When drafting a contract, both parties often skim past the dispute resolution clause, only for it to become the first thing read when a disagreement arises. The choice between arbitration and the commercial court is not a stylistic preference: it affects duration, cost, confidentiality and enforceability. Here is a practical comparison to help you choose before you sign.
The commercial court
The competent judicial body for commercial disputes in the Kingdom, hearing claims under the Commercial Courts Law and its procedures.
- Cost: generally lower — no arbitrator fees or arbitration centre charges.
- Appeal: levels of litigation allow the judgment to be reviewed.
- Enforcement: direct, through the execution courts inside the Kingdom.
- Publicity: proceedings are less private than arbitration.
Commercial arbitration
The parties’ agreement to submit the dispute to an arbitrator or arbitral tribunal instead of the courts, under the Saudi Arbitration Law and the rules of the chosen centre.
- Confidentiality: the standout advantage — proceedings and the award are not made public.
- Expertise: you can choose an arbitrator specialised in the field of the dispute (construction, technology, energy).
- Flexibility: agreement on language, seat, procedure and timetable.
- Cost: usually higher, and may not suit small claims.
- Finality: an arbitral award is not appealable on the merits; challenge is limited to specific grounds of nullity.
- Cross-border disputes: easier to enforce across borders under the New York Convention.
How do you choose?
- Deal value: small and medium claims are usually better suited to the courts on cost grounds.
- Sensitivity of information: if the dispute would expose trade secrets or pricing, arbitration fits better.
- The other party: if they are outside the Kingdom, arbitration eases enforcement and avoids jurisdiction disputes.
- Technical nature: engineering and technical disputes benefit from a specialised arbitrator.
- Speed: arbitration’s timetable can be shaped, but that depends on how well the clause is drafted.
Common mistakes in an arbitration clause
- A vague clause that does not name the centre or rules, turning the dispute into an argument over the dispute mechanism itself.
- Not specifying the number of arbitrators or how they are appointed.
- Omitting the language and seat of arbitration, especially with a foreign party.
- Combining an arbitration clause with a conflicting jurisdiction clause in the same contract.
- Inserting an arbitration clause with an entity that cannot arbitrate without special consent.
In short
There is no option that is always better; there is an option that fits the nature of the deal and its parties. More important than the choice itself is that the clause is written clearly, with no room for interpretation.
We help you choose and draft the dispute resolution clause as part of contract drafting and review, and manage the dispute itself through litigation and dispute management.
Have a contract with an arbitration clause?
Review the clause before signing — it cannot be amended once a dispute begins.
This article is general information, not legal advice, and always refer to the laws in force and the rules of the chosen centre.