THE AUTHORS:
Sara Aalamri, Partner at Clyde & Co
Almuzen Alassaf, Trainee Associate at Clyde & Co
Clyde & Co’s Young Arbitration Group provides a unique insight into international arbitration issues through the lens of young international arbitration practitioners working across different jurisdictions. In this series with Daily Jus, Clyde & Co explores the evolving landscape of arbitration reforms, analyzing recent developments, legislative changes, and their impact on dispute resolution worldwide.
The Kingdom of Saudi Arabia (“KSA”) has embarked on major reformations to develop its legal system to enable the provision of effective Alternative Dispute Resolution (“ADR”) in line with international standards and best practices. The objective is to promote trust, meet the aspirations of investors and incentivize international business in KSA.
This article takes a brief look at some of the key developments impacting arbitral proceedings in KSA.
Key Arbitration Law
In 2012, KSA introduced a new Arbitration Law that was promulgated pursuant to Royal Decree No. M/34 Dated 24/05/1433H (corresponding to 16/04/2012G) (Saudi Arbitration Law) with a view to establishing a robust and reliable arbitration framework, aligning with international standards.
The Saudi Arbitration Law is largely based on the UNCITRAL (United Nations Commission on International Trade Law) Model Law on International Commercial Arbitration (1985). Notable provisions are:
- Scope of Application: The Saudi Arbitration Law applies to any arbitration conducted within KSA or to international commercial arbitrations where the parties have agreed to be subject to this law, excluding personal status disputes and matters not subject to reconciliation.
- Arbitration Agreement Recognition: Saudi Arbitration Law recognises arbitration agreements as valid and enforceable, whether included in a contract or as a separate agreement.
- Arbitration Tribunal: The Saudi Arbitration Law allows for the appointment of a sole arbitrator or a panel of arbitrators to decide disputes. It also outlines the procedures for appointing arbitrators and defining their roles.
- International Arbitration: The Saudi Arbitration Law sets the criteria for arbitration to qualify as international, such as the parties’ business locations or the place of arbitration being outside KSA.
- The Effect of Awards: Arbitral awards issued under Saudi Arbitration Law are binding and conclusive, with limited grounds for annulment, ensuring that arbitration remains an effective dispute resolution method.
Recent Updates to the Saudi Arbitration Law: Enhancing Efficiency and Transparency
In 2017, updates were made to the Saudi Arbitration Law by the issuance of the Executive Regulations of the Arbitration Law (“Executive Regulations”). The Executive Regulations enhanced the arbitration framework in KSA by clarifying provisions in the Saudi Arbitration Law, aiming to increase efficiency and transparency under the law, notably:
- The Saudi Court of Appeal is identified as the competent court within the Saudi Arbitration Law, emphasising its role as a designating and appointing authority.
- The contents of the notice of arbitration;
- A written notice may be delivered electronically:
- Introduced a new provision whereby an arbitral tribunal may accept the intervention or the joinder of a third party, provided that the parties to the arbitration and the third party to be joined all consent; and
- The process for challenging the Saudi Court of Appeal’s decision to set aside an award before the Saudi Supreme Court.
The Saudi Centre for Commercial Arbitration (SCCA): The Dirst Saudi Arbitration Institution
The Saudi Ministerial Council decided to create the SCCA in 2014 as a non-profit organisation with the goal of advancing ADR procedures, such as mediation and arbitration, for business conflicts. The SCCA is independent from the government, ensuring a neutral and professional approach to dispute resolution. The SCCA facilitates access to arbitration for both domestic and international parties and provides its services in both Arabic and English.
The SCCA’s Arbitration Rules 2023 are based primarily on the internationally recognized UNCITRAL Arbitration Rules (1976), assuring that their arbitration services are in conformity with global practices. These rules, the first version of which came into force in May 2016, provide a clear, structured, and efficient approach to dispute resolution, emphasizing transparency and fairness. The SCCA also introduced emergency arbitration provisions within the rules, which will allow for a quicker response to any emergency situation requiring immediate intervention. In 2018, the SCCA adopted the Expedited Procedure Rules to provide parties with the option of fast tracked, streamlined process, with the option of arbitration by a sole arbitrator, and abbreviated time limits while focusing cost efficiency to accommodate small claims.
The SCCA arbitration awards, which are given under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the “New York Convention”), are enforceable domestically and abroad in jurisdictions that are signatories to the Convention.
Enforceability of Arbitration Awards: Saudi Arabia’s Commitment to Global Standards
KSA is a signatory to the New York Convention, the Riyadh Arab Agreement for Judicial Cooperation (1983) and the Gulf Co-operation Council (“GCC”) Convention for the Execution of Judgments, Delegations and Judicial Notifications (1995).
In March 2013, KSA issued the Enforcement Law promulgated pursuant to Royal Decree No. M53/1433 (“Enforcement Law”). The Enforcement Law governs the recognition and enforcement of domestic, international and foreign arbitral awards in KSA. Under KSA’s Enforcement Law, arbitral awards are treated as enforcement documents, allowing for compulsory execution. They are enforceable provided they meet conditions stipulated under the Enforcement Law such as proper jurisdiction, conclusiveness under the applicable law, and alignment with KSA public policy. These provisions ensure effective enforcement of arbitral awards within KSA.
The SCCA conducted a Saudi Case Law Study to enhance the understanding of the judicial approach towards arbitral awards and their enforcement in KSA. The study gathers detailed information on how the Court of Appeals and Supreme Court handle matters involving arbitral awards and court decisions, particularly regarding the grounds for annulments.
In 2022, the SCCA expanded its Saudi Case Law Study to include 720 judgments from the Saudi Court of Appeal and 38 from the Supreme Court. This study found a notably low annulment rate of just 8%.
The study also examined arbitration-related judgments issued by the Supreme Court and found that 29 of a total of 38 judgments reviewed, or 76%, concerned issues of annulment or enforcement. Notably, only one objection was successful, enforcing reassurance that arbitral awards are not arbitrarily annulled in KSA. Furthermore, the Saudi Minister of Justice revealed that, the Saudi Court of Appeal reviewed more than 4,000 arbitral award rescission claims over the past three years, and arbitral awards were upheld in 90% of those claims.
KSA Government Contracts and Arbitration Clauses
The Government Tender and Procurement Law (“GTPL”) was promulgated pursuant to Royal Decree No. M/58 dated Shawwal 13, 1427H (Corresponding to December 14, 2006) sets out the conditions required for proposing an arbitration clause in a government contract and provides that a government body may agree to adopt arbitration in its contract after obtaining the approval of the Minister of Finance. This provided higher flexibility towards arbitration clauses in government contracts compared to the former requirements for obtaining exceptional approvals under the older version of the GTPL.
A Forward-Looking Vision for Arbitration in KSA
KSA’s continuing reforms to its arbitration law and the establishment of the SCCA demonstrate its commitment to improving its dispute resolution mechanisms and aligning with international standards. KSA is positioning itself as a hub for arbitration in the region, attracting both domestic and international businesses seeking reliable and efficient dispute resolution.
In providing for clearer arbitration and award enforcement procedures, while allowing more latitude to contracting parties, KSA has set a solid foundation for becoming a leading pro-enforcement regime in international arbitration and integrating its legal framework into the global economic and legal system.
ABOUT THE AUTHORS
Sara Aalamri is a partner in Clyde & Co’s dispute resolution group and is based in the Jeddah office. Sara has over 15 years’ experience working with clients operating in the energy and natural resources, infrastructure and projects and construction sectors. Sara is the Vice Chair of the International Chamber of Commerce (ICC) Saudi National Committee for Arbitration and alternative dispute resolution (ADR), and delegate to the ICC Commission on Arbitration and ADR. She is a member of the Makkah Region Lawyers Committee under the Saudi Bar Association, and an officer at the International Bar Association (IBA) Arab Regional Forum.
Almuzen Alassaf is a bilingual trainee associate within the Dispute Resolution Group, based in Clyde & Co’s Riyadh Office. She has experience in dispute resolution, corporate law, employment, insurance, and construction. She graduated in 2024 with a Bachelor of Law from Prince Sultan University.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
