SAUDI ARABIA Law and Practice Contributed by: Zeyad Khoshaim, Abdullah Alajlan and Kamil Mehiz, Khoshaim & Associates
3. The Arbitration Agreement 3.1 Enforceability
Article 154 of the Implementing Regulations of the GTP Law outlines additional requirements for govern - ment entities agreeing to arbitration. • Arbitration applies only to contracts valued over SAR100 million, subject to adjustment by the Min - ister of Finance. • Arbitration must occur in Saudi Arabia, adminis - tered by the SCCA or another licensed centre, and governed by Saudi Arabian law. • The arbitration agreement must be included in the contract documents. • Contracts performed outside Saudi Arabia are exempt from the value requirement, allowing arbi - tration regardless of contract value, but approval from the Saudi Minister of Finance is needed. 3.2 Arbitrability Under the Saudi Arabian law, certain subject matters are excluded from arbitration. Specifically, Article 2 of the Saudi Arbitration Law states that the provisions of the law do not apply to personal status disputes or matters not subject to reconciliation. • Personal status disputes typically involve issues related to family law such as marriage, divorce, child custody, alimony, visitation, endowments, wills, paternity, absence, death, determination of heirs, and inheritance, including real estate dis - putes involving endowments or wills, or matters concerning minors or absentees (see Article 33 of the Saudi Law of Civil Procedures). • Matters not subject to reconciliation refer to issues where settlement is legally prohibited, such as criminal cases against the state, crimes with a prescribed punishment under Shari’ah and matters of public policy. The general approach to determining whether a dis - pute is “arbitrable” in Saudi Arabia involves assessing whether the dispute falls within these excluded cat - egories. If the dispute pertains to personal status or involves issues that cannot be reconciled, it is deemed non-arbitrable and cannot be resolved through arbi - tration.
Under Article 9 of the Saudi Arbitration Law, an arbi - tration agreement must be in writing to be valid and enforceable. While this is the primary requirement, other rules may impact its validity, as outlined below. • The arbitration agreement can be made either before or after the dispute arises, including when the dispute is already before a court; however, if the dispute is already before a court, the arbitration agreement must clearly specify the matters/issues it covers, or it would be deemed void. • A written arbitration agreement can be in the form of a document issued by both parties, an exchange of documented correspondence, telegrams, or other electronic or written means of communica - tion. • A reference to an arbitration clause in a contract or any document, or to the provisions of a model contract, international convention, or similar docu - ment, will also be considered a valid arbitration agreement if the reference clearly incorporates the clause into the contract. Furthermore, under Article 10 of the Saudi Arbitration Law, the individual entering into the agreement must have the legal capacity to bind the party they repre - sent to arbitration. Article 10 (2) of the Saudi Arbitration Law stipu - lates that government bodies can enter into arbitra - tion agreements only with the approval of the Prime Minister, unless a specific legal provision allows otherwise. Subsequently, the Government Tenders and Procurement Law (the “GTP Law”), enacted by Royal Decree M/128 on 13/11/1440H (corresponding to 16 July 2019), and its Implementing Regulations issued by Minister of Finance Resolution No 1242 on 21/031441H (corresponding to 19 November 2019), which took effect on 1 December 2019, updated this requirement. Under Article 92 (2) of the GTP Law, gov - ernment entities can now enter into arbitration agree - ments with prior approval from the Saudi Minister of Finance.
668 CHAMBERS.COM
Powered by FlippingBook