Dispute resolution in the Kingdom of Saudi Arabia

Sara Aalamri, partner at AlGhazzawi & Partners, and one of the first Saudi women licensed to practise law in Saudi Arabia, provides an update and summary of the dispute resolution landscape in the jurisdiction.

1. Legal landscape of Saudi Arabia

The Saudi legal system is based on Islamic (Sharia) Law and secular laws and regulations enacted by the Government.[1] Saudi Arabia embarked on major reformations, recently invigorated by Vision 2030[2], to develop the legal system and environment in the country. The aim is to enable the provision of effective alternative dispute resolution in line with international standards and best practices to improve the legal environment, meet the aspirations of investors, promote trust and incentivise doing business in Saudi Arabia.

2. The development of Arbitration Law in Saudi Arabia

The new Arbitration Law of 2012 and its executive regulations in 2017 included reforms compatible with international treaties and the UNCITRAL Model Law, which prompted the listing of Saudi Arabia among states with legislation based on or influenced by the UNCITRAL Model Law.[3] The law regards the parties’ agreement as a cornerstone for their arbitration procedures and honours their selection of arbitrators and choice of foreign law, arbitral rules and language of proceedings. The law also recognises international commercial arbitrations conducted out of Saudi, where it would apply if the parties agreed to subject their arbitration to this law. While the law allows limited circumstances for setting aside arbitral awards, it prevents Saudi courts from reviewing the concluded dispute merits as it clearly sets out that arbitral awards have the authority of an enforceable adjudicated matter that is not subject to appeal.

3. New and amended laws

• The Enforcement Law of 2012 addresses the requirements for enforcing local and international arbitral awards in Saudi Arabia, facilitating enforcement based on reciprocity under international treaties. It also recognises that arbitral awards are unappealable and only allows limited circumstances for disputing enforcement. A recent study by the Saudi Center for Commercial Arbitration (SCCA) on the period 2017 to 2021 indicated that the Saudi Courts of Appeal issued 720 judgments, including 38 judgments by the Supreme Court, related to arbitral awards where the percentage of judgments setting aside arbitral awards on the basis of conflict with Sha ria and public policy represented only 8% of total claims filed, which further decreased to 3.8% in 2022.[4]
• The Government Tender and Procurement Law of 2019 provides that arbitration may be adopted in Government contracts subject to fulfilling the required conditions under the law and the Minister of Finance's approval. This has alleviated the threshold that was required under the former law. A further circular was adopted confirming that selecting the SCCA for administering the arbitration in a Government contract would facilitate the required approval.
• The Judicial Expenses Law of 2021 implemented judicial expenses on court proceedings for the first time in Saudi Arabia. The intention is to decrease overload on the court system, restrict frivolous lawsuits and promote private (or alternative) dispute resolution (ADR). Article 5 of this law imposes judicial expenses of 1% of the arbitral award amount, not exceeding SR 1 million, on claims to set aside the arbitral award, which is to be borne by the party requesting to set aside the award if its claim is rejected.
• The Civil Transactions Law coming into force this December 2023 marks a significant milestone in legal reform as it represents the first codification of Sharia’s well-established principles governing contracts and torts, facilitating application by courts and tribunals.
• Legal reforms widely accept electronic proceedings and hearings accommodating highly efficient and cost-effective ADR.

4. The Saudi Center for Commercial Arbitration (SCCA)

The SCCA was established in 2014. It is the first institutional arbitration centre in Saudi Arabia. Its mission is to provide professional, transparent and efficient private dispute resolution services[5] and raise awareness about ADR in Saudi Arabia. The SCCA adopts international standards and best practices, its arbitration rules were based on the UNCITRAL Arbitration Rules due to their widespread success and acceptance, and it also provides mediation services. The SCCA signed a cooperation agreement earlier this year with the Economic Cities and Special Zones Authority (ECZA) to provide institutional arbitration and other private dispute resolution services based on procedural mechanisms that will be designed for investors in economic cities and special zones. Recently, the SCCA introduced amendments to its rules, including provisions for unconditionally applying the parties’ choice of law, expedited procedures and cost-effective measures for small claims to increase efficiency.

5. Saudi Arabia is party to multiple treaties for the recognition and enforcement of judgments and arbitral awards, including:

• The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards;
• The Riyadh Convention for Judicial Cooperation between Arab States, and
• The Gulf Cooperation Council (“GCC”) Convention for the Execution of Judgments, Delegations and Judicial Notifications.

About the author: Sara Aalamri is a partner at AlGhazzawi & Partners, focusing on commercial law, construction disputes and international arbitration. As one of the first Saudi women licensed to practise law in Saudi, she was also one of the first class of female students to study law in Saudi. She graduated from King Abdulaziz University with honours. Sara earned her LLM from Boston University School of Law and was featured in the School's 150th Anniversary Commemorative Book as one of the 150 alumni around the world with influential achievements. Sara is a member of the Makkah Region Lawyers Committee under the Saudi Bar Association (“SBA”) and an officer of the International Bar Association’s Arab Regional Forum. 

Further Ciarb resources:

The State of Play of Arbitration in the MENA Region - November 2023

Footnotes:

[1] The two main sources of Sharia are as follows: (i) the Qur’an, which is the central text of Islam that is considered by Muslims to be the verbatim word of God; and (ii) Sunnah, which is the legacy of Prophet Mohammed (peace be upon him) including his sayings, acts and teachings. These two sources of Sha ria comprise the constitution of Saudi Arabia as stated in Article 1 of the Basic Law of Saudi Arabia. In addition to the two sources, Islamic (Fiqh) jurisprudence, based on Islamic scholars’ interpretation of Qur’an and Sunnah and the consensuses, and, sometimes, the analogy of Qur’an and Sunnah to construe an applicable rule on modern day issues, form a supplemental source of Sha ria.

[2] https://www.vision2030.gov.sa/en/

[3] https://uncitral.un.org/en/texts/arbitration/modellaw/commercial_arbitration/status

[4] SCCA, Key Findings of the 2022 SCCA Study Regarding Saudi Case Law Related to Arbitration, available at: https://sadr.org/assets/uploads/SCCA_Case_Law_Key_Findings_2022_En.png

[5] https://www.sadr.org/?lang=en