In a recent Financial Times article Caroline Binham and Helen Warrell reported that, “Saudi Arabia will lobby the UK government as early as November to set up a confidential court in London that would settle multimillion pound commercial disputes arising from the Middle Eastern kingdom. The Saudis hope that a London-based arbitration centre would help counter investor concerns about the Saudi Arabian legal system and thus boost foreign investment into the kingdom.” This is an intriguing development and one that addresses foreign companies’ concerns about the ability to secure and enforce consistent and equitable dispute resolution in Saudi Arabia. Because it is a topic of great interest to firms now operating in Saudi Arabia and/or interested in doing so, SUSTG asked Amgad Husein and John Balouziyeh, with SNR Denton and based in Riyadh, to comment on this potential development.
Commentary on Saudi Arbitration Court in the U.K.
A Saudi Arabian arbitration dispute resolution process in the UK could be a very good idea depending on its implementation. This may attract foreign investment. While such an idea is potentially an innovative solution, the details of its implementation will determine its success.
In our view the main issue is not that investors require a particular arbitration review in a particular jurisdiction like the UK, but whether the parties will be able to enforce foreign arbitration awards. Foreign investors mostly question the ability to enforce an arbitral award.
If this new “court” as it is called in the press will allow parties to easily and efficiently enforce foreign awards in Saudi Arabia, that would be its main and significant benefit. As it stands now, it is very difficult to enforce foreign judgments and awards in Saudi Arabia.
The Saudi Courts have procedures for the enforcement of judgments obtained in a foreign jurisdiction to which a party has submitted in the Kingdom of Saudi Arabia subject to Article 8(1)(g) of Royal Decree No. M/51 dated 17/7/1402 H., corresponding to [11/05/1982 (G)] (the Grievances Board Law). The Grievances Board Law grants the Grievances Board the authority to accept applications for the enforcement in Saudi Arabia of foreign judgments. Article 6 of the Rules of Pleadings and Procedures of the Grievances Board, as issued by Council of Ministers Resolution No. 190 dated 16/11/1409 H. [20/06/1989 (G)] (the Rules), provides that an application to enforce in Saudi Arabia a foreign judgment will be assessed on two bases:
(a) first, the applicant must show that the jurisdiction that issued the foreign judgment will reciprocally enforce judgments of the courts of Saudi Arabia. The Grievances Board examines the issue of reciprocity on a case-by-case basis without reference to prior cases;
(b) second, the applicant must show that the terms of the foreign judgment are consistent with Islamic law as enforced in Saudi Arabia.
The Grievances Board may then only execute the foreign judgment on these conditions. Through experience we have seen that there are no definitive ways to satisfy the criteria and that enforcement is still handled on a case by case basis. Enforcement is often viewed as time consuming and unpredictable.
Therefore, although arbitration in the UK may conceptually be appealing to non-Saudi investors, it is our view that it remains more important for any proposed dispute resolution mechanism to allow foreign arbitration awards to be enforced in a more regular and standardized fashion. This would in our view go a long way in encouraging further large-scale foreign investment in the Kingdom.
Amgad Husein and John Balouziyeh are corporate attorneys resident in Saudi Arabia and co-authors of The Legal Guide to Doing Business in Saudi Arabia (Thomson Reuters, forthcoming). They can be reached at Amgad.Husein@snrdenton.com and John.Balouziyeh@snrdenton.com.
