INTERNATIONAL ARBITRATION 1/3LY
S AUD I A RB I T R AT I ON L AW 2012 : THE P OS I T I V E IMPA C T PRO JEC T ED?
RE VISED LEGISL ATION In theory, the 2012 Arbitration Law significantly improved the legal landscape for arbitration in KSA, which had previously been governed by an Arbitration Law enacted in 1983. In the intervening years, the Kingdomacceded to the New York Convention (1994) and the United National Commission on International Trade Law (UNCITRAL) created the ‘Model Law on International Commercial Arbitration’ (1985, with amendments in 2006). The 2012 Arbitration Law is based on theModel Lawbut incorporates significant local law elements; for example, any arbitral award can be challenged if it is inconsistent with Shari’ah. The Lawapplies to both domestic arbitration and international commercial arbitrationwith a Saudi seat, but not to foreign arbitral awards; with its remit limited in this way, the new law onlywent so far in ameliorating the legal environment for parties arbitrating disputes in the Kingdom. POSITIVE OUTCOMES Even so, a number of positive trends havematerialised as a result of the new legislation: the local courts have been generally supportive, for example in a number of cases they have declined to hear claims subject to binding arbitration clauses; and courts have recognised parties’ rights under the 2012 Law to adopt the rules of external arbitration centres as their agreed procedures. Indeed, in a recent case concerning an arbitration governed by the International Chamber of Commerce (ICC) Rules, the DammamCourt of Appeal required the claimant to file its Request for Arbitrationwith the ICC as the first step, and therefore declined the claimant’s application for the court to appoint the arbitrators. Furthermore, arbitral awards (domestic and foreign awards with Saudi seats)made under the 2012 Lawhave the same status as court decisions once they are ratified; and, combinedwith the 2013 Enforcement Law, there is nowa detailed process available to parties for converting an arbitral award into a recovery. This recent Enforcement Lawalso provides true benefit to parties attempting to enforce foreign awards in KSA. For a foreign award to be successfully enforced, it has long been a requirement that the award be both consistent with Shari’ah andmade in a location that reciprocally enforces Saudi judgements and awards. The benefit of the 2013 Enforcement Law is that the reciprocity requirement can be satisfied by theMinistry of Justice releasing an official statement that the issuing jurisdiction is on the approved list, if applicable. This obviates the need for courts to decide whether the seat of the arbitration is ‘reciprocal’ and is a great step forward in overcoming practical obstacles to the recognition and enforcement of foreign arbitral awards in Saudi Arabia.
BY BEN COWLING, PARTNER AT CLYDE & CO LLP
In April 2012, the Kingdom of Saudi Arabia (KSA) enacted a new Arbitration Law which was hailed as a boon for investors and a major step forward for commerce. Two years on, we consider whether the law is having the positive impact anticipated. As the largest economy in the Arabian Gulf, KSA offers a wealth of potential for both domestic and international companies seeking to do business in the Kingdom. Yet its legal system remains a somewhat uninviting jurisdiction for foreign investors: its substantive law is based on Shari’ah, and the absence of a system of binding precedent means local courts are bestowed with broad discretion to determine disputes. Unsurprisingly, foreign investors seek to mitigate risk by including arbitration clauses when contracting with Saudi parties. Arbitration, however, is not a panacea for any given problem a party may encounter when endeavouring to resolve a dispute in the Kingdom.
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