Arbitration, or tahkeem as it is known in Arabic, has deep roots in Middle Eastern legal tradition. Its use can be traced back to the earliest sources of Shariah, or Islamic Law. In more modern times, Saudi Arabia signed the Convention on the Recognition and Enforcement of Arbitral Awards of 1958 (the ‘New York Convention’). However, despite this, arbitration has been underutilised as a method of resolving disputes in the Kingdom. This is turn has been due to the fact that the legal framework, comprised in the Arbitration Regulation of 1983 (Royal Decree No. M/46) and the Rules for Implementation of 1985 (Ministerial Resolution No. 7/2021/M) (the ‘old arbitration law’), has been less supportive of the process than in more ‘arbitration friendly’ jurisdictions. For example, the approach of the Local Courts on enforcement has typically been to review the merits of an arbitral award. This has meant that a party could spend a substantial sum arbitrating a dispute only to find that the decision is later reversed by the local courts.

The enactment of the new arbitration law (Royal Decree No. M/34) in April 2012 together with the new enforcement law (Royal Decree No. M/53), which came into force in March 2013, together comprise a significant modernisation of the arbitration regime in Saudi Arabia. Furthermore, ongoing plans to set up an arbitration centre in London to deal with disputes arising in the Kingdom suggest that there is a real impetus to ensure that parties conducting business in the Kingdom have a practical alternative to the local courts.

Jan-Mar 2014 issue

King & Spalding