Saudi Arabia updates arbitration law to resolve more commercial disputes

Like the companies they serve, international arbitration venues are also subject to the pressures of competition. Various arbitration locations and policies have their advantages, and arbitration laws can make a big difference in parties' decisions about where they want commercial disputes to be resolved.

Among the many reforms to international arbitration in 2012, Saudi Arabia overhauled its arbitration law to modernize outmoded practices and lessen the chances that Saudi courts will intervene in arbitrated disputes. The new law is based largely on the Model Law created by the United Nations Commission on International Trade Law (UNCITRAL), which has been implemented by almost 70 countries around the world.

Saudi Arabia's old arbitration law, which only allowed arbitration of domestic disputes, was not popular with the Saudi business community and was also shunned by multinational corporations due to perceived inefficiencies and other difficulties. The UNCITRAL Model Law, which was most recently amended in 2006, details all stages of the arbitral process, including:

  • Drafting of arbitration agreements
  • Designating the composition and jurisdiction of arbitral tribunals
  • Defining the extent of potential court intervention in the arbitration process
  • Recognition of arbitral awards and enforcement of judgments in Saudi courts

One significant departure from the UNCITRAL Model Law is a provision requiring that arbitration awards not contravene Sharia law and the public order of Saudi Arabia. Sharia prohibits imposition of interest (usury), and this prohibition could have significant implications for enforcement in Saudi courts of arbitration awards that include a grant of interest.

Another significant change is that arbitrators no longer have to be either male Saudi citizens or non-Saudi Muslims with a proper professional designation. Under the new law, arbitrators must have full legal capacity and a university degree in Sharia science or law.

Helping business clients resolve disputes in any international arbitration venue

Regardless of the nature of the dispute or the language of the contract, business enterprises with international operations require consistent and experienced legal representation to ensure profitability. An international arbitration attorney can explain the opportunities and pitfalls of any scenario and provide dedicated representation to help clients achieve their legal goals.