1 INTRODUCTION TO CONSTRUCTION DISPUTES

History²

Prior to the existence of the common law concept in England, i.e. before William the Conqueror, society both in England and throughout much of Europe, in particular the Germanic peoples, was subject to varied local customs that generally were unwritten, were not uniform and were enforced arbitrarily.

In 1154, during the reign of Henry II, the common law system in England was institutionalised into “a unified system of law” which was “common” to the country through incorporating and elevating local custom to the national level, which ended local control, eliminated arbitrary remedies and reinstated a system which resolved claims by evaluating common local knowledge.

Judges would be sent from the King’s central court to hear the various disputes throughout the country. These judges would then resolve disputes on an ad hoc basis according to what they interpreted the local customs to be. They would then return to London and would discuss their cases and the decisions they made with the other judges and before recording their decisions. Over time the rule mentioned earlier of stare decisis developed, where a judge would be bound to follow the decision of an earlier judge and would be required to adopt the earlier judge’s interpretation of the law and apply the same principles promulgated by that earlier judge, if the two cases had similar facts. By this system of precedent, decisions became useable and with it the pre-Norman system of disparate local customs was replaced by a consistent system of laws that was common throughout the whole country, hence the name, “common law”.

Stare decisis

The rule of stare decisis has two components. The first is that a decision made by a superior court is binding on a lower court. This is known as “binding precedent” or “binding authority”. Under the English system precedent is usually created by the decision of a higher court, such as the House of Lords, which has now become the Supreme Court of the United Kingdom after taking over the judicial functions of the House of Lords in 2009. This differs from civil law and pluralist systems, such as Scots law, where precedent is not binding but instead case law will be taken into account by the courts in rendering their decisions. The second component is that a court should not overturn its own precedents unless there is a strong reason to do so and should be guided by principles from lateral and lower courts as required under the circumstances. This also leads to what is known as “persuasive precedent”, which, while not binding on the particular court, is “advisory” in nature and something that can be ignored if necessary.

In the common law system, there are various levels of courts usually commencing with the trial courts, whose decisions can be reviewed by the intermediate appellate courts and thereafter by a supreme court, such as in the UK. The inferior courts, i.e. the trial courts, are where the matters commence and they are bound to obey precedents established by the appellate court for their jurisdiction and all Supreme Court precedent. It is interesting to note where arbitrations and adjudications fit into this picture. In most international adjudications, e.g. FIDIC contract-related, there is recourse to arbitration for an “appeal”-type process and from there to the “trial” court level and upwards from that point. As will be seen in later chapters, arbitrators may or may not be required to follow the law but for purposes of this chapter the “chain” of stare decisis would be from the Supreme Court down to the appellate court to the trial court to arbitration and then to adjudication.

One succinct explanation of this principle was set out in a North American case, where the Supreme Court of California³ wrote:

“[u]nder the doctrine of stare decisis, all tribunals exercising inferior jurisdiction are required to follow decisions of courts exercising superior jurisdiction. Otherwise, the doctrine of stare decisis makes no sense. The decisions of this court are binding upon and must be followed by all the state courts of California. Decisions of every division of the District Courts of Appeal are binding upon all the justice and municipal courts and upon all the superior courts of this state, and this is so whether or not the superior court is acting as a trial or appellate court. Courts exercising inferior jurisdiction must accept the law declared by courts of superior jurisdiction. It is not their function to attempt to overrule decisions of a higher court.”

While discussing this principle it is interesting to note that there are slight modifications in the various jurisdictions; however, generally this method of “filtering down” decisions from the Supreme Court is referred to as “vertical stare decisis”.⁴

This concept of vertical stare decisis, based upon the idea that a judge, for reasons of commercial and social stability, should be bound by judges of higher courts, has another facet and that is that a judge should also respect the decisions of earlier judges of similar or of a coordinate level. This is known as “horizontal stare decisis”.⁵

In the UK, the House of Lords was the court of last appeal before it evolved into the Supreme Court of the UK and until London Street Tramways v London County Council⁶ it was not strictly bound always to follow its own decisions. In that case the Earl of Halsbury LC wrote:

“… it has now been admitted that there is upon this very question a decision of this House … My Lords, for my own part I am prepared to say that I adhere in terms to what has been said by Lord Campbell and assented to by Lord Wensleydale, Lord Cranworth, Lord Chelmsford and others, that a decision of this House once given upon a point of law is conclusive upon this House afterwards, and that it is impossible to raise that question again as if it was res integra and could be reargued, and so the House be asked to reverse its own decision. That is a principle which has been, I believe, without any real decision to the contrary, established now for some centuries, and I am therefore of opinion that in this case it is not competent for us to rehear and for counsel to reargue a question which has been recently decided.”

After this case, once the Lords had given a ruling on a point of law, the matter was closed unless and until Parliament made a change by statute. This rather strict view was modified after the Practice Statement of 1966, which allowed the House of Lords to adapt English law to meet changing social conditions. Although the House of Lords would treat its decisions as normally binding, it would depart from these when it appeared right to do so. It should be noted, however, that despite this the Practice Statement has been seldom applied by the House of Lords and then usually only as a last resort. This is one of the major differences between the stare decisis principle in the UK and in the USA. In the United States the Supreme Court can, and does, overrule itself. There, for example, the court wrote in Burnet v Coronado Oil & Gas Co:⁷

“Stare decisis is usually the wise policy, because in most matters it is more important that the applicable rule of law be settled than that it be settled right. … But in cases involving the Federal Constitution, where correction through legislative action is practically impossible, this Court has often overruled its earlier decisions. … This is strikingly true of cases under the due process clause.”

The United States Supreme Court further wrote in Smith v Allwright:⁸

“[W]hen convinced of former error, this Court has never felt constrained to follow precedent. In constitutional questions, where correction depends upon amendment, and not upon legislative action, this Court throughout its history has freely exercised its power to re-examine the basis of its constitutional decisions.”

It is interesting to note that while in the UK the House of Lords rarely reverses itself, the United States Supreme Court in the period 1946–1992 alone reversed itself in about 130 cases.

Further, with the advent of the EU under section 3(1) of the European Communities Act 1972, decisions of the European Court of Justice are binding in matters of community law on all English courts despite the fact that it is not bound by its own previous decisions. Thus the new order of stare decisis in the UK is as follows:

1. 
   

   European Court of Justice.

   
   
2. 
   

   The Supreme Court of the United Kingdom (formerly the House of Lords).

   
   
3. 
   

   Court of Appeal: Here the Court of Appeal is bound by decisions of the Supreme Court of the United Kingdom even if it considers them to be wrong. In Young v Bristol Aeroplane Co Ltd, the Court of Appeal held that it was bound by its own previous decisions subject to the following three exceptions:

   
   
   
   
   1. 
      

      Where there are two conflicting decisions the Court of Appeal must decide which to follow and which to reject;

      
      
   2. 
      

      Where a decision of its own has been impliedly overruled by the House of Lords;

      
      
   3. 
      

      The previous decision was given by carelessness or mistake.

   
   
4. 
   

   Divisional Courts: A Divisional Court is bound by the Supreme Court and the Court of Appeal and normally follows a previous decision of another Divisional Court.

   
   
5. 
   

   High Court: The High Court is bound by the Court of Appeal and the Supreme Court but is not bound by other High Court decisions. However, other High Court decisions are of strong persuasive authority in the High Court and are usually followed. Decisions of individual High Court judges are binding on the county courts.

   
   
6. 
   

   Crown Courts: Decisions made on points of law by judges sitting at the Crown Court are not binding, though they are of persuasive authority.

   
   
7. 
   

   County Courts and Magistrates’ Courts: Decisions of these courts are not binding.

It should also be noted the effect of the European Court of Human Rights pursuant to the Human Rights Act 1998, where courts in the UK must now have regard to decisions of the European Court of Human Rights.

Further, as to the principle of stare decisis, it should be noted that only the actual statements of law are binding and these are the reasons for the decision or “ratio decidendi”. All other reasoning within a judgment is known as “obiter dictum”. If a statutory provision or precedent had not been brought to the previous court’s attention before its decision, the precedent would not be binding. Also, if a court finds a material difference between cases then it can choose not to be bound by the precedent. Persuasive precedents are those that have been set by lower courts and, as already mentioned, while they may be persuasive, they are not binding. Most importantly, precedents can be overruled by a subsequent decision by a superior court or by an Act of Parliament.

Common law countries

The common law constitutes the basis of most former English speaking and/or British Commonwealth countries including:

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  England & Wales

  
  
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  Australia

  
  
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  Canada (except Quebec)

  
  
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  Sri Lanka

  
  
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  Singapore

  
  
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  Northern Ireland

  
  
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  New Zealand

  
  
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  South Africa

  
  
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  Malaysia

  
  
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  Hong Kong

  
  
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  The Republic of Ireland

  
  
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  USA (except Louisiana)

  
  
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  India

  
  
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  Pakistan

  
  
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  Malta

Stare decisis, therefore, is not usually a doctrine used in civil law systems because, as will be seen in the next section, it violates the principle that only the legislature may make law. However, the civil law system does have jurisprudence constante, which is similar to stare decisis and dictates that the courts’ decisions move in the direction of maintaining a predictable result for the benefit of society and commerce. Thus, theoretically inferior courts are generally not bound to precedents established by superior courts. However, in practice the need for predictability dictates that inferior courts generally defer to precedents by superior courts. In a sense, the most superior courts in civil law jurisdictions, such as the Cour de Cassation and the Conseil d’État in France, are recognised as being bodies of a quasi-legislative nature.

The doctrine of jurisprudence constante also influences how court decisions are structured. In general, court decisions of common law jurisdictions are extremely detailed with lengthy speeches by the court providing reasoning behind the decision and how it was reached. This occurs to justify a court decision on the basis of previous case law as well as to make it easier to use the decision as a precedent for future cases.

By contrast, court decisions in some civil law jurisdictions, such as France, tend to be extremely brief, mentioning only the relevant legislation and not going into great detail about how a decision was reached. This is the result of the theoretical view that the court is only interpreting the view of the legislature and that detailed exposition is unnecessary. As a consequence, much more of the exposition of the law is done by academic jurists who provide the explanations, whereas in common law nations this would be provided by the judges themselves.

Court opinions in other civil law jurisdictions, e.g. Germany, tend to be much longer than in France, and courts will frequently cite previous cases and academic writing. However, some of these courts place less emphasis than do common law courts on the particular facts of the case, instead emphasising the discussion of various doctrinal arguments and finding what the correct interpretation of the law should be.

The Napoleonic Code

The Napoleonic Code, known originally as the Code Civil des Français, is the French Civil Code, established in 1804 under Napoléon I, and originally drafted by four jurists. For its time, it was striking in that it forbade privileges based on birth, allowed freedom of religion and specified that government jobs go to the most qualified. While it was not the first legal code to be established in a European country with a civil legal system, it was, with its stress on clearly written and accessible law, a major step in establishing the rule of law. Historically, the Napoleonic Code was not based on earlier French laws but instead developed out of the various customs of France, notably the Coutume de Paris and this process of re-codification was inspired by Justinian’s Corpus Juris Civilis in dividing civil law into:

1. 
   

   the law of persons;

   
   
2. 
   

   the law of property;

   
   
3. 
   

   acquisition of property.

Before the code, France did not have a single set of laws but instead depended on local customs and often on exemptions, privileges and special charters granted by the kings or other feudal lords, which were removed during the French Revolution. Specifically, the many different legal systems used in different parts of France were to be replaced by a single legal code, the drafting of which was led by Jean-Jacques-Régis de Cambacérès, then the Second Consul under Napoleon.

In ancien régime France, law courts, which were then known as the “parlements”, often took a somewhat legislative role where the judge would either protest a royal decision, i.e. protest excesses of royal power, or, in some occasions, defend the privileges of the social classes to which the judges belonged. The latter was especially true in the final years before the French Revolution and as a result, the French Revolutionaries took a negative view of judges making law. This was reflected in the Napoleonic Code provisions, which prohibited judges from passing judgments exceeding the matter to be judged, because general rules were within the domain of the legislative not the judiciary power. As mentioned in the previous section, in theory there is no case law in France. Despite this the French courts had to fill the gaps in the laws and regulations. This resulted in a large body of jurisprudence being developed and although there is no actual stare decisis the decisions by important courts have become more or less equivalent to case law.

Key to all of this is that the code established certain important provisions regarding the rule of law. Laws could be applied only if they had been duly promulgated and only if they had been published officially, which meant that no secret laws were authorised. Additionally, ex post facto laws were also prohibited and importantly the code also prohibited judges from refusing justice on grounds of insufficiency of the law thus encouraging the courts to interpret the law and to give “case specific” decisions rather than handing down general judgments, which had functioned in the past as a substitute for the legislature.

In 1808, the Code d’instruction criminelle was published and is the basis of the modern “inquisitorial system” of criminal courts, used in France and in many civil law jurisdictions. Interestingly, in light of the current trend in the EU as to the European Court of Human Rights, the French Revolution’s Declaration of the Rights of Man and of the Citizen almost 200 years earlier had taken up the banner of protecting the weaker in society from the perils of a strong regime. Indeed, Napoleon remarked that care should be taken to preserve personal freedoms, especially when the case was before the Imperial Court as “these courts would have a great strength, they should be prohibited from abusing this situation against weak citizen without connections”. It should also be noted that while it was not until 1836 in England that prisoners charged with a major crime were allowed to have counsel, article 294 of the Code d’instruction criminelle allowed the defendant to have a lawyer before the Court of Assizes and mandated the court to appoint the defendant a lawyer if the defendant did not have one. Failure to do so would render the proceedings null and void.

Even though the Napoleonic Code was not the first civil code and did not represent the whole of his empire, it was one of the most influential. It was adopted in many countries occupied by the French during the Napoleonic Wars and thus formed the basis of the private law systems in countries including Italy, the Netherlands, Belgium, Spain, Portugal, and their former colonies. In the German regions on the left bank of the Rhine (Rhenish Palatinate and Prussian Rhine Province), the former Duchy of Berg and the Grand Duchy of Baden, the Napoleonic Code was in use until the introduction of the Bürgerliches Gesetzbuch in 1900 as the first common civil code for the entire German Empire. Indeed, the Napoleonic Code was in force in central Poland from 1808 to 1946, and was also adopted in 1864 in Romania (with some modifications) and which is still in force. Further, it was also adopted in Egypt as part of the system of mixed courts introduced in Egypt after the fall of Khedive Ismail.⁹ Other codes with some influence in their own right on the codification of the civil law were the Swiss, German and Austrian codes, but even there some influence of the French code can be felt, as the Napoleonic Code is considered the first successful codification. Thus, the Napoleonic Code has to different degrees influenced the civil law systems of the countries of modern continental Europe, with the exception of Russia and the Scandinavian countries.

Additionally, in the United States, the State of Louisiana’s civil code has kept its Roman roots and some of its aspects feature influences of the Napoleonic Code, with the inclusion of both Roman and Spanish civil traditions. The term “Napoleonic Code” is also used to refer to legal codes of other jurisdictions that are influenced by the French Code Napoléon, especially the civil code of Quebec, which was derived from the Coutume de Paris, which the British continued to use in Canada following the Treaty of Paris in 1763. Most of the laws in Latin American countries are also based in the Napoleonic Code, such as the Chilean Civil Code and the Puerto Rican Civil Code.

Differences between common and civil law

Codification is not the only difference between civil and the common law. The important distinction between codes and statutes is the methodological approach taken by the courts. In civil law countries, legislation is seen as the primary source of law and the courts base their judgments on the provisions of codes and statutes from which solutions in particular cases are to be derived. Thus, courts have to reason extensively on the basis of general rules and principles of the code, often drawing analogies from statutory provisions to fill any gaps in the understanding of the statute and to achieve coherence. In the common law, cases are the primary source of law while statutes are seen only as incursions into the common law and, thus, interpreted narrowly.

Another difference between the common and civil law countries lies in the methods used by the judiciary. In the United States, judges are seen as balancing the power of the other branches of government. In civil law in France, however, the concept of separation of powers is accomplished by assigning different roles to the legislature and to the judges, with the judge as la bouche de la loi: “the mouth of the law”. That is why under the civil law the concept of binding precedent does not exist to the same extent that it does under the common law and certain civil law systems are based upon the inquisitorial system (similar to Dispute Boards) rather than the adversarial system of the common law countries.

Civil law countries

Civil or civilian law is a legal tradition which is the base of the law in the majority of countries of the world, including:

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  France (and former colonies)

  
  
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  Germany

  
  
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  Greece

  
  
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  Japan

  
  
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  Denmark

  
  
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  Finland

  
  
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  Quebec (Canada)

  
  
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  China (a mix of civil and socialist law)

  
  
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  Italy (and former colonies)

  
  
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  Austria

  
  
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  Portugal

  
  
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  South Korea

  
  
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  Norway

  
  
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  Iceland

  
  
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  Puerto Rico (USA)

  
  
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  Russia (a mix of civil and socialist law)

  
  
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  Spain (and former colonies)

  
  
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  Switzerland

  
  
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  Turkey

  
  
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  Republic of China (Taiwan)

  
  
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  Sweden

  
  
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  Louisiana (USA)

  
  
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  Latin America

History

Historically, Sharia or Shari’ah is the body of Islamic law and the legal framework in Muslim legal systems that deals with aspects of both business law and contract law. Some Islamic scholars accept it as the body of precedent and legal theory established before the nineteenth century while other scholars view Sharia as a changing body and include Islamic legal theory from the contemporary period.

Before Islam, the Arabs resolved their disputes without the use of any formal court system. This was done either through arbitration or through conciliation and was administered through tribal chiefs or other respected tribal elders. The resolution of disputes during this period relied on the parties’ first coming to an agreement as to the extent to which any resolution of their dispute would be binding upon them.

The coming of Islam brought with it the development of a legal system known as Sharia, which in effect recognised and upheld the earlier dispute resolution procedures. The ability to settle disputes amicably is seen in Sharia. Dispute resolution techniques, notably arbitration, are seen in all four sources of Sharia. This totality of Sharia is based upon the Quran (Koran): Sunna (the acts and sayings of the Prophet Mohammad (pbuh)); Idjma’ (the consensus of opinion – which is similar to the concept of “common law”) and Qiyas (which is reasoning by analogy). Whether dispute resolution is binding or not is, of course, still dependent upon the intent of the parties and this can best be determined if the parties at the inception have an agreement as to whether any dispute resolution decision is final and binding upon them. Thus agreements for such dispute resolution methods as arbitration could be made binding, or even for Dispute Board decisions. Conciliation, similar to mediation, is permitted under Islamic law in civil, commercial, family and other matters as long as it does not permit acts against God’s commands or the matter settled by conciliation falls in the ambit of rights of God, i.e. crimes and their sanctions. Again, this method of dispute resolution is also dependent upon the agreement of the parties to its being held as binding or not.

Sharia does not give detailed rules on any form of dispute resolution. The Quran sets out general principles, which govern individuals and, like in the common law countries, it is the jurists who are responsible for expanding and clarifying various aspects as necessary. The interpretation of the Quran, known as the “Ijtihad”, is where the Islamic jurists give their elaborations and deductions as needed by society and it is this area of Sharia that governs in matters such as dispute resolution. It is important to note that there are four major doctrinal schools of Islamic Sharia, each with a slightly different view on dispute resolution, in particular dealing with arbitration and conciliation. Both of these principles are also part of the adjudication processes such as Dispute Boards and as such become part of this discussion.

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  Enforcement provisions

  
  

  As far as enforcement is concerned, ADR decisions would be enforced via the courts in both Saudi Arabia and Iran according to the arbitration law of each country. The Saudi Arbitration Law (“SAL”) would take this decision to the Board of Mazalim jurisdiction “Diwan Al-Mazalim”.²⁶

The Commercial Circuit (“CC”) in the Diwan will revise the decision and decide whether it is enforceable in Saudi Arabia or not. The Commercial Circuit in Diwan Al-Mazalim could also revise any arbitration award or ADR decision sought to be enforced by the court’s coercive powers in Saudi Arabia — according to the substantive rules of Sharia as expressed in the Hanbali School of Law.²⁷ This revising power finds its base in article (39) of the implementation rules, which binds the tribunal to issue its award in accordance with Sharia law. The same also applies to Dispute Boards.

In Iran, according to the Iranian Arbitration Law (“IAL”) the competent court will play the same role. The main difference is that the Iranian Arbitration Law is based on the UNCITRAL Model Law while the Saudi Arbitration Law is not. The competent Iranian court will decide the enforceability of the award in Iran according to the requirements of article 33(1) of the Iranian Arbitration Law.

Dispute Review Board decisions

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  An ADR proceeding such as a Dispute Review Board could, for example, issue a recommendation, which is open to acceptance. In the recommendation situation, if neither of the parties sends a notice of dissatisfaction to the other party²⁸ this recommendation is considered a final and binding resolution to the issue in question. The parties are required to enforce it and it would not be subject to any further recourse.

  
  
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  The party seeking to enforce the Dispute Review Board’s decision should refer the other party’s failure to agree to a binding form of ADR. If an arbitration award were issued in favour of the claimant, the claimant could seek enforcement in Diwan Al-Mazalim. The Diwan will revise the award. The dispute referred to arbitration will not be seen as the mere failure to comply with the Dispute Review Board’s decision, but the supervisory power of the Diwan will extend to include a substantive review of the Dispute Review Board’s decision. The same will happen if the failure to comply with the Dispute Board’s decision is by itself referred to the Diwan.

Dispute Adjudication Board decisions

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  A Dispute Adjudication Board will issue a decision, which will be accepted by both parties and, thus, enforced amicably. Or the other party will serve a notice of dissatisfaction on one party. Consequently, the Dispute Adjudication Board’s decision will be temporarily binding pending final resolution if either party so desires.

  
  
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  A temporarily binding decision is not likely to be capable of enforcement in Saudi Arabia. A notice of dissatisfaction would have an effect of an accepted application for leave to appeal in the court’s system – in suspending enforcement of the Dispute Adjudication Board’s decision.

The form of the Dispute Board decision

No binding rule on the form of Dispute Board decisions is available in Sharia law. It should follow the form agreed upon by the parties. In the case of no agreement, it will take the form the board members deem proper. However, the Dispute Board decision must always be in writing and good practice dictates that if the form of the decision is not stated the parties should either agree a format or the Dispute Board members should set one out for the agreement of the parties as part of their Board procedure.

Particulars as to the Kingdom of Saudi Arabia

As mentioned above, the enforcement of a Dispute Board decision is likely to end up in the form of an arbitration award. Hence, the constraints relevant to Sharia law in the Saudi Arbitration Law (“SAL”) are relevant to arbitration as they are to Dispute Board decisions. Also, some public order Sharia substantive principles will be of significant relevance. Most important in this regard is that no interest should apply to any amount of money to be paid. The right to be heard on all issues, natural law or due process and a fair hearing for both parties and their representatives, should be clearly shown by the decision in order to prove that fair trial has taken place.

On 8 June 2012, Saudi Arabia published its new Arbitration Regulation (Royal Decree No. M/34) (the New Arbitration Regulation “NAR”) replacing the Arbitration Regulation of 1983 (Royal Decree No. M/46) and the Rules for the Implementation of the Arbitration Regulation of 1985 (Ministerial Resolution No. 7/2021/M) (the former law) – all of which affect the enforcement of Dispute Board decisions through arbitration. The NAR (which became effective on 7 July 2012) institutes a variety of reforms to Saudi Arabia’s arbitration system.

Prior to this new law, all arbitrations in Saudi Arabia were subject to judicial oversight by the Saudi courts and under the former law were to be conducted in Arabic and awards could be modified, reformed and/or rejected at the discretion of the court.

Additionally, under the former law the court was responsible for appointing arbitrators if the parties did not do this and also for approving the parties’ agreement to arbitrate, and as there were no written requirements for arbitration agreements any decision as to whether to approve arbitration was in the court’s discretion. It should be noted that under the former law the court also supervised and gave rulings on procedure and requests for injunctive and interim relief.

Most importantly, under the former law the courts had sole responsibility for the enforcement of arbitral awards (both foreign and Saudi) and were free to review the award specifically to make certain that the award was Sharia-compliant – the broad right to reverse, rewrite or vacate any award and then to award new damages as it deemed necessary.

The NAR now follows from the 1985 UNCITRAL Model Law on International Commercial Arbitration, as amended in 2006, and as a result aligns Saudi law with international arbitration norms, allows more control to the parties, and provides greater clarity on several issues, which include:

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  New written guidelines for determining whether an agreement to arbitrate may be enforced.

  
  
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  Clear and detailed procedures for the appointment and/or recusal of arbitrators.

  
  
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  Languages other than Arabic may be used if ordered by the arbitration panel or the parties agree (although awards must be translated to Arabic prior to enforcement).

  
  
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  Government bodies are prohibited from entering into arbitration agreements, unless approved by the Prime Minister.

  
  
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  The parties are now free to choose which law will apply. However, the new arbitration law affirms that Sharia is paramount and that arbitration awards may be enforced only if they are Sharia-compliant.

  
  
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  It should be noted that while the New Law provides increased flexibility with respect to many matters it is all still subject to the Saudi courts’ oversight and mandate to ensure Sharia compliance.

It is still for discussion whether under Saudi law women can now act as arbitrators.²⁹ If in any dispute or in any stage of a Dispute Board’s decision is referred for enforcement, defence of nullity may face the party in whose favour the decision was. If the Dispute Board decision is used as evidence, this defence may not be raised, however. Additionally, the chairman of the board shall have sufficient knowledge of the Sharia principles.³⁰

To avoid the possibility of annulment of Dispute Board decisions, it may be advisable to use women and/or non-Muslims as experts and not as members of Dispute Boards, keeping the membership of the Dispute Boards to Muslim men.

Further, if oral evidence is admitted, the testimony of two women will be considered equal to that of one man. Hence, on every issue on which oral evidence is given, the testimony of two men or one man and two women is required for this oral evidence to be admissible and effective.³¹ This is subject to article 31 of the implementation rules, which requires that witness statements shall be given pursuant to Sharia principles.

As for Gharar,³² it is more likely to appear in cases of bespoke contracts and not in standard forms with which Saudi Arabia courts are now quite familiar.

This review of Sharia-related issues in the Saudi Arbitration Law is necessary because arbitration, unlike the concept of Dispute Boards, has gained considerable recognition, understanding and familiarity in Saudi Arabia. Yet, the issues raised are still obstacles in the way of the Dispute Board-friendly environment in Saudi Arabia.

Particulars as to the Islamic Republic of Iran

The Iranian Arbitration Law is based on the UNCITRAL Model Law. No Sharia-related provisions are found in it, and hence any legal issues related to Dispute Boards would be secular provisions and not Sharia-based ones.

In principle, Dispute Boards are an acceptable means of dispute resolution under Sharia law, given that the parties are treated on an equal footing and that the general principles of adjudication are taken into consideration. The agreement to refer any dispute or difference to a Dispute Board, whether a Dispute Review Board or Dispute Adjudication Board, is a contractual agreement that shall be respected and to which the parties are bound as far as their contracts allow.

Dispute Boards under common, civil or Sharia law

Since Dispute Boards are governed by the law of the country in which the underlying contract is also governed, the basis of its decisions and rulings should follow those of the “host” country. Generally, this is governed by the underlying law of contract. To the extent that Dispute Board members are in need of assistance in this regard most standard Dispute Board provisions should provide for the member’s right to seek legal guidance as needed.

Additionally, as to the Dispute Board Decision, most contracts provide that if the decision is not accepted then the matter may go to arbitration, usually before a pre-agreed arbitration panel or to be determined by an internationally recognised arbitration group, such as the International Chamber of Commerce (ICC). In this regard the arbitration decision will be based upon the rule of law of that particular jurisdiction.