Saudi Arabia and Qatar: Converging Views on Mediation
By: Minas Khatchadourian
Saudi Arabia and Qatar are both members of the Gulf Cooperation Council (GCC). After some three years (2017-2020) of wild seas between Qatar and its neighbors, diplomatic relations have been restored at Al-Ula Summit.
Qatar and Saudi Arabia have been among the 52 countries who have signed the most recent Convention prepared by the UNCITRAL on cross-border mediation (“Singapore Mediation Convention”).
Furthermore, Qatar and Saudi Arabia have both ratified the Singapore Mediation Convention, as a very interesting step towards the use of mediation when dealing with the resolution of cross-border commercial disputes, addressing a problem whereby mediation was repeatedly turned down as an alternative dispute resolution option because a settlement might not be readily enforceable in a different jurisdiction.
Qatar’s ratification triggered a six-month countdown to the Convention application which came into force in September 2020 for the first three countries who ratified it (Singapore, Fiji and Qatar). Saudi Arabia’s ratification followed on 5 May 2020 and the Convention entered into force there on 5 November 2020.
In accordance with Article 14(1) of the Singapore Mediation Convention, the Contracting States agreed that the Convention would enter into force six months after the deposit of the third instrument of ratification, acceptance, approval, or accession.
Mediation is an efficient and attractive means to resolve disputes, particularly as it can allow parties to preserve commercial relationships. It can avoid all unnecessary costs, delays and management time associated with more formal methods of dispute resolution such as litigation and arbitration.
Therefore, Saudi Arabia and Qatar are considered jurisdictions where any entity or person may request from its competent courts, the enforcement of an international mediation settlement agreement falling within the scope of application of the Singapore Convention (Article 1).
The Singapore Mediation Convention has been designed by the UNCITRAL to become an essential instrument in the facilitation of international trade and in the promotion of mediation as an alternative and effective method of resolving trade disputes. It ensures that a settlement agreement reached by parties becomes binding and enforceable in accordance with a simplified and streamlined procedure (Article 4). It thereby contributes to strengthening access to justice and the rule of law.
In many MENA-GCC jurisdictions, an attempt to resolve a dispute amicably is becoming an essential tactical ingredient in any overall dispute resolution strategy, with failure to do so adversely often affecting cost awards. Even without the Singapore Mediation Convention, it is open to parties who have an existing arbitration agreement contained in their commercial agreements to resort to mediation as a pre-arbitration or pre-litigation step.
The Convention includes two reservations left to the discretion of each ratifying State (Article 8). A first reservation permits a State Party to the Convention to exclude, from the application of the Convention, settlement agreements to which it is a party, or to which any governmental agencies or any person acting on behalf of a governmental agency is a party, to the extent specified in the declaration. A second reservation permits a State Party to the Convention to declare that it will apply the Convention only to the extent that the disputing parties have agreed to its application.
In this respect, while the State of Qatar has not expressed any reservations to the Convention, considering that any settlement agreement resulting from mediation to which it has participated or any of its governmental agencies or entities (ministries, etc.) can be enforced by Qatari Court orders, the Kingdom of Saudi Arabia preferred to express its reservation on this point. In other words, Saudi Arabia ratified the text of the Singapore Convention under condition that “it shall not apply to settlement agreements to which Saudi Arabia is a party, or to which any of its governmental agencies or any person acting on behalf of a governmental agency is a party”.
It results that in the context of a large infrastructure contract generally signed by the Saudi Government (or a public entity such as a Royal Commission for Works) with an Asian contractor
for example, such a declaration may be problematic. In case a settlement agreement is reached following a mediation and that the settlement is in favor of the Contractor, such a declaration by Saudi Arabia would prevent enforcement under the Convention, as it poses a significant risk to the potential enforceability of any mediated settlement. Nevertheless, such settlement agreement is not deprived of value as the agreement can still be enforced as a contract through the Saudi Courts.
On the other hand, a major construction contract signed after September 2020 between a Saudi private contractor and the Qatari Public Works Authority (“PWA”) and where following a dispute, the contracting parties resorted to mediation and a settlement agreement was signed in favor of the contractor. This agreement falls in the scope of the Singapore Convention.
It remains to be seen how the national Courts in the States which ratified the Convention will interpret in practice the provisions of the Convention.
The converging views of Qatar and Saudi Arabia on the benefits of mediation are of great importance, particularly where the parties have their place of business in different States or the parties’ place of business is different from the State in which a substantial part of the obligations under the settlement agreement is performed or with which the subject matter of the settlement agreement is most closely related.
The prominence of mediation in the Kingdom of Saudi Arabia is expected to be bolstered significantly by the recently enacted Commercial Courts Law (Royal Decree No. M/93 issued on 15 Sha’ban 1441 corresponding to 15 April 2020) and by the expected Qatari Law establishing the “investment and trade court” as well as a new Mediation Law to support the means of alternative dispute resolution.