ArticlesEnforcement of Arbitral Awards in Kingdom of Saudi Arabia.

7 April, 20210
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Enforcement of Arbitral Awards in Kingdom of Saudi Arabia.

Possible problems in the enforcement phase of foreign arbitral awards:

DR. Omar Alkholi

In 1414.H the Kingdom acceded to the New York Convention of 1958 regarding the recognition and enforcement of Foreign Arbitral Awards, so the enforcement of these awards in the Kingdom is, in principle, governed by the provisions of that Convention.

With the promulgation of the enforcement Act in the Kingdom including in article (9), the express provision that arbitrators’ awards in a foreign country are to be regarded as writs of execution, Saudi enforcement courts have become the sole competent authority to enforce the arbitral  award, whether national or foreign, provided to be appended to the exequatur first.

In doing so, it is necessary for the arbitral tribunal’s decision (arbitral award) to be enforced. The competent court of appeal must decide that there is no cause for invalidity in this award, such as its violation of the provisions of Islamic law or public order in the Kingdom. And not to oppose any judgment or decision by a committee, court or body having jurisdiction over the subject matter of the dispute in the Kingdom, or the expiration of (60) days specified by law as the date of filing the invalidity claim.

Accordingly, the creation and determination of a judicial authority for the enforcement of arbitral award would promote and preserve the effort, expenses and result of the arbitral process, after the Board of Grievances has long been the competent authority of the enforcement of foreign arbitral awards on Saudi territory, accompanied by interventions that led to the invalidity of many foreign arbitral awards unduly only for personal aversion to those awards.

Also, credit goes to the legislative transformation in the Kingdom that if the foreign or national arbitral awards includes any violation of the provisions of Islamic law or public order in the Kingdom, the non-enforcement does not include all the award, but only the contrary part, while in the past, the practical application was not to enforce the entire arbitral award if it contains any part of it that is considered a violation of public order([2]).

One of the possible problems of arbitration taking place outside the Kingdom and the party who the award was issued in his favor, or who has an interest in enforcing it within the Kingdom, is surprised by the refusal to ratify the award for several reasons, the most prominent of which are the following:

  1. If one of the members of the arbitral tribunal is not a Muslim:

Although Saudi arbitration law did not require a specific religion for the arbitrator, the competent court of appeal may refuse to grant the executory formula of the arbitral award, in which an arbitrator who is not a Muslim participate, considering that arbitration is a type of judiciary, and judiciary is a jurisdiction and the rule is that “there is no jurisdiction for non-Muslims over a Muslim,” therefore non-Muslims cannot take over a process of arbitration that would bind a Muslim to specific obligations. Thus, the arbitral award required to be enforced in the Kingdom would be contrary to the public order in it.

The problem may seem more complex if the arbitrator who participated in issuing the award is a Muslim, but espouses one of those doctrines that some see as blasphemy and therefore the award which he issued or participated in issuing cannot be implemented or enforced.

  1. If one of the members of the arbitral tribunal is a female:

It is agreed that the legal nature of arbitration is considered judiciary and that the arbitrator is required to have the requirements of a judge.

It is also agreed that the judiciary is a “jurisdiction” Should women participate in an arbitration process then in the light of what was said, peace and blessings be upon him, “people who are ruled by a woman will not succeed”.

 Although the Saudi arbitration law did not require “masculinity” in the arbitrator, as well, the court of appeal may consider arbitration to be a type of judiciary, and judiciary is jurisdiction, and women may not have a jurisdiction over a man and thus cannot take over the arbitration process. Hence, it was decided that the arbitral award would be invalid for violating public order.

  1. If the subject of the dispute was not legitimately permissible:

If the subject of the dispute, over which an arbitral award was issued outside the Kingdom, is illegitimate or impermissible under the provisions of Islamic law, the Court of Appeal is likely to refuse to ratify it for its violation of public order, for instance, the investment activity in dispute is linked to impermissible businesses such as singing, cigarettes, musical instruments, etc.

Years ago, the General Court had ruled that a sum of money had been recovered from an artist who had received it to celebrate a wedding but did not implement, therefore a judgement was delivered to return the sum of money to the treasury and not to return it to his owner because it’s malicious money.

 Also, in a recent judgment (October 2017 AD) The Riyadh Administrative Court rejected a lawsuit filed by an artistic company demanding to overturn a decision issued by the Committee of  Adjudication of Competition law violations, by which the company was fined five million SAR for its violation of the law regarding the rights conditions of an “album” registered in the name of one of the “artists”, justifying that the subject of the lawsuit and the disputed matter which is “Singing and music” is legitimately forbidden by a fatwah issued by the Permanent Committee for Ifta, and accepting the case is legitimately impermissible, moreover acceptance the case or ruling in the favor of one of them means legitimizing that business. Furthermore, If the court accepts the lawsuit and ruled in the plaintiff’s favor, he will not be punished for his violation of law and legitimacy, resulting in corrupting and helping to spread the legitimacy violations.

 Also, in late 2020, two judges were dismissed, one of whom refused to rule in a case related to “hookah” smoke, and the other decided not to adjudicate a case in which a “Barber” would shave the beards, based on previous fatwahs prohibiting Hookah and beard shaving. The Supreme Council of the Judiciary, however, has passed a decision to dismiss them from the judiciary.

One of the issues in which the arbitral award would be rendered invalid as it violated the provisions of Islamic law and public order in the Kingdom, that it includes usurious interests, compensation for moral damage or loss of profits.

The Board of Grievances has already justified such an argument by saying, “in order to clarify its point of view, it stands on evidence derived from a consensus or fatwahs issued by the Fiqh Academy or the Board of Senior scholars, which shows that loss of profit and compensation for moral damage is contrary to Islamic Law Because such compensation goes into, and Allah knows, in the content of his Almighty saying, “And do not eat your money among yourselves unjustly”.

  1. The use of another State’s law:

If the two parties of the arbitral dispute were Saudis and agreed to use the law of a foreign country, the courts of appeal would absolutely refuse to ratify the award rather, would rule that it is invalid on the grounds that the Muslim could not have recourse to the laws of non-Muslims.

If one of the parties of the arbitral dispute is Saudi, and the other is foreigner, the executive formula can be added to the award unless it is contrary to public order.

Practical case on women’s membership in an arbitral tribunal:

In 2016 AD (1437H), the Saudi Board of Grievances approved the appointment of a woman as an arbitrator in an arbitral dispute in Kingdom of Saudi Arabia.

Thus, a woman have the right to be an arbitrator in any arbitral dispute, where she is chosen either as an appointed arbitrator or as a third arbitrator and as a presiding arbitrator, whether she was Saudi or not, following the decision of the first Commercial Circuit of Administrative Court of Appeal of the Eastern region in case No. 3022/c of 2001 1436, Dated 3/8/1437H from / … against Chinese Beijing Ltd. regarding the formation of an arbitral tribunal, including the nomination of the lawyer S.G as an appointed arbitrator by the Chinese company (the respondent), settling thereby the argument that arose because one of the parties of the dispute chose “a woman” as an arbitrator appointed by it.

The court only ratified the formation of the arbitral tribunal, which includes a woman among the arbitral tribunal members, without reasoning its judgement, although the Court of Appeal is obliged to give reasoning according to the Law, as a way of avoiding the current dispute on this issue the court only said “and based on the above, recognizing the agreement of the parties to choose the arbitral tribunal … And this in order to hear and adjudicate this case in accordance with the arbitration law, and pursuant to articles (14) and (15) of the arbitration law issued by Royal Decree No. M/34 and 24/5/1433 H, the Circuit shall substantiate and act accordingly, and shall end this case.”

The Court’s reluctance to reason the judgment may be due to conflicting views on the appointment of women as an arbitrator on the grounds that arbitration is considered “judiciary” and judiciary is a jurisdiction, is it possible to give women such jurisdiction?

The answer to this question is answered by two views: One is a supporter and the other is an opponent

The supporter attributed this to the reasons given by the respondent company’s representative on the basis that the relationship between the two adversaries and the arbitrators is a contractual relationship, which means that “the jurisdiction of arbitration differs from the jurisdiction of judiciary, because the jurisdiction of the judiciary is a general jurisdiction that the judge derive from the guardian, while the arbitrator derives his own jurisdiction that is limited to a particular dispute from the agreement of the parties of the arbitration – the power of will – to do so, and therefore, the relationship between the adversaries and the arbitrators is a contractual relationship of private law, which is conducted by an offer issued by the adversaries (to appoint arbitrators) and acceptance to that appointment issued by the arbitrators, and it goes without saying that, as a result of this fundamental difference between the general jurisdiction of judiciary derived from the guardian and the private jurisdiction of arbitration derived from the adversaries, the arbitral award is only enforced if the execution judge ordered it to be enforced,

this is in accordance with Article 14 of the enforcement Law No. M/53: Dated 13/8/1433H.

In connection with the above, it is not right to say that women are not suitable for arbitration, according to the Prophet – peace be upon him – “People who are ruled by a woman will not succeed” because this Hadith relates to general jurisdiction (succession), and not to the private jurisdiction of arbitration, and this is explained above by the difference between arbitration and the judiciary, as regards the nature and source of each jurisdiction. And this is so fundamental difference that gauging the arbitration to the judiciary is neither valid nor expandable. In the light of the above, the fact that conferring women the job of arbitration is legitimately permissible is certain”.

Then the respondent representative, while sticking to the principle that women may be appointed as arbitrators, moved to another argument that is the current Saudi Arbitration Law does not prevent women from being arbitrators, as “the arbitrator is not required to be of a certain gender and the evidence of this is the text of article 14 of the Arbitration Law concerning the conditions to be met in the arbitrator … The proper extrapolation of the content of this text reveals the fact that the arbitration law did not require the arbitrator to be of a particular gender, but required he or she to have full legal capacity, and by this it means the capacity to dispose, which means the ability to conduct his or her own legal work, and the capacity to dispose lies in the discretion, this stage begins with reaching the age of majority, which is 18 Hijri, “enjoying his mental strength and not being interdicted,

in this case the person could have the full capacity to dispose, thus, all his acts will be valid, also it is required to have a good conduct which is intuitive requirement of the arbitrator job. In the light of this text, the arbitrator could be a man or a woman, as the text is general, and the general shall remain general, and if the legislature required the arbitrator to be a man, he would have stated this explicitly.”

And contrary to this trend, the opponent trend that considers it is not the right of women to be arbitrators emerged, basing their opinion on:

“1. The respondent choosing its arbitrator to be a woman was rejected by my client, especially that his case was presented to several arbitrators to choose any of them to be the arbitrator of his or her own, but they all refused to confront a woman arbitrator for violation of the legitimacy, also there would be a possibility for a challenge on her being an arbitrator, which could lead to the prolongation of the dispute.

2.The arbitrator is a judge, and the majority of scholars as Malikiyah, Shafei, Al-Henabelah and Hadith scholars were unanimous in the non-permissibility of the woman’s job in judiciary, and they inferred this from several things, including: the women were not conferred with these jurisdictions in the era of The Prophet (peace and blessings be upon him), and the Rightly-Guided Caliphs and those who came after them, also his Almighty saying: “The men are superior to the women by right of what Allah has given one over the other and what they spend “,

where they explained that God -his praise and Majesty- prevented her from having jurisdiction over the family, which is the smallest jurisdiction of the jurisdictions, so a fortiori to prevent her from having what is greater than this, also, Ibn Kodamah mentioned (may God bless him) in the “Sufficient” three conditions: One of them is perfection, and there is two types of it; the provisions perfection, and the appearance perfection, the provisions perfection is considered in four things, that are: to be an adult, sensible, free male, and in his response to the opinion of the Hanafia that women may have jurisdiction in money,” the Prophet (peace and blessings be upon him) saying: “People who are ruled by a woman will not succeed”, and because the judge attends the forums of opponents and men, and is required to have the perfect opinion, the sharp mind and the insight, and the woman who is under-minded, with little opinion, is not suitable to attend the forums of men, and not to accept her testimony, even if she has a thousand women with her, if there is no man with them, God have warned against their errantry and forgetfulness by the Almighty saying “if one of them fails to remember, the other would remind her “, moreover, she is not suitable for the great leadership, nor for countrys’ ruling, thus, the Prophet (Peace and blessing be upon him) did not confer nor his successors and those who came after them women the judiciary jurisdiction or country ruling, according to what reached us, even if this was done, all the ages probably, would not have been without it “.

Although this judgement was made without reasoning, it established the principle that women may legitimately take over the job of arbitration, despite the continuing jurisprudential debate in this regard.

The Circuit that issued the judgment should have – as long as the matter is controversial- given reasoning for embracing this permission, which would be a judicial principle to be applied in all similar judgments.

In late 2020 in settling this conflict the Court of Appeal appointed a woman as a third arbitrator to an arbitral tribunal.

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