International Arbitration Comparative Guide

1 Legal framework

1.1 What is the relevant legislation on arbitration in your jurisdiction? Are there any significant limitations on the scope of the statutory regime – for example, does it govern oral arbitration agreements?

The relevant legislation governing arbitration in Saudi Arabia is Royal Decree M/34 (2012) promulgating the Arbitration Law. This is Saudi Arabia's second standalone arbitration law, which replaced the Arbitration Law issued by Royal Decree M/46 (1983).

Pursuant to Article 2, the Arbitration Law applies to:

• arbitrations conducted in Saudi Arabia; and
• international commercial arbitration conducted abroad where the parties have agreed that the Arbitration Law will apply.

Article 9(2) provides that an arbitration agreement must be in writing, failing which it will be null and void.

Moreover, the Implementing Regulations of the Arbitration Law (2017) form part of the relevant legislation governing arbitration in Saudi Arabia.

1.2 Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?

Article 3 of the Arbitration Law distinguishes between domestic and commercial international arbitration. It provides that an arbitration is international in the following situations:

• The main business centre of each arbitration party is based in more than one country at the time the arbitration agreement is concluded. If either party has several business centres, the centre that is most closely connected to the dispute will prevail. If either or both parties do not have specific business centres, their usual place of residence will prevail.
• The main business centre of each party is based in the same country at the time the arbitration agreement is concluded and one of the following places is outside that country:
• • the place of arbitration, as specified or referenced in the arbitration agreement;
  • the place of implementation of a significant part of the commitments arising out of the business relationship between the two parties; or
  • the place most related to the disputed subject.
• The arbitration parties agree to use a permanent arbitration organisation, commission or centre whose head office is located outside Saudi Arabia.
• The subject of the dispute covered by the arbitration agreement relates to more than one country.

1.3 Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?

Saudi arbitration law is inspired by the UNCITRAL Model Law and includes several arbitration-friendly principles, including:

• affording greater independence to the arbitral process;
• providing for enhanced procedural powers of the arbitral tribunal; and
• allowing clearer enforcement of arbitration agreements and awards.

1.4 Are all provisions of the legislation in your jurisdiction mandatory?

The Arbitration Law specifies its scope and application in Article 2. The parties can apply other rules to govern arbitrations with their seat in Saudi Arabia, provided that such application does not offend Saudi Arabia's public policy.

Generally, in the Saudi courts, violation of the mandatory provisions of Sharia is considered a violation of public policy.

Moreover, there are mandatory provisions concerning:

• the arbitration agreement; and
• the composition of the arbitral tribunal, including a requirement that the number of arbitrators be uneven (Article 13).

1.5 Are there any current plans to amend the arbitration legislation in your jurisdiction?

There has been only one amendment to the law: Article 24(1) was deleted pursuant to Royal Decree M/8 of 26 August 2021. We are not aware of any plans to amend the arbitration legislation in Saudi Arabia. However, its provisions are frequently interpreted by the Saudi courts.

1.6 Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?

Saudi Arabia has been a signatory to the New York Convention since April 1994.

Saudi Arabia applies the reciprocity reservations, having declared that it will restrict the application of the convention to the recognition and enforcement of arbitral awards made in the territory of a contracting state.

1.7 Is your jurisdiction a signatory to any other treaties relevant to arbitration?

Saudi Arabia is a party to several other treaties relevant to arbitration, including:

• the Hague Convention for the Pacific Settlement of International Disputes 1907;
• the Inter-Arab Investment Guarantees Corporation 1970;
• the Washington Convention 1980;
• the Unified Agreement for the Investment of Arab Capital in Arab Countries 1981;
• the Riyadh Convention on Judicial Cooperation between States of the Arab League 1983;
• the New York Convention 1985;
• the Gulf Cooperation Council Convention for the Execution of Judgments, Delegations and Judicial Notifications 1996; and
• various bilateral investment treaties.

2 Arbitrability and restrictions on arbitration

2.1 How is it determined whether a dispute is arbitrable in your jurisdiction?

Under Article 2 of the Arbitration Law, the provisions of the law will not apply to:

• personal status disputes;
• family law disputes; or
• matters that are not subject to reconciliation.

The arbitrability of a dispute can be challenged before:

• an arbitral tribunal under Article 20; or
• the courts under Article 50/1/a.

2.2 Are there any restrictions on the choice of seat of arbitration for certain disputes?

Article 28 of the Arbitration Law provides that the two parties to arbitration may agree on the venue of arbitration within Saudi Arabia or abroad. In the absence of such an agreement, the venue of arbitration will be determined by the arbitration tribunal, having regard to the circumstances of the case, including the convenience of the venue to both parties. This will not prejudice the power of the arbitration tribunal to convene at any venue it deems appropriate for:

• deliberation;
• hearing of witnesses, experts or the parties to the dispute;
• inspection of the subject matter of the dispute; and
• examination or review of documents.

3 Arbitration agreement

3.1 What are the validity requirements for an arbitration agreement in your jurisdiction?

Article (9) provides as follows:

• The arbitration agreement may be concluded prior to the occurrence of the dispute, whether in the form of a separate agreement or stipulated in a specific contract. The arbitration agreement may also be concluded after the occurrence of a dispute, even if such dispute was the subject of an action before the competent court. In such case, the agreement must specify the matters to be included in the arbitration; otherwise, the agreement will be void.
• The arbitration agreement must be in writing; otherwise, it will be void. An arbitration agreement will be deemed to be written if it is included in:
• • a document issued by the two parties; or
  • an exchange of documented correspondence, telegrams or any other electronic or written means of communication.
• A reference in a contract or a mention therein of any document containing an arbitration clause will constitute an arbitration agreement. Similarly, any reference in the contract to the provisions of a model contract, international convention or any other document containing an arbitration clause will constitute a written arbitration agreement if the reference clearly deems the clause as part of the contract.

According to Article 10, an arbitration agreement may be concluded only by persons having legal capacity to dispose of their rights, whether they be natural persons (or representatives) or corporate persons. Government bodies may not agree to enter into arbitration agreements, except with the approval of the prime minister, unless allowed by a special provision of law.

Moreover, if an agreement to resort to arbitration is reached while the dispute is being considered before the competent court, the court must refer the dispute to arbitration according to Article 12.

3.2 Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?

Under Article 21 of the Arbitration Law, an arbitration clause which forms part of a contract will be treated as an agreement independent of the other terms of the contract. The nullification, revocation or termination of the contract which includes such an arbitration clause will not entail the nullification of the arbitration clause therein, if that clause is valid. The Saudi courts have confirmed that the arbitration agreement must be treated as a ‘distinct agreement' and can be void or voidable only on grounds which relate directly to the arbitration agreement, and not merely because of the invalidity of the main agreement.

3.3 Are there provisions on the seat and/or language of the arbitration if there is no agreement between the parties?

The Arbitration Law does not specify the seat. However, certain formalities must be followed when certain types of parties sign an arbitration agreement – for example, government bodies may not enter into arbitration agreements without the prior approval of the prime minister, unless allowed by a special provision of law. Moreover, according to Royal Order 28004 of 28 January 2019:

• directed government agencies and state-owned companies seeking to settle their disputes with foreign investors must do so through arbitration which take place in Saudi Arabia at:
• • the Saudi Centre for Commercial Arbitration; or
  • one of the licensed arbitration centres; and
• the laws of Saudi Arabia must be applied to the subject of the dispute.

Article 29 of the Arbitration Law states that the default language for the arbitration will be Arabic where the parties have not agreed otherwise.

Article 29 provides as follows:

4 Objections to jurisdiction

4.1 When must a party raise an objection to the jurisdiction of the tribunal and how can this objection be raised?

Article 20 of the Arbitration Law provides as follows:

4.2 Can a tribunal rule on its own jurisdiction?

Article 20(1) of the Arbitration Law expressly allows an arbitral tribunal to rule on its own jurisdiction. It provides that the arbitration tribunal will decide on any pleas related to its jurisdiction, including those based on:

• the absence of an arbitration agreement;
• the expiry or nullity of such agreement; or
• non-inclusion of the subject matter of the dispute in the agreement.

4.3 Can a party apply to the courts of the seat for a ruling on the jurisdiction of the tribunal? In what circumstances?

Under Article 20 of the Arbitration Law, the arbitration tribunal will decide on any pleas related to its jurisdiction, including those based on:

• the absence of an arbitration agreement;
• the expiry or nullity of such agreement; or
• non-inclusion of the subject matter of the dispute in the agreement.

However, it may join these pleas to the subject and decide on them both. If the arbitration tribunal decides to dismiss the plea, such plea may not be raised except by filing a case to nullify the arbitration award ending the entire dispute, pursuant to Article 54 of the Arbitration Law.

5 The parties

5.1 Are there any restrictions on who can be a party to an arbitration agreement?

Under Article 10 of the Arbitration Law, any party with the legal capacity to dispose of its rights to enter into a contract or agreement can be a party to an arbitration agreement.

However, certain formalities must be followed when certain types of parties sign an arbitration agreement – for example, government bodies may not enter into arbitration agreements without the prior approval of the prime minister, unless allowed by a special provision of law. Moreover, according to Royal Order 28004 of 28 January 2019:

• directed government agencies and state-owned companies seeking to settle their disputes with foreign investors must do so through arbitration which take place in Saudi Arabia at:
• • the Saudi Centre for Commercial Arbitration; or
  • one of the licensed arbitration centres; and
• the laws of Saudi Arabia must be applied to the subject of the dispute.

5.2 Are the parties under any duties in relation to the arbitration?

The Arbitration Law does not impose a mandatory set of procedural rules that parties must comply with; rather, the parties are free to specify in the arbitration agreement which rules they want to govern the arbitration. For example, Article 15(2) provides as follows:

Article 25(1) provides as follows:

On the other hands, Article 7 provides as follows:

Generally, parties may state that the UNCITRAL Rules or the International Chamber of Commerce Rules will apply. These rules will impose duties on the parties in the arbitration, such as when to file written submissions to the tribunal and so on.

5.3 Are there any provisions of law which deal with multi-party disputes?

Article 11 of the Implementing Regulations of the Arbitration Law provides that where there are multiple parties to the arbitration, the proceedings will commence on the day on which the last party receives the arbitration application. Moreover, Article 13 of the regulation provides that the arbitration tribunal may accept the intervention or the joinder of a third party, upon the approval of:

• the parties to the arbitration; and
• the party to be joined.

6 Applicable law issues

6.1 How is the law of the arbitration agreement determined in your jurisdiction?

As arbitration agreements under the Arbitration Law are separable from the contract in which they are contained, this doctrine of separability means that it is possible for an arbitration agreement to be governed by a different law from the law of the substantive contract.

Article 38 of the Arbitration Law provides as follows:

6.2 Will the tribunal uphold a party agreement as to the substantive law of the dispute? Where the substantive law is unclear, how will the tribunal determine what it should be?

Under Article 38(1)(b) of the Arbitration Law, if the arbitrating parties fail to agree on the statutory rules applicable to the subject matter of the dispute, the arbitration tribunal will apply the substantive rules of the law it deems most connected to the subject matter of the dispute. When deciding the dispute, the arbitration tribunal will take into account:

• the terms of the contract that is the subject of the dispute;
• prevailing customs and practices applicable to the transaction; and
• previous dealings between the parties.

Moreover, under Article 38(2) of the Arbitration Law, the tribunal may decide on a settlement and may rule on it in accordance with the rules of justice and fairness, if the parties have expressly authorised it to do so.

7 Consolidation and third parties

7.1 Does the law in your jurisdiction permit consolidation of separate arbitrations into a single arbitration proceeding? Are there any conditions which apply to consolidation?

The Arbitration Law does not provide for the consolidation of arbitral proceedings. However, such power may be conferred on the tribunal:

• by the parties' agreement under Article 25(1); or
• if the specific institutional rules governing the arbitration allow for consolidation and the parties consent thereto.

7.2 Does the law in your jurisdiction permit the joinder of additional parties to an arbitration which has already commenced?

Article 13 of the Implementing Regulations of the Arbitration Law provides that the arbitration tribunal may accept the intervention or the joinder of a third party, upon the approval of:

• the parties to the arbitration; and
• the party to be joined.

7.3 Does an arbitration agreement bind assignees or other third parties?

An arbitration agreement is binding only on the parties and the tribunal thus has limited scope to assume jurisdiction over third parties. However, under Saudi civil law, where contractual rights are assigned, the assignee will usually be bound by any applicable arbitration agreement under the original contract.

8 The tribunal

8.1 How is the tribunal appointed?

The Arbitration Law leaves it to the parties to agree on the method for selecting the arbitrators. Article 15 provides as follows:

8.2 Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?

Article 13 of the Arbitration Law provides that: "The arbitration tribunal shall be composed of one arbitrator or more, provided the number of arbitrators is an odd number; otherwise, the arbitration shall be void."

Article 14 provides as follows:

8.3 Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?

Article 17 of the Arbitration Law provides as follows:

8.4 If a challenge is successful, how is the arbitrator replaced?

Article 19 of the Arbitration Law provides that: "If the mandate of an arbitrator expires due to death, disqualification, dismissal, recusal, disability or any other reason, a replacement shall be appointed according to the procedures followed in the appointment of the arbitrator whose mandate has expired."

8.5 What duties are imposed on arbitrators? Are these all imposed by legislation?

Article 16 of the Arbitration Law stipulates that an arbitrator is obliged to:

• treat parties equally and give each party a full opportunity to present its case; and
• disclose any circumstances that are likely to give rise to justifiable doubts as to their impartiality or independence.

8.6 What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?

(a) Procedure, including evidence?

Article 16 of the Arbitration Law provides as follows:

(b) Interim relief?

Article 23(1) of the Arbitration Law provides as follows:

(c) Parties which do not comply with its orders?

Article 23(2) of the Arbitration Law provides as follows:

(d) Issuing partial final awards?

Article 39(5) of the Arbitration Law provides that: "The arbitration tribunal may issue provisional or partial awards, prior to making the final award ending the entire dispute, unless the parties agree otherwise."

(e) The remedies it can grant in a final award?

An arbitral tribunal can award damages provided that such relief is awarded pursuant to an express request by the parties. Moreover, Saudi law takes a more restrictive approach in determining damages than what international companies are accustomed to in common law jurisdictions.

A tribunal does not have the power under Saudi law to:

• award punitive damages; or
• order imprisonment or the payment of fines.

(f) Interest?

Saudi law prohibits the recovery of interest. Article 55(2) of the Arbitration Law provides that: "If it is possible to isolate the part of the award that violates [Sharia or public policy], the competent court may order the execution of the non-violating part of the award." This provision should allow a party to enforce those parts of the award that are Sharia compliant, without the parts that involve interest (riba).

8.7 How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?

This varies depending on the plaintiff and the defendant. Under Article 34 of the Arbitration Law:

• if the plaintiff, without acceptable justification, fails to submit a written statement of its claim in accordance with Article 30(1) of the law, the arbitration tribunal will terminate the arbitration proceedings, unless otherwise agreed by the parties; and
• if the defendant fails to submit a written statement of its defence in accordance with Article 30(2) of the law, the arbitration tribunal will continue the arbitration proceedings, unless otherwise agreed by the two arbitrating parties.

8.8 Are arbitrators immune from liability?

The Arbitration Law is silent as to whether arbitrators can be subject to liability.

9 The role of the court during an arbitration

9.1 Will the court in your jurisdiction stay proceedings and refer parties to arbitration if there is an arbitration agreement?

Under Article 11 of the Arbitration Law:

9.2 Does the court in your jurisdiction have any powers in relation to an arbitration seated in your jurisdiction and/or seated outside your jurisdiction? What are these powers? Under what conditions are these powers exercised?

The Saudi courts have the authority to assist in an arbitration where necessary pursuant to various provisions of the Arbitration Law. For example, they have the power to:

• assist in the appointment of arbitrators (Article 15);
• issue interim or precautionary measures (Article 22(1)); and
• upon request by the arbitration tribunal, issue an order of judicial delegation (Article 22(2)).

The arbitration tribunal may, as it deems fit, seek the assistance of the competent agency in the arbitration proceedings – for example, in relation to:

• calling a witness or an expert;
• ordering the submission of a document or a copy thereof;
• reviewing a document; or
• undertaking any other proceeding, without prejudice to the right of the arbitration tribunal to conduct said proceeding independently (Article 22(3)).

If members of the arbitration tribunal fail to reach an agreement and a majority decision cannot be achieved, the arbitration tribunal may appoint a casting arbitrator within 15 days. Otherwise, the competent court will appoint a casting arbitrator (Article 39(2)).

If the arbitration award is not issued within the stipulated period, either party may request the competent court to issue an order:

• specifying an additional period; or
• terminating the arbitration proceedings.

In such case, either party may file a case with the competent court (Article 40(3)).

9.3 Can the parties exclude the court's powers by agreement?

Generally, the parties cannot exclude the court powers by agreement. However, the parties have discretion to agree on the procedures governing the arbitral proceedings.

On the other hand, Article 18(1) of the Implementing Regulations of the Arbitration Law provides that: "An appeal for vacating the arbitration award shall not be accepted if the appellant waives his right to file the same upon the issuance thereof." This means that it may be agreed that the court cannot consider a claim to invalidate an arbitration award in the event of a waiver.

10 Costs

10.1 How will the tribunal approach the issue of costs?

Article 42(2) states as follows:

However, Article 24 has been deleted from the Arbitration Law, meaning that the provisions of Article (24) of the Law are no longer applicable.

10.2 Are there any restrictions on what the parties can agree in terms of costs in an arbitration seated in your jurisdiction?

There are no restrictions specified in the Arbitration Law on what parties can agree to in terms of costs.

11 Funding

11.1 Is third-party funding permitted for arbitrations seated in your jurisdiction?

There are no restrictions on third-party funding for arbitrations seated in Saudi Arabia.

12 Award

12.1 What procedural and substantive requirements must be met by an award?

Article 42(2) of the Arbitration Law provides as follows:

12.2 Must the award be produced within a certain timeframe?

Article 40 the Arbitration Law provides as follows:

1. The arbitration tribunal shall render the final award ending the entire dispute within the period agreed upon by both parties. In the absence of agreement, the award shall be issued within twelve months from the date of commencement of arbitration proceedings.
2. In all cases, the arbitration tribunal may extend the arbitration period provided that such extension does not exceed six months, unless the parties agree on a longer period.
3. If the arbitration award is not issued within the period provided for in the preceding paragraph, either party may request the competent court to issue an order specifying an additional period or terminating the arbitration proceedings. In such event, either party may file a case with the competent court.
4. If an arbitrator is appointed in place of another in accordance with the provisions of this Law, the period set for the award shall be extended by thirty days.

13 Enforcement of awards

13.1 Are awards enforced in your jurisdiction? Under what procedure?

Arbitration awards that are not governed by the Arbitration Law are recognised in Saudi Arabia as binding irrespective of the country in which they were made, as long as that country is a signatory to the New York Convention.

In relation to arbitration award that is governed by Saudi Arbitration Law, Article 53 of the Arbitration Law provides that:

14 Grounds for challenging an award

14.1 What are the grounds on which an award can be challenged, appealed or otherwise set aside in your jurisdiction?

Article 50(1) of the Arbitration Law sets out the grounds upon which an award can be set aside, as follows:

• No arbitration agreement exists or such agreement is void, voidable or terminated due to the expiry of its term.
• Either party, at the time of concluding the arbitration agreement, lacked legal capacity, pursuant to the law governing its capacity.
• Either arbitration party fails to present its case:
• • due to lack of proper notification of the appointment of an arbitrator or of the arbitration proceedings; or
  • for any other reason beyond its control.
• The arbitration award excludes the application of any rules which the parties to arbitration have agreed will apply to the subject matter of the dispute.
• The composition of the arbitration tribunal or the appointment of the arbitrators was carried out in a manner that violates the law or the agreement of the parties.
• The arbitration award has ruled on matters that are not included in the arbitration agreement. Nevertheless, if parts of the award that relate to matters that are the subject of arbitration can be separated from those that do not, the nullification will apply only to the parts that are not the subject of arbitration.
• The arbitration tribunal has failed to observe conditions required for the award in a manner affecting its substance or the award is based on void arbitration proceedings that affect it.

Moreover, Article 50(2) of the Arbitration Law states that:

14.2 Are there are any time limits and/or other requirements to bring a challenge?

Article 51(1) of the Arbitration Law states that:

14.3 Are parties permitted to exclude any rights of challenge or appeal?

Article 18(1) of the Implementing Regulations of the Arbitration Law provides that: "An appeal for vacating the arbitration award shall not be accepted if the appellant waives his right to file the same upon the issuance thereof."

15 Confidentiality

15.1 Is arbitration seated in your jurisdiction confidential? Is a duty of confidentiality found in the arbitration legislation?

The Arbitration Law does not impose a duty of confidentiality on the parties in respect of arbitral proceedings. However, the Saudi Centre of Commercial Arbitration (SCCA) Rules contain provisions regarding confidentiality. Article 44 of the SCCA Rules states:

Article 43(2) of the Arbitration Law provides that: "The arbitration award may not be published in whole or in part except with the written consent of the parties to arbitration."

15.2 Are there any exceptions to confidentiality?

No available information is found regrading this specific question.

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.