Litigation 2021 Comparisons

Last Updated December 04, 2020

Law and Practice

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Hatem Abbas Ghazzawi & Co. is an independent Saudi Arabian law firm with offices in Jeddah and Riyadh. The firm regularly acts for international clients in disputes before Saudi Arabian courts. As an independent firm, it is often instructed by other law firms, including firms with Saudi Arabian affiliates when their local offices are conflicted. It remains the first-choice Saudi counsel for many foreign companies and international law firms seeking advice on Saudi Arabian law. Recent clients include SAMBA Financial Group, Citicorp Trustee Company Limited and Golden Belt 1 Sukuk Company. The firm is currently involved in six bankruptcy proceedings, including the Maan Al Sanea/Saad Trading financial reorganisation procedure involving claims totalling USD21 billion. This is the first financial reorganisation under Saudi Arabia’s new bankruptcy legislation.

The Kingdom of Saudi Arabia was created as a state on 23 September 1932. From its inception, the government has made it its express policy to govern according to the principles of Islamic law (the Sharia). This was given statutory expression by the Basic Law of Rule, Royal Order No A/90 of 27 Sha’ban 1412 Hejra corresponding to 1 March 1992. Although not so in name, in practice it amounts to the Kingdom’s constitution.

The fundamental principles of Islamic law were laid down between the seventh and tenth centuries of the Common Era (CE). Islamic law continues to evolve, but there is no codified set of rules, nor any system of judicial precedent. In the absence of codification, recourse is had, in ascertaining the Islamic law rules to apply to a given issue, to the writings of jurists regarded as authoritative by judges and others tasked with the interpretation and application of Islamic law in any given jurisdiction. There are several madhahib (schools of Islamic law) within the Sunni tradition. Historically, it is the Hanbali school that has been dominant in the territory that is now Saudi Arabia. The Islamic law texts that Saudi jurists regard as authoritative were compiled during the period from the 13th to 17th centuries CE. In the nature of things, these texts reflect the concerns of a pre-industrial society and do not address many commercial, business or economic issues.

Under Islamic law, and consequently under modern Saudi law, a government may issue "regulations" (as opposed to "laws"). The limit on the government’s ability to legislate is that no legislation may conflict with established Islamic law principles.

In theory, Islamic law is meant to be all-embracing and, therefore, all legislation is intended to supplement Islamic law, and statutes are referred to as regulations, rather than laws or acts. In practice, there are numerous areas of law where Islamic law offers few or no guidelines and where government-made legislation is, therefore, the only law. However, where a given subject matter is covered in some detail in the authoritative Islamic law texts, the Saudi Arabian government tends not to legislate in those areas. For example, there is no Saudi Arabian legislation setting out general principles of contract law.

Proceedings before Saudi Arabian courts are inquisitorial in nature. Accordingly, the judges may raise issues in the course of proceedings that neither party has advanced and it is not uncommon for the judges to start new lines of enquiry once the parties’ formal submissions are closed.

Saudi Arabia has courts that are administered by the Ministry of Justice, and specialised tribunals. The General Courts (also known as the Sharia Courts), the Commercial Court and the Labour Courts are under the Ministry of Justice administration.

Among the other specialised tribunals (whose names mostly explain their scope of jurisdiction fully) are:

  • the Administrative Court, also known as the Board of Grievances, which has exclusive jurisdiction over disputes to which the government or government agencies are party;
  • the Committee for the Resolution of Securities Disputes, which deals with disputes falling within the ambit of the Capital Markets Regulation and its Implementing Rules;
  • the Committee for Banking Disputes; and
  • the Committee for the Settlement of Insurance Disputes.

The past ten years have seen considerable change to the administration of justice in Saudi Arabia, which was initiated under the Judiciary Regulation, Royal Decree No M/78 of 19 Ramadan 1428 Hejra corresponding to 1 October 2007. The Board of Grievances used to have jurisdiction in commercial disputes, which was transferred to the newly formed Commercial Courts in October 2017, at the same time widening the definition of commercial disputes to include construction cases and commercial property disputes. Labour disputes used to be administered by the Ministry of Labour’s Commission for the Settlement of Labour Disputes, whose jurisdiction was transferred to new Labour Courts in October 2018.

The enforcement of judgments has been reformed, as was arbitration. Most recently, the procedures of the Commercial Courts were overhauled by the Commercial Courts Regulation, Royal Decree No M/93 of 15 Sha’ban 1441 Hejra, corresponding to 8 April 2020 Gregorian, which entered into force on 16 June 2020.

Since early 2020, most filings and proceedings before Saudi Arabian courts and tribunals take place online. Physical hearings before the courts are open to the public, while proceedings before statutory tribunals tend to be in camera. Under the Commercial Courts Regulation 2020, public access to the particulars of a commercial case and the documents filed in it is possible upon payment of a fee, but a party with an interest may apply for an order that proceedings, or parts thereof, are kept confidential.

Non-Saudis do not have rights of audience before Saudi Arabian courts unless they appear as litigants in person. There is no formal requirement that litigants must be represented by licensed lawyers, but a non-lawyer may not represent more than three parties at any given time.

It is open to lawyers and their clients to agree to the type of remuneration that suits both parties. Lump-sum fees, retainer, contingency fees and hourly charges are common. There are no restrictions on a third party funding lawyers’ fees and other costs in legal proceedings.

There are no restrictions on the types of lawsuits in which a third party may fund a party’s costs.

Third-party funding is available to the plaintiff and the defendant.

There is no minimum or maximum limit for third-party funding.

The costs considered are a commercial issue.

Contingency fees are permitted. There is no legislation that addresses this issue.

There are no time limits by when a party to the litigation should obtain third-party funding.

In commercial cases, the claimant must ordinarily give 15 days’ notice before action to the defendant, without proof of which the claim cannot be filed online.

The concept of the time barring of substantive rights is alien to Islamic law. In practical terms, however, a similar result is reached by a doctrine broadly equivalent to estoppel by conduct. Thus, where a claimant has delayed bringing action for such length of time and in such circumstances as to indicate an implied waiver of the claim, the law will hold him to his implied waiver and bar his remedy. No precise set of rules exists as to when this doctrine may be invoked.

Each case will turn on its own facts and the court’s assessment of whether, in the circumstances, the lack of action — or of any positive act or indication — amounts to a waiver. Generally speaking, where the defendant relies on no more than pure inaction, the number of years would have to be in double digits.

Time bars are recognised under Saudi Arabian statute law, but only as procedural devices and not as substantive time bars. Moreover, these time bars are specific rather than general. Examples include the following:

  • under the Commercial Courts Regulation 2020, claims in commercial cases under the court’s jurisdiction are time barred after five years from when the cause of action accrued;
  • under the Labour Regulation, Royal Decree No M/51 of 23 Sha’ban 1426 Hejra corresponding to 27 September 2005, employment disputes must be initiated within not more than 12 months from the date on which the employment relationship ended;
  • under the Negotiable Instruments Regulation, Royal Decree No 37 of 11 Shawwal 1383 Hejra corresponding to 22 February 1964, claims under dishonoured cheques must be initiated within six months from the expiry of the period for presentation;
  • under the Civil Procedure Rules of the Board of Grievances, claims for judicial review of administrative action must be initiated before the Board of Grievances within 60 days from the concerned governmental department’s ruling;
  • under the Procedure Rules of the Committees for Adjudication of Insurance-related Disputes and Violations, Council of Ministers Resolution No 190 of 9 Jumada Awwal 1435 Hejra corresponding to 10 March 2014, actions on insurance disputes may not be heard after the expiration of five Hejra years from the date of entitlement to the amounts the subject matter of the claim;
  • the Capital Market Regulation, Royal Decree No M/30 of 2 Jumada Thani 1424 Hejra corresponding to 31 July 2003, imposes a five-year time bar on certain claims before the Committee for the Resolution of Securities Disputes; and
  • most claims under the Commercial Maritime Regulation, Royal Decree No M/33 of 5 Rabi Thani 1440 Hejra corresponding to 12 December 2018, become time barred after two years, including claims arising out of carriage of goods by sea, charterparties, salvage, collisions, personal injury and marine insurance.

The Saudi Arabian courts have jurisdiction over Saudi Arabian citizens even if they are not resident in Saudi Arabia. The Saudi Arabian courts have jurisdiction over non-Saudis who are resident in Saudi Arabia.

The Saudi Arabian courts have jurisdiction over non-resident foreigners in the following circumstances:

  • if the dispute concerns assets in Saudi Arabia or obligations that were initiated or executed in Saudi Arabia;
  • if the dispute involves a bankruptcy declared in Saudi Arabia; and
  • if the dispute is filed against several co-defendants and one of them is subject to the court’s jurisdiction.

In addition to the above, the Saudi Arabian courts have jurisdiction over non-resident Muslim foreigners in certain family law and inheritance contexts.

From 2020, all actions must be initiated by filing, online, a brief statement of claim, together with the key documents on which the claimant relies. More detailed submissions can be filed in due course, and in the course of proceedings both parties can change their arguments to a certain extent.

Service of process on resident individuals and corporations is carried out electronically by the court. Service outside the jurisdiction must be effected through diplomatic channels.

If a defendant fails to appear after having been duly summoned, the claimant can make an application to have the defendant brought before the court by the police. If it is not possible to bring the defendant before the court, a default judgment will be entered.

Class action were first introduced in 2017 before the Committee for the Resolution of Securities Disputes. The Commercial Courts Regulation 2020 has introduced class actions in commercial disputes. A class action before the Commercial Court requires not less than ten claimants with the same claim and cause, and against the same defendant. The claimants must be represented by the same advocate and the claims must be consolidated into a single statement of claim.

It is possible to consolidate claims with an ongoing class action. Before a class action proceeds to trial, a settlement offer must be made to, and considered by, the claimants.

There are no requirements to provide clients with a cost estimate prior to litigation. It is common to conduct litigation on a contingency fee or fixed fee basis.

Saudi Arabian legal actions proceed in a series of short hearings and one can make applications at any stage of the proceedings.

Applications to dismiss a case on the basis of an agreement to arbitrate or to submit disputes to the courts of another jurisdiction must be lodged before a substantive defence is lodged. Once a substantive defence is lodged, the defendant is deemed to have acquiesced to the court’s jurisdiction, although it is still open to the court to dismiss the case on jurisdictional grounds on its own motion. There are no mechanisms for summary judgment.

It is common for defendants to contest proceedings on the basis that the Saudi Arabian courts do not have geographic jurisdiction over a given dispute, or that the dispute should come before a different Saudi Arabian court or judicial tribunal.

A party with an interest in the subject matter of a dispute may file a petition or make an oral request to the court to join as claimant or defendant. Judges also have the discretion to join an interested party to proceedings without the party having made an application to join.

There is no security for costs in Saudi Arabian legal proceedings.

To the extent that costs are awarded, this takes place upon final judgment.

There are no fixed time limits for rulings on ordinary motions. Expedited applications may be made for:

  • a survey for proof of status;
  • prohibition on travel;
  • a stay of new works;
  • judicial custodianship;
  • preservatory attachment;
  • obtaining a product sample;
  • preservation of specific documents;
  • prohibition on disposal or permitting the same;
  • applications having the status of urgency in commercial regulations.

Before the Commercial Courts, rulings on expedited applications must be made within three days from the date of referral.

Other than before the Commercial Courts, there is no discovery of documents in Saudi Arabian legal proceedings. The claimant must substantiate their case on the basis of the documents that are in their possession and the defendant must defend the case on the basis of the documents that are in their possession.

Under the Commercial Courts Regulation 2020, a party may request the other party to disclose documents that are connected with the claim. Such documents must be particularised by specific identity or by type; they must have a connection with the commercial transaction, or result in a fact therein being brought to light; and they must not be of a confidential character. A plea of confidentiality must be supported by reasons why the documents are confidential. Failure to disclose documents as ordered by the court may be treated as circumstantial evidence by the court.

Other than before the Commercial Courts, there are no procedures under which a litigant can obtain discovery from a party that is not a party to the proceedings. Under the Commercial Courts Regulation 2020, a party can apply for an order to:

  • join another party in order to compel them to present a document in his possession that is related to the action; or
  • order any governmental authority to present any information or documents in its possession relating to the action, without prejudice to the relevant regulations.

Mandatory disclosure of documents before the Commercial Courts is a new development, and non-existent before other courts and tribunals. To get an order for disclosure before the Commercial Courts:

  • the documents must be particularised by specific identity or by type;
  • the documents must have a connection with the commercial transaction, or result in a fact therein being brought to light; and
  • they must not be of a confidential character.

A claimant must prove their claim on the basis of the documents in their possession and a defendant must defend the claim on the basis of the documents in their possession. A litigant or the court may ask a party to affirm or deny the claim on oath, which is a solemn procedure and used to be rarely invoked but has become more common in recent years. If a claim is denied on oath, or the claimant fails to confirm their case on oath, the case is dismissed, with only limited grounds for appeal.

The Legal Profession Regulation, Royal Decree No M/38 dated 28 Rajab 1422 Hejra corresponding to 14 October 2001, provides that lawyers must treat information received from clients as confidential. Other than before the Commercial Courts, there are no rules that grant legal privilege to attorney-client communications. Under the Commercial Courts Regulation 2020, a party may oppose an application for disclosure on the basis of confidentiality. In principle, it is possible that this may be extended to lawyer client communications if these are appropriately marked.

The Implementing Rules of the Commercial Courts Regulation 2020 provide that whether a document is confidential is determined in the court’s discretion but, when exercising that discretion, the court must consider:

  • whether the confidentiality is established under a regulation, or under a decision of the competent authority;
  • whether the agreement between the parties provides that a document shall be confidential or non-confidential; and
  • whether access to a document would entail a violation of any right to commercial confidentiality or any rights connected therewith.

It is generally difficult, but not impossible, to obtain injunctive relief through the Saudi Arabian courts. Where injunctive relief is granted, it tends to be in the form of an injunction, rather than specific performance. Such orders may freeze assets or ban a defendant from travelling.

Injunctive relief can be granted at a single hearing. Before the Commercial Courts, such hearings must take place within three days from the referral. Under the Commercial Courts Regulation 2020, the court may rule on an expedited application outside working hours or on holidays.

Injunctive relief can be obtained on an ex parte basis.

An application for an asset freeze or travel ban requires the submission of countersecurity and the claimant can be held liable in respect of the defendant’s losses if the claim fails.

Saudi Arabian courts do not exercise extraterritorial jurisdiction.

Injunctive relief cannot be obtained against third parties.

There are no formal mechanisms against a defendant who fails to comply with an injunction. It is in the judge’s discretion to have the defendant arrested.

Proceedings before all Saudi Arabian courts and judicial tribunals are broadly similar to proceedings in civil law jurisdictions. Litigation takes place in a series of short hearings, which can last between 15 minutes and one and a half hours. Since May 2020, most hearings have been conducted on electronic platforms, which may remain the norm even after the COVID-19 situation is over.

Once the action is formally instituted, the parties are summoned to a hearing, usually within a few weeks of the filing of the complaint. At this and subsequent hearings the parties file written submissions, oral argument is heard and evidence is produced. The parties’ arguments unfold step by step. It is open to the parties to change their respective arguments at any stage of the proceedings.

In between hearings there are normally intervals of several weeks, depending on the concerned court’s case-load. There is no limit on how many submissions may be filed in the course of proceedings. It is common for both parties to exhaust their respective arguments before their submissions are closed.

There are no case management hearings or similar proceedings in Saudi Arabia.

There are no jury trials in Saudi Arabia.

Most commercial cases proceed on documentary evidence alone. A party or its employees or agents are not treated as witnesses and their statements have no evidential value. Witnesses must be independent and the general standard of proof is the evidence of two male Muslims of good character, or one male and two females.

One important feature of Saudi Arabian law of evidence concerns the taking on an oath. If the claimant has failed to prove his case conclusively through witnesses or documentary evidence, he may challenge the defendant to deny his liability on oath. If the defendant accepts the challenge and denies the claim on oath, the case is closed with only limited means of appeal. It is also open to the defendant to ask the claimant to confirm his claim on oath and judges have the power to order either party to take the oath. Because of the extreme religious significance attached to demanding and taking an oath, the right to challenge a party was not frequently invoked in the past. However, in recent years challenges to take an oath have become more common.

The parties to Saudi Arabian legal proceedings are free to introduce expert evidence into the proceedings. Where technical or complex financial issues are raised, it is common for the judges to appoint an expert or experts as advisers to the tribunal. It is within the tribunal’s discretion whom it appoints as an expert and to accept or disregard all or part of the expert’s findings, but, ordinarily, the determination of technical or complex financial issues falls to the expert.

See 1.3 Court Filings and Proceedings.

Saudi Arabian proceedings are inquisitorial in nature and the judge has full conduct of the proceedings, including the questioning of witnesses. A judge may raise issues that neither party has raised. A judge can issue a judgment whenever he is satisfied that both parties have presented their case fully. This is usually done in the course of a hearing and a written judgment is issued a few weeks later.

Prior to the COVID-19 crisis and the move to electronic proceedings, legal proceedings typically took from 18 to 30 months to reach a final judgment. It is too early to judge whether the move to electronic litigation will alter these timeframes. In theory, electronic proceedings should be faster than physical hearings, but there still are glitches in the system leading to cancelled or postponed hearings.

It is open to the parties to settle a dispute at any time without the court’s approval, but court proceedings will only be formally discontinued if the claimant withdraws their complaint or the settlement is recorded before the court.

Given that court proceedings before courts and tribunals other than the Commercial Court are treated as confidential, settlements of lawsuits before them also remain confidential. A settlement that is recorded in the records of the Commercial Courts is not confidential, unless one or both parties can persuade the court to treat this information as confidential.

A settlement agreement made in the course of legal proceedings has the effect of a judgment. If a settlement agreement is notarised or formally sealed, it can be enforced like a judgment.

If a settlement agreement is obtained fraudulently or without authority, it can be set aside by the court.

The nature and scope of remedies available in Saudi Arabian proceedings are more limited than in many other jurisdictions. In general, the remedies recognised under Islamic law are the right to rescind a contract, restitution or damages for actual and tangible losses, with no means of recovering compensation for loss of anticipated future profits or loss of business reputation.

In cases of death or accidental personal injury, the responsible party is liable to pay blood money (diyah) as compensation to the victim or the victim’s heirs. The amount of blood money payable for accidental death was fixed early in the history of Islam at 100 camels, with personal injuries liability pro-rated with reference to this ceiling. From time to time, and location to location, the value of 100 camels has been expressed in a monetary equivalent. The current standard applicable in Saudi Arabia was laid down by Royal Order No 43108 of 3 Shawwal 1432 Hejra corresponding to 1 September 2011, at SAR300,000.

Punitive damages are not awarded by Saudi Arabian courts. Furthermore, because damages for loss of anticipated future profits or loss of opportunity are not awarded, the level of compensation tends to be relatively low by international standards.

The Saudi Arabian courts do not award interest in any manner of form.

Pursuant to the Enforcement Regulation, Royal Decree No M/53 of 13 Sha’ban 1433 Hejra corresponding to 14 July 2012, applications for the enforcement of judgments are lodged with enforcement judges, who have wide-ranging powers, including summoning a judgment debtor’s bankers and accountants. If a defendant fails to satisfy a judgment, their access to government services may be cancelled and their bank accounts are likely to be frozen. Travel bans are not uncommon and in extreme cases an uncooperative judgment debtor may be imprisoned.

The only international treaties on the reciprocal enforcement of judgments to which Saudi Arabia is a party are the Arab League Treaty on the Enforcement of Judgments signed at Riyadh on 16 April 1983, which superseded the Arab League Treaty on the Enforcement of Judgments dated 14 September 1952, and the Arab Gulf Cooperation Council Convention on the Enforcement of Judgments of 6 December 1995. However, a foreign judgment can be enforced in Saudi Arabia if the applicant can demonstrate that the country where the judgment was issued will give reciprocal treatment to Saudi Arabian judgments.

Until 14 February 2013, the Board of Grievances, being the tribunal having general jurisdiction over most categories of commercial and administrative disputes, had exclusive jurisdiction to hear applications for the execution of foreign judgments and arbitration awards. Since the enactment of the 2012 Enforcement Regulation, applications for the enforcement of foreign judgments must be submitted to enforcement judges.

In a judgment issued in 1992, the Board of Grievances ruled that a judgment of the English High Court of Justice was not enforceable on the basis of reciprocity in Saudi Arabia. The Board of Grievances ruled that the only judgments that are enforceable in Saudi Arabia on the basis of reciprocity are judgments of countries who are party to a treaty or convention for the reciprocal enforcement of judgments to which Saudi Arabia is also a party, or whose authorities would give executive force to judgments of the courts of Saudi Arabia without the requirement of instituting an action on the judgment. Similarly, a judgment of the Board of Grievances issued in 2007 that a judgment of the US District Court for the District of Columbia in the USA was enforceable in Saudi Arabia was overturned on appeal. In 2019, the Enforcement Court in Al Khobar refused to recognise an English High Court judgment, which refusal was confirmed by the Court of Appeal.

Appeals from the General Courts, the Labour Court and the Commercial Court are heard by the Court of Appeal. A decision of the Court of Appeal can be appealed before the Supreme Court on the basis that it contravenes Islamic Law or Saudi Arabian regulations, that the court passing judgment was not properly constituted or did not have jurisdiction, or that the court did not properly characterise the facts.

The Administrative Court, the Committee for Banking Disputes, the Committee for the Resolution of Securities Disputes and the Committee for the Settlement of Insurance Disputes and Violations of the Saudi Arabian Monetary Agency each has its own appellate tribunal, but the appeals process in these appellate tribunals is broadly similar.

All first-instance judgments and interim decisions of Saudi Arabian courts and tribunals, other than small claim with a value below USD13,350, can be appealed. A final and enforceable judgment of the Court of Appeal can be appealed to the Supreme Court, on the basis of errors of law, mischaracterisation or misdescription of facts, lack of jurisdiction and res judicata, but this does not apply to banking disputes, insurance disputes and securities disputes. An appeal to the Supreme Court does not result in a stay of enforcement. Lastly, it is possible to object to a final and enforceable judgment by way of review on the basis of narrow grounds such as fraud or forgery, lack of representation, and the like.

The rules of all courts and tribunals require the application for an appeal from a judgment to be filed within 30 days from receipt of the written judgment. Appeals against expedited judgments or orders must be filed within ten days from receipt of the judgment or order. Appeals are very common, and in most cases the appellate tribunal reviews the appeal application, the judgment and case file without further argument from the parties, and issues a decision making the judgment final and enforceable.

Where the appellate tribunal considers that the application has merit, it may refer the case back to the court or tribunal of first instance, with a request to adduce additional evidence or reconsider the facts in light of directions given by the appellate tribunal. In such situations, the court or tribunal of first instance usually invites further argument from the parties and issues a new judgment. There have been several instances of proceedings where the process was repeated three times before a final and enforceable judgment was issued. The appellate tribunal can also take over the handling of the case and make its own ruling.

The Court of Appeal can consider both issues of law and issues of fact, but will ordinarily remit the case to the court at first instance where further facts must be ascertained.

There are no rules that provide for the Court of Appeal to impose any conditions on granting an appeal.

Judgments which have been appealed are not final and enforceable until the Court of Appeal has confirmed the first instance judgment.

There are no court fees in Saudi Arabia. It is within the court’s discretion to award costs to a successful litigant. In the past this discretion was rarely exercised and when it was, the sums were modest and well below the cost of engaging a commercial law firm. More recently, the Commercial Court has been more willing to award costs to successful claimants.

Given that the awarding of costs is discretionary, there are no clear parameters that dictate how awards of costs are calculated.

Saudi Arabian courts do not award interest.

Islamic law prescribes that settlement is preferable to litigation and the courts are under a duty to exhort the parties to seek mediation or conciliation, if possible. The Saudi Centre for Commercial Arbitration offers alternative dispute resolution (ADR) facilities.

Under the Implementing Rules of the Commercial Courts Regulation 2020, conciliation and mediation is mandatory in:

  • disputes among partners in a mudaraba company;
  • disputes between merchants or claims against merchants under commercial contracts with a claim value below SAR1 million (USD266,000);
  • commercial disputes between spouses or close relatives; and
  • where the contract provides that disputes must be mediated.

In family disputes and labour disputes, the court will first refer the parties to official mediation before the case is heard by the court.

ADR in family and labour disputes, and before the Saudi Centre for Commercial Arbitration is well established.

The law governing arbitrations in Saudi Arabia underwent radical change with the enactment of the new Arbitration Regulation, Royal Decree No M/34 of 25 Jumada Awwal 1433 Hejra corresponding to 16 April 2012. Under the old legislation, arbitrations had to be conducted under close supervision of the competent court or judicial tribunal. In particular, once an award was issued, either party had an automatic right to raise objections on substantive and procedural grounds to the competent court. Such objections were common, with the courts often hearing all or part of the case anew and substituting their own ruling for that of the arbitrators, so that most commercial arbitrations in Saudi Arabia just added a further layer to the dispute resolution process.

The new legislation is based on the UNCITRAL model and removes much of the courts' control. Furthermore, it is now possible to conduct arbitrations in Saudi Arabia in a language other than Arabic and to appoint non-Muslim arbitrators. The parties are free to agree to the procedures of an international arbitration body, such as the Chartered Institute of Arbitrators or the ICC, or to the procedural rules of another country, or to determine their own procedural rules. Failing such an express choice, the procedural rules applicable under Saudi Arabian law govern the arbitration.

Under the new Regulation, no involvement of the courts is necessary in principle until the award is deposited with the competent court by the arbitral tribunal. Prior to that stage, the involvement of the courts will only be necessary if invoked by a party or the arbitrators; for example:

  • because the parties fail to agree on a sole arbitrator;
  • the respondent fails to appoint its arbitrator within 15 days of having been notified of the claimant's appointment;
  • there is an application for recusal of one or more arbitrators;
  • the parties or the arbitrators apply for provisional measures;
  • no agreement is reached with an arbitrator over their fees; or
  • the arbitrators are unable to reach a decision.

Disputes relating to personal status may not be submitted to arbitration. In general, cases involving the government or government agencies may not be submitted to arbitration without a Royal Order. However, under the Government Tenders and Procurement Regulation, Royal Decree No M/128 of 13 Dhul Qada 1440 Hejra corresponding to 16 July 2019, disputes under government procurement contracts may be submitted to arbitration with the permission of the Minister of Finance, provided that this takes place before the Saudi Centre for Commercial Arbitration.

Article 49 of the Arbitration Regulation provides that arbitral awards that are made in accordance with its rules may not be appealed in any form. However, under Article 50 an application for nullity of an award may be lodged with the competent court; for example, because of procedural defects. Furthermore, Article 50 (1) (d) provides that an award may be declared null if there is a failure to "apply any of the rules of law that the parties to the arbitration had agreed should be applied to the subject matter of the dispute" and Article 50 (2) provides that the competent court shall rule of its own motion that an award is void if "it contains material contrary to the provisions of Islamic Law and public order in the Kingdom".

This, obviously, leaves the door open to re-hearings of the dispute, whether the award was rendered in Saudi Arabia or abroad. Nevertheless, unless the parties have agreed otherwise, a ruling of nullity by the competent court does not invalidate the agreement to arbitrate. Therefore, in most cases a ruling of nullity should result in a new arbitration or a rectification of the award by the original arbitral tribunal.

Applications for the enforcement of arbitration awards must be lodged with an enforcement judge.

Pursuant to Royal Decree No M/11 of 16 Rajab 1414 Hejra corresponding to 29 December 1993, Saudi Arabia ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention), with effect from 18 July 1994, albeit subject to an express public policy reservation, which is commonly understood to mean that no part of an award that conflicts with Islamic law is enforceable in Saudi Arabia.

Under Article 9 (6) of the Enforcement Regulation, applications for the execution of foreign arbitration awards must be lodged with an execution judge. Article 11 of the Execution Regulation and of its Implementing Rules sets out the rules for the enforcement of foreign judgments and arbitration awards, which include the following:

  • the award must be final and unappealable;
  • there must not have been any action pending before a Saudi Arabian court in respect of the same issues;
  • the defendant was summoned to attend, was properly represented and was put in a position to defend himself; and
  • the award does not conflict with Islamic law.

Dispute resolution in Saudi Arabia has already undergone fundamental changes starting with the reform of the courts system that was begun in 2007, and the Arbitration Regulation and Enforcement Regulation of 2012. More recently, for the past five years, court proceedings (and government services generally) have gradually been moved to digital platforms.

The ongoing move from physical filings and hearings to digital platforms was accelerated as a result of the COVID-19 crisis in 2020, when all initial court proceedings and interim applications were moved online in a matter of weeks. When court services resumed in early June after the end of the initial lockdown, most hearings were moved to digital platforms. Although there are teething problems, by-and-large, the process works.

Practical problems include too short notice periods for online hearings, failures to provide digital links in time, and problems for the judges to identify parties or their representatives. In particular, the electronic notification system of the Commercial Court is less reliable than the systems of other courts and tribunals. It can only be hoped that these problems will be solved in due course. Neither can there be certainty whether the online system will be retained in its present form once the COVID-19 crisis is over.

Hatem Abbas Ghazzawi & Co.

Office Number 113
First Floor
Saudi Business Centre
Madina Road, Al Baghdadiyah
Jeddah 21442
Saudi Arabia

+966 12 650 4475

+966 12 657 2007

secretariat@saudilegal.com www.saudilegal.com
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Law and Practice in Saudi Arabia

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Hatem Abbas Ghazzawi & Co. is an independent Saudi Arabian law firm with offices in Jeddah and Riyadh. The firm regularly acts for international clients in disputes before Saudi Arabian courts. As an independent firm, it is often instructed by other law firms, including firms with Saudi Arabian affiliates when their local offices are conflicted. It remains the first-choice Saudi counsel for many foreign companies and international law firms seeking advice on Saudi Arabian law. Recent clients include SAMBA Financial Group, Citicorp Trustee Company Limited and Golden Belt 1 Sukuk Company. The firm is currently involved in six bankruptcy proceedings, including the Maan Al Sanea/Saad Trading financial reorganisation procedure involving claims totalling USD21 billion. This is the first financial reorganisation under Saudi Arabia’s new bankruptcy legislation.