A critical analysis of Hong Kong and UK Legal Frameworks Regarding Security for Cost in International Commercial Arbitration in the context of Saudi Arabian business environment
Abstract
The increased internationalisation of global trade has highlighted the limitations of domestic dispute resolution methods. Domestic courts are generally unable to enforce judgements against non-resident entities, while the adversarial nature of court proceedings can harm relationships and potentially reputations in the long run. In their place, arbitration has become the preferred dispute resolution method on the international stage, due to the benefits for long-term working relationships and the enforceability across borders. Two of the world's leading seats of arbitration - the United Kingdom (primarily London) and Hong Kong - have established frameworks which foster business confidence as well as the swift resolution of disputes. As an incentive to arbitrate - and indeed an incentive to do business across borders where the legal circumstances may otherwise be uncertain - the security for costs order has grown in scope and popularity recently. A security for costs order requires a party seeking to bring an arbitration to guarantee that the court costs of the respondent - and sometimes the arbitral body as a whole - are accounted for. This deters spurious claims, reduces the potential for arbitration claims to be used strategically and encourages arbitration entities to delegate resources to solve disputes. Saudi Arabia has lagged behind internationally and even regionally when it comes to establishing effective arbitration frameworks. In recent years, however, the Kingdom has sought to rectify this by establishing an effective and transparent arbitration framework with a view towards establishing itself as a regional model when it comes to arbitration. As it stands, however, Saudi Arabia's security for costs regime lags behind that of other seats of arbitration. By looking to Hong Kong and London, the Kingdom will be able to adapt and improve its regime to make itself more attractive regionally and internationally. In order to do so, Saudi Arabia will need to improve the country's record on impartiality in decision making as well as provide a clearer and broader discretionary process for decisions to be made regarding arbitration. In particular, London and the London Court of International Arbitration provides a template from which this can be developed.