Saudi Arabia
JordanTHE LAW FIRM OF HAZIM AL MADANI ATTORNEYS AND LEGAL CONSULTANTS
Similarities between the UNCITRAL Arbitration Act and the Islamic sharia rules
The beginning of arbitration in Saudi Arabia:
The law that governs Saudi Arabia is the Islamic Shariah law, the legality of arbitration in Islamic Shariah law has been proven in the Holy Qur’an and the Prophet’s Sunnah and by the consensus of the Companions and reason.
Saudi Arabia has not recognized arbitration from the beginning, despite its importance that prevailed in the Islamic era, with the continuous legislative development of Saudi Arabia and the vision of the international development of arbitration and its impact on fateful international decisions, in particular, such as the oil and gas industry, which led to a change in the direction of Saudi Arabia regarding the importance of arbitration and its solution to fateful international problems. The Saudi regulator approved the principle of arbitration independence, as this principle exists when the arbitration agreement is a condition of the contract, SO here the issue of independence arises that makes the arbitration agreement void in the event of one of the reasons for its invalidity, as Both the contract and the arbitration agreement are independent of each other so that the invalidity of the contract does not affect the validity of the arbitration agreement, and vice versa. The invalidity of the arbitration agreement does not affect the validity of the contract. It is noteworthy that the Saudi regulator states a special provision that recognizes the independence of the arbitration clause, unlike some other Arab legislation that did not explicitly state it, such as Moroccan and Algerian legislation.
Saudi Arabia has not recognized arbitration from the beginning, despite its importance that prevailed in the Islamic era, with the continuous legislative development of Saudi Arabia and the vision of the international development of arbitration and its impact on fateful international decisions, in particular, such as the oil and gas industry, which led to a change in the direction of Saudi Arabia regarding the importance of arbitration and its solution to fateful international problems. The Saudi regulator approved the principle of arbitration independence, as this principle exists when the arbitration agreement is a condition of the contract, SO here the issue of independence arises that makes the arbitration agreement void in the event of one of the reasons for its invalidity, as Both the contract and the arbitration agreement are independent of each other so that the invalidity of the contract does not affect the validity of the arbitration agreement, and vice versa. The invalidity of the arbitration agreement does not affect the validity of the contract. It is noteworthy that the Saudi regulator states a special provision that recognizes the independence of the arbitration clause, unlike some other Arab legislation that did not explicitly state it, such as Moroccan and Algerian legislation.
Investment environment and expectations after the new arbitration system:
Saudi Arabia is interested in developing and encouraging investment and investors and eliminating all investors’ concerns due to the slow resolution of disputes before the Saudi judicial courts or the delay in implementing judgments, which led to the loss of the rights of investors, whether national or foreign. This led to the abolishment of the arbitration system and the issuance of a new arbitration system by Royal Decree No. (M/34) dated 24/5/1433 H, which was implemented on 17/8/1433 H (corresponding to July 7, 2012), which led to a major reform in the framework of arbitration in Saudi Arabia in order to be in line with the best practices of international commercial arbitration.
What is the new arbitration system based on?
The new arbitration law is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration which was amended in 2006 but continues to extend and spread.
What are the arbitration procedures according to the new Saudi arbitration system?
Based on the internationally recognized UNCITRAL Arbitration Rules, the Saudi Center was established under the Special Arbitration Rules for Saudi Commercial Arbitration which is a formal procedure leading to a binding decision from a neutral arbitral tribunal, enforceable in accordance with domestic arbitration laws and international agreements such as the 1958 New York Convention.
The rules of the Saudi Center for Commercial Arbitration have been drafted to comply with the current Saudi Arbitration Law issued in 1433 AH – 2012 AD, which is also based on the internationally recognized and authoritative UNCITRAL Arbitration Rules.
The arbitration system applies to every arbitration, whatever the Regulatory relationship of the dispute, whether it takes place in Saudi Arabia or is a broad business. its parties have agreed to subject it to this system, with two conditions that the provisions of Islamic Sharia and the provisions of international agreements to which Saudi Arabia is a party shall not be violated.
The rules of the Saudi Center for Commercial Arbitration have been drafted to comply with the current Saudi Arbitration Law issued in 1433 AH – 2012 AD, which is also based on the internationally recognized and authoritative UNCITRAL Arbitration Rules.
The arbitration system applies to every arbitration, whatever the Regulatory relationship of the dispute, whether it takes place in Saudi Arabia or is a broad business. its parties have agreed to subject it to this system, with two conditions that the provisions of Islamic Sharia and the provisions of international agreements to which Saudi Arabia is a party shall not be violated.
Has Saudi Arabia amended the UNCITRAL law?
Yes, Saudi Arabia has made some amendments to make the new arbitration law in line with the Islamic Shariah principles
Are there some provisions in the new arbitration law that are not in the UNCITRAL Model Law?
Yes, for example:
- ● The rules to which arbitration is submitted must be applied without prejudice to the provisions of Islamic Sharia.
- ● Saudi governmental entities require pre-authorization to enter into arbitration agreements unless authorized by existing legislation.
- ● The arbitrator must have the necessary legal capacity, be of good conduct, and hold a university degree in law or Islamic law. In a three-member arbitral tribunal, it is sufficient for the chairperson of the arbitral tribunal to hold a university degree in law or Islamic law.
- ● The parties shall be free to choose which rules will govern their dispute, including those outside Saudi Arabia, and alternatively, the arbitral tribunal shall be free to determine which of these rules so long as those rules do not violate Islamic law.
- ● The arbitration decision may also be revoked by the Court of Appeal, on its own, if the arbitral decision is contrary to the principles of Islamic Sharia and the Saudi general policy, if it is contrary to an agreement by the parties, or if the subject matter of the dispute is not arbitrable.
What are the benefits of the new arbitration law in Saudi Arabia?
- ● It provides more procedural discretion to the parties as it is consensual.
- ● It preserves the confidentiality of the information between them.
- ● Rapid settlement of disputes and avoiding loss of rights.
- ● Flexibility and simplicity in resolving disputes.
- ● Reducing the state's expenses on the judiciary.
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