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The Saudi Arabian 2012 Arbitration Law

The following is a guest post by Abdalrahman Alangari, a student from Saudi Arabia who was a foreign law intern at the Law Library of Congress for a few months in late 2016.

Map of Saudi Arabia (Washington, D.C.: Central Intelligence Agency, 2003). Library of Congress Geography and Maps Division, //lccn.loc.gov/2005631745.

Map of Saudi Arabia (Washington, D.C.: Central Intelligence Agency, 2003). Library of Congress Geography and Map Division, //lccn.loc.gov/2005631745.

The Kingdom of Saudi Arabia is the largest economy among the Gulf countries. Developments in the Kingdom in recent years have transformed it into a new regional and global hub for commercial arbitration. The developments have included the establishment of the Saudi Center for Commercial Arbitration (SCCA) and the issuance of a new Arbitration Law. The Law was issued on July 7, 2012, by Royal Decree No. M/34, replacing the Arbitration Law of 1983. Since its issuance, the 2012 law has generated debate among legal practitioners. Some have endorsed the law and consider it to be a substantial step in the field of international arbitration. Others, however, have raised concerns about the practicability of its application.

Those supporting the 2012 law have argued that it eliminates some controversial provisions of the previous arbitration law of 1983. For instance, under the 1983 law, arbitrators were required to be Muslim. However, the 2012 law only requires that they must have a university degree in Sharia law (Islamic law) or a Bachelor of Laws.

The 2012 law also does not discriminate between genders. It does not specify any gender requirements for arbitrators, nor does it contain any language that prohibits a woman from serving as an arbitrator.

Another feature seen as a positive development by proponents of the law is that it promotes the separability principle of an arbitration agreement. Article 21 states that the arbitration clause in a contract shall be treated as a separate independent agreement from other terms in the contract. The nullification, revocation, or termination of the contract therefore does not entail the annulment of the arbitration clause if such a clause is valid.

In addition, under article 50 of the 2012 law, the court in charge of administering the arbitral award only has the authority to review the award and not the facts of the case. In doing so, it must ensure the award is in conformity with Sharia law and the Kingdom’s public policy.

In contrast to the 1983 law, article 29 of the 2012 law allows arbitration hearings to be conducted in a language other than Arabic. Article 29 provides that arbitration shall be conducted in Arabic, unless the arbitration tribunal or the disputed parties, agree on another language or languages.

Some legal scholars, however, have raised concerns that the 2012 law impedes the enforcement of some arbitral awards. According to article 55 of the 2012 law, Saudi courts will not enforce an arbitral award conflicting with the principles of Islamic law. For example, if the award ordered one of the parties to pay interest as a form of financial compensation, such interest is considered to be reba. Reba violates the country’s public policy since it is prohibited under Islamic law. Accordingly, the Saudi court that is in charge of implementing the arbitral award will not be able to obligate the party to pay such compensation.

The Law Library of Congress holds a variety of reference books in both Arabic and English addressing the Saudi legal system, including business and company laws.  This includes books such as The Effect of Company Mergers on the Saudi Legal System (2004) (Arabic); Islamic Law and Legal System: Studies of Saudi Arabia (English) (2000); and Saudi Arabia, Keys to Business Success (1981) (English).

We have previously published two other posts on international arbitration law: International Arbitration Law in Mexico – Global Legal Collection Highlights and Arbitration in Turkey and Istanbul as a New International Arbitration Center.

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