SAUDI ARABIA Law and Practice Contributed by: Faisal Daudpota, Daudpota International (in alliance with Khalil Aljehani Law Firm)
7.4 Arrest of Vessels Subject to Foreign Arbitration or Jurisdiction Saudi courts generally grant provisional vessel arrests to secure maritime debts, even if the underlying con - tract mandates foreign arbitration or jurisdiction. • Legal authority: Under the Saudi Arabian Maritime Law (Royal Decree No M/33), arrests are treated as provisional measures to secure a claim rather than a final judgment on the dispute. Commercial courts typically issue arrest warrants within three days of an application. • Procedural timeline: To maintain the arrest, the claimant must file the substantive lawsuit in the agreed foreign forum and validate the arrest in Saudi courts, typically within eight days. • Key requirements: Applicants must establish a valid maritime debt (eg, unpaid supplies, charter - party breach) and provide counter-security (usually a local bank guarantee) to cover potential damages if the arrest is deemed wrongful. All documents must be translated into Arabic and accompanied by an apostilled POA. 7.5 Domestic Arbitration Institutes Saudi Arabia has a premier domestic arbitration insti - tution that handles maritime claims, along with a spe - cialised legal framework for the maritime industry. The SCCA The SCCA is the primary institution for domestic and international arbitration in Saudi Arabia, including maritime disputes. While the SCCA handles general commercial disputes, it is explicitly noted as a venue for settling maritime disputes, aiming to create a safe environment for both foreign and domestic parties in this sector. The SCCA operates under rules modelled on the UNCITRAL Arbitration Rules, which allow for the appointment of arbitrators with specific subject matter expertise, including maritime law. The SCCA provides expedited procedures for less complex cases, which can be useful for maritime claims.
7.6 Remedies Where Proceedings Are Commenced in Breach of Foreign Jurisdiction or Arbitration Clauses Saudi courts generally uphold foreign jurisdiction and arbitration clauses, supported by the Arbitration Law (2012, amended 2023). • Dismissal of proceedings: Under Article 11, if a lawsuit is filed in breach of an arbitration clause, the court must dismiss the case, provided the defendant raises the objection before submitting any other defence. Courts also respect foreign jurisdiction clauses unless they violate Sharia or public policy. • Mandatory referral: Article 12 obliges courts to refer parties to arbitration if a valid agreement exists, even if the dispute is currently pending before the court. • Interim measures: To prevent asset disposal, par - ties can apply to Saudi courts for precautionary attachment (freezing orders) or use emergency arbitrator procedures while proceedings are pend - ing. • Competence-competence: Saudi law adopts the principle that the arbitral tribunal has the authority to determine its own jurisdiction, allowing it to con - firm its mandate even if parallel court proceedings have been initiated. 8. Ship-Owners’ Income Tax Relief 8.1 Exemptions or Tax Reliefs on the Income of Ship-Owners’ Companies Tax Relief for Saudi Shipping Companies Unlike some jurisdictions, Saudi Arabia does not uti - lise a “tonnage tax” regime, but instead offers struc - tural tax incentives and a low-tax environment: • zero-rated VAT – international transportation ser - vices for passengers and goods, including vessel leasing, are subject to 0% VAT; • logistics zone incentives – companies established in the Special Integrated Logistics Zone (SILZ) are eligible for a 0% corporate income tax rate for up to 50 years on qualifying maritime activities; • regional headquarters (RHQs) – multinational com - panies setting up RHQs can access 0% income
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