Mysteries over Saudi City court

On 30 October the Financial Times published an intriguing story under the headline ‘Saudis seek private court in London’.

The article describes how Saudi Arabia “plans to lobby the UK Government to set up an arbitration centre in London”, with a panel comprising leading UK lawyers and former judges, how “the Saudis aim for their largest companies, including Aramco, the state oil monopoly, contractually to stipulate the use of the London venue to settle any dispute” and how “the contracts would be written under English law”.

The motive is said to be to attract foreign investment. Presumably, it is believed that foreign investors will have more faith in English arbitration than Saudi law and the Saudi courts, or Saudi-administered arbitration.

This implicit endorsement of English lawyers as arbitrators, English law as governing law for arbitration and, possibly, the English courts as a supervisory jurisdiction is obviously a good thing for English lawyers.

Of course, if this development brings to London disputes that would otherwise have been dealt with elsewhere, that will be good news for us. But the FT piece raises some questions too.

A puzzling aspect of the article is the reference to “lobbying the UK Government” and to “insiders” having said that “the plans could be broached with senior government ministers within the next month”.

It is hard to imagine why any lobbying would be required. The scheme’s backers can incorporate their institution, publish a set of rules and open for business, all within the framework of the existing law. There is no need for any change to legislation, and there is no need to obtain an operating licence or anything like that.

What is being proposed simply seems to be a new institution to administer arbitrations. Such institutions already exist - most obviously the London Court of International Arbitration and the ICC. Therefore, it is surely natural to wonder what it is that the Saudi backers object to about those institutions, and how the new institution - and its rules and procedures - will differ from what is already on offer.

The aim of the exercise is to inspire confidence in foreign customers and investors who deal with Saudi businesses. Saudi law prevents the enforcement of foreign awards insofar as they are contrary to the principles of Sharia - most notoriously, awards of interest. So perhaps the motivation is to create a set of rules that will ‘Sharia-proof’ awards made under them, to try and guarantee enforceability in Saudi Arabia.

At present, though, there are no details on what the rules will comprise or on how the new institution will function. For the moment, London’s commercial lawyers can only watch this space with interest.