International arbitration law and rules in the Kingdom of Saudi Arabia (KSA)

Parties are free to choose the language and the substantive law of the dispute in arbitration. This is an attractive feature of the international arbitration regime in KSA and should offer comfort to parties which would not be comfortable with proceedings being held in Arabic and subject to KSA law.

1.1.1 On 16 April 2012, the Kingdom of Saudi Arabia (KSA) brought in new arbitration legislation, the Arbitration Law, by Royal Decree No. M/34 (Arbitration Law) which replaced the Arbitration Law 1983. It came into force on 9 July 2012, 30 days after its publication in the Saudi Gazette. 

1.1.2 The Arbitration Law is largely based on the UNCITRAL Model Law and eliminates some of the previously controversial provisions, (eg arbitrators are no longer required to be Muslim and there is no discrimination between genders). The new provisions, such as the reduced role of the court and increased party autonomy has brought the KSA arbitration procedure more in line with other jurisdictions, which should help to make it a more desirable seat for arbitration. 

1.1.3 Supplemental pieces of legislation to the Arbitration Law include:

• the Executive Regulations which were implemented on 22 May 2017 following the issuing of Cabinet decision No. 541/1438 (Regulations). The Regulations provide clarifications to a number of the articles of the Arbitration Law; and
• the Execution Law (Royal Decree No. M/53 of 1433 (2012)) (Execution Law) which applies to the enforcement of arbitral awards in KSA. 

2.1.1 The Arbitration Law applies to arbitrations seated in the KSA, as well as to arbitration proceedings from other jurisdictions, as long as the parties agree that it applies. 1 Arbitration Law, art 2

2.1.2 The Arbitration Law provides the parties with the freedom to choose:

• the rules that will apply;
• the arbitrator(s); and
• the governing law of the dispute. 

2.2.1 The KSA legal system is based on Shari’a law which has supremacy over all laws and regulations in the KSA. 2 Basic Law of Governance (Royal Decree No. A/90 of 1412), art 7 As such, any arbitration conducted in the KSA must also comply with Shari’a law. 3 Arbitration Law, art 5 Consequently, the arbitral procedure, and ultimately the award, cannot contravene the principles of Shari’a as failure to comply could render the award unenforceable in the KSA.

2.3.1 The KSA as a rule does not recognise and therefore does not enforce awards that violate KSA public policy which is itself mainly based on Shari’a. 4 Ibid, art 38.1 and art 55. Therefore, to arbitrate on matters of public policy is akin to arbitrating on the Shari’a itself. This also applies to the enforcement of foreign arbitration awards in the KSA. 5 Royal Decree No. M/53 of 13 Sha’ban 1433 Hejra corresponding to July 3, 2012, art 11 and art 12.

2.4.1 The recently issued Commercial Courts Law 2020 (Cabinet decision No. 115 of 1441) prescribes a general limitation period of five years from the date on which the claim arises. 6 Commercial Courts Law (Cabinet decision No. 115 of 1441), art 24 However, the Commercial Courts have the discretion to accept claims after the expiry of the limitation period based on just grounds. At this stage it is not clear how the Commercial Courts will interpret and implement this provision, but it is likely that the limitation period will also apply to claims subject to arbitration under KSA law. 

3.1.1 An arbitration agreement is defined under Article 1 of the Arbitration Law as:

“an agreement between two or more parties to refer to arbitration all or certain disputes which have arisen, or which may arise between them in respect of a defined legal relationship, whether contractual or non-contractual. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate arbitration agreement.”

3.1.2 Arbitration agreements may be made either before or after the dispute occurs. 7 Arbitration Law, art 9(1) Further, arbitration agreements must be in writing. This includes electronic or other written means of communication. 8 Ibid, art 9(2) and 9(3) Moreover, the Arbitration Law permits the incorporation of an arbitration agreement by reference, provided that the reference clearly specifies that the arbitration agreement itself forms part of the contract. 9 Ibid, art 9(3)

3.1.3 The parties to an arbitration agreement may be natural persons or juristic entities, provided that the signatory in respect of the latter is authorised to agree to arbitration. 10 Ibid, art 10(1) Importantly, it is not permissible for governmental authorities to agree to arbitration unless they have obtained approval from the Prime Minister of the KSA, or the law otherwise permits them to do so. 11 Ibid, art 10(2) However, the Government Procurement Law 2019 (Royal Decree No. M/128 of 1440) provides an exception to this requirement, providing that in the case of government procurement contracts, the approval of the Minister of Finance to the arbitration agreement will be sufficient. 12 Government Procurement Law (Royal Decree No. M/128 of 1440), art 92(2)

3.2.1 The Arbitration Law provides that an arbitration agreement in a contract is considered to be a separate agreement from the other contractual conditions. As such, the invalidity, revocation or termination of the contract in which the arbitration agreement is contained will not result in the invalidity of the arbitration agreement. 13 Arbitration Law, art 21

4.1.1 Parties are free to select the arbitrator(s). If they fail to come to an agreement, the court can make the appointments. In the case of a sole arbitrator, the Saudi Court of Appeal shall make the appointment at the request of the party seeking to accelerate the arbitration, within 15 days of an application being made. 14 Ibid, art 15(1)(A); Regulations, art 10 Where more than one arbitrator is required, each party shall appoint an arbitrator and the two appointed arbitrators shall select a third. Any failures in this regard will result in the court making the necessary appointments within 15 days of receipt of the application. 15 Arbitration Law, art 15(1)(B) The application for the court to appoint an arbitrator must include a copy of the request for arbitration and the arbitration agreement. 16 Regulations, art 4

4.1.2 The arbitral tribunal must be odd in number 17 Arbitration Law, art 13 and arbitrators must:

• be of full legal capacity;
• be of good conduct and reputation;
• have a degree in Shari’a law or a degree in law; and
• not have a vested interest in the dispute. 18 Ibid, art 14 and art 16(1)

4.2.1 An arbitrator cannot be disqualified unless there are justifiable doubts about his impartiality, or if he lacks the agreed qualifications. 19 Ibid, art 16(3)

4.2.2 Where there is no agreement between the parties on the procedure for challenging an arbitrator, the party seeking disqualification shall submit a written request to the tribunal setting out the reasons for the challenge. The request must be submitted within five days from the date of learning of the relevant circumstances. 

4.2.3 Where an arbitrator is challenged, they can choose to resign without giving reasons and this resignation will not be considered an admission of the reasons for the challenge. 20 Regulations, art 5

4.2.4 If the challenged arbitrator does not withdraw, or the other party does not agree to the request within five days of it being submitted, the tribunal shall determine the request within 15 days from the date of receipt. In the event the request is rejected, the request may be referred to the Court of Appeal within 30 days, for a non-appealable decision. 21 Arbitration Law, art 17(1)  

4.2.5 Further, where an arbitrator is unable or fails to perform their duties, resulting in an unjustified delay to the proceedings and there has been a failure by the arbitrator to withdraw and the parties agree to their withdrawal, then either party may refer the issue to the Court of Appeal for a final decision. 22 Ibid, art 18(1)  

4.2.6 Where an arbitrator needs to be replaced, an alternative arbitrator will be appointed using the procedures followed in the original selection process. 23 Ibid, art 19 This will result in the suspension of the proceedings until a replacement has been appointed, unless the need for a replacement has arisen due to the disqualification of an arbitrator. 24  Regulations, art 6

4.3.1 When an arbitrator is appointed, an independent contract is entered into between the arbitrator and the parties regarding the applicable fees. 25 Arbitration Law, art 24(1) Where no agreement on fees is reached, or where the Court of Appeal itself has made the appointment, the court shall determine these (on a non-appealable basis) 26 Ibid, art 24(2) and may request a copy of any contracts concluded with the arbitrators. 27 Regulations, art 7(2) Copies of any contracts entered into with the arbitrators shall be deposited at the relevant arbitration institution (being the competent authority administering the case). 28  Ibid, art 7(1)

4.3.2 The agreed fees will also be documented within the final arbitral award alongside the other costs of the arbitration. 29 Arbitration Law, art 42(2)

5.1.1 The Arbitration Law provides for the tribunal to determine its own competence, including challenges relating to the absence of an arbitration agreement, the invalidity of an arbitration agreement and whether the subject matter of the dispute falls within the scope of the arbitration agreement. 30 Ibid, art 20(1)

5.1.2 The tribunal may determine its competence in this regard, either prior to or in conjunction with its decision on the merits of the dispute. 31 Ibid, art 20(3) If the decision as to jurisdiction is reserved until the final award, the challenging party may only appeal by applying for the nullification of the award. 32 Ibid, art 20(3)

5.2.1 The parties are at liberty to agree to the tribunal (at one party’s request) ordering interim measures. Further, the tribunal may ask the party seeking the measures to provide a financial guarantee for the execution of interim relief. 33  Ibid, art 23(1)

5.2.2 If the party against whom the measures are sought fails to comply, then the tribunal may authorise the requesting party to take the necessary measures to execute the tribunal’s order. 34 Ibid, art 23(2)  

6.1.1 The parties are free to choose the procedure and therefore the institutional rules that apply. 35 Ibid, art 4 and art 25(1) However, in the absence of such an agreement, the arbitral tribunal may decide on the procedure it thinks fit. 36 Ibid, art 25(2) If the tribunal determines the procedure, the parties must be informed by the arbitral tribunal of the procedure to be adopted ten days prior to the adoption of that procedure. 37 Regulations, art 8

6.2.1 The claimant must submit a request for arbitration to the respondent to start the proceedings. 38 Arbitration Law, art 26 The Regulations prescribe that the request must include various details, including: the names of the parties, details of their contractual relationship and the arbitration agreement, details of the dispute, a summary of the request for relief and details regarding the arbitrator proposed (where a sole arbitrator is required) or to be appointed on its behalf. 39 Regulations, art 9.  

6.2.2 The proceedings will start the day the request for arbitration is received by the other party, unless agreed otherwise. 40 Arbitration Law, art 26  

6.3.1 The Regulations permit the joining of third parties, provided that both the parties and the third party agree. 41 Regulations, art 13  

6.4.1 The parties are free to agree on the seat of the arbitration, as being in either KSA or abroad. 42 Arbitration Law, art 28 The Arbitration Law will apply to any arbitration seated in the KSA and to any arbitration seated internationally provided that the parties have agreed to this. 43 Ibid, art 2 Where there is no agreement, the tribunal will decide, having regard to the circumstances of the claim and convenience of the parties. 44  Ibid, art 28

6.4.2 The choice of seat shall not prejudice the tribunal's right to hold hearings or deliberations at any place it deems appropriate. 45 Ibid  

6.4.3 The arbitration shall be conducted in Arabic, unless the parties agree, or the tribunal determines otherwise. 46  Ibid, art 29(1)

6.5.1 The written proceedings shall be conducted in accordance with the timetable agreed by the parties or directed by the tribunal. 47 Ibid, art 30 The Arbitration Law does not prescribe time limits for commencing an arbitration or any time limit for submission of pleadings. Under Shari'a law, there are no prescribed limitation periods, as one of the applicable maxims of Saudi Arabian law is a just right never dies.

6.5.2 In the first instance, the claimant shall send the statement of claim setting out the facts of the claim and the relief requested. 48 Ibid, art 30(1) Thereafter, the respondent shall issue its defence and any counterclaim, although a counterclaim may be submitted later if the tribunal considers there is justification for the delay. 49 Ibid, art 30(2) Either party can amend or expand upon their claims during the proceedings, unless the tribunal decides otherwise to avoid delay. 50 Ibid, art 32  

6.5.3 Unless otherwise agreed, the tribunal may decide that written evidence is sufficient to make a decision and dispense with the requirement for a hearing. 51 Ibid, art 33(1) Where any hearing is held, the parties must receive sufficient advance notification of the dates. 52 Ibid, art 33(2) Once the hearing has taken place, the minutes thereof must be signed by the witnesses, experts and the parties, along with the tribunal. Unless otherwise agreed, the minutes must be distributed to the parties. 53 Ibid

6.6.1 If the claimant fails to submit a written statement of their claim, without reasonable justification, then unless the parties agree otherwise, the arbitration will be terminated. 54 Ibid, art 34(1) However, if the respondent fails to submit a defence, without reasonable justification, then unless the parties agree otherwise, the arbitration will continue. 55 Ibid, art 34(2)  

6.6.2 If either party fails to attend the hearing, the tribunal can make a decision based on the evidence they have before them. 56 Ibid, art 35  

6.7.1 A copy of the evidence relied on by the parties shall be sent to the tribunal and the other party, including any expert reports or other evidence being relied upon. 57 Ibid, art 31 This will take place within the time period agreed upon by the parties or determined by the tribunal. 58 Ibid, art 30

6.8.1 The tribunal may appoint experts to provide reports regarding the issues in dispute, 59 Ibid, art 36(1) and each party shall provide information to the expert and access to documents as required. 60 Ibid, art 36(1) Following the issuance of the expert report, the parties shall be given an opportunity to comment upon its contents 61 Ibid, art 36(3) and the tribunal may decide (on its own or at the request of one of the parties) to hold a hearing for the examination of the expert. 62 Ibid, art 36(4)

6.9.1 The Arbitration Law contains no express provisions governing disclosure. However, the tribunal may request assistance from the concerned authority 63 The “concerned authority” is not further specified in the Arbitration Law. to order the production or inspection of documents. 64 Arbitration Law, art 22(3)

6.10.1 The Arbitration Law does not specify that the arbitral proceedings are confidential, but mandates that the arbitral award shall not be published (in whole or in part) without the parties' agreement. 65 Ibid, art 43(2) There is no rule prohibiting the parties from agreeing on confidentiality provisions within the arbitration agreement.

7.1.1 The parties are permitted to agree on the substantive law pertaining to the dispute. 66 bid, art 38(1)(A) Where there is no agreement, the tribunal shall apply the substantive law that it considers most relevant to the subject matter of the dispute, 67 Ibid, art 38(1)(B) taking into account the contract, norms, customs and the usual course of dealing between the parties. 68 Ibid, art 38(1)(C)

7.2.1 The award shall be issued within the period agreed by the parties but, in the absence of an agreement, the final award will be issued within twelve months from the date of commencement of the arbitration. 69 Ibid, art 40(1) However, in all cases, the tribunal may decide to extend the deadline for issuing the award by a further six months (unless otherwise agreed by the parties). 70 Ibid, art 40(2) If the arbitration award is not issued by the revised deadline, then either party can ask the court to specify a further deadline or to terminate the proceedings. 71 Ibid, art 40(3)

7.2.2 In terms of the award itself: 

• it must be written and signed by the arbitrators; 72 Ibid, art 42(1)
• where there is more than one arbitrator, the award must be issued by the majority and include reasons for any arbitrators who have not signed; 73 Ibid, art 39(1), and art 42(1)
• it must specify the date and place of issue, the names of the parties, the names of the arbitrators, a summary of the arbitration agreement, a summary of the parties’ positions and the expert evidence, as well as details of the award itself; 74 Ibid, art 42(2) and
• it must also include a determination of the tribunal's fees, the expenses of the arbitration and set out how these are to be apportioned between the parties. 75 Ibid

7.2.3 A copy of the award must be delivered to the parties within 15 days of issuance. 76 Ibid, art 43(1) The arbitral tribunal shall then deposit the original award, and an Arabic translation of the award (if issued in a different language) with the court, also within 15 days of issuance. 77 Ibid, art 44

7.3.1 If the parties agree on settlement during the proceedings, they can request that the terms of the settlement be recorded before the tribunal. If this happens, the tribunal will issue an award on the basis of the settlement, which shall be enforceable on the same basis as a final award. 78 Ibid, art 45

7.4.1 Tribunals do not have the power to award interest. Interest, damages for consequential loss and punitive or exemplary damages are contrary to Shari’a law and are unenforceable.

7.4.2 The Arbitration Law provides that the arbitral award shall set out the tribunal’s fees and the expenses of the arbitration and how these are to be distributed between the parties. 79 Ibid, art 42(2) Notably, there is no express reference to the tribunal being empowered to award the costs associated with the parties' legal representatives and, as such, a specific agreement in this regard will be required. If the parties fail to agree on costs, no costs will be awarded. 

7.5.1 Provided the award was issued in accordance with the Arbitration Law, it shall be binding and enforceable against all parties. 80 Ibid, art 52

7.6.1 Within 30 days of receiving the award, the parties may request the tribunal to interpret any ambiguities in the award 81 Ibid, art 46(1) and the interpretation shall be issued within 30 days of the request being submitted. 82 Ibid, art 46(2) Any interpretation issued will be viewed as an integral part of the award itself. 83 Ibid, art 46(3)

7.6.2 In terms of material errors contained in the award, the tribunal of its own volition or at the request of one of the parties, shall make the required corrections. The correction must be made within 15 days of the date of the award, or within 15 days of receipt of a request to correct. 84 Ibid, art 47(1) The correction shall be issued in writing by the tribunal and notified to the parties within 15 days. 85 Ibid, art 47(2) Furthermore, if the tribunal exceeds its powers as regards the correcting of the award, this could lead to the award’s nullification under the Arbitration Law. 86 Ibid

8.1.1 Where a claim is filed in court and the defendant asserts its reliance on an arbitration agreement (prior to the submission of any defence), the court shall decline to hear the case. 87 Ibid, art 11(1)

8.1.2 Notwithstanding this, the court does have jurisdiction over a number of matters relating to the arbitration, including the appointment of arbitrators 88 Ibid, art 15(1)(B) and determining the tribunal’s fees where the parties fail to agree. 89 Ibid, art 24(2)

8.1.3 Further, either party can request that the court orders interim protective or precautionary measures, such as injunctions or freezing orders, at the request of one of the parties (prior to the commencement of the arbitration proceedings) or at the request of the tribunal after the proceedings have already begun. 90 Ibid, art 22(1)

8.1.4 In addition, the tribunal may request assistance from the court in relation to the conduct of the arbitration, such as summoning witnesses to attend or the disclosure of documents. 91 Ibid, art 22(3)

9.1.1 An award may not be challenged except by way of filing a nullification application. 92 Ibid, art 50  Any nullification action will need to be filed within 60 days of notice of the award. 93 Ibid, art 51(1)

9.1.2 In order to have the award set aside, the party must bring their case before the Court of Appeal in Riyadh, unless another Court of Appeal within KSA has been agreed. 94 Ibid, art 8 The circumstances under which an award may be nullified include:

• if the arbitration agreement was invalid because either party lacked legal capacity;
• if either party was prevented from submitting a defence for reasons beyond their control;
• if the award does not adhere to the rules the parties agreed on;
• if the tribunal rules on matters not included in the arbitration agreement; 95 Ibid, art 50(1)
• if the award violates Shari’a law or public policy;
• if the award was contrary to the parties’ agreement; or
• the subject matter of the dispute could not be arbitrated upon. 96 Ibid, art 50(2)

9.1.3 The party requesting to have the award set aside must attach to the request: the original award, the arbitration agreement and a translation of the award in Arabic. 97 Regulations, art 18 The Court of Appeal will then only be able to adjudicate on the setting aside of the award under Article 50 of the Arbitration Law on the grounds set out above, but will not examine the facts or the subject matter of the dispute. 98 Arbitration Law, art 50(4)

9.1.4 If an award is set aside by a court, then the parties can challenge the decision by appealing to the KSA Supreme Court within 30 days of the decision to set aside the award. However, if the nullification application is rejected, this cannot be appealed against. 99 Regulations, art 17

9.2.1 If a party applies to the Court of Appeal to have the award set aside, then this does not automatically stay the enforcement of the award unless the applicant requests this and the application is based on serious grounds. Any application for a stay of enforcement must be determined within 15 days and the court may order the provision of a financial guarantee by the applicant party. 100 Arbitration Law, art 54

10.1.1 Arbitral awards issued in accordance with the Arbitration Law will be enforceable. 101 Ibid, art 52 Before any application for the recognition and enforcement of an award may be filed, however, the prescribed period of 60 days for making a nullification application must have elapsed. 102 Ibid, art 55(1)

10.1.2 The application for the recognition and enforcement of an award must include the original award (or a certified copy) in Arabic, the arbitration agreement, and proof that the award was deposited with the competent court within 15 days of it being issued. 103 Ibid, art 53 Further, before an enforcement order for the arbitral award can be issued, the court must be satisfied that the award has been properly issued to the party against whom it was issued 104 Ibid, art 55(2)(C)  and that it does not:

• conflict with any decision issued by a court, committee or authority that has jurisdiction on the subject of dispute in KSA; 105 Ibid, art 55(2)(A)  or
• violate Shari’a Law or KSA public policy. 106 Ibid, art 55(2)(B)

10.1.3 No appeal against an order for the recognition and enforcement of an award is permissible. 107 Ibid, art 55(3)

10.2.1 Once an order for the recognition and enforcement of the award is issued, the execution thereof in KSA will be governed by procedures of the Execution Law which provides for execution of both domestic and international judgments and arbitral awards in KSA.

10.3.1 To enforce an international award, it must be verified that:

• the Saudi courts do not have jurisdiction to hear the matter;
• the proceedings were in compliance with due process; 
• the award is final in the country where it was issued; 
• the award does not contravene any judgment or order issued in the KSA; and 
• it complies with KSA public policies. 108 Execution Law, art 11 and art 12

10.3.2 In addition, KSA acceded to the New York Convention in 1994 with a reservation that it would be restricted to those awards made in other contracting states. 

10.3.3 Therefore, parties to arbitrations seated in jurisdictions which have acceded to the New York Convention, will generally be permitted to present their awards for recognition and enforcement in KSA under the provisions of the Arbitration Law.