|Enforcing Foreign Judgments and Foreign Arbitral Awards in Saudi Arabia|
Where disputes arise in connection with commercial contracts between Saudi and non-Saudi parties, there is often provision for the dispute to be settled by non-Saudi laws in a non-Saudi court or non-Saudi arbitration.
The non-Saudi party's desire to have disputes arising in connection with the contract resolved in a familiar forum - applying familiar laws - is understandable. However, before adopting non-Saudi laws and non-Saudi forums for their contracts with Saudi entities, non-Saudi parties should consider the enforceability in Saudi Arabia of non-Saudi judgments and non-Saudi arbitral awards.
1. ENFORCEABILITY OF NON-SAUDI JUDGMENTS.
First, the applicant must show that the jurisdiction that issued the Foreign Judgment will reciprocally enforce judgments of the courts of Saudi Arabia. Neither the Grievances Board Law nor the Rules provide any guidance as to how an applicant seeking to enforce a Foreign Judgment in Saudi Arabia is to prove the reciprocity of the jurisdiction from which the Foreign Judgment issued.
However, it has been reported that the Grievances Board declined to enforce the judgment of a UK court despite the fact that the applicant produced a letter from the UK government stating that, as a general rule, the UK courts will enforce foreign judgments in the UK. The Grievances Board held that the letter did not guarantee reciprocity. Nor did the Grievances Board give any credence to a legal opinion from a UK lawyer, as it was not considered an official document. That said, it is important to note that the Grievances Board examines the issue of reciprocity on a case-by-case basis without reference to prior cases.
Second, the applicant must show that the terms of the Foreign Judgment are consistent with Islamic law as enforced in Saudi Arabia. This is a requirement that Foreign Judgments frequently cannot meet. Many commercial practices upheld in common law and civil law jurisdictions - such as conventional insurance and the charging of interest - are forbidden and unenforceable under Islamic law as enforced in Saudi Arabia.
Reciprocal Enforcement Treaties.
The 1983 Convention on Judicial Co-operation between States of the Arab League (the "Riyadh Convention") and the 1995 Protocol on the Enforcement of Judgments Letters Rogatory, and Judicial Notices issued by the Courts of the Member States of the Arab Gulf Co-operation Council (the "GCC Protocol") both provide generally that each signatory (the "Recipient State") will recognise the judgment of a court of any other signatory (the "Originating State") where the court of the Originating State had proper jurisdiction over the case and where the judgment has been finally adjudged. However, the Riyadh Convention and the GCC Protocol permit a Recipient State to refuse to recognise the judgment of the courts of an Originating State where:
2. ENFORCEABILITY OF NON-SAUDI ARBITRAL AWARDS.
The Riyadh Convention.
The New York Convention.
Article 3 of the New York Convention provides that each Contracting State to the New York Convention will recognise arbitral awards and enforce them in accordance with the Contracting State's rules of procedure. The New York Convention applies not only to the recognition and enforcement by Contracting States of arbitral awards made in other Contracting States but also to the enforcement by Contracting States of arbitral awards made in non-Contracting States, provided that such arbitral awards satisfy the basic conditions set down in the New York Convention. However, pursuant to Article 1(3) of the New York Convention, Saudi Arabia ratified the New York Convention subject to a reservation such that Saudi Arabia will apply the New York Convention only to arbitral awards made in another Contracting State (the "Reciprocity Reservation").
A Contracting State may, however, pursuant to Article 5 of the New York Convention, decline to recognise and enforce an arbitral award:
It is important to note that the Grievances Board has invoked the "public policy" exception set forth in Article 5 of the New York Convention when declining to enforce a Foreign Arbitral Award the terms of which were not consistent with Islamic law as enforced in Saudi Arabia.
Meeting the requirements of consistency with Islamic law as enforced in Saudi Arabia and reciprocity is difficult, and the enforcement in Saudi Arabia of a non-Saudi judgment or non-Saudi arbitral award remains the exception rather than the rule. Accordingly, in a commercial contract between a Saudi party with assets only (or primarily) within Saudi Arabia and a non-Saudi party, the non-Saudi party should consider the value of having the contract governed by Saudi law and subjecting any disputes to Saudi forums.
Beaumont / Abdullah Al-Hashim