Arbitration is gradually gaining momentum in the Kingdom of Saudi Arabia (KSA) and is becoming the preferred method of dispute resolution for not just specialized, complex and high-value disputes but standard commercial arrangements in the KSA. The advantages and disadvantages of adopting arbitration as the dispute resolution mechanism in the KSA are discussed below.

1.1 Advantages

• Parties have autonomy to decide the procedure for their disputes.
• Arbitrators who are experts in the subject matter of the dispute can be appointed.
• Proceedings can be conducted in the preferred language of the parties, whereas the official language used before the courts of the KSA is Arabic.
• The KSA has a local arbitration institution, the Saudi Center for Commercial Arbitration (SCCA), whose practices are in line with international best practices.
• Arbitration ensures confidentiality of proceedings.
• The KSA courts are now pro-enforcement and pro-arbitration, and parties can enter into arbitration with confidence that the arbitration clause will be upheld and the award will be enforced, as a general rule.

1.2 Disadvantages and common pitfalls

• Irrespective of the agreement between the parties or the terms of the arbitral award, the courts in the KSA will not allow recovery of interest while enforcing an arbitration award.
• Enforcement of an arbitration award can be challenged if it is not compliant with Sharia or public policy. This enhances the grounds generally available for challenging an arbitral award.
• Government institutions and entities generally do not include arbitration provisions in their contracts given the stringent approval requirements involved, which are discussed in detail below. Accordingly, foreign investors entering into contracts with government entities will generally need to agree to dispute resolution before the KSA courts.
• The KSA court system does not rely on binding precedents, which can at times leave arbitrators without guidance on how to decide certain issues.

1.3 Distinctive features

As noted above, an arbitration award will not be enforced if it is against the principles of Sharia and public policy. Further, the courts will not allow any interest amount that forms part of the award to be recovered.

2.1 Legal framework

The key laws governing arbitration in the KSA are:

• The Law of Arbitration (Royal Decree No. M/34 (2012)) (“Arbitration Law”).
• Implementing Regulation of the Arbitration Law Cabinet Resolution No. 541 of 1438 (2017) (“Implementing Regulations”).
• Enforcement Law (Royal Decree No. 53 (2012)) (“Enforcement Law”).
• Implementing Regulations for the Enforcement Law (Resolution No. 9892 (2013) (“Enforcement Law Regulations”).

In addition to the above, the KSA has established the SCCA. The SCCA is a not-for-profit organization established by the Saudi Ministerial Council and has promulgated its own rules governing arbitration procedures. The various rules of the SCCA will be discussed in Section 2.8, below, in further detail.

2.2 What qualifies under domestic law as “international arbitration”? Is there a specific statute?

Article 3 of the Arbitration Law defines an international arbitration as follows:

“[A]rbitration shall be international if the dispute is related to international commerce, in the following cases:

1. If the head office of the parties to an arbitration agreement is located in more than one country at the time of conclusion of the arbitration agreement …
2. If the head office of the two parties to arbitration is located in the same country at the time of conclusion of the arbitration agreement, and one of the following places is located outside said country: a) The venue of arbitration as determined by or pursuant to the arbitration agreement; b) Any place where a substantial part of the obligations arising from the commercial relationship between the two parties is executed; c) The place most connected to the subject matter of the dispute.
3. If both parties agree to resort to an organization, standing arbitration tribunal, or arbitration center situated outside the Kingdom.
4. If the subject matter of the dispute covered by the arbitration agreement is connected to more than one country.”

2.3 Ratification of the New York Convention

Yes. The New York Convention was ratified on 19 April 1994.

2.4 Ratification of the ICSID Convention

Yes. The ICSID Convention was ratified on 8 May 1980 and came into force on 7 June 1980.

2.5 Other treaties relating to arbitration

Other treaties to which Saudi Arabia is a party include the Riyadh Arab Agreement for Judicial Cooperation and the GCC Convention for the Execution of Judgments, Delegations and Judicial Notifications.

2.6 Choice of forum for intra-EU dispute settlement

Not applicable.

2.7 Is the municipal law governing arbitration based on UNCITRAL Model Law?

Yes.

2.8 Recent amendments or reforms in arbitration laws

The SCCA has published its new Arbitration Rules, which came into effect in May 2023. The new Rules have introduced significant changes, such as:

• The 2023 Rules establish the SCCA Court, which replaces the Committee for Administrative Decisions. The SCCA Court has the powers to, inter alia, review emergency applications, and decide challenges to arbitrators and jurisdiction. The SCCA Court can also resolve disputes relating to the place of arbitration and the number of arbitrators. The SCCA is responsible for overseeing the administration of arbitration by the arbitration tribunals operating under the SCCA regime. The SCCA comprises experienced international arbitration practitioners.
• The new Rules provide for advance Online Dispute Resolution for claims not exceeding SAR 200,000.
• Unlike the first edition of the Arbitration Rules which made compliance with the “rules of Sharia” mandatory, the new Arbitration Rules omit the reference to Sharia rules. Thus, parties are free to choose the applicable law. Article 37 of the new Rules provides that the arbitration tribunal must apply the law designated by the parties, and if the parties have not chosen the applicable law, the most appropriate law should be applied. Article 37.4 of the Rules further clarifies that the law of the seat will apply unless the parties expressly agree otherwise.
• The time period for making the final award has been increased from 60 to 75 days, which may be extended further by the SCCA on its own or pursuant to a request from the arbitration tribunal.

3.1 Presence of local arbitration institutions

The SCCA.

3.2 Does the London Court of International Arbitration (LCIA) have a local office?

No.

3.3 Does the Permanent Court of Arbitration (PCA) have a local office?

No.

3.4 Does the ICC International Court of Arbitration have a local office?

No.

3.5 Does the International Centre for Dispute Resolution (ICDR) have a local office?

No.

3.6 Agreement entered into with local offices of international arbitration institutions

The SCCA and the International Centre for Settlement of Investment Disputes (ICSID) entered into a cooperation agreement in March 2024 which, inter alia, provides for cooperation and coordination between the two institutions in respect of arbitration and mediation services and allows parties in ICSID proceedings the option to hold hearings at SCCA facilities in the KSA. The SCCA has entered into similar cooperation arrangements with the PCA and the China International Economic and Trade Arbitration Commission.

4.1 Requirements as to content and form

The arbitration agreement must be in writing. The agreement can be concluded through exchange of correspondence or any other written means. It can also be concluded by incorporating an arbitration clause in a document through reference, that is, by referring to an arbitration clause set out in another document or agreement.

4.2 Validity of arbitration agreements

Article 10 of the Arbitration Law states that only people with legal capacity can enter into an arbitration agreement. Government bodies cannot enter into an arbitration agreement except with the approval of the Prime Minister or where it is expressly allowed by law.

4.3 Special formalities

As mentioned in Section 4.1, above.

4.4 Governing law

Article 38 of the Arbitration Law states that subject to the principles of Sharia and public order, while deciding a dispute, the arbitration tribunal shall apply the laws of the country agreed between the parties and if no law has been agreed or there is a dispute in respect of the governing law, the tribunal shall apply the laws of the jurisdiction which is most closely connected to the dispute.

The position under the SCCA Rules regarding governing law has already been summarized in Section 2.8 above.

5.1 Applicable restrictions

Criminal matters, family law matters such as divorce proceedings, public policy matters and administrative matters are generally not subject to arbitration proceedings.

6.1 Stay of proceedings

If a party files a case before a court but the parties had agreed to resolve their disputes through arbitration, then the court is required to dismiss the suit in favor of the arbitration proceedings, provided the defendant raises this objection to jurisdiction and does not take any action which could be viewed as a waiver of the arbitration clause and agreement to participate in the court proceedings.

6.2 Anti-suit injunctions

Article 22 of the Arbitration Law allows the competent court to order provisional or precautionary measures, upon the request of either party, prior to commencing arbitration proceedings, or upon a request by the arbitration tribunal during arbitration proceedings.

7.1 Restrictions on the parties’ freedom to choose arbitrators

Parties are free to select arbitrators, subject to compliance with the conditions discussed in Sections 7.2 and 7.3, below.

7.2 Requirement of arbitrator independence and impartiality

Arbitrators are required not to have any vested interest in the dispute.

7.3 Mandatory rules applicable to the appointment process

The arbitrators must be:

• an odd number;
• of full legal capacity;
• of good conduct and reputation; and
• holder of at least a university degree in Sharia or law. If the arbitration tribunal is composed of more than one arbitrator, it shall be sufficient that the chair of the tribunal meets such requirement.

7.4 Appointment mechanism in the absence of party agreement or applicable institutional rules

Under the Arbitration Law, if the parties are unable to agree on the appointment of the arbitrator, either party may petition the court for the appointment of the arbitrator.

7.5 Mandatory rules applicable to the replacement process

If an arbitrator is to be replaced because of death, disqualification, dismissal, recusal, disability, or any other reason, his/her replacement is to be appointed according to the procedures followed in the appointment of the arbitrator.

7.6 Mandatory disclosure obligations

An arbitrator is required to disclose to the arbitration parties in writing, from the time of his/her appointment and throughout the arbitration proceedings, any circumstances likely to give rise to justifiable doubts as to his/her impartiality or independence.

7.7 Grounds for challenge

There are grounds for challenge if the arbitrator does not meet the conditions set out in Section 7.3, above or has a vested interest in the dispute.

7.8 Mandatory rules governing the challenge of arbitrators

If the parties have not agreed on the procedure for challenging the appointment of an arbitrator, the aggrieved party will submit their challenge to the tribunal. If the challenge is not successful, they can petition the court. If the arbitration is under the SCCA’s Rules, the petition will be submitted to the SCCA Court.

7.9 Removal

As mentioned in Section 7.7, above.

7.10 Liability and immunity of arbitrators

As noted in Section 7.7, above, the appointment of arbitrators can be challenged by the parties if there are any doubts regarding their impartiality, fairness or conduct. We discuss in Section 15.1, below the Code of Ethics published by the SCCA, which aims to ensure that integrity, transparency and fairness are maintained by the arbitrators throughout the proceedings. Any bias or procedural impropriety by the arbitrator(s) can also result in challenges to the arbitration award at the enforcement stage.

8.1 Interim measures

8.1.1 Overview of interim measures

Article 22 of the Arbitration Law allows the competent court to order provisional or precautionary measures, upon the request of either party, prior to commencing arbitration proceedings, or upon a request by the arbitration tribunal during arbitration proceedings.

8.1.2 Relevance of availability of emergency arbitrator mechanism

As noted above, Article 22 of the Arbitration Law allows the court to order provisional or precautionary measures. The SCCA Rules set out a detailed procedure for the appointment of an emergency arbitrator, even before the tribunal’s composition is complete. The emergency arbitrator is appointed by the SCCA Court. The emergency arbitrator has the authority to decide on the emergency measures sought but cannot serve as part of the tribunal that will later resolve the main dispute (unless otherwise agreed).

8.2 Taking of evidence

Article 22(3) of the Arbitration Law states that the arbitration tribunal may, as it deems fit, seek any assistance required in the arbitration proceedings, such as calling a witness or an expert, ordering the submission of a document or a copy thereof, without prejudice to the right of the arbitration tribunal to conduct the proceedings independently.

8.3 Appointment or challenge of arbitrators

As discussed in Section 7.8, above.

8.4 Other available assistance

Article 22(2) of the Arbitration Law grants the courts a general power to “issue an order of judicial delegation” upon a request by the arbitration tribunal. The court can, therefore, delegate specific powers to aid the tribunal in discharging its obligations.

9.1 Domestic scope of sovereign immunity from jurisdiction

While the KSA does not have a composite legislation relating to Sovereign Immunity, certain principles are enshrined in the law. For instance, Article 21 of the Enforcement Law explicitly states that attachment and enforcement shall not apply to “State assets”. Moreover, under the Arbitration Law, Government bodies cannot enter into an arbitration agreement except with the approval of the Prime Minister or where it is expressly allowed by law, thereby limiting the exposure of state entities and institutions to foreign jurisdictions/arbitral awards.

9.2 Immunity from execution

As discussed in Section 9.1, above.

The Arbitration Law provides a lot of flexibility to parties in respect of the conduct of hearings. Article 28 of the Arbitration Law allows parties to choose the venue in the KSA or outside the KSA. Article 28 also grants the arbitrator(s) the power to convene at any venue it deems appropriate for the proceedings.

Parties must be granted sufficient advance notice of hearings. Minutes of the hearing are to be signed by the parties, together with any witnesses or experts attending the hearing.

The arbitration tribunal has the power to decide a matter on the basis of the written submissions and documents submitted by the parties.

Likewise, the SCCA Rules provide parties with a lot of flexibility in terms of the resolution of disputes. In fact, Article 25 encourages the tribunal and parties to consider how technology could be used to reduce the environmental impact of arbitration proceedings.

The Arbitration Law states that the arbitral award shall not be published (in whole or in part) without the parties’ agreement but does not contain any express provision dealing with the confidentiality of the proceedings as a whole. However, it does not preclude parties from agreeing on specific confidentiality obligations.

Under the SCCA Rules, unless the parties agree otherwise, all information relating to the arbitration proceedings is to be kept confidential.

12.1 Requirements as to content and form

The arbitration award should be in writing, should provide reasons for reaching the decision and should be signed by the arbitrators. It should include:

• the date of pronouncement and place of issuance;
• the names and addresses of the parties to the dispute;
• the names of the arbitrators as well as their addresses, nationalities, and capacities;
• a summary of the arbitration agreement and the parties’ statements, pleadings, and documents; and
• a summary of the expert report (if any).

The award should also determine the arbitrators’ fees, costs of arbitration, and their distribution between the parties. If the arbitral tribunal consists of more than one arbitrator, the award is valid if it is signed by a majority of the arbitrators.

12.2 Time limit

Unless the parties have agreed otherwise, the arbitration award has to be rendered within 12 months from the commencement of the arbitration proceedings. The period can be extended by six months, unless the parties agree to a longer period.

12.3 Remedies

Remedies include monetary damages, specific performance and sale or delivery of property. The arbitration tribunal cannot award interest, as that is contrary to the principles of Sharia.

13.1 Interpretation and correction of awards

Within 30 days of receiving the award, a party may request clarification of any ambiguity. Corrections to the award can be made by the tribunal on its own, within 15 days of the issuance of the award or within 15 days of the receipt of the request by a party.

13.2 Challenge of an award

An application for nullification of the award has to be filed within 60 days of the award. The application is filed before the Court of Appeal.

Grounds for nullification include:

• If no arbitration agreement exists, or if such agreement is void, voidable, or terminated due to expiry of its term.
• If either party, at the time of concluding the arbitration agreement, lacked legal capacity.
• If either arbitration party fails to present its defense due to lack of proper notification of the appointment of an arbitrator or the arbitration proceedings, or for any other reason beyond its control.
• If the arbitration award excludes the application of any rules which the parties to the arbitration agree to apply to the subject matter of the dispute.
• If the composition of the arbitration tribunal or the appointment of arbitrators is carried out in a manner that violates the law or the agreement of the parties.
• If the arbitration award rules on matters not included in the arbitration agreement.
• If the arbitration tribunal fails to observe the conditions required for the award in a manner that affects its substance, or if the award is based on void arbitration proceedings that affect it.

If an award is set aside, then the aggrieved party can challenge the decision before the KSA Supreme Court within 30 days of such decision. However, if the nullification application is rejected, there is no further right to appeal.

13.3 Recognition and enforcement proceedings

An application for recognition and enforcement of the award can be filed after the lapse of 60 days from the announcement of the award. The application for enforcement should be accompanied by:

• The original award or an attested copy thereof.
• A true copy of the arbitration agreement.
• An Arabic translation of the arbitration award attested by an accredited authority, if the award is not issued in Arabic.
• Proof of the deposit of the award with the competent court.

Before the enforcement order is passed, the court must satisfy itself that the award:

• was notified to the other party;
• does not conflict with any decision issued by the court, authority or committee; and
• does not conflict with the principles of Sharia or public policy.

Once the award is approved, it is enforced by the enforcement court.

13.4 Cost of enforcement

The party filing the enforcement application is not required to pay any fee.

13.5 Enforcement of orders of emergency arbitrators

Generally, orders of the emergency arbitrators will be enforced through the court.

The KSA acceded to the New York Convention in 1994, with a reservation that it would restrict the application of the Convention to the recognition and enforcement of arbitral awards made in the territory of a Contracting State.

14.1 Process for enforcing New York Convention awards

An application is filed through the online Najiz system directly with the Enforcement Court. The Enforcement Court will enforce the award provided:

• there is reciprocity vis-à-vis awards passed in the KSA, in the jurisdiction in which the award was passed;
• the courts of the KSA have no jurisdiction to review the dispute regarding which a judgment or order is issued;
• the parties to the dispute were summoned to appear, were duly represented, and were given the right to defend themselves;
• the award is final and non-appealable;
• the award does not conflict with any judgment or order issued in the KSA; and
• the award does not conflict with public policy.

14.2 Grounds for resisting enforcement of New York Convention awards

The arbitration award can be challenged on the grounds mentioned in Section 14.1, above, as well as the grounds mentioned in the New York Convention.

14.3 Enforcing non-Convention awards

In order to enforce non-convention awards, the conditions set out in Section 14.1, above, will need to be met: specifically, the party seeking enforcement will need to establish that there is reciprocity with respect to awards passed in the KSA in the jurisdiction in which the award was passed.

15.1 Applicable to counsel

The SCCA has published a Code of Ethics for Arbitration, Mediation and the Parties to the arbitration (the “Code”). The Code prohibits parties and their counsel from threatening or intimidating SCCA employees or neutrals. Counsel are expected to inform their clients and witnesses about the decorum to be maintained in the proceedings. Counsel are also to abide by the confidentiality obligations related to the proceedings.

15.2 Applicable to arbitrators

Impartiality and independence of the arbitrators is the cornerstone of the Arbitration Law and the SCCA Rules. We have already discussed the disclosure obligations and the grounds for challenging appointment of arbitrators in Section 7 above.

The Code bounds arbitrators to ensure the fairness and integrity of proceedings and to make full disclosure of any matter which could result in a conflict of interest. It also obligates them to ensure the confidentiality of the proceedings.

16.1 Applicable regulatory requirements

The SCCA Rules requires a party funded by a third party to disclose the particulars of the party having an economic interest in the outcome of the arbitration proceedings.

16.2 Overview of the third-party funding market

The market for third-party funding in the KSA is still in its development phases. Any third-party funding within the KSA generally takes into consideration the local requirements, including the requirements of Sharia, such as those applying to the charging and recovery of interest.

17.1 Types of specialist arbitration

In addition to the SCCA, the KSA has certain specialist arbitration centers such as the Saudi Real Estate Arbitration Center (SRAC), which specializes in resolving real estate disputes arising from programs supervised by the General Real Estate Authority, such as lease disputes and disputes of homeowners. Likewise, the Saudi Council of Engineers has established the Engineering Arbitration Center (EAC) for settling engineering disputes.

17.2 Key legal principles

Each specialist arbitration center focuses on resolving disputes pertaining to a specialized practice area. Parties generally need to agree on dispute resolution through the specialized arbitration center.

17.3 Types of claim and defenses typically brought in that area

As explained above, each dispute resolution center focuses on a specific set of disputes. The types of disputes handled by SRAC and EAC have been briefly discussed in Section 17.1, above.

17.4 Issues and strategic considerations to take note of

Parties generally resort to specialist arbitration centers when expertise in a specific practice/dispute area is required. However, the need for specialization has to be balanced against the procedural flexibility and holistic services provided by a full-service arbitration center such as the SCCA. For instance, arbitration proceedings before the SRAC are in Arabic, and, therefore, this may be a disincentive for a foreign investor.

The 2023 Rules published by the SCCA have greatly helped bring the arbitration regime in the KSA in line with international best practices and have encouraged parties to rely on arbitration rather than the traditional court system for dispute resolution. There is a clear intent from the Government and the SCCA to take all measures necessary to ensure that the SCCA is globally recognized as one of the leading alternative dispute resolution centers of the world. Accordingly, we expect more reforms in the future to make the SCCA more robust and effective as an alternative dispute resolution center. The SCCA’s Rules allow parties to utilize technology for effective resolution of disputes. We expect that just like the Saudi courts, which conduct a large number of their hearings online, greater reliance will be placed by parties on technology for effective dispute resolution. The SCCA has already started conducting hearings online.  

The role of arbitration remains limited in government contracts because of statutory limitations. However, with the KSA attracting investment each year and with a greater emphasis on public–private partnerships, it is not too difficult to imagine that reforms may be introduced to bring a certain degree of relaxation in respect of government contracts.