Saudi Arabia: Enforcing Foreign Arbitral Awards Where Assets Are In Saudi Arabia

A recent case may represent a tangible sign that the enforcement of foreign arbitral awards in KSA has entered a new era. Saudi Arabia has recently enforced a US$18.5 million foreign arbitral award rendered under ICC Rules, clearing a significant hurdle to executing the award against assets held in the Kingdom.

Recognition of a Foreign Arbitral Award Lawyers for a UAE claimant have recently announced that a Saudi Arabian court has enforced a US$18.5 million foreign arbitral award rendered under ICC Rules. This is the first hurdle to executing the award against assets held in the Kingdom.

The arbitral award was issued by a three-member tribunal composed of common-law trained arbitrators seated in London.

Positive Signs While Saudi Arabia has been a signatory of the New York Convention since 1994, it has been notoriously difficult to get arbitration awards, particularly foreign awards, enforced in Saudi Arabia, adding a layer of risk to doing business with entities with assets held primarily in the Kingdom.

Over the past four years, there have been significant pro-arbitration amendments to Saudi legislation. In 2012, Saudi Arabia adopted a new Arbitration Law,1 based on the 1985 UNCITRAL Model Law on International Commercial Arbitration, allowing parties substantially more autonomy in arbitration proceedings. Subsequently, Saudi Arabia enacted a new Enforcement Law,2 which was meant to improve the enforcement of awards and judgments, including foreign arbitral awards. Notably, the Enforcement Law eliminated review of foreign arbitral awards by the Board of Grievances (the Board). The Board undertook a full review on the merits to ensure that the award was Shari'a compliant. Under the Enforcement Law, a foreign arbitral award is put before a specialised enforcement judge who is to undertake limited, streamlined review of enumerated criteria.

There has been scepticism as to whether legislative changes would have a practical effect. Even under the updated laws, an enforcement judge must satisfy himself that, inter alia, an award does not contradict Saudi public policy, i.e., is Shari'a compliant.

Conventional wisdom had been that, in order to meet that burden, it was best to have at least one Shari'a-trained arbitrator on the panel and seat the arbitration in a Muslim country to signal compliance.

The enforcement of this award, rendered by common-law arbitrators seated in the UK, could indicate that parties may be allowed greater flexibility in their choice of arbitrators and seat without compromising the enforceability of the award.

Caution Remains Warranted While enforcement of this award is a positive sign, caution is still warranted.

In Saudi Arabia there is no system of binding precedent or case reporting and each judge has substantial discretion, particularly with respect to what is—and is not—Shari'a compliant. In an economy like the Kingdom, it is also important to note that the Enforcement Law prohibits the seizure of or execution against property owned by the State.

In this specific case, it will be interesting to learn if the UAE claimant has received the amount award

Footnotes

1 Arbitration Law, issued through Royal Decree No. M/34, 16 April 2012.

2 Enforcement Law, issued through Royal Decree No. M/53, 3 July 2012.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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