Trade Disputes in Saudi Arabia
Arbitration of disputes is becoming common in Saudi Arabia. However
dispute settlement in Saudi Arabia continues to be time-consuming and
uncertain. Even after a decision is reached in a dispute, effective
enforcement of the judgment can still take years.
Thus it is suggested that a foreign company investing in Saudi Arabia include in contracts a foreign arbitration clause.
- Arbitration Law
Royal Decree called “Arbitration Regulations” (Royal Decree No. M/46
dated 1983), that states the arbitration tribunal must consist of an
uneven number of arbitrators with the chairman being an expert in
Shari'ah or in the Kingdom's commercial rules and regulations.
However, any judgment contrary to Islamic principles, such as the payment of interest, will not be enforced.
- Conformity to International Commercial Arbitration Rules
Party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
- Appointment of Arbitrators
- The arbitrating parties have the freedom to choose their own arbitrators.
- Arbitration Procedure
The arbitrating parties first need to approach the Committee for Conciliation of Commercial Agency Disputes which was established in 1992 to deal with conflicts between foreign companies and their Saudi agents. If the committee fails to resolve the dispute, the case is then referred to the courts. The committee can still make recommendations to the courts and to the Ministry of Commerce. It is important to note that the committee's recommendations are not binding and only the courts can determine legal aspects of such disputes.
What differentiates the arbitration process in Saudi Arabia from that in other countries is that it does not avoid the courts or the commercial committees that would have jurisdiction over the dispute had the arbitration process not taken place. In the Kingdom, the courts and the committees are referred to as the “competent courts” and they must approve of the arbitration agreements, and decide whether or not to enforce the award and by what means. In cases where the parties fail to choose an arbitrator, the competent court can do so.
For details, visit the Saudi embassy website.
- Permanent Arbitration Bodies
Saudi International Arbitration Commission (SIAC) (Sectors Covered: Established in 2005, SIAC is first formal arbitration program for the
business community. The SIAC falls under the Saudi chapter of the
International Chambers of Commerce, and has adopted the same
arbitration system employed by the International Court of Arbitration.)
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