherent inequality in society. This opens up the possibility
of the unfair or unequal status given to the parties in the dispute belonging to
different social classes. Although, the difference in status during arbitration
may be acceptable in Chinese society as a necessary consequence of existential
inequality, there is difficulty in reconciling this practice with the
international standard on arbitration especially now that China has decided to
enhance its international relations. A related disadvantage is the difficulty
that the Chinese arbitration system faces in applying international standards
for arbitration especially in international disputes. Chinese arbitration system
insists on the application of its processes proving to result to greater dispute
when the foreign party wishes to enforce different arbitration rules. China
still has a long way to go in determining acceptable ways of internationalizing
its arbitration system.
The primary
disadvantage of Saudi Arabian arbitration system is the integration of the
religious, social, political and economic areas into this dispute resolution
system. This is considered as a disadvantage especially for international
disputes because western practices often delineate these areas so that business
dispute is separate from personal issues. Similar to the Chinese arbitration
system, Saudi’s arbitration system face the disadvantage of difficulty in
considering international arbitration rules. In practice, Saudi arbitration
proceedings often apply Saudi rules and laws despite the existence of
contractual agreements to the contrary. Saudi Arabia has to determine the
effective manner of integrating its arbitration system with international
standards especially since the country is seeking international investments.
Resolution of
Conflicts between Chinese and Saudi Arabian Companies
Since both China and Saudi Arabia recognize
international arbitration standards providing for respect of contractual
agreements, then the provisions of the contract between both the Chinese and
Saudi Arabian companies should be respected. If the contract provides for the
application of the Chinese, Saudi Arabian or another arbitration system, then
the companies that are also parties to the contract should comply with the
agreement. This is true regardless of existence of an arbitration agreement
prior or during the dispute.
Assuming that
the parties are contemplating which arbitration system to use, the best option
is to integrate the best and common arbitration rules in the two systems. The
arbitration system should comply with the international rule of giving equal
standing to disputing parties so the interests of both parties are respected.
The arbitration system to be enforced should also follow the formalities of
international arbitration of differentiating business and economic disputes from
personal issues to facilitate a directed or guided dispute resolution.
Alternative Dispute
Resolution Options
Alternative dispute resolution (ADR) comprise of
mechanisms for the settlement of disputes outside of the courts. Alternative
dispute resolution is utilized because it minimizes the time involved in the
court settlement of disputes because issues can be settled in a month or several
months compared to a year or years it takes to determine a case filed in court.
ADR also minimizes the cost of litigation. Apart from these benefits, ADR also
maximizes the control that the parties have over the settlement of the dispute
by allowing them freedom to determine the limitations and the pace of the case
resolution. (2005, 2000)
Apart from
arbitration, there are several alternative dispute resolutions that may be
utilized by disputing parties. First is mediation or conciliation. Mediation
refers to the dispute resolution process where the parties call upon a mediator
or conciliator to assist the parties in the settlement of their issues. This
differs from arbitration because the mediator does not try to resolve the case
but enhances the communication between the parties so that they can agree on
ways to settle their dispute ( 1999). Mediation leaves the control over the
outcome to the parties. Mediation is appropriate in cases where the parties seek
to preserve their personal, business or legal relations. This system is also
effective in instances where the emotions of the parties are clouding the
judgment. The mediator can assist the parties by bringing the issues into focus
for the parties. However, the system is effective only in case where the parties
enjoy equivalent status. ( 2004, 1999, )
Second is
neutral evaluation, where the parties present their case to a neutral person who
then gives an objective assessment of the merits or strengths and weaknesses of
the issues presented by the parties and offer recommendations for settling the
dispute. The neutral party is usually expert on the issues of the dispute.
Although the recommendation of the neutral party is not binding, the parties may
recognize these as context for negotiating the issues ( 2003,). This ADR system
is effective in disputes involving technical issues requiring expert assistance.
(2004, 1999,)
Third is
settlement conference that works either as mandatory or voluntary. This is done
prior to the trial date with the parties together wither lawyers meeting with a
judge or settlement officer to discuss the strengths and weaknesses of the case
for both parties. After which, the parties decide whether to amicably settle the
issue rather than commence court proceedings, especially if the latter option
would result to a losing situation for the parties. (2004, 1999, )
International
Arbitration Courts
In
international arbitration there are two means of utilizing arbitration, these
are ad hoc arbitration and institutional arbitration. Ad hoc arbitration works
through the following process: 1) the parties seeking the settlement of their
disputes specify the different aspects of arbitration such as a) the relevant
law that supports the arbitration process, b) the rules that will govern the
arbitration process, c) the methods to be employed in selecting an arbitrator or
arbitrators; d) the particular language to be used in the communications as well
as the place of arbitration; and e) most importantly the arbitrable issues; 2)
the parties may also opt to utilize the rules of an arbitration institution even
without submitting to the authority of that particular institution; and 3) the
parties may consider using ad hoc arbitration in order to minimize costs, speed
up the arbitration process and structure the proceedings according to the
demands of their particular situation. (2002, )
Institutional
arbitration refers to a mechanism where the parties identify a specific
institution that will administer the arbitration process starting from the time
of demand for arbitration until the award. The chosen institution may either
administer arbitration according to the rules it follows or based on the rules
of another institution, depending upon the exigencies of the situation.
Institutional arbitration has several advantages and disadvantages to disputing
parties. The advantages include; 1) the convenience of having previously
established rules; 2) the availability of administrative assistance in the case
of institutions with a secretariat or a court of arbitration; 3) the institution
as a third party has a system of appointing an arbitrator; 4) there are also
physical facilities established for arbitrators and the support services giving
the process a semblance of formality; 5) generally, arbitration institutions
review final awards to ensure that this meets the basic requirements for
enforceability; and 6) arbitration institutions also provide objective
encouragement for parties who are reluctant to proceed with the arbitration
process. ( 2002,)
Institutional arbitration utilizes the venue of
international arbitration courts and tribunals, one of which is the encompassing
World Trade Organization rule-based Arbitration
Tribunal covering a wide array of
arbitration issues on trade and other commercial relations. There are differing
opinions regarding the effectiveness of the dispute settlement mechanism of the
World Trade Organization. Despite the fact that the system is riddled with
issues, it offers a viable system of dispute resolution among trading states.
The Understanding on Rules and Procedures Governing the Settlement of Disputes
provides the rules and procedures for managing the different disputes arising
between member states and their nationals. It was the dispute settlement
understanding that created the Dispute Settlement Body (DSB) made up of all
members of the WTO. The DSB facilitates the dispute settlement procedures. The
dispute settlement understanding also provides for a time frame for the
settlement of disputes. There is also a system for appealing the initial
resolution of the case that applies a standardized interpretation of the
particular clauses of multilateral state agreements. This prevents nations from
delaying the dispute resolution process by merely ignoring the complaints. (
2002,)
The aim of the
strengthened dispute resolution rules and procedures is to provide “security and
predictability to the multilateral trading system” contained in article 3,
paragraph 2 of the Rules and Procedures Governing the Settlement of Disputes.
The strict time limit provides a promising solution to the process. This gives
the suggestion that a resolution to the dispute will be achieved within the
period depending upon the cooperation and mutual goal for resolution of the
nations involved. Dispute resolution facilitated by the WTO members themselves
involves the protection of the interests of the parties in finding a mutually
acceptable solution that is consistent with the agreements binding upon member
states. (2004)
Conclusion
Arbitration has made its
mark as a significant and indispensable alternative dispute resolution mechanism
in domestic and international issues due to its ability to minimize cost and
time spent for litigation when the conflict can be settled amicably.
In domestic affairs, arbitration has long been a
viable conflict resolution mechanism in ancient civilizations developing into
modern nation-states, such as the present states of China and Saudi Arabia,
covering various areas of family and interpersonal relations. In
international relations, particularly in trade and economic disputes,
arbitration is integrated into contracts as the preferred means for the
settlement of disputes arising from the exercise of the rights and obligation in
the agreement. Its significance determines its persistence as a dispute
resolution process despite changes in the international relations of China and
Saudi Arabia and the structure and nature of international trade.
The historical and religious
context of China and Saudi Arabia led to the development of arbitration systems
unique to their societies, constituting the primary difference between their
arbitration systems. The three political thinkers Confucius, Lao Tzu and Sun Tzu
influenced the principles governing Chinese arbitration while Sunni Islam serves
as the foundation of arbitration rules and guidelines. However, international
arbitration links these two different systems due to the recognition of both
countries of international arbitration rules through their common membership of
international organizations such as the United Nations and the World Trade
Organization. Chinese and Saudi Arabian arbitration have both similarities and
differences but one thing is clear, their respective arbitration systems are
expected to persist due to the historical and self-determination foundations.
