Enforcing Foreign Judgments and Foreign Arbitral Awards in Saudi Arabia
June 2004
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.

1.1 General Principles.
In principle, judgments issued by non-Saudi courts ("Foreign Judgments") can be enforced in Saudi Arabia. Article 8(1)(g) of Royal Decree No. M/51 dated 17/7/1402 H / 11 May 1982 (the "Grievances Board Law") grants the Grievances Board the authority to accept applications for the enforcement in Saudi Arabia of Foreign Judgments. Article 6 of the Rules of Pleadings and Procedures of the Grievances Board, as issued by Council of Ministers Resolution No. 190 dated 16/11/1409 H / 20 June 1989 (the "Rules"), provides that an application to enforce in Saudi Arabia a Foreign Judgment will be assessed on two bases.

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.

1.2 Reciprocal Enforcement Treaties.
Saudi Arabia is a party to two regional treaties concerning the reciprocal enforcement of judgments. However, the terms of these treaties are no more permissive than the provisions of the Grievances Law and the Rules.

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:

  1. The judgment is contrary to Islamic law or the Constitution or public order of the Recipient State;
  2. The judgment is a default judgment and the defendant was not properly notified of the case or the judgment;
  3. The dispute in respect of which the judgment was issued:
    1. Was previously finally adjudged in the Recipient State;
    2. Was referred to the courts of the Recipient State before it was referred to the courts of the Originating State and is still before the courts of the Recipient State;
  4. The judgment is against the government of the Recipient State or an official of the Recipient State for acts arising out of the performance of his duties as an official of the Recipient State; or
  5. The enforcement or recognition of the judgment would be contrary to an international agreement or convention in force in the Recipient State.

2. ENFORCEABILITY OF NON-SAUDI ARBITRAL AWARDS.

2.1 General Principles.
There are no Saudi statutes dealing with the enforcement of arbitral awards from arbitrations with seats in jurisdictions outside of Saudi Arabia ("Foreign Arbitral Awards"). However, as a practical matter, we would expect the legal principles governing the enforcement of non-Saudi judgments to be applied equally by Saudi courts to applications to enforce Foreign Arbitral Awards.

2.2 The Riyadh Convention.
Article 37 of the Riyadh Convention provides that arbitral awards from Originating States will be recognised and enforced in Recipient States, subject to the exceptions set forth in Articles 28 and 30 of the Riyadh Convention (summarised in section 0 above) and to the following additional exceptions:

  1. If under the law of the Recipient State, the dispute that is the subject of the arbitral award from the Originating State is not arbitrable;
  2. If the arbitration agreement upon which the arbitration was based was void or had expired;
  3. If the arbitrator(s) was not competent under the terms of the arbitration agreement or the laws under which the arbitral award was made;
  4. If both parties to the arbitration were not duly summoned to appear; or
  5. If the terms of the arbitral award are such that the enforcement of the arbitral award would be against the public policy of the Recipient State.

2.3 The New York Convention.
By Royal Decree No. M/11 dated 16/7/1414 H / 30 December 1993, Saudi Arabia ratified the 1958 Convention for the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"). Briefly, Article 1 of the New York Convention provides that the New York Convention applies to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards is sought.

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:

  1. Where the party against whom the arbitral award is invoked can prove that:
    1. The parties to the arbitration agreement were under some incapacity according to the law applicable to them;
    2. The arbitration agreement was not valid under its governing law;
    3. It was not given proper notice of the appointment of the arbitrator or of the arbitration or was otherwise unable to present his case;
    4. The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to the arbitration;
    5. The composition of the arbitral authority was not in accordance with the arbitration agreement; or
    6. The arbitral award is not yet final or has been set aside or suspended by the jurisdiction of the seat of the arbitration; or
  2. Where the competent authority of the Contracting State where enforcement of the arbitral award is sought finds that:
    1. The subject matter of the dispute is not capable of settlement by arbitration under the law of the Contracting State where enforcement of the arbitral award is sought; or
    2. he recognition or enforcement of the arbitral award would be contrary to the public policy of the Contracting State where enforcement of the arbitral award is sought.

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.

3. CONCLUSION.
The dual themes of reciprocity and consistency with Islamic law as enforced in Saudi Arabia permeate the Saudi Arabian laws concerning the enforcement in Saudi Arabia of non-Saudi judgments and non-Saudi arbitral awards. Whether an application to enforce a non-Saudi judgment or a non-Saudi arbitral award in Saudi Arabia is considered in the context of Saudi law general principles, the Riyadh Convention, the GCC Protocol, the New York Convention, or otherwise, consistency with Islamic law as enforced in Saudi Arabia and reciprocity are the two threshold requirements that must be met.

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.

John Beaumont / Abdullah Al-Hashim
The Law Firm of Yousef & Mohammed Al-Jadaan

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