Arbitration Condition in Commercial Paper Disputes

Dr. Walid E. Al Dhafiri
Assistant Professor of Commercial Law – Faculty of Law, University of Dar Al Uloom – Riyadh – KSA


The research deals with the provisions of the arbitration clause in commercial paper disputes in the Saudi legal system, and it also offers an answer to the main question which is the extent to which it is permissible to agree on arbitration in commercial paper disputes. Hence, how correct is the inclusion of the arbitration clause in commercial papers, or more precisely in the body of the instrument itself, whether it is a bill of exchange, a promissory note, or a check? The study went on to answer in the affirmative, as long as the dispute arising from commercial papers does not violate public order on the one hand, and on the other hand, as long as the dispute is acceptable to reconciliation. This is in accordance with the Saudi arbitration system.
Also presented are the provisions of activating the arbitration clause in commercial paper disputes through the application of the provisions of the Saudi arbitration system, and the validity and enforcement of the arbitration clause, whether in the face of the drawer or the drawee, or the endorsers according to his role in the circulation of the commercial paper.
And after reviewing the provisions of the Saudi Commercial Papers and Arbitration Laws, the study concluded with the permissibility of arbitration as a means of settling commercial paper circulation disputes by including the arbitration clause in the paper, and the circulation of the condition with the paper itself, thus implementing the negative and positive effects of the arbitration clause, until the dispute is resolved by arbitration by the last holder of the paper.
The study ended with several recommendations, the most important of which is the necessity of the intervention of the Saudi regulator in order to extend the scope of the check in the check as a commercial paper so that it is permissible to arbitrate in it by presenting issues regarding it, and the necessity of the urgent intervention of the Saudi judiciary to implement the positive effect of the arbitration clause.

Keywords: drawer, drawee, commercial paper, arbitration agreement, arbitration.

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