Preparing, Voting, Ratifying FRP Proposal,

What Creditors should Monitor

Saudi Bankruptcy Law grants creditors a range of procedural and substantive rights to oversee the Financial Restructuring Proposal (FRP) at every stage, including preparation, voting, and ratification of the proposal. These rights are designed to prevent debtor manipulation, mitigate potential abuses, and facilitate the smooth implementation of the FRP plan, ultimately enhancing the procedure’s chances of success.

Preparing FRP Proposal

The FRP proposal is primarily prepared by the debtor, with the assistance of the bankruptcy trustee, within the timeline set by the court when initiating the procedure. As the party most familiar with its financial, business, and economic situation, the debtor is in the best position in determining the necessary type of restructuring—whether equity restructuring, debt restructuring, or a combination of both. In the case of debt restructuring, the debtor must decide on the most suitable approach, such as an extension of repayment terms, a reduction of debt, or a debt-for-equity swap.

Bankruptcy trustee assistance would be to ensure the compliance of the FRP Proposal with the Bankruptcy Law and Implementing Regulation and to ensure its integrity. Additionally, the trustee must submit a report to the court assessing whether the proposal is likely to be accepted by creditors and if it is enforceable. The trustee may also request the court to include a clause in the proposal allowing for the exchange of a security provided to a secured creditor if necessary for the proposal’s implementation. However, this clause must ensure that the creditor receives an alternative security equivalent to the original security[1].

Creditors do not have a role in the phase of preparing FRP proposal. However, if a Committee of Creditors is formed, it is entitled to provide its opinion in the phase of preparing the FRP Proposal or when preparing a proposal to modify the FRP plan[2]. A Creditors’ Committee may be formed by a court decision if deemed appropriate, either upon the request of the bankruptcy trustee, a group of creditors holding at least 50% of the total debt, or at the court’s own initiative[3]. It is worth noting that the Creditors’ Committee does not include all creditors, and its decisions are made by a simple majority, with each member having an equal vote rather than a weighted vote based on the value of their debt. While the committee’s opinion on the FRP proposal is neither an actual vote nor binding, it serves as a valuable opportunity to gauge the proposal’s likelihood of receiving approval in the formal vote. Additionally, it allows for the identification of creditor concerns and potential areas for improvement in the proposal.

Voting FRP Proposal

For a creditor to have the right to vote on the FRP proposal, two conditions must be met; the creditor must have an accepted claim listed in the official list of claims approved by the court, and the proposal must affect the creditor’s legal or contractual rights[4].

Filing a claim within the timeline set by the trustee is crucial for creditors to avoid the risk of losing their voting rights, although the proposal may impact their legal or contractual rights. However, creditors should also carefully assess their prospects of recovering their claims outside the FRP through other legal avenues before deciding on their course of action[5].

The debtor must notify creditors whose claims are approved in the list of creditors ratified by the court at least 21 days before the FRP proposal voting date, specifying the date and time of the vote. Along with this notification, the debtor must also provide a copy of the proposal[6].

Although the debtor is responsible for sending the voting meeting notification, the meeting itself is led by the bankruptcy trustee. The meeting may be held in person or virtually, provided that the chosen venue ensures active participation and allows for accurate vote recording[7]. The bankruptcy trustee must prepare minutes of the voting meeting, detailing the calculation of votes, the weight of each vote, and the final voting result. Additionally, the trustee must notify creditors of the voting outcome and submit the results to the bankruptcy court[8].

Creditors should verify with the bankruptcy trustee to ensure there are no errors in the calculation of the voting results. In particular, they should carefully review the following:

1. The accuracy of counting votes and the weight of each vote;
2. Whether the percentage needed to conclude that a class of creditors has accepted the proposal (2/3 of the value of voters’ debts);
3. Whether the percentage needed of non-affiliated creditors – if they exist – have voted in favor of the proposal (more than 50%)[9].

Creditors should promptly notify the bankruptcy trustee of any errors in the voting results to prevent the submission of incorrect result to the court.

Ratifying FRP proposal

If the proposal was voted positively, the trustee must submit a request to the court for ratification. The trustee is also required to notify creditors of this request and inform them of the court session date at which the proposal will be considered for ratification.

The court will ratify the proposal after ensuring that it is fair and has been accepted by all classes of creditors and shareholders. However, the court may impose a cramdown and approve the proposal despite objections from certain creditor classes if the following conditions are met:

1. The proposal is fair.
2. The proposal has been accepted by at least one class of creditors.
3. The proposal has been voted affirmatively by cross-classes percentage of 50% of value of voters’ debts.
4. If the court is convinced that the proposal would be in favor of the majority of creditors[10].

This wide discretion of bankruptcy court in considering ratifying FRP proposal requires that creditors exercise a kind of checks and balances. This ensures the process is not abused by the debtor or misrepresented by the trustee regarding the proposal’s impact on both creditors and the debtor.

A creditor who voted the proposal negatively, may attend the proposal ratification session and object to the proposal ratification on the ground that the proposal is not fair and is harmful to his interests[11]. Some possible grounds for objection include:

1. The debtor or the trustee did not respect the due process when inviting creditors to vote or during voting, especially if no appropriate notification has been sent, if the notification is not accompanied by a copy of the proposal, if the voting venue does not allow for active participation of voters or recording accurately their votes, if there is any mistake or wrongful action in collecting or counting votes or if creditors were not notified of the voting result[12].
2. If the proposal does not contain proper classification of creditors. The implementing regulation implies that the proposal classifies creditors based on the following criteria; a) the nature and similarity of their rights and b) the impact of the proposal on their rights[13]. Some strategies used to classify creditors can also take the form of manufacturing an impairment regarding some creditors in order to guarantee that the creditor would vote to accept the proposal[14]. For example, the proposal could pay creditor nearly his claim, but not entirely, in full to ensure he would vote in favor of the proposal. This strategy is known as artificial impairment. The creditor should observe whether the classification of creditors in done properly and object to the court if there is any wrongful classification of creditors.
3. Whether the proposal include a complete and clear financial disclosure that would allow the creditors to assess the financial and economic situation of the debtor and assess the other alternatives the creditors may have comparing to the impairment provided for in the FRP Proposal[15]. The Implementing Regulation provided for a set of information that must be included in the proposal that cover all aspects regarding the debtor current and future financial situation including his assets, debts, pending and potential claims initiated by and against the debtor and pending and potential cross border insolvency procedure[16].

A clear and complete financial disclosure would allow the creditors to assess the following:

1. Whether the proposed solutions respect the best interest of creditor rule. The debtor should adopt the debt restructure approaches that would enable him to achieve his goal with the minimal impact on creditors.
2. It would help creditors to assess the other alternatives to recover their debts by applying a hypothetical liquidation analysis[17] and compare the liquidation value of their rights with the impairment provided for in the FRP Proposal.

4. Whether the proposal maintains a fair balance between preserving creditors’ existing rights, the distribution of impairment, and the new rights, benefits, or securities granted to different creditors [18].
5. A creditor may object to the court if there is wrong, illegal or absence of disclosure of affiliated creditors. The absence of the proper disclosure of affiliated creditors would affect the result of voting process and undermine non-affiliated creditors votes.
6. A creditor may also object to the court if there is any attempt to fabricate illegitimate creditors. This could occur if the debtor engages in fraudulent arrangements with third parties by creating fictitious debts, recognizing non-existent claims, or inflating the value of certain debts to secure their inclusion in the list of claims. Such actions would allow these parties to vote on the proposal, thereby manipulating the voting process and harming legitimate creditors. It is important to note that this practice constitutes a criminal offense under bankruptcy law[19].

The creditor may bring this issue to the court’s attention if such misconduct occurs. By reviewing the approved list of creditors, the creditor can identify any suspicious claims that may indicate fraudulent activity. Under the Bankruptcy Law and its Implementing Regulations, creditors have the right to examine the list of claims, enabling them to detect and challenge any irregularities[20].

In conclusion, creditors’ active involvement in the FRP proposal process is not only essential for safeguarding their rights but also plays a crucial role in upholding the integrity of the process and enhancing the likelihood of a successful financial restructuring.

 

 

 

[1] Paragraph 4, Article 75 Saudi Bankruptcy Law.

[2] Paragraph 1/c Article 26 Implementing Regulation.

[3] Paragraph 1 Article 24 Implementing Regulation.

[4] Paragraph 1 Article 76 Saudi Bankruptcy Law.

[5] Richard E. Lear, Proof of Claim: To File or Not to File.., Holland & Knight Newsletter, February 2009.

[6] Paragraph 1 Article 77 Saudi Bankruptcy Law, Paragraph 2 Article 45 Implementing Regulation.

[7] Article 8 of Rules of Meeting Management in Bankruptcy Procedure issued by Minister of Commerce and Investment decision N. 13 dated 18/1/1441 H.

[8] Paragraph 1, Article 12 of Rules of Meeting Management in Bankruptcy Procedure and paragraph 4 Article 79 Saudi Bankruptcy Law.

[9] Paragraph 2, Article 79 Saudi Bankruptcy Law.

[10] Paragraph 2, Article 80 Saudi Bankruptcy Law.

[11] Paragraph 4, Article 80 of Saudi Bankruptcy Law.

[12] Paragraph A, Article 35 of Saudi Bankruptcy Law.

[13] Paragraph Q, Article 16 Implementing Regulation.

[14] Ben Rosenblum & Mark G. Douglas, First Impression: The Sixth Circuit Weigh in on Artificial Impairment under a Chapter 11 Plan, Jones Day Publication, March/April 2016.

[15] Paragraph B, Article 35 Of Saudi Bankruptcy Law.

[16] Paragraph P, Article 16 Implementing Regulation.

[17] A simplified Approach to the Best Interest Test in Complex Bankruptcies, American Bankruptcy Institute Journal, April 2003.

[18] Paragraph C, Article 35 of Saudi Bankruptcy Law.

[19] Paragraphs A & B, Article 202 of Saudi Bankruptcy Law.

[20] Paragraph 4, Article 68 of Saudi Bankruptcy Law, Article 10 Implementing regulation.

 

Problem Definition and Background

Endowments (Awqaf) own assets that they manage and invest in various types of ventures, including their development, preservation, leasing, and maintenance. The endowment administrator (Nadzir) has the authority to carry out transactions that serve the best interest and benefit of the endowed property and its revenue. The activities of the administrators are subject to the supervision of the General Authority for Awqaf, which is regulated by Royal Decree No. 11/M, dated 26/02/1437H.

Various transactions undertaken by endowments may lead to disputes related to the management of endowment funds and the contracts they enter into, including sales, purchases, leases, and other acts of disposition and administration. Some endowments have adopted the practice of stipulating arbitration as a means of resolving potential disputes arising from these contracts.

It is noteworthy that the Arbitration Law excludes disputes related to personal status matters and matters that cannot be settled through conciliation.

Endowments may be categorized as public, which are designated for charitable purposes; family endowments, which are designated for the descendants or relatives of the founder; or mixed endowments, which combine elements of both types, as detailed in Article 1 of the General Authority for Awqaf Law.

The General Authority for Endowments (Awqaf) supervises all public, family, and mixed endowments, as well as the activities of custodians or administrators within the limits prescribed by laws[1], without violating the conditions set by the endowers or interfering with the administrators’ duties. The authority may also assume custodianship of an endowment if the endower has not appointed another person to undertake this responsibility.

Judicial practices in the Kingdom have varied regarding the permissibility of resolving disputes related to endowment management through arbitration. Some rulings have dismissed lawsuits due to the existence of an arbitration clause, while others have invalidated arbitration awards on the grounds that all disputes involving endowments fall under personal status matters and matters that cannot be settled through conciliation.

On the other hand, some judicial precedents have held that the endowment administrator lacks the legal capacity to enter into arbitration agreements.

Undoubtedly, the inconsistency in judicial decisions in this regard leads to legal uncertainty and ambiguity concerning disputes related to endowment management and asset investment. This results in substantial financial expenditures on managing such disputes without achieving meaningful outcomes.

This paper aims to explore the dimensions of the issue and provide a legal analysis of the permissibility of arbitration in disputes concerning the management of endowment funds, the contracts they enter into, and the legal capacity of endowment administrators to enter into such agreements. This will be achieved by considering relevant legal texts, judicial rulings, and comparative judicial applications.

The Permissibility of Arbitration in Endowment-Related Disputes

Article 2, Paragraph 2 of the Arbitration Law (Royal Decree No. 34/M, dated 2/5/1433H) states that the provisions of the law do not apply to disputes related to personal status matters or those that cannot be settled through conciliation.

Article 33 of the Law of Civil Procedures specifies the jurisdiction of personal status courts and refers to several matters related to endowments, including:

• Paragraph 2 states that personal status courts have jurisdiction over the establishment of endowments, wills, lineage, absence, death, and the identification of heirs.
• Paragraph 3 includes inheritance and the division of estates, including real estate, if they involve disputes, endowed shares, wills, minors, or absent persons.
• Paragraph 4 grants personal status courts jurisdiction over appointing guardians, trustees, and endowment administrators, authorizing them for transactions requiring court approval, and dismissing them when necessary.

The Implementing Regulations of the Law of Civil Procedures specify that jurisdiction over the appointment of endowment administrators belongs to the court within whose jurisdiction the endowment property is located. If multiple properties exist, jurisdiction is determined by the court overseeing the majority of the endowed assets.

Notably, the new Personal Status Law, issued by Royal Decree No. 73/M, dated 6/8/1443H, does not include any provisions related to endowments.

This raises the question of whether disputes concerning the management of endowment funds fall under personal status matters, which are excluded from the scope of the Arbitration Law.

Judicial practices in Saudi courts have varied regarding the permissibility of arbitration in endowment-related disputes. Some courts have ruled that arbitration clauses in lease contracts between an endowment and a company are invalid, based on the argument that endowment-related disputes fall under personal status matters[2]. Similarly, the Riyadh Court of Appeals annulled an arbitration award in a dispute between an endowment and an individual regarding the management of the endowment’s affairs. The court justified its decision by stating that, under the Law of Civil Procedures, endowment-related disputes fall within the realm of personal status matters, and that endowment affairs are non-arbitrable, as stipulated in Article 2 of the Arbitration Law[3].

Conversely, another court took a different approach, ruling that a lawsuit could not proceed due to the existence of an arbitration clause in a sales contract between an endowment and a company. The court rejected the argument that arbitration is impermissible in endowment-related disputes[4].

The rulings of the Egyptian Court of Cassation have established that excluding matters related to the essence of endowments from the jurisdiction of civil courts and assigning them to Sharia courts— as stipulated in the regulations governing the organization of Sahria courts at the time[5]—. However, lawsuits related to financial accounts against endowment administrators, as well as disputes concerning the lease of endowed properties, are not considered matters of endowment foundation and thus fall under the jurisdiction of civil courts[6].

Furthermore, rulings have established that disputes over the ownership of endowed properties or their recovery from illegal occupants are not considered matters of endowment validity and do not fall under the jurisdiction of Sahria courts but rather civil courts[7]. Similarly, claims for financial entitlements filed against an endowment administrator in their official capacity are classified as financial claims within the jurisdiction of civil courts, rather than Sahria courts[8].

A reading of the Law of Civil Procedures indicates that the jurisdiction of personal status courts over endowment-related matters is limited to issues concerning the establishment of endowments, including disputes over the validity, nullification, enforceability, or interpretation of endowment deeds. It also includes matters related to the division of estates containing endowed shares and the appointment, dismissal, and authorization of endowment administrators for transactions requiring court approval.

General courts hold general jurisdiction under Article 31 of the Law of Civil Procedures, except where the law specifically assigns jurisdiction elsewhere. The rules on jurisdiction should not be interpreted expansively or analogically.

Accordingly, it is evident from the provisions of the Law of Civil Procedures that not all endowment-related disputes fall under personal status matters excluded from arbitration under the Arbitration Law. Only the matters explicitly listed in Article 33 of the Law of Civil Procedures are non-arbitrable. This exclusion does not extend to the management of endowment funds or the investment of endowment assets, which may be resolved through arbitration.

The Endowment’s Capacity to Enter into an Arbitration Agreement

The first paragraph of Article (10) of the Arbitration Law No. 34/M, dated 24/5/1433H, stipulates that arbitration is only valid if conducted by a party who has the legal capacity to dispose of their rights, whether a natural or legal person. Accordingly, an arbitration agreement must be concluded by someone who has the capacity to dispose of their rights. If the arbitration agreement is entered into by a representative of a natural person or a legal person, regardless of the source of representation or agency, the representative must have the capacity to undertake acts of disposition, not just acts of management. If obtaining prior authorization from the judiciary or any other relevant authority is required, such authorization must be secured before agreeing to arbitration.

It is well established that an endowment (Waqf) has legal personality and can initiate legal action and be sued. If a lawsuit involves a right claimed by or against the endowment, such a case may be filed and heard in both instances[9].

The judiciary in comparative legal systems has upheld this principle. The Egyptian Court of Cassation ruled that an endowment, as governed by Islamic jurisprudence, constitutes a legal entity in civil law, possessing all the attributes of legal personality. A legal entity, like a natural person, has a legally presumed existence and a presumed will, which is exercised through its legal representative[10].

Regarding an endowment’s capacity to settle disputes through conciliation, Islamic jurisprudence holds that an endowment administrator may only enter into a settlement if it clearly benefits the endowment and serves its best interests, a determination typically made by the judiciary. Courts have required that settlements in endowment disputes undergo judicial review and approval by the judiciary. Based on this principle, an endowment administrator may engage in arbitration with judicial authorization[11].

It is also notable that statutory provisions governing endowments impose restrictions on certain acts of disposition and, in some cases, acts of management, requiring prior judicial approval. Article (223) of the Civil Procedure Law states that if the public interest necessitates the sale, substitution, or relocation of a public endowment, the endowment administrator may not proceed without authorization from the competent court. Additionally, if the management of a family endowment necessitates actions such as selling, substituting, transferring, mortgaging, borrowing for its reconstruction, purchasing a replacement, dividing, segregating, merging, leasing for a period exceeding ten years, or engaging in Profit-Sharing Partnership (Mudaraba) if the sale proceeds are insufficient for replacement, the endowment administrator must obtain prior judicial approval to execute such transactions. It should be noted that if the General Authority for Endowments is appointed as the administrator of an endowment, it has broader powers under Article 5 of the General Authority for Endowments Law No. M/11, dated 1437 AH. This is an exception to the provisions of Judicial Procedures Law, as stipulated in Article 25 of the General Authority for Endowments Law.

Conclusion and Recommendations

From the analysis of the preceding legal texts, the following conclusions can be drawn:

• The management of endowment (waqf) assets does not fall under the category of personal status matters that the Saudi Arbitration Law excludes from arbitration. The matters classified as personal status issues under the jurisdiction of personal status courts are explicitly listed in the Civil Procedure Law, including the establishment of the endowment, the division of an estate containing a waqf share, and the appointment, dismissal, and authorization of endowment administrators for transactions requiring judicial approval. This conclusion is also supported by established practices in comparative legal systems.
• Disputes related to the management of the endowment and its contractual agreements for investment purposes are not excluded from arbitration under Saudi Arbitration Law based on the argument that they involve matters that cannot be settled amicably. In fact, settlements involving endowments are permissible as long as they serve the best interests of the endowment and receive judicial authorization.
• The settlement of a dispute through conciliation during arbitration proceedings and the issuance of an arbitral award incorporating the settlement terms, in accordance with Article (45) of the Arbitration Law, is permissible, provided that the competent court grants approval.
• However, arbitration should not include an agreement where the parties authorize the arbitral tribunal to decide the dispute ex aequo et bono or amiable compositeur, as per the second paragraph of Article (38) of the Saudi Arbitration Law. Delegating the tribunal to decide the dispute ex aequo et bono or amiable compositeur does not mean resolving the dispute amicably; rather, it grants the tribunal the authority to rule power to decide a dispute based on equity and fairness rather than strictly applying the law, provided that it does not violate Islamic law.
• An arbitration agreement is considered a dispositive act, and an endowment administrator must obtain court authorization to enter into such an agreement, whether the endowment is public, family or mixed. This authorization must be obtained, whether the arbitration agreement is concluded before or after the dispute arises, and regardless of the nature of the contract, since the arbitration agreement itself constitutes a dispositive act.

Based on the above analysis, the following recommendations are suggested:

• Modern endowments manage substantial assets and engage in complex transactions with third parties, making it crucial to establish a legal framework that provides clarity and certainty for all parties involved. The lack of a clear regulatory framework and inconsistent judicial practices regarding arbitration in disputes related to endowment transactions may lead to financial losses in managing these disputes or discourage third parties from engaging in transactions with endowments due to legal uncertainties and unpredictability.
• Addressing inconsistencies in judicial rulings regarding the permissibility of arbitration in disputes arising from contracts concluded by endowments in managing their assets and investments is necessary. This could be achieved by issuing a directive from the Supreme Judicial Council or referring the matter to the Supreme Court to establish a unified legal principle. Such a measure would promote legal certainty, stability in transactions, and effective dispute management. It would also clarify which court is competent to grant authorization for endowment administrators to agree to arbitration for existing or potential disputes.
• In light of the determination regarding the permissibility of settling disputes arising from contracts concluded by the endowment in managing its assets, efforts should be made to develop model arbitration clauses for contracts entered into by the endowment. These clauses should specify the scope of arbitrable matters and outline the process for obtaining the necessary approvals to ensure the validity of the arbitration clause or agreement.
• Creating a practical guide for endowment administrators, outlining the limits of their authority and powers in managing disputes involving the endowment. It should also specify the cases in which court authorization is required.

[1] The authority to supervise family endowments was previously held by the General Authority for the Guardianship of Minors’ Funds and their equivalents before this responsibility was transferred to the General Authority for Endowments under its governing law. This law nullified any conflicting provisions found in the regulations of the General Authority for the Guardianship of Minors’ Funds.

[2] Court of Appeals ruling in the Makkah Region No. 3799264, dated 24/3/1437H, in case No. 37203338 regarding a request for the appointment of an arbitrator.

[3] Riyadh Court of Appeals ruling in case No. 429000805, dated 8/8/1442H.

[4] Ruling of the Court of Appeals in the Makkah Region in case No. 33699557, dated 6/4/1434H.

[5] This regulation was later repealed, and family courts were established, excluding endowment-related matters from their jurisdiction, which then became the responsibility of civil courts.

[6] Egyptian Court of Cassation, Appeal No. 71 of Year 4, Omar Collection, dated 16/5/1935.

[7] Egyptian Court of Cassation, Appeal No. 35 of Year 13 Q, Omar Collection, Session dated 13/4/1944.

[8] Egyptian Court of Cassation, Appeal No. 3 of Year 26, Technical Office, dated 14/6/1958.

[9] Sheikh Dr. Abdullah bin Muhammad bin Saad Al-Khunain, Regulation of the Actions of Endowment Adminstrators by the Judiciary, p. 36.

[10] The Egyptian Court of Cassation, Appeal No. 54 of the Year 17, Omar Collection, dated 11/3/1948.

[11] Sheikh Dr. Abdullah bin Muhammad bin Saad Al-Khunain, ibid

 

Introduction

One of the fundamental objectives of modern bankruptcy laws—including the Saudi Bankruptcy Law—is to regulate the chaos of individual claims against a distressed debtor. This highlights the importance of suspending claims for a specified period and conducting a centralized review of claims through entities responsible for implementing bankruptcy regulations.

There are three main bankruptcy procedures:

• Protective Settlement
• Financial Restructuring
• Liquidation

This article focuses on the Financial Restructuring procedure, which involves a comprehensive review of the debtor’s financial situation. The aim is to reorganize the debtor’s financial affairs under the supervision of a licensed bankruptcy trustee to ensure a fair process.

The Financial Restructuring procedure offers several advantages, including:

• Creditors are allowed to submit their claims within a period not exceeding 90 days from the opening of the procedure, with a maximum period of 60 days in the case of financial restructuring for small debtors.
• The procedure covers any debt owed by the debtor that arose before the issuance of the judgment opening the financial restructuring procedure. This includes both due and future debts, confirmed or contingent debts, and debts with a fixed or indeterminate value.
• Claims Are Not Limited to Business-Related Debts as creditors can submit claims for any fixed debts owed by the debtor, regardless of whether they are directly related to the debtor’s business activities.
• The bankruptcy trustee is required to verify and assess the claims, preparing a list that includes recommendations for each claim. The recommendation may be to accept or reject the claim, or to refer it to an expert for further evaluation of technical aspects.
• If a claim is rejected or referred to an expert, the trustee must notify the claimant to uphold the principle of due process. The creditor then has the right to appear before the court to request the inclusion of their claim in the final list.

The issue under examination in this paper is identifying the types of uncertain, incomplete, unmatured, and unquantified claims that can be submitted in the Financial Restructuring procedure, the options available to creditors in this regard, and the obligations of the bankruptcy trustee in handling such claims.

Types of Claims That Can be Submitted in the Financial Restructuring Procedure

The Bankruptcy Law has broadly defined the types of claims that can be submitted in the Financial Restructuring procedure. However, the law imposes two key restrictions:

1. The claim must be a financial right:
   • Non-financial claims are not accepted, such as demands for contract termination, eviction of leased property, or delivery of a sold item, even if they impact the financial rights of the parties.
   • A creditor with such a claim against the debtor has the following options:
     • Wait until the moratorium period ends, then file the case before the appropriate forum, whether a court or an arbitration panel.
     • Resume the case if it was previously filed but was suspended due to the effects of the moratorium.
     • Request the court to lift the moratorium specifically for their case.

2. The claim must have arisen before the opening of the procedure. This requirement applies regardless of whether the debt originated from a legal act or a factual event.

For financial claims, straightforward, fixed, matured, and quantified claims generally do not pose any issues. However, other types of claims may present challenges, including:

• Unquantified Claims: These arise when a claimant seeks compensation for an obligation that could not be specifically performed, without an agreed or judicially determined compensation amount. In such cases, the law requires the claimant to provide an estimated value of the debt, and the bankruptcy trustee must verify the actual value of the claim. This involves assessing the elements of damage suffered by the claimant based on the alleged civil liability, whether contractual or tortious.
• Future (Unmatured) Claims: a maturity period refers to a definite future timeframe, legally, judicially, or contractually determined, for the fulfillment of an obligation. Deferral refers to the postponement of delivering the consideration to a specified future date.

• Contingent Claims: a contingent claim is one that depends on a future event that is uncertain to occur. For a claim to be considered contingent, the condition must meet the following criteria:

• • It must be uncertain and not yet fulfilled at the time of the obligation’s creation—if the condition already existed when the obligation arose, the obligation would be considered definitive rather than contingent.
  • It must be possible—an obligation cannot be contingent on an impossible event.
  • It must be lawful—the condition must not violate Sharia or public policy.

• Potential Claims: although a contingent claim is inherently a potential claim, as it depends on an uncertain future event, the legislator has taken a broad approach in defining potential claims. The wording of Article 63(1) of the Bankruptcy Law explicitly includes anything with current or future financial value, thereby encompassing all forms of uncertainty in claims. Some examples of Potential Claims that may arise in various situations, includes:

• • Unsettled Damages in Contractual or Tort Liability: This occurs when the extent of damage caused by the debtor’s contractual or tortious liability is not yet determined. For example, if the debtor’s fault resulted in a bodily injury to the claimant, but the claimant has not yet fully recovered, the full extent of material and moral damages remains uncertain.
  • Recourse Claims Based on Unjust Enrichment (In Rem Verso): This applies when a claimant seeks compensation from the debtor after having paid a debt on their behalf. For instance, if a guarantor pays off a debt owed by the debtor and later claims reimbursement from them without a contractual relationship, the claim is based on unjust enrichment. However, if the validity of the guarantor’s payment is still under legal dispute, the claim remains unsettled.
  • Claims Based on a Judgment Under Appeal: If the claimant’s demand is supported by a judgment against the debtor, but the judgment is still subject to appeal, the claim remains uncertain until the final ruling is issued.

The Philosophy of the Bankruptcy Law in Allowing Potential Claimants to File

The Bankruptcy Law’s philosophy behind allowing potential claimants to submit their claims in the Financial Restructuring procedure is rooted in the fact that this procedure involves a comprehensive financial restructuring of the debtor. It is not only concerned with listing the fixed, matured, and finalized debts, but also includes potential, future, contingent, and unquantified debts for the following reasons:

• Providing Creditors with a Full Financial Picture: by disclosing all types of debts, creditors can assess the debtor’s financial position before voting on the financial restructuring proposal. This enables them to predict the viability of the business, its assets, and liabilities, helping them decide whether accepting debt reductions, impairments, or write-offs would be more beneficial than liquidation and asset sales. Unlike Protective Settlement, where the debtor’s financial disclosure is based mainly on their documents and financial statements, the Financial Restructuring procedure requires actual verification of debts and an inventory of assets.
• Ensuring the Integrity of the Process and Enhancing the Success of the Proposal: including potential, unmatured, or contingent claims in the restructuring plan helps the debtor avoid being overwhelmed by unexpected legal judgments or enforcement orders once the moratorium period ends. If these claims later become final and enforceable, they could jeopardize the debtor’s ability to implement the restructuring plan. However, including them in the proposal does not mean the debtor acknowledges them (if disputed), agrees to accelerate them (if deferred), or waives any conditions (if contingent). Instead, it is a precautionary measure in case these claims become legally binding debts, which could impact the debtor’s solvency and ability to implement the restructuring plan.
• Categorizing Potential Claimants Fairly: if the debtor chooses to include potential claims in the restructuring plan, they can classify these creditors into one or multiple class of creditors, ensuring that their participation does not unfairly impact the classification of creditors. This prevents potential claimants from having equal voting rights with those holding fixed, matured, and finalized claims.

Creditor’s Strategic Options for Potential or Disputed Claims

If a creditor fails to submit their claim within the specified period announced by the trustee, they will be excluded from voting on the financial restructuring proposal. However, the creditor may still petition the court—before the vote—to prove that they attempted to submit the claim but it was not received by the trustee due to circumstances beyond their control or that the debtor or trustee wrongfully excluded their claim from the list of creditors.

Losing the right to vote does not affect the creditor’s substantive rights against the debtor. Failure to submit a claim does not constitute a waiver of their rights, as creditors are not obligated to file their claims within the financial restructuring procedure. Instead, they may pursue their claim separately before the competent dispute resolution forum.

Some argue that filing a claim within bankruptcy proceedings can significantly impact a creditor’s strategy in pursuing litigation, as bankruptcy courts operate within strict procedural frameworks, including limited evidence, predefined deadlines, and collective claim assessments. This may affect how much time and attention is devoted to analyzing and assessing individual claims.

Key Considerations When Submitting a Claim in the Financial Restructuring Procedure

When a claim is submitted and included in the list of creditors during the financial restructuring procedure, the following points should be noted:

• Submitting a claim does not automatically entitle the creditor to enforce payment from the debtor.
• Even if a claim is submitted, the debtor is not required to incorporate it into the financial restructuring proposal.
• The right to vote on the financial restructuring proposal—under Article 66(1) of the Bankruptcy Law—is reserved only for creditors whose claims are accepted in the claims list and whose rights are affected by the proposal, either legally or contractually.

Additionally, a creditor should proactively submit their claim during the financial restructuring procedure to avoid the risk that the debtor may include the claim in the proposal and may impair or reschedule the claim without the creditor having the right to vote, simply because he did not file his claim in time.

It is important to note that once the financial restructuring plan is approved, it becomes binding on the debtor, creditors, and owners, as per Article 37 of the Bankruptcy Law, which applies to the financial restructuring procedure.

By submitting their claim in the financial restructuring procedure, a creditor seeks to secure a position and exercise their rights, including:

• Voting on the Proposal: if the financial restructuring proposal affects the creditor’s rights in any way, they will have the right to vote on it.
• Candidacy for the Creditors’ Committee: if a creditors’ committee is formed, the creditor may run for membership, provided their claim is accepted in the claims list, as stipulated in Article 24(3)(a) of the Implementing Regulations of the Bankruptcy Law. This committee plays a critical role in overseeing the procedure, influencing key decisions, and monitoring the performance of both the trustee and the debtor.
• Pursuing Debt Recovery through Legal Remedies: if the creditor’s claim is not included in the claims list (e.g., if it is rejected by the court) or if the debtor does not include it in the restructuring proposal, the creditor retains the right to pursue their claim through all available legal remedies and initiate enforcement actions once the moratorium period ends.

The Trustee’s Position on Contingent or Disputed Claims

1. Claims Subject to a Condition or Due in the Future but Proven Against the Debtor
   • The trustee should recommend acceptance of such claims while clearly stating their conditional or deferred nature in the rationale for the recommendation.
2. Unliquidated Claims with an Estimated Value Submitted by the Creditor
   • The trustee must verify the actual value of the claim and review the creditor’s estimate. If necessary, the matter may be referred to an expert for valuation.
   • If the claim is denominated in a foreign currency, it must be converted to Saudi Riyals (SAR) based on the exchange rate at the initiation date of the procedure.
3. Disputed Claims Pending Before a Court or Arbitration Panel Without a Final Judgment
   • The trustee must assess the claim independently and recommend either acceptance or rejection, relying on the evidence and documents provided by the creditor.
   • This does not infringe on the jurisdiction of other forums, as the creditor voluntarily submitted their claim within the bankruptcy procedure. U.S. bankruptcy courts follow a similar practice, where the trustee evaluates claims even if litigation is ongoing.
   • If technical expertise is required to clarify certain aspects of the dispute, the trustee may recommend consulting an expert, provided this does not unreasonably delay the restructuring process.
4. Claims Requiring Extended Investigation or Advanced Litigation Stage
   • If clarifying the factual elements of a claim requires excessive time beyond reasonable procedural limits, or if the litigation/arbitration is already at an advanced stage, the trustee may recommend accepting the claim as a contingent claim solely for voting purposes, pending final resolution of the dispute.
5. Contingent Claims with Uncertain Factual Elements or Legal Disputes
   • If a claim remains factually uncertain or is subject to a legal dispute that may affect the creditor’s rights, the trustee should include it in the claims list as a contingent claim, eligible for voting in the financial restructuring procedure.

Exclusion of Contingent Claims

Some may argue that only finalized and established claims should be included in the claims list, which could be reasonable in liquidation proceedings, as inclusion directly grants creditors the right to distribution from the bankruptcy estate. However, the situation in financial restructuring is different, and excluding contingent claims could have significant consequences:

1. Weakening the Success of the Financial Restructuring Plan: if contingent claims are not addressed in the restructuring proposal and the debtor’s financial position is not clearly assessed, these claims may eventually become enforceable judgments. If enforcement is sought against debtor’s assets, it could disrupt cash flows critical to executing the plan and fulfilling obligations to creditors within the agreed timelines.
2. Contradicting the Bankruptcy Law: excluding contingent claims contradicts Article 63(1) of the Bankruptcy Law, which explicitly acknowledges such claims. The legislator does not include redundant provisions, meaning that the law intended for contingent, potential, and future claims to be part of the restructuring process. It is unrealistic to assume that the legislator meant for trustees to evaluate and verify these claims only after their conditions are met or their payment is confirmed, as this would be impractical within the strict timelines for claim submission and court approval.

Including contingent claims in the financial restructuring process does not mean that the trustee should be lenient in accepting claims that lack supporting evidence—even if acknowledged by the debtor. This is because:

• A debtor may collude with certain claimants to include fraudulent claims without supporting documentation.
• Such fraudulent claims could be used to manipulate voting outcomes or push through a proposal that other creditors would otherwise reject.

The trustee should carefully assess potential fraudulent claims that:

• Appear inflated beyond their actual value.
• Are artificially structured with the debtor to grant preferential treatment, such as increasing debt value or securing guarantees at the expense of other creditors.

If there is suspicion of fraudulent claims, the trustee must:

1. Assess the legitimacy of the claim under Articles 201(d) and 202(a) of the Bankruptcy Law.
2. Report the matter to the competent authorities under Article 206.
3. Refer suspected violations to the Public Prosecution for investigation under Article 208.

The philosophy of financial restructuring requires:

• A comprehensive financial assessment of the debtor to ensure clarity, predictability, and credibility in the restructuring process.
• Avoiding unforeseen claims that could jeopardize the plan’s success after its approval.
• Recognizing contingent, potential, and future claims for voting purposes, provided they are backed by credible evidence.
• Preventing the misuse of restructuring procedures to manipulate the voting process or prejudice the rights of other creditors.

Thus, while contingent claims must be considered, strict fraud prevention measures are essential to protect the integrity of the restructuring process.

Introduction

The vis attractiva concursus principle or the attracting force of the bankruptcy proceeding is a priciple that implies that all ancillary proceddings may be attracted to and brought before the forum concursus. In another words, the court that has opened insolvency proceedings claims sole jurisdiction to deal with the claims of creditors and any incidental disputes arising from the debtor’s insolvency.

The practical importance of considering the extent to which this principle is applicable raises several questions. how can the efficiency and effectiveness of bankruptcy procedures be reconciled with the parties’ rights to due process? how is this principle applied in the various ancillary proceedings, particulary when there is an arbitration agreement? finally is this principle applicable in the context of cross-border insolvencies?

This article will explore how this principle is applied in Continental Europe, The United States and Saudi Arabia.

Europe

Efficicieny and due process: are they at odds in bankruptcy proceedings?

The application of the Vis Attractiva Concursus Principle raises concerns about its consistency with the parties’ due process rights. This principle shifts the case from the forum designated by procedural law to the bankruptcy courts. Such an exception may surprise the parties, and, thus affect their due process rights. This issue has been examined by the European Court of Justice (The ECJ). The ECJ concluded that concentrating all the actions directly related to the insolvency of an undertaking before the courts of the Member State with jurisdiction to open the insolvency proceedings also appears consistent with the objective of improving the effectiveness and efficiency of insolvency proceedings. The ECJ also found it necessary for the proper functioning of the internal market to avoid incentives for the parties to transfer assets or judicial proceedings from one Member State to another, seeking to obtain a more favourable legal position (forum shopping)[1].

Scope of the principle and the different types of ancillary proceedings

The new European Union Regulations on Insolvency Proceedings provided that the courts of the member state within the territory of which insolvency proceedings have been opened shall have jurisdiction for any action which derives directly from the insolvency proceedings and is closely linked with them, such as avoidance actions[2].

To determine whether an action derives directly from insolvency proceedings, The decisive criterion adopted by the ECJ to identify the area within which an action falls is not the procedural context of which that action is part, but the legal basis thereof. According to that approach it must be determined whether the right or the obligation which forms the basis of the action has its source in the ordinary rules of civil and commercial law or in derogating rules specific to insolvency proceedings[3].

In another case, the ECJ limited the application of the principle of vis attractiva concursus. The Court ruled that an action for damages for unfair competition, in which the assignee of part of a business acquired during insolvency proceedings is accused of misrepresenting itself as the exclusive distributor of products manufactured by the debtor, does not fall within the jurisdiction of the court that opened the insolvency proceeding[4].

United States

The principle of vis attractiva concursus is a concept from civil law systems where the initiation of insolvency proceedings centralizes all related legal actions and claims to the court handling the insolvency case. This means that all matters pertaining to the debtor’s estate are drawn into the jurisdiction of the insolvency court. In the context of the United States, which operates under a common law system, the principle as it is traditionally understood in civil law jurisdictions does not apply. However, the U.S. Bankruptcy Code does embody a similar centralizing principle to some extent. Here are the relevant aspects of how this works in the U.S.:

Automatic Stay

When a bankruptcy petition is filed, an automatic stay immediately takes effect, halting most actions by creditors against the debtor or the debtor’s property. This stay aims to preserve the estate and ensure that it can be distributed equitably among creditors through the bankruptcy proceedings. Prohibited collection actions are listed in Bankruptcy Code §362. Common examples of prohibited actions include contacting the debtor by telephone, mail or otherwise to demand repayment; taking actions to collect money or obtain property from the debtor; repossessing the debtor’s property; starting or continuing lawsuits or foreclosures; and garnishing or deducting from the debtor’s wages. Under certain circumstances, the stay may be limited to 30 days or not exist at all, although the debtor can request the court to extend or impose a stay.

Jurisdiction of Bankruptcy Courts

U.S. bankruptcy courts have comprehensive jurisdiction over matters involving the debtor’s estate. This includes the power to hear and determine all cases under the Bankruptcy Code. Additionally, bankruptcy courts have jurisdiction over all property, wherever located, of the debtor’s estate. The bankruptcy court considered whether foreign creditors could be held accountable for violating the automatic stay as a result of the creditors procuring the arrest of one of the debtor’s vessels in a Belgian court in order to compel payment of pre-petition claims owed by the debtor to the foreign creditors. In considering the question, the bankruptcy court began its analysis with a discussion of whether it could exercise in personam jurisdiction over the foreign creditors. With respect to one of the creditors, Andrea Shipping (PTH) Ltd., the court stated that it clearly has personal jurisdiction over Andrea Shipping because Andrea filed a proof of claim and has therefore consented to the jurisdiction of the United States Bankruptcy Court[5].

Centralization of Disputes

Much like vis attractiva concursus, U.S. bankruptcy law aims to centralize disputes related to the bankruptcy estate to streamline the process and ensure consistent adjudication. This centralization helps in managing the debtor’s estate effectively and efficiently. The Seventh Amendment to the United States Constitution provides that parties litigating in federal court have the right to a trial by jury in civil cases. This right to a jury trial is subject to being waived and, in the context of a bankruptcy case, may be waived unintentionally as a result of filing a proof of claim[6]

In conclusion, while the U.S. does not explicitly adopt the vis attractiva concursus principle, the Bankruptcy Code incorporates mechanisms that achieve a similar effect. These mechanisms centralize the handling of the debtor’s financial matters and disputes within the bankruptcy court system. Key features include the automatic stay, which halts most creditor actions against the debtor’s estate upon the filing of a bankruptcy petition, and the comprehensive jurisdiction of bankruptcy courts over all matters related to the debtor’s estate. This centralization ensures efficient and consistent adjudication of claims and disputes, mirroring the intent of vis attractiva concursus in civil law jurisdictions.

Saudi Arabia

The principle of vis attractiva concursus is not explicitly provided for in the Saudi Bankruptcy legal system. However, some procedures within the system have equivalent effects. These include the moratorium, which suspend all actions and enforcement procedures against the debtor or the debtor’s estate. Additionally, Saudi law grants comprehensive jurisdiction to commercial courts handling bankruptcy cases, allowing them to decide on creditors’ claims regardless of their origin.

Mortoruim

The Saudi Bankruptcy Law incorporates a moratorium period in both financial reorganization and liquidation processes. Under the financial reorganization procedure, the moratorium spans 180 days from the filing date, with the provision for a potential extension of another 180 days at the discretion of the court. This moratorium commences upon filing but can be terminated prematurely if the court approves the financial reorganization proposal or decides to conclude the financial reorganization proceedings. In the liquidation procedure, the moratorium starts upon filing and remains in effect until the liquidation process is terminated.

During the moratorium period, no action, claim, or enforcement procedure can be initiated or continued against the debtor, the estate, or any debtor guarantor. This restriction applies across all jurisdictions with the authority to hear such claims or actions. The moratorium thus constitutes a legally binding suspension of the right to pursue debts from the debtor or the estate. Any action or enforcement procedure undertaken during the moratorium is deemed null and void. Furthermore, the commercial court retains the authority to reclaim any assets disposed of in contravention of the moratorium restrictions.

Jurisdiction of Commercial Courts

In Saudi bankruptcy law, for both financial reorganization and liquidation procedures, creditors whose debts predate the commencement of the procedure need to file their claims with the bankruptcy trustee. After receiving and considering proofs of claims, the trustee will then create a list of creditors, which must be submitted to the court for approval.

Under Saudi bankruptcy law, the commercial court maintains jurisdiction over claims that might originally fall under different court domains. This means a labor claim, originally under the jurisdiction of the labor court, an alimony claim originally under the jurisdiction of the personal status court, or a banking claim originally under the jurisdiction of the banking dispute committee, can all come under the jurisdiction of the commercial court in a bankruptcy case. Moreover, this principle applies even when an arbitration clause is in place. When submitting a claim to the commercial court under bankruptcy procedure, the creditor is considered as waiving the previously agreed upon arbitration clause.

If a creditor chooses not to submit his claim to the commercial court, but instead waits to file a claim in the appropriate forum after the moratorium, there could be several repercussions:

1. In the financial reorganization processes, the creditor would be ineligible to vote on the proposal. This means they would forfeit any say in shaping the proposal, including any debt impairment where they do not bear any voting rights. Moreover, the creditor might no longer have the right to challenge the proposal’s ratification by the court.
2. As for liquidation processes, the creditor might risk missing out on their rightful share when the estate’s liquidated assets get distributed.

Centralization of Disputes

There are some other examples of the centralized approach of the Saudi Bankruptcy law which include:

1. The law suggests that any request to initiate a bankruptcy procedure relevant to a regulated entity must be preceded by an approval decision from the competent regulatory authority responsible for overseeing and supervising the entity’s activities. The law, interestingly, grants the commercial court the jurisdiction to handle disputes arising from these competent authority decisions. This is true even if the authority is an administrative body, which traditionally would fall under the jurisdiction of the board of grievances.
2. Article 6 of the law confers jurisdiction upon the commercial court to oversee the enforcement of its decisions and judgments, as well as to address any disputes arising from such enforcement.
3. Article 208 of the the law grants the commercial court criminal jurisdiction to adjudicate cases related to bankruptcy and levy penalties.
4. Article 3 of the Rules Governing Bankruptcy Procedures in Commercial Courts empowers the commercial court to adjudicate debtor claims against third parties arising from bankruptcy procedures.

Conclusion

The attaracting force of bankruptcy court jurisdiction is crucial for successfully resolving insolvencies. A centralized approach to managing bankruptcy-related claims fosters efficient administration of justice, prevents forum shopping and abuse of the process, and equips bankruptcy proceedings with the necessary tools for effective financial reorganization or liquidation.

 

[1] ECJ judgement of 12 February 2009, Christopher Seagon v Deko Marty Belgium NV., Case C-339/07, European Court Reports 2009 1-00767.

[2] Article (6), Paragraph (1) of the European Union Regulations on Insolvency Proceedings of 20 May 2015.

[3] ECJ judgment of 4 September 2014, Nickel & Goeldner Spedition v Kintra UAB, Case C-157/13.

[4] ECJ judgement of 9 November 2017, Tünkers France, Tünkers Maschinenbau GmbH, Case C-641/16.

[5] United States Bankruptcy Court, M.D. Florida, Bankruptcy No. 95-10453-8P1. Adv. No. 97-365, March 12, 1997.

[6] Richard E. Lear, proof of claim: To File, or Not to File…, Holland & Knight Newsletter, February 2009.

The Challenge of Case Flow Management

The famous letter of Amir al-Mu’minin Omar ibn al-Khattab to Abu Musa al-Ash’ari—may Allah be pleased with them both—when he appointed him as a judge, later known as the “Judicial Constitution,” included his statement[i]:

“If someone claims a right that is absent or requires evidence, set a time limit for him to establish it. If he presents his evidence, grant him his right; but if he fails, then decide the case against him. This is the most just course and the clearest in dispelling uncertainty.”

This part of the letter indicates that once a case is ready for judgment, the judge must rule on it immediately without delay. It is the right of litigants to be granted time to prepare their defense, as the evidence and arguments they rely on may not be immediately available. However, if the claimant fails to prove his case after being given sufficient time and the judge detects stubbornness and evasiveness, no further extension should be granted, and the case should be decided against him. This principle embodies the essence of justice[ii].

Through this directive, Omar ibn al-Khattab—may Allah be pleased with him—establishes the principle of swift justice, which stems from the idea that every dispute must have a limit to ensure the stability of legal positions and achieve legal certainty. At the same time, it is essential to provide all parties with a fair opportunity to present their evidence, legal arguments, and defenses before a decision is made.

Adopting an effective system for justice administration and court management brings numerous benefits. Improving the case-handling process reduces the time needed for each case and increases the efficiency of the judicial system. Implementing a sound case management system is not only necessary for judicial systems struggling with case overload, delays, or backlog but is also crucial even when the case burden is reasonable. Efficient case management through the optimal use of court resources facilitates the work of judges, court staff, litigants, and lawyers, ultimately enhancing public confidence in the judicial system.

This paper aims to present key ideas regarding the various strategies and programs adopted by judicial systems to manage case workload, ensuring timely resolution while considering other judicial objectives and considerations. These programs may be based on legislation, internal regulations, or administrative frameworks, with a focus on highlighting best practices in this regard.

Judicial systems adopt different strategies to reduce delays in case proceedings, but they generally fall into three main categories: first, the development of dispute management procedures, including dispute prevention or resolution through alternative dispute mechanisms; second, the improvement of court organization; and finally, the enhancement of the human and financial resources necessary for judicial work[iii].

This paper focuses on strategies and approaches for managing case flow and controlling case backlog.

Policies for Controling Caseload

The first step toward effective case flow management is understanding the incoming caseload as a basis for adopting a sound policy to handle it. Proper management of case workload helps allocate the necessary human and financial resources efficiently. In practice, various policies exist for managing and controlling case workload, including:

 

• Forecasting and Monitoring

Courts must have the ability to anticipate their case workload, which helps in understanding expected work demands and allocating the necessary resources accordingly. This workload can be measured by analyzing historical data and assessing both the volume and complexity of cases.

In the Netherlands, for example, a model called Lamicie is used to calculate the workload of judges and court administrators by estimating the time required to handle cases. This model categorizes cases into 49 types, each assigned a specific weight, which is periodically reviewed based on time management studies.

In Spain, the Modulos de Trabajo model is used to determine the average time a judge is expected to dedicate to different types of cases. This model is also based on studies related to court time management. It is important to note that all research concerning the estimation of courtload should undergo regular review to ensure accuracy and relevance[iv].

• Reducing Caseload

This can be achieved by promoting alternative dispute resolution methods such as mediation, conciliation, early neutral evaluation, and arbitration, which help alleviate court workloads. Some countries, including Slovenia and Croatia, as well as courts in several U.S. states, have implemented court-annexed alternative dispute resolution programs under judicial supervision. Other tools for reducing caseload include excluding small claims from the appeal process by making judgments in such cases final, as well as introducing measures to prevent the misuse of appeal rights. For example, courts may grant appellate courts the authority to dismiss manifestly ill-founded appeals based on an initial review of case documents. Penalties may also be imposed for frivolous appeals, such as fines on the appellant. In Norway, for instance, a panel of three judges from the Court of Appeal conducts a preliminary review of appeals within two to three days of their filing. If an appeal is clearly without merit, it is dismissed by a final decision without being referred to a hearing panel. All tyese solutions must also respect the principle of the right to an effective remedy.

• Restorative Criminal Justice

Another approach to reducing caseload is to grant prosecutorial discretion to dismiss cases and avoid trial when reconciliation occurs between the defendant and the victim or between the prosecution and the defendant in minor cases. Many judicial systems follow this practice.

• Case Assignment

Adopting a flexible case assignment system is among the policies that support effective caseload management. This involves redistributing cases or allowing judges to assist colleagues in cases of illness, annual leave, or other reasons. Such a system should ensure the optimal use of judicial resources, maintain fairness among cases, and prevent judge shopping, where parties attempt to have their case assigned to a specific judge. Additionally, it should balance caseload distribution among judges, define responsibilities at each stage of proceedings, and establish oversight mechanisms to ensure that all parties fulfill their duties[v].

For example, in France, a number of judges are assigned to assist the president of the court by temporarily replacing their colleagues in case of absence for any reason. This system is known as the support judge.

In the Netherlands, there is a system called the Flying Brigade, which consists of a unit of judges who assist court divisions by handling simple and routine cases. They review these cases and prepare a preliminary draft ruling, which is then sent to the court divisions for approval if they choose to adopt it. This system helps manage the increasing caseload[vi].

• Allocating Appropriate Resources to Handle Caseloads

The purpose of understanding and assessing the caseload in different courts and the time required to resolve cases is to allocate suitable human resources, including judges and administrative staff, as well as financial resources such as courtrooms, equipment, and other necessities, in proportion to the workload[vii].

Managing Caseload Policies

In addition to policies and strategies aimed at reducing caseload, redistributing it, or providing the necessary human and financial resources, it is equally important to adopt policies and strategies for effective caseload management and case flow control. This refers to the set of actions undertaken by the court to monitor and regulate the progress of cases from the time they are filed until their resolution, ensuring the smooth and efficient administration of justice.

Among the policies and strategies that have been implemented and tested in various judicial systems are:

• Early Intervention and Continuous Monitoring

This approach ensures that the court, rather than the parties to the dispute, controls and oversees the progress of the case. Early judicial intervention involves the judge taking charge as soon as a case is filed by establishing a management plan. This includes giving directions to the parties, holding meetings to set a schedule for hearings and procedural steps, and assigning deadlines for each stage.

Continuous monitoring means that from the moment a case is registered, its progress is systematically tracked. The court registry subjects the case to a system that allows for regular reviews of its progress. This review process is integrated into a centralized automated case management system that ensures cases follow a structured process. The system includes steps such as recording case details, scheduling hearings, issuing case management orders, and guiding the case through resolution—whether by a ruling, decision, or settlement. It also extends to post-resolution procedures, ensuring no case is neglected or forgotten[viii].

Additionally, continuous judicial oversight includes the possibility of imposing procedural sanctions on parties who fail to complete required actions within the designated deadlines.

• Differentiated Case Management (DCM)

Differentiated Case Management (DCM) refers to a system where courts vary their approach to managing cases based on the level of attention required from judges and court staff, as well as the time needed for case resolution. This concept goes beyond the procedural distinctions mandated by law, such as jurisdictional variations based on case type and value, to introduce differences in how cases within the jurisdiction of the same court are handled.

Typically, courts apply uniform procedures and timelines to all cases within their jurisdiction, prioritizing them based on filing dates. However, this approach overlooks case-specific differences, often leading to unnecessary delays for complex cases while simpler ones are resolved quickly. For example, minor regulatory offenses do not require the same level of judicial attention as more serious misdemeanors affecting individuals.

DCM establishes different procedural tracks based on case complexity and the time needed for evidence review and litigation. This allows for a separate track for simple cases and another for more complex matters, with classification criteria based on case size, legal complexity, and the number of involved parties. A preliminary review is conducted immediately after case filing, with the participation of the parties, to assign the case to the appropriate track.

The classification process must be based on clear and transparent criteria, and attorneys should have the opportunity to present their views during this initial phase. Once cases are classified, court schedules can be managed more efficiently, ensuring appropriate staff allocation for each track[ix].

There is no fixed number of tracks for DCM; rather, courts should design tracks based on a realistic assessment of procedural needs, informed by studies of average case resolution times. Courts should also set estimated timelines for each track. For example, if three tracks are adopted—complex, standard, and expedited—then cases in the expedited track might be expected to conclude within six months, those in the standard track within one to one and a half years, and complex cases within two years. Courts can further refine these tracks based on evolving needs.

The success of DCM relies on early case assessment at the time of filing, using information provided by the parties. A designated court officer conducts a quick screening to assign cases to the appropriate procedural track, ensuring that each case follows a management approach suited to its complexity and timeframe.

The United States has implemented DCM at both the federal and state levels, leading to a significant reduction in pending civil and criminal cases and an increase in case resolution rates[x].

• Effective Procedures for Case Preparation

Efficient case preparation in judicial systems that incorporate a preparatory stage plays a crucial role in facilitating case resolution. To achieve this, case management during this stage should adhere to the following principles:

• Setting Short Deadlines: Courts should establish short, well-defined timelines and inform parties and their representatives that all requests for postponement or schedule adjustments must be submitted before the set date. Such requests should only be granted if there is a valid and reasonable justification. Appropriate measures should be taken against attorneys and litigants who fail to adhere to deadlines and procedural requirements.
• Addressing Reasonable Requests Promptly: Courts should attempt to accommodate reasonable requests from litigants and attorneys early in the process to prevent them from resurfacing during trial sessions, thereby avoiding unnecessary delays.
• Realistic Timeframe Management: The scheduling of preparatory procedures should be realistic, ensuring that any granted extensions allow for the necessary actions to be completed within the designated period. Additionally, continuous review of case management procedures should take place to assess the reasonableness of the burdens placed on litigants and their representatives, as well as the financial costs they incur.
• Effective Management of Court Hearings

The credibility established by holding hearings within their scheduled timeframes will contribute to ensuring that litigants and their attorneys are prepared for these sessions. It may also pressure them to seek an amicable settlement outside the courts. Moreover, the optimal use of court time in managing hearings will drive the progress of cases and facilitate their resolution in a timely manner. Several mechanisms enable this effective management, including:

• Accurate Case Scheduling Policy

This pertains to determining the number of cases that a court can hear in a single session. One possible approach is to schedule hearings for cases regardless of the likelihood that some may be settled before the hearing procedures begin. This could result in surplus time due to case settlements or dismissals. The alternative approach involves scheduling hearings for a greater number of cases than the court can actually handle, anticipating that some cases will be settled beforehand. However, this approach may lead to an overload when many new cases arise, preventing the court from hearing all cases and increasing congestion.

To avoid the risks of both approaches, the optimal solution may be to adopt a reasonable setting factor (RSF) that balances the time requirements for hearing cases with the number of newly filed cases. RSF refers to “the lowest number of cases per session that allows the court to effectively control and manage the pending caseload in terms of volume and case age.” This factor depends on the flexibility available to each court.

One example of case scheduling policies is the smart docket system used in Wrentham Court, Massachusetts, USA. Under this system, judges and civil mediation personnel assign each case a trial rating, which is based on the nature of the case and previous experiences regarding its likelihood of proceeding to trial without settlement. Specific percentages are assigned to cases that are expected to be settled or dismissed without a final ruling. Based on past rates, a certain percentage of over-scheduling is determined, ensuring a realistic approach that prevents unnecessary case postponements while also avoiding excessive unused court time[xi].

 

• Case Adjournment Policy

One of the key factors in establishing credible and well-structured case hearing schedules and ensuring effective litigation session management is minimizing the number of cases postponed from one session to another without necessity. Frequent postponements encourage lawyers and litigants to be less prepared for hearings, as they anticipate that the case will be postponed.

A lack of preparedness—whether in terms of documents, memoranda, bringing witnesses, or presenting arguments—often leads to further postponements. This results in inefficient use of court time and an increased number of cases being scheduled for later sessions, making it difficult for the court to complete its hearings on time. Consequently, lawyers begin to expect delays, further discouraging adequate preparation, creating a cycle of postponements. The solution to this issue is to limit the acceptance of postponement requests to the narrowest scope, ensuring that they are only granted when there is a genuine and reasonable excuse. Additionally, case scheduling for future sessions should be done carefully to avoid overburdening the court and preventing it from handling cases efficiently.

• Concentrated Approach

A key element in effective session time management is adopting a concentrated approach. This approach ensures that sessions proceed sequentially without unnecessary fragmentation, allowing for the completion of procedural steps within clearly defined timeframes for exchanging submissions and presenting arguments. The court should not merely react to the litigants’ behavior in proving their case but should instead actively manage the proceedings.

A distinctive method to maximize the efficiency of court time is to hold a pre-hearing management meeting no later than two weeks before the scheduled hearing. This meeting, attended by the litigants or their representatives, can address various procedural matters, such as issuing decisions on discovery or documents production if these were not resolved during the case preparation phase. It also helps clarify the legal and factual issues in dispute, identify undisputed matters, facilitate the exchange of documents and memoranda, review initial and interim motions, and resolve them before the hearing.

Furthermore, this meeting allows for the exchange of witness lists, the scheduling of witness testimonies to avoid redundancy, discussions on admissibility of evidence, and addressing any special requirements for the hearing, such as the need for interpreters or remote testimony via telecommunication or online networks. Necessary arrangements and technologies should be put in place in advance to ensure smooth proceedings.

The judge can enforce this structured approach by setting reasonable yet flexible deadlines for different procedural stages, such as document exchange, submission of memoranda, witness testimonies, oral arguments, and final rebuttals. These deadlines should be predetermined in consultation with the parties to ensure fairness and reasonableness according to the specifics of each case. If necessary, deadlines can be adjusted during the proceedings, but only in exceptional cases and to the least extent possible[xii].

• Effective Management of Judicial Information

This includes adopting modern technologies to track case progress and monitor completed steps, as well as accessing necessary information for case resolution available in other courts or certain government agencies.

• Effective Case Management Reports

Case flow management reports serve two functions: on the one hand, they provide information on the proper utilization of available court resources, and on the other hand, they establish performance measurement standards that court administrators should rely on to identify and resolve issues.

These reports must be accurate and allow the court to evaluate its performance against predetermined standards and objectives. They should also be accessible to judges and court administrators. For case flow management reports to fulfill these functions, they must possess the following characteristics:

• Accuracy and Comparability of Data

Case flow management reports will only be useful if the data on which they are based is accurate and consistent. Inaccurate data may result from missing information or incorrect data entry. To ensure data accuracy, a team of specialists should be tasked with reviewing and verifying the entered data and the criteria used by employees in the data entry process, enabling the detection and correction of errors.

It is also important to clearly define the key stages of case proceedings to avoid confusion among data entry personnel. This includes specifying when a case is considered registered, pending, or concluded. A case may be concluded by a final ruling, dismissal, failure to renew it within the legally stipulated period, or any procedural occurrence that moves the case from an active to an inactive status.

Additionally, administrative procedures should be standardized to ensure that the data is reliable and accurately reflects real-world judicial operations.

• Defining the Type of Data to Be Recorded and Included in Reports

Given the diversity of case types, their different categories, and the varying procedures followed in each case, along with potential procedural complications, court employees may become uncertain about what data should be recorded or omitted.

Entering excessive data may lead to an overload of codes and unnecessary complexity, resulting in an unclear depiction of the court’s case management process. Conversely, insufficient data may produce the same issue.

Therefore, it is essential to clearly define the data that should be entered into the court information system, adopting standardized definitions and codes to prevent errors and avoid either an excessive or insufficient amount of data.

 

• Effectiveness

This relates to including data that court administrators and judges need to assess the current situation and use the information in reports effectively to manage caseload. Reports should neither be overloaded with unnecessary data nor lack sufficient details to provide a realistic picture of case management in the court.

The most essential data that reports should include are details about individual cases. Judges must have information about the cases they will hear at least a week before the parties appear in court. The court’s weekly schedule should specify the names of the parties, types of cases, their categories, and hearing dates.

Additionally, reports should provide data on the court’s overall case workload, including completion rates, the volume of pending cases, backlog indicators, the average age of pending and resolved cases, and the postponement rate. These metrics help measure whether case management objectives are being met at the court level or across the judiciary as a whole.

Regarding postponements, it is preferable that reports include qualitative, analyzable data on granted adjournments, detailing their type, reason, and the party requesting them. Such data will help judges understand the volume of granted postponements, enabling them to manage the caseload more effectively.

The success of case management reports in fulfilling their function depends on the conviction of those managing cases about their importance in achieving efficient judicial administration. It also relies on the accuracy of the data contained within and how the information is presented—it should be concise and simple for administrators to handle effectively. To ensure reports contribute to efficient case flow management, they should be issued periodically, whether annually, semi-annually, or quarterly.

 

 

[i] Ibn al-Qayyim cited it in I‘lam al-Muwaqqi‘in

[ii] Saud Muhammad Al-Turaifi, Foundations of Justice in Umar ibn Al-Khattab’s Letter to Abu Musa Al-Ash‘ari, Naif Arab University for Security Sciences, Riyadh, Saudi Arabia, 2004, p. 111.

[iii] Gar Yein Ng, Quality of Judicial Organization and Checks and Balances, G.J. Wiarda Institute for Legal Research, Utrecht, The Netherlands, 2007, P. 6.

[iv] Dr. Mostafa Abdel Ghafar, Methodologies for Developing Judicial Policies and Court Management, Dar Al-Nahda Al-Arabiya, 2015, p. 395.

[v] David C. Steelman, John A. Goerdt and James E. Mcmillan, Case flow Management, The Heart of Court Management in the New Millennium, OP, P. 114.

[vi] Philip M. LANGBROEK and Marco FABRI, The Right Judge for Each Case: A Study of Case Assignment and Impartiality in Six European Judiciaries, Antwerp, Intersentia, 2007., P. 16.

[vii] European Commission for the Efficiency of Justice, Best Practices on Time Management of Judicial Proceedings, Council of Europe, 2006, P. 17.

[viii] David C. Steelman, John A. Goerdt and James E. Mcmillan, Case flow Management, The Heart of Court Management in the New Millennium, OP, P. 3.

[ix] UNODC, Resource Guide on Strengthening Judicial Integrity and Capacity, United Nations Publications, Vienna, 2011, P.51.

[x] David C. Steelman, John A. Goerdt and James E. Mcmillan, Case flow Management, The Heart of Court Management in the New Millennium, OP, P. 5.

[xi] David C. Steelman, John A. Goerdt and James E. Mcmillan, Case flow Management, The Heart of Court Management in the New Millennium, OP, P. 9.

[xii] UNODC, Resource Guide on Strengthening Judicial Integrity and Capacity, OP, P. 49.

Introduction and Background of the Problem

Interim relief or conservatory measures represent a form of temporary protection, taking the form of orders or rulings issued with a provisional nature until the dispute is definitively resolved. These measures serve various purposes, including preserving the status quo or restoring it to its previous state until a final decision is made, preventing tampering with evidence, or safeguarding assets that may ensure the enforcement of the final judgment.

The regulation and request for interim and conservatory measures are well-established in most modern judicial systems. Moreover, seeking such measures in arbitration proceedings has become increasingly common and is incorporated into numerous comparative legal systems. Additionally, interim relief is widely recognized in the rules of many leading international arbitration institutions, such as the International Centre for Dispute Resolution of the American Arbitration Association (AAA-ICDR), the International Court of Arbitration of the International Chamber of Commerce (ICC), the Singapore International Arbitration Centre (SIAC), the London Court of International Arbitration (LCIA), and the Saudi Center for Commercial Arbitration (SCCA). These institutions allow parties to request such measures either from the arbitral tribunal once it has been constituted or from an emergency arbitrator or interim measures arbitrator, who may be appointed to rule on these requests before the consititution of the arbitral tribunal.

Although requesting interim and conservatory measures has become available in modern arbitration proceedings, whether in ad hoc or institutional arbitration, seeking such measures from the courts still holds a particular appeal for many arbitration parties. One of the factors contributing to this appeal is that, in many comparative legal systems, interim measures can be requested through an ex-parte application without the need for a fully established adversarial proceeding. Additionally, court-ordered interim and conservatory measures can be enforceable against third parties, as is the case with an order freezing a bank account with a financial institution[1].

Comparative arbitration laws address situations where the parties have agreed to grant the arbitral tribunal the authority to rule on requests for interim and conservatory measures, as well as scenarios where such an agreement is absent. These laws also outline how parties can obtain interim and conservatory protection.

This paper examines the issue of jurisdiction over the issuance of interim and conservatory measures under the Saudi arbitration law and comparative laws, as well as the available options in both ad hoc and institutional arbitration.

Does the Arbitration Agreement Confer Jurisdiction on the Arbitral Tribunal to Consider and Issue Interim and Precautionary Measures?

Although it has become well-established in practice that arbitration is now the natural forum for international trade disputes, an arbitration agreement remains an essential prerequisite for an arbitral tribunal to have jurisdiction over a dispute. Unlike state judiciary, arbitration is not always available or uniform; rather, it is the parties’ agreement that establishes the deviation from the general jurisdiction of state courts and grants jurisdiction to the arbitral tribunal. The role of the state, in this regard, is to recognize the full effect of the parties’ will as reflected in the arbitration agreement and to regulate its boundaries[2]. This means that an arbitration agreement has two effects; a negative effect, which prevents state courts from hearing the dispute, and a positive effect, which grants the arbitral tribunal jurisdiction to hear and decide the dispute with a binding and final award.

The key question that arises is whether the negative and positive effects of an arbitration agreement extend to interim and precautionary measures—meaning that the mere existence of an arbitration agreement automatically deprives state courts of jurisdiction to grant such measures and confers exclusive jurisdiction on the arbitral tribunal—or whether a specific agreement is required to this effect[3]? The following discussion will examine the position of the UNCITRAL Model Law and some comparative legal systems before analyzing the position of the Saudi Arbitration Law.

Jurisdiction over Requests for Interim and Precautionary Measures Under the UNCITRAL Model Law

The UNCITRAL Model Law does not attribute a negative effect to an arbitration agreement that would prevent parties from seeking interim and precautionary measures from the courts before arbitration proceedings commence or from allowing courts to issue such measures in response to these requests[4].

However, once arbitration proceedings have begun and the arbitral tribunal has been constituted, the Model Law permits the tribunal to issue interim measures at the request of either party, unless the parties have agreed otherwise[5]. Furthermore, the Model Law mandates that an interim measure issued by an arbitral tribunal be recognized as binding and enforced, regardless of the country in which it was issued[6].

At the same time, the UNCITRAL Model Law does not deprive the judiciary of the power to issue interim measures during arbitration proceedings. It explicitly allows courts to grant such measures for the purposes of arbitration, irrespective of whether the arbitration is seated in the jurisdiction where the court is being requested to issue the interim measure[7].

The Explanatory Note to the Model Law underscores that this provision—added in 2006—aims to eliminate any uncertainty regarding whether an arbitration agreement affects the authority of the competent court to issue interim measures. It clarifies that a party to an arbitration agreement remains free to request interim measures from the court, just as they are free to request them from the arbitral tribunal.

The overall implication of these provisions is that jurisdiction over interim and precautionary measures under the UNCITRAL Model Law is shared between courts and arbitral tribunals. The parties are free to choose either forum unless their arbitration agreement provides otherwise. Therefore, there is no requirement for a special agreement granting the arbitral tribunal authority to issue interim and precautionary measures; rather, the parties may explicitly exclude the tribunal from exercising such authority if they so agree.

Jurisdiction Over Requests for Interim and Precautionary Measures in Comparative Laws

The English Arbitration Act allows parties to agree that the arbitral tribunal shall have the authority to issue interim and precautionary measures. However, this jurisdiction is contingent upon an explicit agreement between the parties granting the tribunal such authority. If no specific agreement is made, the tribunal does not have this power[8].

Conversely, the English Arbitration Act grants the judiciary the authority to issue interim and precautionary measures in support of arbitration. This applies in cases where the arbitral tribunal does not have such authority or is unable to exercise it[9].

Accordingly, the English Arbitration Act does not provide for shared jurisdiction between arbitral tribunals and courts regarding the issuance of interim or precautionary measures. Instead, it makes the tribunal’s authority to grant such measures dependent on the parties’ agreement. In the absence of such an agreement, jurisdiction to issue interim and precautionary measures remains with the courts as part of their role in supporting arbitration proceedings.

Under French law, the existence of an arbitration agreement does not prevent parties from seeking interim and precautionary measures from the court as long as the arbitral tribunal has not yet been constituted[10].

However, once the tribunal is constituted, jurisdiction over interim and precautionary measures generally shifts to the arbitral tribunal. Exceptions exist for certain types of interim measures, such as attachment orders and judicial guarantees “Sûretés Judiciaires”, which remain within the jurisdiction of the courts[11].

Egyptian arbitration law allows the court, at the request of either party, to order interim or precautionary measures both before arbitration proceedings commence and during their course[12].

Additionally, the law permits arbitration parties to agree that the arbitral tribunal may, at the request of either party, order any interim or precautionary measures it deems necessary based on the nature of the dispute. The tribunal may also require sufficient security to cover the costs of the ordered measure. If the party subject to the order fails to comply, the tribunal—at the request of the other party—may either authorize that party to take the necessary steps for enforcement or request the court to enforce the measure[13].

These provisions indicate that Egyptian arbitration law considers the court’s jurisdiction over interim and precautionary measures as an inherent authority that remains intact even after arbitration proceedings begin. This jurisdiction is only displaced if the parties explicitly agree to grant the arbitral tribunal the power to order such measures[14].

Jurisdiction over Requests for Interim and Precautionary Measures Under the Saudi Arbitration Law

The Saudi Arbitration Law grants the court the authority to order interim or precautionary measures at the request of one of the arbitration parties before arbitration proceedings commence or at the request of the arbitral tribunal during the arbitration process. The law also allows for the revocation of such measures through the same procedure, unless the parties have agreed otherwise[15].

On the other hand, the Saudi Arbitration Law permits arbitration parties to agree that the arbitral tribunal—at the request of one of the parties—may order any interim or precautionary measures it deems necessary based on the nature of the dispute. The tribunal may also require the requesting party to provide appropriate financial security for the implementation of such measures. If the party subject to the order fails to comply, the tribunal—at the request of the other party—may authorize that party to take the necessary steps to enforce it, including requesting the competent authority to compel compliance[16].

This indicates that the Saudi Arbitration Law allows the judiciary, in its role of supporting arbitration, to order interim and precautionary measures at the request of any party before arbitration proceedings commence. However, once arbitration has begun, the power to issue such measures is reserved for the arbitral tribunal, which evaluates the request to determine its validity and likelihood of success. If the tribunal deems the request justified, it may refer it to the court and request it to order the interim or precautionary measures; otherwise, it may reject it.

A challenge that arbitration parties may face in this regard is that the formation of the arbitral tribunal may occur after arbitration proceedings have officially commenced. According to Article 26 of the Saudi Arbitration Law, arbitration proceedings begin on the date one party receives the request for arbitration from the other party, unless they agree otherwise. Consequently, there may be a gap between the initiation of arbitration and the constitution of the tribunal during which parties are unable to obtain interim or precautionary protection from either the court or the arbitral tribunal.

While we believe that interim protection remains under the jurisdiction of the courts until the tribunal is formed, it may be advisable for the concerned party to assess the need for an interim or precautionary measure before initiating arbitration and, if necessary, request such measures from the court in advance of the commencement of arbitration proceedings.

Interim and Precautionary Measures Under the Rules of the Saudi Center for Commercial Arbitration

The rules of the Saudi Center for Commercial Arbitration (SCCA) allow the arbitral tribunal—at the request of either party—to order any interim or precautionary measures it deems necessary[17].

Additionally, and in line with many international arbitration institutions, the SCCA rules permit parties to request the appointment of an emergency arbitrator if urgent relief is required before the tribunal is constituted[18].

To further regulate the process, the SCCA has dedicated an annex specifically addressing emergency arbitrator proceedings—Annex III of the rules. These proceedings are designed to ensure expedited timelines for appointing the arbitrator, reviewing the request, and issuing a decision. The total period for rendering an interim measure is limited to fourteen days from the date the case is referred to the emergency arbitrator.

It is noteworthy that, under Article 4 of the Saudi Arbitration Law, an agreement by the parties to arbitrate under the rules of an arbitration institution constitutes authorization for that institution to determine the appropriate procedures to be followed. This includes procedures that the law allows the parties to agree on—among them, the authority of the arbitral tribunal to issue interim and precautionary measures.

Some view the practice adopted by arbitration institutions of incorporating special provisions for emergency arbitrators as a means of effectively enhancing interim protection in arbitration proceedings[19]. In this regard, the English Supreme Court ruled that it lacked the authority to grant interim measures under the Arbitration Act when the parties had the option to request the appointment of an emergency arbitrator under the rules of the London Court of International Arbitration (LCIA). The court reasoned that the judiciary’s jurisdiction to issue such measures is restricted to situations where the arbitral tribunal or other relevant bodies lack the authority or are unable to exercise such jurisdiction. Accordingly, the court found that the emergency arbitrator mechanism provides parties with a sufficient opportunity to obtain interim protection[20].

Before initiating arbitration proceedings, parties should carefully consider the limitations on the jurisdiction of both courts and arbitral tribunals in issuing interim or precautionary measures and take these into account when determining the timing of such requests. Institutional arbitration offers a valuable opportunity to secure interim and precautionary protection, whether through the application of emergency arbitrator provisions or the tribunal’s authority to grant such measures.