Arbitration is a legal mechanism that allows parties to refer their dispute to an arbitrator or arbitral tribunal instead of ordinary courts.
The Kingdom of Saudi Arabia has formally adopted arbitration through an independent regulation issued by Royal Decree No. (M/34) in the year 1433 AH (2012 AD).
The Saudi Arbitration Law affirms its applicability to any dispute referred to arbitration within the Kingdom or any international commercial dispute where the parties have agreed to submit to this system.
Exceptions include disputes related to personal status or matters that may not be subject to reconciliation.
In Saudi Arabia, It is governed by several sources: the Arbitration Law itself, its Executive Regulations which set out detailed procedures, and international treaties.
Such as the Washington Convention (1980) establishing ICSID, and the New York Convention (1958) on the recognition and enforcement of foreign arbitral awards.
The Saudi Arbitration Law stipulates adherence to Islamic Sharia and observance of international agreements without compromising the essence of arbitration law, thus reflecting the alignment of the Saudi system with global standards like the UNCITRAL Model Law on International Commercial Arbitration.
Arbitration Procedures
- Its procedures typically begin with a clear arbitration agreement between the parties (either a clause within a commercial contract or a separate agreement).
- Once a dispute arises, the claimant submits a written arbitration request to the chosen center or arbitral body, accompanied by a copy of the arbitration agreement (or clause) and details of the dispute.
- The arbitral tribunal is then formed as agreed (a sole arbitrator or a panel of arbitrators).
- If the parties fail to agree on the appointment of arbitrators, the competent court (usually the Court of Appeal) steps in to appoint the arbitrator(s) on their behalf.
- The arbitral tribunal holds hearings to consider both parties’ arguments and evidence, and the procedures may be flexible as specified by the law or agreed upon by the parties.
- Upon completion of the proceedings, the tribunal issues a binding arbitral award. This award must be reasoned
and signed by the arbitrators and submitted to the competent Court of Appeal for issuance of an enforcement order
with the force of a final judgment.
- Parties may file a limited nullification request before the Court of Appeal (for reasons such as improper appointment procedures or deviation from the arbitration agreement), but there is no general right to appeal the award unless highly specific grounds exist.
Types of Arbitration in the Kingdom
In Saudi Arabia, it includes diverse mechanisms to suit various disputes across commercial, labor, and administrative domains. The following are brief descriptions of these types, classified by management framework, nature of dispute, procedures, and binding nature:
By Management Framework:
- Institutional Arbitration: Conducted through accredited centers (such as the Saudi Center for Commercial Arbitration or the GCC Arbitration Center) that provide standardized rules, logistical support, and specialized case management.
- Ad Hoc Arbitration: Managed directly by the parties without the involvement of a specific institution, giving them full flexibility over procedures (selection of arbitrators, venue, rules, etc.).
By Nature of Dispute:
Examples include:
- Commercial Arbitration: Covers disputes related to commercial transactions, both domestic and international.
- Labor Arbitration: Resolves employment-related disputes in accordance with labor regulations.
- International Arbitration: Involves disputes with a foreign element, such as nationality of parties, contract performance location, or governing law.
- Domestic Arbitration: Deals with disputes arising within Saudi Arabia between Saudi parties or concerning domestic legal relationships.
By Procedural Nature:
- Expedited Arbitration: Fast-track proceedings for lower-value or urgent disputes, including requests for interim or emergency relief (e.g., freezing assets, injunctions).
- Regular Arbitration: Involves more extended timelines, detailed procedures, and formal hearings based on institutional or agreed rules.
By Binding Nature:
- Voluntary Arbitration: Undertaken by parties pursuant to a mutually agreed arbitration clause or standalone agreement, preferably written and clear.
- Mandatory Arbitration: Imposed by law for certain disputes (e.g., labor disputes) where a designated body (like labor courts) is responsible, irrespective of prior agreement.
While all types of arbitration follow the same core principles (arbitration agreement, arbitral tribunal, hearings, final award),
the procedures vary depending on the governing law and parties involved.
Nonetheless, all share the advantages of avoiding lengthy litigation, benefiting from technical expertise, and ensuring confidentiality and relative speed.
Advantages of Arbitration
In Saudi Arabia offers numerous benefits, particularly for businesspersons and corporations:
- Speed and Efficiency: It is typically faster than court litigation, especially with a professional tribunal and flexible procedures.
- Technical Expertise: Parties can appoint arbitrators with specific expertise (real estate, commercial, labor, etc.), ensuring a better understanding of the issues and correct legal application.
- Neutrality and Trust: Parties often prefer international arbitration or foreign arbitrators to ensure neutrality, particularly in cross-border disputes.
- Confidentiality: It’s sessions are private, preserving sensitive information and protecting the reputation of businesses.
- Procedural Flexibility: The law allows parties to choose the language (commonly Arabic or English), schedule and venue of sessions, and customize procedural rules.
- Enforceability: Saudi Arabia recognizes binding arbitral awards and enforces them under statutory authority (with limited nullification grounds). As a signatory to the New York Convention (1958), the Kingdom enables enforcement against assets within Saudi Arabia or in any member state.
- Global Investment Hub: By joining the Washington Convention (1980) establishing ICSID, Saudi Arabia enhances its appeal as an international investment destination, allowing investors to resolve disputes through neutral international arbitration bodies.
Al-Mashora Law Firm’s Arbitration Services
Al-Mash0ra Law Firm has a specialized legal team experienced in all types of arbitration (commercial, labor, administrative, etc.).
Our attorneys possess both local and international expertise and assist clients in drafting arbitration clauses.
Selecting arbitration institutions, managing proceedings, and representing them before arbitral tribunals or courts when needed.
We skillfully handle every step, from drafting the arbitration clause to submitting requests, coordinating hearings, and enforcing awards.
Al-Mashura Law Firm — Your Trusted Legal Partner in KSA.