1 . Key considerations in deciding whether to arbitrate in this jurisdiction
Institutions in Saudi Arabia are increasingly resorting to arbitration instead of the judiciary to resolve contractual disputes. Issued in 2012, the Arbitration Law in Saudi Arabia is largely based on the UNCITRAL Model Law.
Arbitration in the Kingdom is distinguished from judicial proceedings by:
- speed in resolving disputes;
- flexibility; and
- the freedom of the parties to choose the persons who will settle the dispute.
1.2. Disadvantages and common pitfalls
Common obstacles delaying the commencement of arbitration proceedings include:
- a condition requiring an attempt to settle the dispute;
- issues related to non-cooperation by the other party in the appointment of an arbitrator; and
- failure of the party appointed arbitrators to agree on a third and presiding arbitrator.
Following an arbitration award, the enforcement is not immediate. Parties have 60 days to file an annulment claim before the competent court of appeal, which may postpone enforcement of the award.
1.3. Other distinctive features
Courts of appeal have judicial oversight over the arbitration proceedings to ensure that such proceedings do not contradict the rules of the Arbitration Law, Islamic Shariah Law, and the public order in Saudi Arabia.
2 . Principal laws and institutions relating to international arbitration in this jurisdiction
2.1. Legal framework
Saudi Arabia joined the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (New York Convention) in 1994.
Arbitration in Saudi Arabia is governed by the Arbitration Law and its Implementing Regulations. If one of the parties is a government entity, then the relevant articles of the Government Tenders and Procurement Law shall be applied. The enforcement of final arbitral awards falls under the Enforcement Law.
The Arbitration Law provides that the provisions of the Law apply to any arbitration, regardless of the nature of the legal relationship subject to the dispute, whether the arbitration takes place in Saudi Arabia or abroad but where the parties have agreed that the arbitration is subject to the Arbitration Law.
The Arbitration Law also stipulates the creation of an accredited arbitration Center with its own procedures in terms of deadlines, appointment, notification, holding of hearings and calculation of fees to administer the arbitration. Parties are, however, free to arbitrate under the rules of centers established outside of Saudi Arabia (although they rarely do so unless one of the parties is a non-Saudi entity), and parties can also agree to ad hoc arbitration.
2.2. What qualifies as international arbitration?
Arbitration will be international, in line with the Arbitration Law, if the subject of arbitration is a dispute relating to international trade.
2.3. Main local international arbitration institutions
The licensed local institutions include the Saudi Center for Commercial Arbitration, the Saudi Center for Engineering Arbitration, and the Saudi Center for Real Estate Arbitration.
There also exists a regulator of arbitration centers and the Standing Committee for Saudi Arbitration Centers responsible for approving the issuance of licences to establish Saudi arbitration centres, listing the names of arbitrators in licenced centres, and for setting the standards for the registration of arbitrators, their fees and expenses.
3 . Arbitration agreements
3.1. Requirements as to content and form
An arbitration agreement between the parties may be made prior to or after the dispute arises. An arbitration agreement must be in writing and issued jointly by the parties— in the form of an arbitration clause in a contract or in the form of a separate arbitration agreement—or arising from the correspondence exchanged between them. Parties may refer to another document including an arbitration provision and incorporate the arbitration provision to their new contracts through this reference, provided that the referral identifies that the arbitration provision is to be considered part of the contract.
3.2. Validity of arbitration agreements
To be valid, an arbitration agreement must be made by a person who has the power to dispose of his rights, whether he is a natural or a legal person.
3.3. Special formalities
Arbitration agreements where a Saudi government authority is a party are subject to the approval of the Minister of Finance.
3.4. Governing law
Arbitration is subject to Saudi Law if it takes place in Saudi Arabia, without prejudice to the provisions of the Islamic Shariah Law and the provisions of international conventions in which the Kingdom is a party. Parties may agree to subject the relationship between them to the provisions of any document (model contract, international convention, etc.), in which case the provisions of such document, including those related to arbitration, shall apply, provided that they do not contravene the principles of the Islamic Shariah.
4 . Arbitrability
4.1. Applicable restrictions
The Arbitration Law does not apply, and arbitration is not permitted:
- to disputes related to personal affairs;
- to matters in which settlement is not permissible; or
- to in-kind claims related to a property in the Kingdom.
5 . Enforcing arbitration agreements
5.1. Stay of proceedings
A party to an arbitration agreement against which court proceedings are brought can apply to the court to stay the proceedings under Article 11 of the Arbitration Law, which states at paragraph (1) that “a court before which a dispute, which is the subject of an arbitration agreement, is filed, shall dismiss the case if the defendant raises such defense before any other claim or defense” and at paragraph (2) that “filing the action referred to in paragraph (1) of this Article does not preclude the commencement or continuation of the arbitration proceedings or the rendering of the arbitration award".
5.2. Anti-suit injunctions
Saudi Law does not have a specific provision for anti-suit injunctions
6 . Arbitral Tribunal
6.1. Restrictions on the parties’ freedom to choose arbitrators
An arbitrator is required to be legally competent, of good conduct and reputation, and hold at least a university degree in Sharia or law. In the case of multiple arbitrators, it is sufficient that the chairman of the tribunal meets these requirements.
6.2. Requirement of arbitrator independence and impartiality
Arbitration in the Saudi Arabia requires that the arbitrator be impartial and independent of the parties, and shall have no vested interest in the dispute, either before the appointment or throughout the arbitration proceedings.
6.3. Mandatory rules applicable to the appointment process
An arbitral tribunal shall be constituted by one arbitrator or more, provided that the number of arbitrators is odd, otherwise the arbitration will be invalid. Parties are free to choose a method of appointment of, and to select, arbitrators. However, the chairman of the tribunal must hold at least a university degree in Sharia or law.
6.4. Appointment mechanism in the absence of party agreement or applicable institutional rules
If the parties fail to reach an agreement on the appointment of the arbitrators, and if the arbitration tribunal is composed of only one arbitrator, such arbitrator must be chosen by the court. If the tribunal is composed of three arbitrators, each party must choose an arbitrator. The two arbitrators shall then agree to choose the third arbitrator.
If the two arbitrators appointed by the parties do not agree on the choice of the third arbitrator, then the court will select the third arbitrator. When selecting an arbitrator, the court shall take into account the conditions stipulated in the arbitration agreement as well as the conditions required under the Arbitration Law. The decision of the court is final, and parties do not have the right to object.
If a party fails to appoint an arbitrator, the other party may refer the case to the court, which will appoint an arbitrator for the party who abstained from appointing an arbitrator.
6.5. Mandatory rules applicable to the replacement process
An arbitrator appointed by one of the parties may be dismissed by the agreement of the parties.
If an arbitrator fails to perform the arbitrator’s functions or ceases to do so in a manner that leads to unjustifiable delay in arbitration proceedings, and the parties do not agree on dismissing him, the competent court may dismiss the arbitrator pursuant to a petition by either party. The court’s decision shall not be subject to any form of appeal.
6.6. Mandatory disclosure obligations
An arbitrator must disclose in writing to the parties all the circumstances that may raise doubts as to the arbitrator’s impartiality or independence.
6.7. Grounds for challenge
An arbitrator may be challenged only if there are circumstances that raise serious doubts about the arbitrator’s impartiality or independence, or if the arbitrator does not have the qualifications agreed between the parties.
6.8. Mandatory rules governing the challenge of arbitrators
If there is no agreement between the parties regarding the arbitrator removal procedures, a challenge to the arbitrator must be submitted in writing to the arbitral tribunal stating the reasons for the challenge within five days from the date of learning of the circumstances justifying the removal. The decision by the arbitral tribunal on the removal of the arbitrator may be subject to appeal before local courts.
The submission of the challenge before the arbitration tribunal shall result in the arbitration proceedings being suspended. An appeal against the arbitral tribunal’s decision rejecting the disqualification petition shall not result in suspension of the arbitration proceedings.
A challenge to an arbitrator will not be accepted after closing the hearing.
If it is decided to remove the arbitrator, whether by the arbitral tribunal or by the court when considering the appeal, this decision shall result in the arbitration proceedings and any arbitration award being considered null.
An arbitrator may stand down from the dispute if the arbitrator’s removal is requested, without providing reasons for standing down. The stand down shall not be considered an acknowledgement by the arbitrator of the validity of reasons which have been relied upon by the party requesting the removal.
6.10. Liability and immunity of arbitrators
The Arbitration Law and the implementing regulations do not address the immunity or liability of arbitrators.
7 . Assistance by the State courts
A court with legal jurisdiction to resolve disputes subject to arbitration may provide necessary assistance when requested by one of the parties or the tribunal.
7.1. Interim measures
A court may order interim or provisional measures at the request of one of the parties before the commencement of the arbitration proceedings or at the request of the parties or the arbitration tribunal during the arbitration proceedings.
The Arbitration Law does not provide for an emergency arbitrator. However, a number of arbitration centers in Saudi Arabia incorporate procedures for the appointment of an emergency arbitrator.
7.2. Taking of evidence
An arbitral tribunal may request a concerned authority to assist the arbitration proceedings, for example calling a witness or expert or requesting a copy of a document.
7.3. Appointment or challenge of arbitrators
A court will appoint arbitrators in the event of disagreement of the parties. A court will also consider challenges to arbitrators in the event the parties have not reached an agreement on their removal and the arbitral tribunal previously rejected the challenge.
7.4. Other available assistance
Other types of assistance in arbitration are commonly not available.
8 . General procedural (minimum) requirements
An arbitration tribunal will hold hearing sessions to enable each party to present their case and evidence. Written notes and documents may be accepted for the tribunal unless the parties agree otherwise.
The arbitral tribunal shall record the summary of each hearing in minutes signed by the witnesses, experts, attending parties or their agents, and members of the arbitration tribunal. A copy of the minutes shall be delivered to each party, unless the two parties to the arbitration agree otherwise.
If either party fails to appear at a hearing after notification, or fails to submit the required documents, the arbitration tribunal may continue the arbitration proceedings and issue an award based on available evidence.
9 . Confidentiality
The Arbitration Law does not provide for the confidentiality of arbitration proceedings. However, confidentiality of proceedings has been a traditional practice. With regard to the arbitration award, the Arbitration Law states that the award or part thereof may not be published without the written approval of the parties.
10 . Awards
An award by an arbitral tribunal formed of more than one arbitrator is issued by the majority of its members following deliberation. If the views of the tribunal are divided and it has become impossible to reach a majority, the arbitration tribunal may appoint a casting arbitrator within 15 days of the tribunal’s resolution that obtaining majority is not possible. Otherwise, the competent court shall appoint a casting arbitrator in such circumstances.
10.1. Requirements as to content and form
An arbitration award must be issued in writing, justified, and signed by the arbitrators, and must include:
- the date and place of issuance;
- the names of the litigants and their addresses;
- the names of the arbitrators and their addresses, nationalities and attributes;
- a summary of the arbitration agreement;
- a summary of the statements and requests of the parties, their pleading and documents;
- a summary of the report of experts, if any;
- the award text;
- the determination of the fees of the arbitrators; and
- the arbitration expenses and how they are distributed between the parties.
10.2. Time limit
An arbitration tribunal will deliver the award terminating the whole dispute within the duration period agreed upon by the parties. If there is no agreement, the award must be delivered within 12 months from the date of commencement of the arbitration proceedings. The tribunal may extend the duration of the arbitration provided that the extension does not exceed six months.
The Arbitration Law does not restrict the types of relief or remedies, including compensation that may be awarded by arbitrators. Compensation may be awarded for arbitration expenses, attorney fees, consensual fees or any other remedy expenses deemed due by the arbitrators.
11 . Post-award proceedings
11.1. Interpretation and correction of awards
Either party may request, within 30 days following receipt of the award, that the arbitral tribunal interprets any ambiguity that arises in the award. The review must be issued in writing within 30 days following the date of submission of the request. A tribunal must correct any purely clerical misstatement in its award, whether written or calculation, and whether requested by a party or identified on its own account. The amended award must be provided in writing by the tribunal and must be communicated to the parties within 15 days from the date of its issuance.
11.2. Challenge of an award
Arbitration awards issued in accordance with the provisions of the Arbitration Law are not subject to appeal on the merits and may only be subject to annulment proceedings. Such a claim must be filed with the Court of Appeal by any of the parties within 60 days following the date of notification of the award to that party.
A claim to annul an arbitration award will only be accepted if:
- there was no arbitration agreement;
- if the arbitration agreement is null and void;
- if any of the arbitration parties were not legally competent at the time of concluding the agreement;
- if it has not been possible for any of the parties to submit a defence;
- if the arbitration award excluded the application of any of the regulatory rules which the parties have agreed to apply;
- if an arbitral tribunal has not been constituted in accordance with the agreed procedure;
- if the award decided on matters that fall outside the scope of the arbitration agreement;
- if the arbitral tribunal failed to observe the conditions required for the award in a manner that affects its substance; or
- if the award has been based on invalid proceedings affecting it.
The role of the court of appeal is restricted to overseeing the procedural matters related to arbitration, such as verifying the validity of the arbitration agreement or the appointment of arbitrators, without the right to discuss the merits and objective basis of the dispute.
If the court upholds an arbitration award, it shall order the same to be executed and the decision shall not be subject to appeal.
However, if the court annuls an arbitration award, the decision may be appealed before the Supreme Court within 30 days from the day following the notification.
11.3. Recognition and enforcement proceedings
An arbitration award delivered in accordance with the Arbitration Law shall be authentic, authoritative, and enforceable. An order to enforce the award and the award enforcement request must be attached to the original award or a certified copy. A true copy of the arbitration agreement and a translation of the award are required if the award is delivered in another language.
There is no statute of limitations under Saudi law for the enforcement of a foreign judgment or arbitration award. Generally speaking, Sharia (Islamic law) does not recognize that legal rights may terminate simply due to the passage of time.
11.4. Cost of enforcement
The judicial costs for the enforcement of awards in relation to financial claims are estimated at 2% of the value of the claim, provided that such costs shall not exceed SAR 10,000. The direct enforcement (i.e., the enforcement of an award to implement or refrain from implementing an act) costs are estimated at SAR 500.
11.5. Enforcement of orders of emergency arbitrators
The rules of arbitration centers allow either party to request a temporary measure when the formation of an arbitration tribunal is delayed. The center appoints an arbitrator within a maximum period of 24 hours from the submission of the request. The courts accept the enforcement of awards issued by emergency arbitrators.
12 . Enforcement of foreign awards
The Enforcement Court can appoint a specialized judge for the enforcement of awards issued in a foreign jurisdiction to verify that the enforcement conditions are fulfilled.
12.1. Process for enforcing New York Convention awards
Since Saudi Arabia is a party to the New York Convention, the enforcement of the foreign award is based on the principle of reciprocity.
The Enforcement Court is the competent court for enforcement.
For the enforcement of a foreign judgment or order (including arbitral awards), the following documentation is required:
- an official copy of the foreign judgment or order with the enforced statement annexed or enclosed;
- an attestation stating that the judgment has become final and enforceable (unless this is stated in the judgment itself) and that the judgment has been issued by a competent judicial agency in the foreign country; and
- a copy of the judgment notice certified as a true copy, or any other document establishing that the defendant has been duly notified, in the case of judgment in absentia.
A foreign judgment or order may only be enforced if there is no pending suit in Saudi Arabia that has been filed prior to the suit in which the judgment or foreign order was issued.
12.2. Grounds for resisting enforcement of New York Convention awards
When considering a foreign award issued in accordance with the New York Convention, the enforcement judge must verify that the parties were requested to appear and were properly represented, that the award is final, that it does not contradict a judgement or order issued on the same issue by a competent judicial authority in Saudi Arabia and that the award does not include anything that may contradict the provisions of public order in Saudi Arabia.
12.3. Enforcing Non-Convention awards
A judge may only enforce an award issued in a State not party to the New York Convention based only on the principle of reciprocity, i.e., the enforcement court must have evidence that the issuing jurisdiction enforces awards issued in Saudi Arabia.
The burden of proving the satisfaction of the reciprocity treatment requirement shall lie on the party requesting enforcement.
13 . Professional and ethical rules
Professional and ethical standards may be subject to the agreement of the arbitration parties, or the laws, agreements and arbitration rules agreed upon by the parties.
13.1. Applicable to counsel
In compliance with the code of professional conduct applicable to all lawyers in Saudi Arabia, a lawyer must verify that there is no actual or potential conflict of interest with the lawyer’s clients.
13.2. Applicable to arbitrators
An arbitrator must respect the relationship of trust and confidentiality, must be impartial and independent from the arbitration parties, must manage the arbitration proceedings fairly and carefully, must not be affected by any external pressures or personal interests, must disclose any circumstances that would raise doubts about the arbitrator’s independence and impartiality, must avoid inappropriate methods when communicating with the parties, and must be fair and independent when making decisions.
14 . Third-party funding
The laws and the arbitration institutions in Saudi Arabia do not include any provisions that define or expressly address third-party funding.
14.1. Applicable regulatory requirements
14.2. Overview of the third-party funding market in this jurisdiction
15 . Trends and recent developments
A standing committee has been established for arbitration centers and several specialized centers such as the Saudi Center for Commercial Arbitration, the Saudi Center for Engineering Arbitration, and the Saudi Center for Real Estate Arbitration.
The Saudi Minister of Investment has recently stated that work is underway to establish commercial arbitration centers to support the developing investment environment in Saudi Arabia.
Mr. AlArfaj would like to thank Phil Loynes, Ibrahim A. AlKhudair, Alia B. Kaziha and Muneera M. AlFahad for their assistance in writing this chapter.