United States: The New Enforcement Law Of Saudi Arabia: An Additional Step Toward A Harmonized Arbitration Regime

Following on the heels of last year's reform of the arbitration regime in the Kingdom of Saudi Arabia, a new Enforcement Law (the "new Enforcement Law") came into effect in March of this year by virtue of Royal Decree No. M/53.1 The new Enforcement Law, which replaces the relevant provisions of the 1989 Rules of Civil Procedure before the Board of Grievances, will have a particular impact on the enforcement of arbitral awards, whether domestic or international. While it is well known that arbitration is an institution that appears in Islamic law and that the legal system of the Kingdom of Saudi Arabia is based on Shari'a or Islamic law, it may come as a surprise to adepts of international arbitration that awards do not need confirmation by a qadi (or judge) in the Hanbali legal tradition (which is applied in Saudi Arabia), as this school considers that an award already has the characteristics of a court judgment.2 Nonetheless, in practice, if the opposing party is not willing to enforce the award, the confirmation by a qadi must be sought. It is against this backdrop that the new Enforcement Law was promulgated.

This new Enforcement Law contains provisions that affect all aspects of enforcement of domestic and foreign judgments as well as arbitral awards.

Prior to the new Enforcement Law, parties had to bring applications for the enforcement of foreign judgments and arbitration awards before the Board of Grievances.3 Procedure before the Board was lengthy and rigid because the Board was not created solely to hear enforcement requests but also to deal with some of the more important, commercial issues before Saudi courts. As such, the Board of Grievances would undertake a full review on the merits of each award to make sure that the award was compliant with Shari'a; parties were met with the possibility that their award would be refused enforcement due to an arbitrator's unfamiliarity with such Shari'a requirements. In addition, all relevant documents from the arbitration needed to be submitted to the Board in Arabic to allow such a review. Parties seeking the enforcement of foreign judgments or awards thus faced significant delays and were exposed to a retrial of the dispute on the merits by the Board.

The Jadawel Intl. v. Emaar Property case is a notorious example that left a bitter taste for one of the parties. In 2006, Jadawel started arbitration before a three-member tribunal seated in Saudi Arabia. It claimed damages in the amount of US$1.2 billion based on the breach by Emaar of a joint venture agreement relating to a construction project. Jadawel contended that Emaar had formed a partnership with another party in breach of the joint venture agreement. The arbitration spanned a two-year period; finally Jadawel's claim was dismissed and Jadawel was ordered to pay legal costs. However, the award was submitted to the Board of Grievances for enforcement. The Board re-examined the merits to ensure compliance with Shari'a. In its ruling, the Board of Grievances reversed the award; the damages awarded to Emaar were annulled and Emaar was ordered to pay more than US$250 million of damages to Jadawel. Such scenario is unlikely to happen under the new Enforcement Law.

The new Enforcement Law abandons the old system of enforcement proceedings before the Board of Grievances and entrusts enforcement to a relatively new jurisdiction, the Enforcement Judge.4 Several changes are worthy of mention:

  • Article 1 of the new Law defines the Enforcement Judge as "the Chairman and Judges of the Enforcement Circuit, the Enforcement Circuit Judge, or the Judge of the Single Court." This new jurisdiction was created in late 2007 to deal with all enforcement issues. Whereas procedure before the Board of Grievances was lengthy and cumbersome, procedure before a judge specialized in the enforcement of such awards and judgments aims to be more expedient.
  • While the previous regime applied only to foreign judgments and merely by extension to arbitral awards, Article 12 of the new Law makes express mention of arbitral awards.
  • Article 2 empowers the Enforcement Judge to enforce and monitor the enforcement of judgments and awards in Saudi Arabia, except for those rendered in administrative and criminal matters. Furthermore, the Enforcement Judge is required to follow and to respect Shari'a principles in the course of enforcement, unless the law stipulates otherwise.
  • Article 9 provides for compulsory enforcement upon presentation of an executive deed, including a final arbitral award.
  • Article 10 stipulates that appeals of the Enforcement Judge's decision suspend enforcement, parting with a trend in recent domestic legislation in other parts of the world, such as Article 1526 of the French Civil Procedure Code.
  • Article 11 of the new Enforcement Law states that the Enforcement Judge may enforce a foreign arbitral award only on the basis of principles of reciprocity5 and if the party seeking enforcement can ensure that (i) Saudi courts do not have jurisdiction with regards to the dispute, (ii) the award was rendered following proceedings in compliance with the requirements of due process, (iii) the award is in final form as per the law of the seat of the arbitration, (iv) the award does not contradict a judgment or order issued on the same subject by a judicial authority of competent jurisdiction in KSA, and (v) the award does not contain anything that contradicts Saudi public policy.
  • Article 7 allows the Enforcement Judge to take "all precautionary steps" and "seek assistance from the concerned authorities" if a party should resist or violate enforcement. In addition, the new Enforcement Law lays out the procedures available to an Enforcement Judge in pursuit of enforcement; they include provisional attachment (Arts. 23-33), enforceable attachment (Arts. 34-48), attached funds sale (Arts. 49-59), debtor funds under third-party custody (Arts. 60-67), direct enforcement (Arts. 68-72), and those in case of insolvency of the party against whom the award is being enforced (Arts. 77-92).

The new Enforcement Law represents a great step toward harmonization of Saudi law with international standards and a facilitation of enforcement of arbitral awards with the creation of a specific jurisdiction and specific procedures applicable to such enforcement. It should, in theory, guarantee that the merit of the dispute will not be revisited. However, it remains to be seen what effect these provisions will have in practice. For example, the new Enforcement Law cannot guard against any public policy issues found in awards rendered by foreign arbitrators not versed in Saudi law or Islamic concepts. An arbitral award that violates Saudi public policy, for example, by granting interest (or riba), which is prohibited under Shari'a, may run into problems in enforcement. In such cases, Enforcement Judges may require the entire damages aspect of an arbitration to be reheard, especially where the payment of interest is not severable from the award. Nonetheless, the new Enforcement Law remains a further step toward international legal principles and a strong compliment to the 2012 Arbitration Law.

Footnotes

1. Saudi Arabia's new Enforcement Law was issued through Royal Decree No. M/53 of 13 Sha'ban 1433 Hejra corresponding to July 3, 2012 Gregorian.

2. See S. Saleh, Commercial Arbitration in the Arab Middle East, 2006, p. 66.

3. See Article 13(g) of the Grievances Board Law.

4. The office of the Enforcement Judge is relatively new, having been created by the Judiciary Regulation, Royal Decree No. M/78 of 19 Ramadan 1428 Hejra corresponding to October 1, 2007 Gregorian.

5. Invoking the reciprocity reservation to the New York Convention, Saudi courts have refused to enforce arbitral awards from jurisdictions that would not enforce Saudi judgments or awards.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions