Ten Years Since The 2012 Saudi Arbitration Law: Where Are We Now?

Saudi Arabia cements its future as an arbitration hub

The Saudi Center for Commercial Arbitration (SCCA) has published a report on the progress taken by Saudi Arabia over the past decade towards becoming an internationally-recognised hotspot for alternative dispute resolution (ADR).

Background

The SCCA was founded in 2014 by a ministerial council decision as a not-for-profit organisation dedicated to commercial ADR, including arbitration and mediation, with the stated aim of making Saudi Arabia the preferred choice for ADR in the region by 2030.

The SCCA’s report shows how much has changed in Saudi Arabia since July 2012, when the Saudi Arbitration Law (Royal Decree No. M/34) became effective.

Unlike the law that it replaced, the Saudi Arbitration Law is modelled on the UNCITRAL Model Law on International Commercial Arbitration, providing (amongst other things) for party autonomy in many aspects of the dispute such as the applicable law, the rules governing the arbitration and its place and language.

Parties are also free to choose their own representation in the dispute, as the Saudi Ministry of Justice and SCCA recently confirmed.

The country has been a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Award (the New York Convention) since 1994, and the Saudi Arbitration Law grants protection to arbitral awards and confines challenges to a limited number of grounds (including sharia principles) without a review of the merits.

In 2015 the Chartered Institute of Arbitrators in London developed ten principles against which to measure the “safety” of an arbitral seat, known as the London Principles. The benchmarks include assessments of the local arbitration law, the judiciary, legal expertise, education, rights of representation, accessibility and safety, facilities, ethics, and enforceability. 

Saudi Arabia fared well on all measures when it was assessed in 2015, but rather than resting on its laurels the country has taken steps to further bolster its standing in the international arbitration community.

The 2022 SCCA Report 

The SCCA’s 2022 report reveals a number of key statistics that show how arbitration in Saudi Arabia has evolved in the past decade.

• Since the 2012 Saudi Arbitration Law, around 35,000 applications for enforcement of domestic and international arbitral awards have been made before the Saudi Courts. The combined value of those awards is just over USD 6.16 billion. In 2019 more applications for enforcement were filed in the Saudi Courts than had been filed between 2013 and 2018.
• Between 2017 and 2021, 540 arbitration-related judgments and 603 applications were registered with Saudi appeal courts. The grounds for those applications broke down as follows: 49% related to arbitral tribunals; 32% related to arbitral awards; 6% related to arbitration agreements; 3% related to statutory time periods; 1% related to judicial support in aid of arbitrations; and 8% related to other grounds.
• Starkly, only 6% of applications to annul were granted, of which half were granted on sharia and public policy grounds.
• In 2021, courts in Saudi Arabia enforced 204 domestic and foreign awards, with a combined value of USD 2.1 billion. The average timeframe for enforcement proceedings was two weeks.
• Since its launch in October 2016, the SCCA has registered 211 cases for domestic and international parties, starting from fewer than 10 registered cases in each of 2016, 2017 and 2018, to more than 70 in 2020 and over 80 in 2021.
• The combined value of all claims in the SCCA over that period was more than USD 1 billion. The centre has accepted disputes in fields ranging from banking and finance, capital markets and investment, to construction and engineering and arts and entertainment.

Conclusion

The SCCA Report is clear: contrary to perceptions in some quarters, the Saudi Courts are very reluctant to annul or otherwise prevent the enforcement of awards on the grounds of infringements of sharia or public policy.

Furthermore, the increases in filings in the SCCA and the Saudi Courts relating to arbitration shows that the rate of growth of arbitration in Saudi Arabia is high, and shows no sign of slowing down or reaching a peak.

In all, it is hard to avoid agreement with the SCCA that the data collected and published demonstrate that Saudi Arabia is a jurisdiction open to upholding and enforcing arbitral awards.

If you have any questions about dispute resolution in Saudi Arabia, please contact Patrick Gearon, Peter Smith or another member of the Commercial Dispute Resolution team.