SAUDI ARABIA Law and Practice Contributed by: Faisal Daudpota, Daudpota International (in alliance with Khalil Aljehani Law Firm)
procedural comity, provided they do not conflict with Saudi law. Key aspects of enforcement in Saudi Arabia include: • respect for forum selection – Saudi commercial courts often respect clauses directing disputes to foreign courts if the parties are professional entities (eg, importers) and the clause is clearly part of the contract; • mandatory Saudi law – even if a foreign law clause is present, Saudi courts will apply Saudi law to mandatory provisions, particularly regarding liability for cargo damage, and will not apply foreign sub - stantive law; • Sharia compliance (public policy) – a foreign judg - ment or clause that contravenes Sharia principles, such as the payment of interest (riba), will not be enforced; • reciprocity – for foreign judgments or arbitration awards arising from these clauses to be enforced in Saudi Arabia, there must be reciprocity, meaning the foreign country must also enforce Saudi judg - ments; and • exclusive jurisdiction limitations – if the defend - ant resides in Saudi Arabia or the dispute involves assets located in the Kingdom, Saudi courts may refuse to relinquish jurisdiction despite a contrary clause. 7.2 Enforcement of Law and Arbitration Clauses Incorporated Into a Bill of Lading Courts in Saudi Arabia generally recognise and enforce law and arbitration clauses of a charterparty that are incorporated by reference into a bill of lading, provided specific legal requirements are met. Under the Saudi Arbitration Law (Royal Decree No M/34), a reference in a bill of lading to an arbitration clause in a charterparty is considered a valid, written arbitra - tion agreement if the reference clearly incorporates the clause. Key requirements for recognition and enforcement in Saudi Arabia include: • clear reference – the bill of lading must expressly refer to the charterparty and specifically indicate
that the arbitration clause, along with other terms, is incorporated; • written agreement – the arbitration clause must be in writing, which is satisfied by the reference in the bill of lading; • non-signatory binding – while a holder of a bill of lading is often not a signatory to the charterparty, Saudi courts may uphold the clause if the incorpo - ration is clear, often treating the bill of lading as an independent contract that binds the holder; • Sharia compliance – the arbitration agreement must not violate Shari principles or public policy; and • validity challenges – Saudi courts adhere to the principle of “competence-competence”, meaning the arbitral tribunal, rather than the court, generally determines its own jurisdiction and the validity of the arbitration clause in the first instance. 7.3 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards The 1958 New York Convention is applicable in Saudi Arabia, which acceded to it in 1994, typically with a reciprocity reservation. Foreign arbitral awards are enforceable, primarily governed by the Enforcement Law (Royal Decree No M/53) and the 2012 Arbitration Law (Royal Decree No M/34), provided they do not violate Sharia principles. Key aspects of arbitration law in Saudi Arabia include the following: • applicable convention – the 1958 New York Con - vention is in force; • primary domestic law – the Arbitration Law (Royal Decree No M/34 of 2012), which is based on the UNCITRAL Model Law; • enforcement mechanism – the Enforcement Law (Royal Decree No M/53 of 2012) (and its Imple - menting Regulations) governs the recognition and enforcement of foreign awards; • public policy exception – foreign awards must comply with Islamic Sharia principles, as enforce - ment may be refused if it violates public policy; and • competent authority – the Enforcement Court is responsible for enforcing foreign awards.
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