Enforcing Foreign Arbitral Awards in Saudi Arabia: Practical Considerations

Foreign companies doing business in Saudi Arabia have historically been wary of relying on international arbitration as a dispute resolution mechanism. Their concerns are perhaps most famously illustrated by the ICC case, Jadawel International (Saudi Arabia) v. Emaar Property PJSC (UAE). This arbitration arose out of a construction dispute and proceeded in Saudi Arabia before a three member Tribunal. A final award was issued in September of 2008 dismissing Jadawel’s claims. The award was subsequently challenged, however, and the Second Commercial Court of the Board of Grievances re-examined the merits. In April 2009, the Board of Grievances declined to enforce the award and, moreover, reversed it.  In reversing the award, the Board of Grievances ordered Emaar to pay damages and make other reparations to Jadawel.

The prospect of an arbitration award being reversed on the merits during enforcement in Saudi courts was enough to persuade some parties that they would be better off opting for Saudi court litigation in the first instance, unless an arbitral award could be feasibly enforced outside the Kingdom. But much has changed in the intervening decade to change this perception. Among the most important developments in this regard are KSA’s adoption of modernised arbitration and enforcement laws. ‎

Three years after the award in Jadawel v. Emaar, Saudi Arabia published its long-awaited arbitration reform law in 2012. The new arbitration law, Royal Decree No. M/34 dated 24/05/1433 H, was followed in 2017 by the implementing regulations issued by the Council of Ministers’ decree No. 541 dated 26/08/1438 H (the new Arbitration Law). The new decrees replaced arbitration laws that had been in place for decades: Royal Decree No. M/46 (the old Arbitration Law) and the Rules for its implementation (Ministerial Resolution No. 7/2021/M).

The new Arbitration Law borrowed from the 1985 UNCITRAL Model Law on International Commercial Arbitration as amended in ‎‎2006. As such, the new law more closely aligned Saudi law with the application of international arbitration norms in other jurisdictions including, for example, competence-competence ‎and ‎separability).‎

A year after the new Arbitration Law was published, a new enforcement law also came into effect: Royal Decree No. M/53 (the new Enforcement Law). The new Enforcement Law superseded Articles 96 to 232 of the Law of Procedure before Shariah Courts (as enacted by Royal Decree No. M/21 dated 20/5/1421 H), as well as Article 13(g) in the Board of Grievances Law (as enacted by Royal Decree No. M/78 dated 19/9/1428), and all other statutory provisions inconsistent with the Enforcement Law.

Article 11 of the Enforcement Law sets out and clarifies the requirements for the enforcement of foreign orders, judgments and arbitral awards. For example, Article 11 is subject to the ‘requirements of international treaties and conventions’, which include limited grounds for overturning a foreign arbitral award. Article 50 of the new Arbitration Law contains similar grounds. Crucially, however, Article 50(4) of the new Arbitration Law also explicitly provides that, during any set-aside proceeding, the court may not review the merits of the case:

‘The Competent Court shall consider the annulment claim in the cases aforementioned in this Article without having the right to examine the facts and subject of the dispute.’

This clarification, among others in the new laws, is yielding results as cases make their way through local courts. In particular, following the passage of the arbitration and enforcement law reforms in 2012 and 2013, the number of applications for foreign arbitral award enforcement in Saudi Arabia has trended upward.

Among the first widely reported examples of successful recognition and enforcement occurred in 2016. The Riyadh Enforcement Court granted an enforcement application made by a UAE subsidiary of a Greek telecommunications company against a Saudi counterparty. At issue was arbitral award in favor of the UAE subsidiary resulting from an ICC arbitration seated in London. The Enforcement Court ruled that the US$18.5 million award should be enforced against the Saudi respondent in compliance with the new Enforcement Law.

Compliance as such refers in particular to the preamble and subsections of Article 11 in the Enforcement Law:

(Enforcement Law, https://www.moj.gov.sa/Documents/Regulations/pdf/En/76.pdf)

As enumerated, the competent court must ascertain that: (1) Saudi courts do not have jurisdiction; (2) the award complied with due process requirements; (3) the award is final under the law of the seat; (4) the award does not contradict a judgment or order issued on the same subject by a judicial authority in Saudi Arabia; and (5) the award also does not conflict with Saudi public policy.

What are the obstacles to meeting these requirements, in particular 4-5, which specifically invoke Saudi law and “public order”?

As always, the overarching point is that no regulation is deemed lawful if it violates a tenet of the shariah (See, e.g., Article 5 of the New Arbitration Law). Similarly, if an agreement or individual provision in a contract violates the shariah, it would be unenforceable (e.g., a provision that calls for the payment of interest, which is prohibited under the shariah as applied in Saudi Arabia). For this reason, parties should take care early in the dispute resolution process to ensure any award will be enforceable.

For example, while the arbitration law does not require that all arbitrators in a three-member tribunal be competent in shariah (e.g., wing arbitrators may have a civil law degree), parties should take the arbitrators’ familiarity with shariah law into consideration when selecting arbitrators so as to protect the enforceability of the award before Saudi courts.

I recently spoke with Mohammed Alfawaz at Alasim & Alfawaz in Riyadh to discuss examples of enforcement issues in Saudi courts currently.  One general observation is that enforcement court judges may lean towards granting foreign judgments and arbitral awards even if they are contrary to their own interpretation of Islamic Principles. At the same time,

“Enforcement Courts Judges do not enforce judgments and arbitral awards that are indisputably against Islamic Principles such as the recovery of interest. However, their approach is to deny the interest part of the award or judgment and grant the merits. Another issue concerns the general difficulty of getting injunctions in Saudi courts. Enforcement Court judges are likewise conservative in terms of granting injunctions. The reason is that the New York Convention does not address injunctions and therefore Saudi Arabia is not bound to grant them. Lastly, we have seen some judges who are concerned about the reciprocityissue even if there is a treaty. Some judges want to be certain that the other country is not declining to enforce Saudi Court judgements or arbitral awards”.

The significance of these points extends beyond the Kingdom. In multi-jurisdictional disputes where either the law of the seat or substantive law is different from the jurisdiction where the award is likely to be enforced, it is important for parties to consider whether the remedies sought in arbitration can be aligned with the laws and policies of the jurisdiction where the award may ultimately be enforced. For further discussion of enforcement and other topics, see Saudi Arabia in the Dispute Resolution Review (11th Edition).