Case Study Details

Background: A foreign contractor from the UK entered into a contract with a Saudi developer to build a residential complex in Riyadh. The contract stipulated that the contractor would complete the project within 18 months and receive a total payment of SAR 100 million (USD 26.7 million). The contract also contained an arbitration clause that provided that any dispute arising out of or in connection with the contract would be settled by arbitration under the rules of the Saudi Center for Commercial Arbitration (SCCA), and that the governing law would be Saudi law.

Objective: The contractor faced several delays and difficulties in executing the project, such as obtaining permits, importing materials, hiring workers, and complying with safety and quality standards. As a result, the contractor incurred additional costs and requested an extension of time and an increase in payment from the developer. The developer refused to grant any relief to the contractor and accused the contractor of breaching the contract by failing to meet the agreed deadlines and specifications. The developer also withheld part of the payment due to the contractor and threatened to terminate the contract and claim damages. The contractor disputed the developer’s allegations and claims and sought to enforce its rights under the contract.

Process: The contractor-initiated arbitration proceedings against the developer by filing a request for arbitration with the SCCA, as per the arbitration clause in the contract. The SCCA is an independent and neutral institution that administers arbitrations in accordance with its rules and regulations, which are based on international best practices and standards. The SCCA also provides a list of qualified and experienced arbitrators who are familiar with Saudi law and practice.

The parties agreed to appoint a sole arbitrator from the SCCA’s list, who was a Saudi lawyer with expertise in construction disputes. The parties also agreed to conduct the arbitration in English, as both parties were proficient in the language. The arbitrator fixed a procedural timetable for the exchange of written submissions, documentary evidence, witness statements, and expert reports. The arbitrator also held a hearing where he heard oral arguments from both parties and examined their witnesses and experts.

The arbitrator issued an award within 12 months of his appointment, as required by the SCCA rules. The award was reasoned and contained a summary of the facts, the issues, the applicable law, the analysis, and the decision. The arbitrator found that both parties were partly responsible for the delays and defects in the project and that they had failed to cooperate and communicate effectively. The arbitrator decided to adjust the contract price and time in accordance with the actual work done and the circumstances encountered by the parties. The arbitrator also awarded interest and costs to both parties proportionally.

Outcome: The award was final and binding on both parties, as per the SCCA rules and the arbitration clause in the contract. The award was also enforceable in Saudi Arabia, as it complied with the requirements of the Saudi Law of Arbitration and did not violate any public policy or Shari’a principles. The parties accepted the award and settled their dispute amicably, without resorting to litigation or further appeals. The parties also resumed their contractual relationship and completed the project successfully.