Arbitration Practice In Saudi Arabia Kingdom

By Author: Anthony W Bills
Total Articles: 158
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Arbitration practice in Saudi Arabia Kingdom
Introduction
Arbitration is the process of solving disputes outside judicial courts in which the disputing parties refer the dispute to an arbitral tribunal consisting of one or more persons. The decision of the arbitral tribunal by which the parties agree to be bound is called the award. In some cases, there is more than one award in the course of arbitration and in such cases, the arbitration is not considered settled until the final award is made. Most commercial disputes are solved by arbitration. The reason for this is that in arbitration, the parties have the advantage of being able to choose the arbiters and that the details of the dispute are not publicized in an open court. Unlike litigation, arbitration is quicker, efficient and more flexible. In arbitration, the parties are friendly unlike in litigation where the differing parties consider themselves adversaries. Two basic forms of arbitrations exist in principle. The most common is one in which the parties agree to submit all future disputes to arbitration in the form of a clause in the main agreement while ...
... the second type comprises of an agreement by the disputing parties to resolve existing disputes by arbitration.
Arbitration has gained a lot of popularity as a means of solving business disputes in the Kingdom of Saudi Arabia in the last twenty years and as a result of this, the kingdom issued its first Arbitration Regulations, known as the Royal Decree No. M/46 in 1983. According to Article 1 of the Regulations, arbitration may be agreed upon in order to solve existing disputes or in advance to solve any dispute that may arise following the implementation of a contract. Article 2 prohibits arbitration in cases where conciliation is not allowed by law. This is in matters like criminal offenses, matters of public and administrative law, state property, inheritance issues, some marital disputes etc. Arbitral awards are not publicized in the Kingdom of Saudi Arabia.
If arbitration is done in done between the nationals of the same nation and enforcement of the award carried out in the same nation such that only the laws of this nation apply, then the arbitration is said to be domestic. If the arbitration however transcends beyond the boundaries, for example if the disputing parties are from different nations, then the arbitration is termed as International. In most cases, the decision whether to enforce an international arbitration award largely depends on the law in the country where the arbitration is done and on the regional and global international arbitration treaties that the states are signatory to (US Department of Commerce 2002).
Overview of the Arbitration Rules and Regulations in Saudi Arabia
a) Bodies of Jurisdiction
Although Saudi Arabia does not have a domestic arbitration center, it is a member of the Gulf Cooperation Council (GCC) and a signatory to Gulf Commercial Arbitration Center (GCAC). Decisions of GCAC are recognized in the Kingdom of Saudi Arabia. Plans are underway to establish a domestic arbitration center. The Kingdom of Saudi Arabia is a contracting state of the New York Convention, Washington Convention, Riyadh Convention and Bahrain Convention (Mahan 1992).
b) Law Governing Arbitration
Saudi Arabia’s arbitration laws are governed by Royal Decree M46 of 1983 and are not based on the UNCITRAL law. The UNCITAL model law provides guidelines for states which may want to implement arbitration legislature. The Saudi arbitration rules are contained in a Council of Ministers resolution 2/2021/M of May 27, 1985. The board of Grievances is the national body which has mandate to supervise arbitration. The board vests its powers in the Arbitration Regulations.
c) The arbitration Rules
The arbitration rules lays down the procedure of application for arbitration, the qualification of arbiters, appointment of arbiters, the roles of arbiters and sets out the procedure to be followed by each party from the onset through to submission of the award. There are two chambers of commerce in Saudi Arabia which administer arbitration. These are the Riyadh and Jeddah Chambers of Commerce. They administer arbitration according to the Arbitration Rules and Arbitration Law. They also have their own rules which they also apply in administering arbitrations.
d) Supervision of Arbitrators and Awards
In the kingdom of Saudi Arabia, arbitrators must be male Saudi citizens or male Muslim expatriates. Where there is more than one arbitrator, the final judge in the arbitral tribunal must have knowledge of Islamic law, be conversant with commercial regulations and know the customs and traditions that apply in the kingdom. The arbitrator should be a neutral person with no interest in the dispute. Any person who has committed a crime (such as murder, adultery, drunkenness or theft and robbery) or has been dismissed from public office is prohibited from becoming an arbitrator. The Board of Grievances supervises the arbitrators. If any matter of concern between either party or the arbitrator arises during arbitration, it is dealt with by the Board of Grievances court. The arbitration awards are rarely reviewed and when this is done, it is only to a limited extent (Redfern 2004).
e) Setting up of an Arbitral Tribunal
The arbitral process starts when a party submits to the court originally competent to decide the dispute an arbitration instrument. This should include the appointment of the arbitrator(s), the consent of the appointed arbiters to hear the dispute and give all the necessary details pertaining to the dispute. The court then approves or rejects the application within a period of 15 days. If a time limit is specified in the arbitration document, then an arbitration award must be made within this period according to the Arbitration Rules. If no such time is specified, then an award has to be made within 90 days starting from the day the arbitration document is approved. The number of times that the arbitration process may be adjourned is limited by the by the Arbitration Rules in order to enable the process get completed in time. A party may request for adjournment in order to furnish the arbitrators with documents which may be of importance as evidence during the process of arbitration.
f) Failure to Participate
The arbitrator is free to decide on the dispute in case one party fails to show up during the first hearing. This is however not possible unless the arbitrator is satisfied with the way in which both parties have filled their statements of claim, defenses, and documentation and that the absent party was properly served with notice of the hearing. If this is done, the award made is considered to have been made in the presence of both parties. If the arbitrating tribunal establishes that notice was not properly served to the defaulting party, the process is adjourned until the notice is properly served. If however the absent party attends before the end of arbitration, then he or she is given the chance to present his case and award will be made only after he has had a chance to present his case. Any award made in the absence of one party is considered null and void if it is established that the defaulting party was not properly served with notice of the hearing.
g) Interim Measures
It is within the rights of the disputing parties to request the court having jurisdiction over the dispute for some interim measures like restraining a party from leaving the country or attaching assets.
h) The parties are also granted powers to challenge the appointment of an Arbiter.
The conditions of challenging the appointment of an arbiter are similar to those of challenging a judge and on mutual agreement, the two disputing parties have the right to remove an arbitrator from the tribunal. The appointment of an arbiter can be challenged on the basis that the arbiter has an interest in the subject of the dispute, or that he is not a Muslim, or has been dismissed from a public office or has in the past committed a crime.
i) Appealing against the Arbitrator’s Decision
Either party can appeal to the court originally competent to hear the dispute within 15 days of the award. The court will then either accept it and issue a judgment or dismiss it and order the execution of the award. The court originally competent to decode on the dispute may declare the award final and that there is nothing to prevent its execution if one party makes this request. The arbitral tribunal is also free to correct any typing and arithmetic errors in the document or errors in the award if one of the arbitrators or one of the disputing parties requests so.
j) Procedure of Enforcing an Arbitration
In Saudi Arabia, awards made in arbitration are enforced by the Board of Grievances, subject to article 5 of the New York convention. This article provides that a foreign arbitration can fail to be recognized if:
i) in the country where arbitration takes place and the award made, the agreement to arbitrate is not valid,
ii) the arbitrators or arbitral tribunal acted extrajudicial in the issuance of the arbitration award,
iii) the arbitral tribunal did not comprise of qualified persons,
iv) the decision of the arbiters was interim and not eventual in the country in which it was made,
v) the Saudi law prohibits resolution of the subject of the dispute by arbitration,
vi) and if enforcement of the award would jeopardize public policy in Saudi Arabia.
Courts in Saudi Arabia are not supposed to reconsider such awards and in regard of the Arab League Convention although in practice, awards from New York and Arab League convention party states are scrutinized to ensure that they do not contradict Islamic principles any part that contravenes Islamic law in not enforceable.
k) Cost of Arbitration
Normally the disputing parties and the arbitrators agree on the fees to be paid to the arbitrators, otherwise the court originally competent to decide on the dispute makes the decision on the amount and allocation of the fees. Such a decision can be challenged within 8 days of notification.
l) Evidence
Parties to arbitration may introduce both oral and documentary evidence in the course of arbitration as provided by article 31 of the Arbitration Regulations. The arbitrators may order a party to produce documentary evidence and the party so required may ask for adjournment in order to furnish the arbitrators with such documents. The arbitrators have mandate to conduct on-site inspections and carry out independent investigations. They are also empowered to obtain the help of an expert to give technical details. The arbitrators will then decide on which party will pay for the fees of the expert.
The Award
a) Requirements
In Saudi Arabia, arbitration is done only if the dispute can be solved by compromise as provided for by the Royal Decree M46 of 1983. The arbitral process starts when an aggrieved party submits to the court originally competent to hear the dispute an arbitration instrument which includes the appointment of the arbitrators and all the necessary details of the dispute. The dispute must not involve government property; must not be prohibited by Saudi law and must not contravene Islamic law. The other party must be properly notified before arbitration begins. In case of an international dispute, arbitration must not be contrary to Saudi law. The arbitration must be in writing for it to be enforceable.
b) Deposition and Notification
All awards, interim and final must be deposited with the authority originally competent to decide on the dispute within 5 days of issuance and all the parties to the dispute be served with copies. This is provided in Article 18 of the Arbitration Regulations. When a party lodges a dispute with the court, the other party must be properly notified in writing before the process of arbitration begins. Notifications pertaining to arbitration are required to be in Arabic and are required to bear:
i) the time and the date that the party carries out the notification
ii) title, name and address of the person to be notified,
iii) title and name of the person who carries out the notification,
iv) title and name of the person who receives the notification and his signature on the original document of notification,
v) the names of the arbitrators,
vi) the reason and time limit of the notification
vii) the venue of arbitration.
The notification should be given to the party or legal representatives of the party. If the party for some reason fails to pass the notice to the other party, the notification shall be given to the nearest to the place of residence of the party to be notified. In case the party to be notified is the government, then the notification shall be served to the ministries or governor’s office. If the party to be notified is a legal entity like a public or private company, then its attorney’s headquarters shall be issued with the notification.
If the time of issuance of an award is explicitly stated in the arbitration instrument then the same shall be made within such time, unless an extension is sought by the parties. If however the date is not given, the arbiters shall make their award within 90 days from the date of approval of the arbitration instrument. This is provided by article 9 of the Arbitration Regulations. Nothing is expressed by the Arbitration Regulations concerning the law that should govern the proceedings of arbitrations. Arbitrators are not bound by the regulations of procedures, but they must comply with Sharia law as provided by article 36 of the Arbitration regulations.
c) Objections and Appeals and Limitation Period
According to article 18 of the Arbitration Regulations, either party may lodge objection to the decision of the arbitral tribunal within 15 days of the notification of the decision by appealing to the court originally having jurisdiction over the dispute. The court may accept the objection and pass a judgment or it may reject the appeal and order execution of the award.
d) Judicial decision
The adjudicating court must be served with and approve an arbitration document before arbitration begins as provided by article 5 of the Arbitration Regulations. The arbitration document shall bear the signatures of the disputing parties or their official authorized representatives. The document must also be signed by the arbiters. The document shall include:
i) the subject of the dispute,
ii) the names of the parties,
iii) the names of the arbiters and their consent to decide over the dispute.
Copies of all documentation relating to the dispute shall be attached to the arbitration document. The document is required to be in Arabic language and does not need to be authenticated or witnessed. This can however to avoid delays in case a party challenges the authenticity of the document at a later stage. Apart from the items that must be included in the arbitration document as laid out in article 5, the parties are free to include any other terms that may be agreed upon. One common practice is to include the time period within which the award is to be issued by the arbitrators.
The judicial approval is required in order to avoid disputes by the parties to the dispute as to the nature of the agreement, but is not a vital step in the process. An arbitration document will generally be approved unless it is contrary to Saudi law or public policy. The court having jurisdiction over the dispute issues its approval within 15 days of submission. After the approval of the document receives approval, the authority having jurisdiction over the dispute may only hear the subject of the dispute according to Arbitration Regulation. It is not stated in the regulations what happens in case one party takes legal action before submitting the arbitration document for approval. If the time within which an award is to be issued is not specified in the document, then the arbitrators must give the award within 90 days and this time starts running from the date the approval is issued.
The court plays no part if the parties choose to resolve their dispute by the use of a private tribunal. However the court has mandate to enforce awards made in such arbitration just like ones arising from arbitration before a public tribunal (Louis-Jacques 2003).
e) UNCITRAL Rules
On April 28, 1976, the United Nations Commission on International Trade Law adopted the UNCITAL Arbitration Rules. These rules provide the procedures that two parties in dispute relating to their commercial transactions may agree. All aspects of arbitration are covered in these rules. They include a provision of a model arbitration clause and set out the procedure for appointment of arbitrators, arbitral proceedings and establish rules in relation to the form, effect and interpretation of the award. The United Nations General Assembly decided to adopt the rules due to the following reasons:
i) The recognition of arbitration as an important means of solving international trade disputes and to try to bring economic harmony in countries with different legal, social and economic systems,
ii) After considering that the rules had been prepared with wide consultation with arbitral institutions and centers of international commercial arbitration.
The UNCITAL recommends that the arbitration rules be used in settlement of disputes arising from international commercial transactions and contracts. The UNCITAL also requests the Secretary-General to make arrangements such that the Arbitration Rules have the widest possible distribution. In Saudi Arabia, awards made in arbitration are enforced by the Board of Grievances, subject to article 5 of the New York convention.
f) ICC Rules
With trade becoming increasingly global and national economies getting so interwoven, the decisions made by governments have more international implications now than in the past. The International Chamber of Commerce (ICC) is a world body that champions global economy as a force for the creation of jobs, economic growth and prosperity and is the world’s only true global commercial organization and has become more assertive in expressing international business views.
ICC accesses national governments through the national committees from its seat in Paris and channels commercial views to intergovernmental organizations on matters concerning commercial operations. Activities of the ICC include:
• Arbitration and dispute resolution.
• Creating open trade business and the market economy.
• Business self-monitoring.
• Fighting commercial crime.
The Enforcement of International Awards in Saudi Arabia
A foreign jurisdiction is enforced when a local court uses its powers to order a party to make the restitution granted by arbitration or litigation in a foreign court. There is no Saudi law that deals with the enforcement of arbitral awards issued by jurisdictions outside Saudi Arabia. In practice, it would be expected that the legal principles that govern enforcement of foreign court jurisdictions to apply to foreign arbitration awards. Article 8(1)(g) of Royal Decree No. M/51 of 1982 provides that the Grievances Board can accept requests for the enforcement of a foreign jurisdiction in Saudi Arabia. The kingdom is a signatory to two regional treaties that provide for reciprocation of judgment enforcements.
a) Regional Institutions
Saudi Arabia is a party to the Riyadh Convention which provides that member states shall recognize and enforce judgments passed in other League of Arab States which are party to the treaty (Paulson 2008). This is called Reciprocal Enforcement of Judgments Agreement. Article 3 of the agreement provides that arbitral awards issued in one member state is enforceable in another member state. Under this article, courts in the state where enforcement is sought are barred from reexamining the subject matter of the dispute. The article however gives exemptions permitting refusal to enforcement of an Arab League award in the following cases:
i) If the dispute cannot be resolved by arbitration according to the laws of the state where enforcement is sought.
ii) If the agreement of the parties to submit to arbitration from which the award is given is not valid.
iii) If notification to the disputing parties was not properly done.
iv) In case the award includes anything that contradicts public policy or principals of morality of the country where enforcement is sought.
v) If the decision of the arbitrator was not final in the country where the award is issued.
vi) If the action of the arbitrators was not within their powers in issuing the award.
The Kingdom of Saudi Arabia is a party to the Gulf Cooperation Center of Arbitration (GCC). There is no domestic arbitration center in the kingdom although plans are underway to set up one in the near future. At the moment, the Grievances Board is the body which has mandate to enforce all foreign jurisdictions, including arbitral awards.
b) New York Convention
Saudi Arabia acceded to the New York Convention in 1993 as provided by the Royal Decree No. M/11of 1993 for the recognition and enforcement of awards arising from arbitration in foreign countries. Article 1 of the New York Convention of 1958 provides that an arbitral award made in the territory of one state shall be recognized and enforceable in another state. The New York Convention provides that the award will be recognized and enforced in accordance with the contracting state’s law. It further provides that such awards will be recognized in non contracting states. The kingdom of Saudi Arabia however ratified the New York convention reservedly, i.e. on condition that Saudi Arabia will only recognize awards made in another contracting state. This is referred to as the Reciprocity Reservation. Article 5 of the New York Convention however provides that a party state may decline to enforce an award if the party against whom action is sought can prove that:
• The parties to the arbitration were not qualified in accordance to the law applicable to them.
• According to the law governing arbitration the agreement was not valid.
• Proper notice was not served or the party did not get the chance to present its case.
• The subject of the dispute falls outside the terms of submission to the arbitration.
• The arbitral authority was wrongly composed according to the arbitration agreement.
• The arbitral award has been suspended and is therefore not eventual according to the arbitrating authority.
The act also provides that a Contracting State can decline to recognize and enforce an award if:
• The nature of the dispute is not solvable by arbitration according to the laws of the state where enforcement is sought.
• Recognition or enforcement of the award jeopardizes public policy in the state where enforcement is sought.
In declining to enforce a foreign arbitral award which contradicts Islamic law, Saudi Arabia invokes the exception in the interest of public policy provided in Article 5.
c) Washington Rules
The International Center for the Settlement of Investment Disputes (ICSID Convention) or the Washington Convention provides arbitration and conciliation as a means of solving investment disputes between nationals of countries who are signatories to the convention. The kingdom of Saudi Arabia is a contracting party to the Washington convention. The Kingdom of Saudi Arabia made some reservations while ratifying the Washington Convention. In the ratification instrument, the kingdom reserved the right not to disclose all information concerning its oil and acts of sovereignty to the International Center for the Settlement of Investment Disputes. Member countries of the ICSID Convention contracted after realizing the need to have international cooperation. Considering the fact that from time to time disputes relating to investments are bound to occur, and that they may be between nationals of a contracting state and another of another contracting state. The international center of arbitration was then set up with its seat in the International Bank of Reconstruction and Development in Washington.
Article one of the Convention Agreement provides that the arbitration center shall make the conciliation and arbitration of contracting states and nationals of other contracting states in disputes relating to investment. Article 18 provides that the center shall have full international legal powers to contract, to acquire and dispose property and to bring legal action upon a legal entity. Article 28 provides that in order to institute proceedings, a national of a contracting state will submit and application in writing to the Secretary-General of the Center. The Secretary-General shall then inform the other party by sending him/her a copy of the application. The application shall contain information concerning the subject of the dispute, the consent to arbitrate and the identities of the parties. The Secretary-General of the center shall determine the fees payable for the use of the center’s facilities. This shall be in accordance to the rules adopted by the Administrative Council.
Case Analysis
It is clear that arbitration has gained popularity as a means of solving commercial disputes in Saudi Arabia and the Middle East in general but in the past, there has been a history of dishonoring of arbitration agreements which has brought about distrust among many parties who would have preferred arbitration to litigation.
i) Jadawel International versus Emaar Properties
In this case, Jadawel Internationaal and Emaar Properties had and agreement in which Emaar Properties would transfer to Jadawel Real Estate Investments:
1) The ownership of two compounds it owned in United Arab Emirates and
2) The 80% shares it owned in Jadawel Real Estate and that Jadawel International would later replace Emaar Properties in Jadawel International.
3) That the name of Jadawel Real Estate Investment would be changed to
Saudi Emaar.
The agreement obliged the defendant to:
1) Pay Jadawel International $760,000,000.
2) Transfer to Jadawel International 18,610,000 of Emaar shares in United Arab Emirates in three parts spanning 33 months.
3) Share its projects of $ 152,000,000 in UAE with Jadawel International as agreed by the chairman of the board of the latter.
Emaar Properties claimed to have had transferred the two compounds to Jadawel International. The Defendant however did not do as agreed and instead enriched at the cost of the Plaintiff. The Defendant’s shares rose to AED 100 s a result of entering into partnership with the Plaintiff. The Plaintiff wanted the court in Riyadh to instruct the Defendant to
1) Pay the Plaintiff the sum of $ 76,000,000 (SAR 285,000,000);
2) To order the delivery of 14,406,666.6 share certificates of UAE Emaar to
his client;
3) To instruct the Defendant to transfer the shares in its property in the

Sum of $ 152,000 which is equivalent to SAR 570,000,000;
4) To instruct the Defendant to pay the attorneys' fees at the rate of 3% of the awarded amount.
The court with jurisdiction over the case was in Riyadh in Saudi Arabia. When
the parties went to court for the hearing, the attorney for Emaar Properties pleaded
the arbitration clause in accordance with article 15 of the contract between the parties
which provides for the arbitration clause. The Court instructed the parties to nominate the
arbiters and prepare the arbitration instrument for approval. The parties submitted the arbitration instrument at the hearing which was signed by the parties and arbitrators as required by the Regulations and the arbitral case was referred to the arbitration secretariat. The Court issued its decision whereby it approved arbitration agreement of Jadawel International against UAE Emaar. Later all minutes and documents of the arbitral case and the arbitration award were submitted to the Court. The arbitral award states as follows:

1. to dismiss the case filed by the Plaintiff Company for instructing the

Defendant Company to pay $76,000,000, transfer18,610,000 shares of UAE
Emaar, which are 372,200,000 after distribution, for the transfer the
ownership of Emaar in Dubai Towers in the sum of $ 152,000,000;
2. to render the agreement between the parties invalid and
unenforceable and not binding on Emaar Properties with the exception of the provision

of paragraph 3 in the award;
3. to dismiss the claim of the Defendant Company that the
agreement of the joint venture (Saudi Emaar) on the ground that a party to
the said agreement, Mohsin, Bashaer, and Mashael son and daughters of

Mohamed Al Jaber were not represented in the arbitration agreement or in
the arbitral case and that each party in the Plaintiff Company (Emaar
Properties and Sons of Mohamed Al Jaber) are entitled to file a case in
this respect if he wants to do so;
4. to instruct the Plaintiff Company to pay the arbitration fees in the sum
of SAR 45,000,000 and the fees in the sum of $ 30,000 of the trustee in
whose hands the exchanged guarantees are entrusted and to reject the claim
of the Defendant with respect to the charges paid to the letter of guarantees against the arbitration fees and the charges of the letter of guarantees exchanged by the parties in this respect;
5. to adjourn the case filed by each party against the other with respect

to the compensation against the material and moral damages and breach of
contractual obligations and to adjourn the case for claiming the attorneys'
fees and expenses.
Emaar Properties decided to challenge the award as provided by the Arbitration Regulations and submitted a challenge to the Court in Riyadh. The attorney of Jadawel International did not appear for the hearing but instead sent a memorandum wherein he
stated the aspects of his challenge to the arbitral award that some of the members of the arbitration tribunal did not attend at some arbitral hearings and that they signed the arbitral minutes at a later hearing, that the arbitral tribunal did not submit its awards to the Court and he was not notified of the awards within the time limit to object thereto, the quick proceedings at the last hearing, that the case was prematurely determined, that the chairman of the arbitration tribunal did not sign the hearing of closing the pleading in the case that the final award was issued on a public holiday, that such significant issues in the case were not determined as the revision of the assessment report, which is attached to the contract the parties agreed to enforce in this agreement and to which the tribunal did not pay any attention, miscalculation as to the evidence of proof as his client submitted the sale contract between the parties, powers of attorneys, decisions, acknowledgments, lawful acts, and a number of witnesses whereas the proofs submitted by UAE Emaar were mere statements which were not established at law and that the words and statements of the Defendant were misinterpreted. At the said hearing the attorney of the Plaintiff requested the Court to determine his challenge to the arbitral award. The attorney of the Defendant requested the Court to ratify the arbitral award and reject the claim of the Plaintiff Company. Both parties stated that their submissions before the Court at the hearings of pleading were sufficient.The Court told the attorney of the Defendant that he was entitled to review the challenge submitted by the attorney of the Plaintiff to the arbitral award and reply to the challenge; however, the said attorney stated that their earlier submissions were enough. The Court issued its judgment at the same hearing. The Plaintiff claims that the arbitral award be cancelled and that the Defendant Company (UAE Emaar) be instructed to pay $ 76,000,000 which is equivalent to SAR 285,000,000 and be delivered 18,610,000 in Emaar's shares before distribution and that the Defendant be instructed to transfer to his client shares in the sum of $ 152,000,000 which is equivalent to SAR 570,000,000 whereas the Defendant Company requested the Court to reject the challenge and ratify the arbitral award. Article 19 of the Arbitration Law provides "If the parties or one of them challenge the arbitral award during the time limit as set forth in the former Article, the competent entity shall consider the challenge and may reject it or accept the challenge or enforce the award." Whereas the Plaintiff filed its challenge within the time limit, the challenge is acceptable on its form. Article 19 of the Arbitration Law provides that the court, which hears the dispute, has jurisdiction to determine the arbitral award as it may acceptor reject it on its merit, as settled by the Grievance Court. Having examined the arbitral award and challenge against it and the papers of the case, the Court found that the grounds on which the arbitral award is based are not correct, as will later be detailed in this judgment. As such, the Court accepted the challenge and will determine the arbitration issue. As regards the substance, the Court examined all documents submitted by the parties including the contract between them, the powers of attorneys issued by the board chairman of the Defendant Company (UAE Emaar) and the transfer by the Defendant (UAE Emaar) of Jadawel Real Estate Investments to its ownership before the notary public and the amendment in the name of Jadawel Real Estate Investment, in which the Plaintiff Company owned 80 of its share, to the name of Saudi Emaar after the two residential compounds had been transferred from the Plaintiff (Jadawel International) to Jadawel Real Estate Investment and the after the amendment to the memorandum of association and appointment of the board of directors and the announcement in this effect in the newspapers and correspondence between the parties.
The Court examined the arbitral award and the challenge against it and found that the parties had signed a sale agreement which was subject to the approval of the board of directors of UAE Emaar and regulatory authorities in Dubai. Further, whether the said agreement was approved or assigned and was as such binding upon the parties or was rejected and the agreement was not binding as such because the condition was not fulfilled and the contract between the parties was pending a condition, which is a valid contract. In practice, a contract may be made consensually by the parties thereto and that the conditional approval of the board of directors as set forth in the contract may be in statement, writing, or act and incase of a dispute, the more evident will be submitted. If the acts of the Defendant (UAE Emaar) after the contract had been made are examined, we find that the board chairman of the Defendant Company issued the first power of attorney on 17.1.2004 and authorized the attorneys in the said power of attorney to sign the partnership agreement between UAE Emaar and the latter has become a partner in Jadawel Real Estate Investments. Further, the memorandums of association were amended and attested by the Saudi Ministry of Commerce and by a notary public in Saudi Arabia and the decisions were authorized to be published in the official gazette etc. The said power of attorney was alone evident to
prove that the board of directors of the Defendant Company had approved the agreement or the board chairman waived the condition with respect to the approval of the board of directors of UAE Emaar and regulatory authorities in Dubai. In principle, the said chairman is entitled to make contracts without having approvals from the board of directors and regulatory authorities in Dubai, as set forth in article 26 of the memorandum of association of the Defendant Company, which provides "The chairman of the board of directors is the head of the Company and may represent the Company
before the courts and with respect to the relations of the Company with third parties. His signature on a document shall be deemed as the signatures of all members of the board of directors." The said Article provides that the said chairman is authorized to make contracts with others and may stipulate conditions for the interest of the Company. In principle, if a person is capable to stipulate conditions, he is capable to waive them. Furthermore, on 24.2.1425 80% of the shares in Jadawel Real Estate Investments were transferred to Saudi Emaar and the memorandums of association were amended and attested by the Saudi Ministry of Commerce and by the notary public and those were announced in the newspapers and by its agents. In principle, an agent represents his principal, as such, the Court found that the said acts decisively prove that the board of directors gave its approval or the Defendant waived its condition with respect to the
approval given by the board of directors of UAE Emaar and regulatory authorities in Dubai. In principle, a condition may not be taken into consideration, if the contrary thereof was expressly stated. The said chairman had acted in this respect as he had issued powers of attorney and they transferred Jadawel Real Estate Investments to its ownership and signed and amended the memorandums of association and they were attested by the Saudi Ministry of Commerce and notary public and were announced in the newspapers. This is evidence on the intention of the board chairman of Emaar who placed as a condition an approval from the board of directors of UAE Emaar and regulatory
authorities in Dubai. By doing such acts and by signing the contract he waived the said condition (he is being authorized to do so) or the board of directors approved the agreement. Had the matter not been so, the chairman would have not performed the sale transaction by issuing the first power of attorney whereby the representatives enforced the contract obligations subject to the approval of Emaar's board of directors with the knowledge of the chairman of UAE Emaar. It is unreasonable that the representatives
would have acted without the knowledge of the issuer of the powers of attorney. The representatives' acts devolve upon their principals. As such, the condition was waived by the chairman who had previously placed the condition and he intended to conclude the contract without any condition or the board of directors had approved the agreement.
The second power of attorney issued by the chairman of the Defendant Company i.e., after more than two months from the date of the first power of attorney, which does not depart in content from the first power of attorney but it confirmed the sale and the contract. The second power of attorney states "H E Mohamed BinAli Al Abbar, the chairman of UAE Emaar Properties appeared before me and stated that he had appointed legal representatives to act on his behalf and act with the other partners in the properties owned by Saudi Emaar in which Emaar Properties, which I represent, in 80% of its entire shares and they were authorized to sell in whole or in part the properties owned by Saudi Emaar to any party and transfer before the notary public and receive the price in the name of the Company and to make leases, receive prices and represent before all official entities and sign on my behalf." As such, by virtue of the above power of attorney the sale was concluded and the said power of attorney evidently proves the intention of the Defendant to conclude the sale and waive the condition. Had the chairman of the Defendant Company intended to maintain the conditional sale, he would have not issued the second power of attorney which proved the transfer of the sold property to the Defendant Company and acceptance of representatives' acts. The said chairman disposed of the properties he was authorized to do through his representatives. Had the chairman not accepted the sale and waived the condition, he would have stated as such in the power of attorney. As such, the apparent power of attorney is contrary to the intention of the Defendant. It cannot be said that the chairman of the Defendant had issued the power of attorney in order to correct the acts issued under by the first power of attorney as the power of attorney is evident because the chairman of the Defendant Company states at the beginning of the power of attorney "he had appointed legal representatives to act on his behalf and act with the other partners in the properties owned by Saudi Emaar in which Emaar Properties, which I represent, in 80%
of its entire shares and they were authorized to sell in whole or in part the properties owned by Saudi Emaar to any party and transfer before the notary public and receive the price in the name of the Company and to make leases." This unquestionably means he intended to reiterate what is stated in the first power of attorney as the apparent words are consistent with each other. Had the chairman intended to revise the wording in the
first power of attorney, he would have expressly stated as such in clear words. The Defendant intended to conclude the sale as it had issued the third power of attorney by the chairman of UAE Emaar on 8.5.2004, which is similar to the second power of attorney.
The Defendant argued that the issue of the powers of attorney rendered the agreement enforceable after being approved and not before the approval. This argument is not correct because the powers of attorney are apparently evident and the argument of the Defendant is mere statements because if the argument is accepted, contracts may be manipulated. Furthermore, the Defendant enforced the contract terms through its representatives. As such, the sale was concluded and the condition was waived. Had the Defendant not intended to conclude the sale, it would have not disposed of the property as an owner. As such, the above potential evidence may not be accepted as it took place after the condition had been waived and the sale concluded. As such, the above argument is rejected. The Defendant had actually intended to conclude the sale as it announced it
in the official media and the deal was spread and the representatives acted among traders and others without any objection on part of the board of directors of Emaar and its chairman or on part of the regulatory authorities to the condition in the contract. As such, they waived the condition as they had not indicated that the condition was existent. In
principle, a statement should be expressed when it is needed. The arbitration tribunal stated that the email issued by the secretary of the chairman of the board of the Plaintiff Company meant that the Plaintiff was aware of the Defendant's intention not to sign the contract and insist on the condition in the contract and that the contract was still pending
and the sale was not concluded accordingly. The said emails states "whether or not Emaar intended to terminate the transaction ";"whether or not the transaction is terminated." The above argument is not correct because the contract had already been made before the said email was sent as the powers of attorney and the acts of the representatives for the transfer of the ownership in Jadawel Real Estate Investments to the Defendant (Emaar Properties) and the change of the name of the company from Jadawel Real Estate Investments to Saudi Emaar and the amendment to the memorandums of association and having them attested by the Saudi Ministry of Commerce and by the notary public and the announcement in the newspapers. The said email was issued after the sale had been concluded and the condition waived and the parties intended to make the contract by signing it. As such, the email may not be taken as evidence. However, the
email may indicate that the transaction is the agreement and the conditional contract was not made, which is remote possibility as the Court will explain later. The second possibility is that the email may refer to the Shuaa report, as the email states "regardless of the above, please find attached our notes as to Shuaa report. Please note and do not hesitate to refer the notes to Shuaa and discuss them with you. Regardless of whether
or not Emaar intends to terminate the transaction, we believe that the information should be corrected." Undoubtedly, the transaction mean is Shuaa report as the emails requests the discussion of the notes with Shuaa and that whether or not Emaar closed the issue of Shuaa report by relying only on the notes, the correction of the information set forth in the report was intended. This explanation is very clear in the email "Emaar may chose one o the said firms set forth in the email, so as to work with each other on the revision of the transaction or the ambiguity surrounding the transaction is clarified through our notes which are attached hereto. Otherwise, I insist on the revision as stated above." It is evident that Shuaa report raised ambiguity with Emaar after the contract had been made.
The Plaintiff confirmed in its letter that UAE Emaar should see its notes on the report and that the auditing should be conducted by specialist auditors. These are very clear as set forth in the letter "to maintain protect the good faith, interests, and good standing of our valuable firms against any doubts on the transaction and other transaction." This means
all discussions were provoked after the agreement had been made; otherwise the revision need not be taken place and the approval of the board of directors of the company was enough, as alleged later by the Defendant. This is evident in "our joint partnership and concepts and reciprocal respect would remain unchanged. " This clearly means that
Shuaa report would not affect their partnership, which is the only one under the contract. The wording is apparently clear and may not be contradicted unless by cogent evidence. As such, the email may not be relied upon as evidence because provisions are interpreted within their context. Ibn Saadi "(rule 29, wording should be restricted by the description, condition or exclusion attached thereto and if restrictions to the wording are not taken into consideration, wording will not be correct. As such, the contract and partnership are existent whether or not the transaction was terminated, as apparently evident in the email.
Furthermore, had the statement "whether or not the transaction was terminated" meant the agreement, it should have meant that the agreement not unenforceable but the discussion on the agreement arising from Shuaa report. As such, the contract was made; otherwise, the email should havestated whether or not the transaction was made. The arbitration tribunal states that the Defendant sought advice from the specialists and did not rely on their advice. In principle, an expert viewpoint is not binding. Had the Defendant sought advice from the specialists, the contract should have been not affected and still valid as
the advice is only concerned with the Defendant as the party who seeks advice may be later refrain from relying on the advice. The arbitration tribunal relied on the letter dated 14.4.2004, which was sent by fax, that the Plaintiff was aware of the refusal of the Defendant to conclude the deal. This evidence is fabricated by the Defendant and not
admitted by the Plaintiff. Furthermore, the Defendant did not submit any evidence that the said letter had been received by the Plaintiff. The above is not correct because the contract had already been made and the condition waived, as already explained, and the Defendant had issued the powers of attorney and its representative disposed of the sold property as they had transferred the ownership of Jadawel Real Estate Investment to the Defendant (Emaar Properties) and the name of Jadawel Real Estate Investment was changed to Saudi Emaar and the memorandums of association were attested by the Saudi Ministry of Commerce and by the notary public and they were announced in the newspapers.
However, the above took place long period of time after the contract had been made and the Defendant's acts were contrary to the above. Had the Defendant not intended to sign the contract, it would have not done the above acts and should have informed the Plaintiff before those acts had been done. The arbitration tribunal stated that the Plaintiff was aware of the incorporation of another company. This does not affect the making of the contract because the memorandum of association does provide any prohibition in this regard. As such, the above argument is groundless. The contract has already been made. Article 6/c of the agreement states "The Second Party shall register properties of Emaar's projects in the sum of $ 152,000,000 after deducting 20% of their market value so as to register the properties in the name of Mohamed Bin Eissa Al Jaber, subject to his discretionary decision." The arbitration award states that the said projects were not truly existent and sale of something which is not defacto owned. Prophet Mohamed (peace be upon him) prohibits any sale of a property which is not owned. As such, this provision should be nullified in addition to there is no specific matter agreed upon by the parties but the determination is left to a party to the contract without any specification. Further, the Plaintiff handed over the sold property to the Defendant and did not receive any consideration. As such, the Defendant should be obliged to pay the consideration as the parties agreed that the Defendant should be obliged to deliver the consideration. The arbitral award is based on ineffective and weak grounds because the result in paragraph 3 of the award has been established and the award iscontradictory. The award states that the agreement had not been made; however, it later states in paragraph 3 that the Defendant Company is still a partner in Saudi Emaar. As such, the award is reversed. The parties agreed in clause 7 of the arbitration award that the losing party would pay the arbitration fees. As such, the Defendant is instructed to pay the arbitration fees on the ground that it is the losing party in the case. As regards the argument that the losing party should be instructed to pay thecharges of the bank guarantees, this is not acceptable in Islamic sharia. As such, the Court rejects the above claim.
As regards the claim of the Defendant to ratify the arbitral award and to reject the claim of the Plaintiff, the Court rejects the above claim. Having considered the papers of the case and duly deliberated, the Court ruled as follows:
1) To reverse the arbitral award issued in case no. 4713/1 of 1425 which is brought by the Plaintiff (Jadawel International) against the Defendant (Emaar Properties);
2) To instruct the Defendant (Emaar Properties) to pay the Plaintiff (Jadawel International) the sum of $ 228,000,000 pursuant to the agreement made by the parties.
3) To instruct the Defendant to deliver 18,610,000 share certificates in Emaar Properties and the resultant distributions and profits with effect from making the agreement.
4) To instruct the Defendant to pay the arbitration fees in the sum of SAR
45,000,000 (forty five million Saudi Riyals) and the trustee's fees in the
sum of $ 30,000.
5) To reject the other claims of the parties, as set forth above.
This is a clear illustration of how arbitral procedure in Saudi Arabia and how recourse is sought in case a party to the arbitration decides to challenge the award made by the arbiters.
ii) Saudi Arabia vs. ARAMCO
In 1958, the Arabian American Oil Company claimed that its rights had been flouted when Saudi Arabia made an agreement with a Greek ship owner Aristotle Onassis and his company. In this case, it was decided that Saudi Arabian law could not be applied because the seat of the arbitral tribunal was in Geneva. The disputing parties had conceded to take their dispute outside the jurisdiction of Saudi courts of law. And the arbitral tribunal held that the parties didn’t want the law of Saudi Arabia to apply to the proceedings. The tribunal could not use the Swiss law and therefore the law that was used was the international law.
In this case, the commercial relationship between ARAMCO and the Saudi Government dated many years. This is why the dispute was referred to an arbitral tribunal of three arbitrators. Originally, the seat of the tribunal was to be in Lucerne in Switzerland but later the disputing parties changed the venue to Geneva. It was further agreed upon that the award would be declaratory, i.e. neither party was to claim damages arising from the dispute. Upon issuing its decision the arbitral tribunal said that parties in dispute can limit the scope of the arbitration agreement to the extent of their legal position. It further said that if the arbitrators do not have the capacity to order enforcement of the award, then the arbitrators can only issue a declaratory award.
A declaratory award is a binding agreement which lays down the legal position of each party and is useful in resolution of disputes where the parties continue to have a commercial relationship. In declaratory awards, the arbitrator sometimes helps rewrite the contract and to fill in missing gaps in the contract (El Rahman 2003).
iii) DynCorp International vs. ARAMCO
In this case, a contract was signed between DynCorp International and ARAMCO. The contract was for DynCorp to manufacture an advanced computer and install it in Aramco’s facilities in Saudi Arabia. The contract provided an arbitration clause, and was written in English. The agreement also provided that the laws of Saudi Arabia shall be used to interpret the contract. The contract provided that any dispute or claim arising from the contract will be settled by arbitration. The parties also agreed that if arbitration is done before one arbitrator and a solution fails to be found within 30 days of the day of notice, then arbitration will be done before 3 arbitrators who will be appointed as follows:
After getting the consent of the appointee, each party shall appoint one arbiter and notify the other party in writing within 60 days of the notice. The appointed two arbiters shall together in agreement appoint a third arbiter. The appointed arbitrators shall be neutral and have no previous interest in the dispute and shall not be present or past employees or directors of either party. The contract further provided that the arbitration proceedings shall be subject to rules and procedures which shall be agreed upon by both parties, that the decision of the arbitration shall be enforceable by both parties under the Regulations and rules agreed upon by the parties and that the Arbitration Regulations are written in Arabic. Article 8 of the Regulations provided that the Authority originally competent to decide on the dispute shall be responsible for all summons and notices no arbitrators are appointed, the authority with jurisdiction over the dispute shall appoint the same upon request by the interested party. DynCorp translated this to: “If the disputing parties fail to appoint the arbitrators...”
The court ordered the plaintiff to submit its claim to arbitration as per the contract on November 13, 2008. it was stipulated in the contract that disputes relating to the contract shall be resolved by arbitration and be subject to the Arbitration Regulations. The contract was also clear on the fact that if one arbitrator fails to bring agreement within 30 days, then the each party shall appoint one arbiter and notify the other party in writing within 60 days of the date of notice. This period runs from the date that a written notice or arbitration is received by the other party. By November 2008, more than 60 days had elapsed from the date of notice; the Defendant had not appointed an arbitrator. In this case, the contract refers to the court originally responsible to hear the dispute to appoint an arbiter. This is according to article 10 (stated in part above). Both parties had consented to the court as the authority originally competent to hear the dispute. Upon the Plaintiff’s request, the court compels the parties to carry out arbitration and orders each party to submit the name, address and qualifications of their appointed arbiter, not later than May 18, 2009. The court declares that failure of a party to comply will imply that the party has waived its right to complain about the courts appointment of the arbiters.
ARAMCO filed a motion seeking a clarification of the court’s April order and asked for reconsideration of the trial. ARAMCO’s attorney, Mohammed Al-Sheik submitted his affidavit which among other things asserted that Sharia is the supreme body of law in the Kingdom of Saudi Arabia. Sharia is a collection of principle and rules from the Holy Quran, Sunnah and other sources. Saudi Arabian judicial system incorporates Shari a law but only applies it in a general way because it is not written or collected in a central place. It leaves the adjudicating body a lot free room for discretion, and such jurisdictions do not set precedence (Baker and Mackenzie 2004).
In its objection, ARAMCO claimed that the court was not the authority referred to in Article 10 of the Regulations and that the parties should refer to other departments of law in Saudi Arabia in order to get clarification of the term authority as referred to in the contract. ARAMCO also asserts that the court should have gone by their attorney’s affidavit which stated that the authority referred to is the Board of Grievances. Finally ARAMCO claimed that the court should not have appointed arbitrators because none of the disputing parties had requested it to do so. DynCorp on the other hand claimed that the court had rightly determined that it was the “Authority” mentioned in article 10, and that it had motioned the trial court to appoint arbitrators. DynCorp claimed further that the contract court was ambiguous and that traditional contact principals should be applied when interpreting arbitration agreements. DynCorp’s attorney cited the case of J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). In which the judge on making a ruling said that the primary concern of the court is to ascertain the true intentions of the parties as expressed in the agreement. In another case of Coker v. Coker, the judge said that in order to achieve this objective, courts should examine and consider the writing in entirety in an attempt to harmonize and give effect to all the provisions of the contract, and that no single provision taken in isolation will be have a controlling effect alone. In order to prove that a contract is ambiguous, the party must show that the contract language can have more than one meaning, or that the language of the contract can not be given a definite meaning or that the contract lacks clarity.
In conclusion, it was decided that the court was disapproved as the “Authority” referenced to in the Regulations, the decision of the arbitration was annulled on this basis. However, even if the decision was not annulled on this basis, the issue of non-Muslim arbitrators could still have come up to challenge the validity of the award (Smit 2007).
Conclusion
Even though Saudi Arabia has made steps in enhancing arbitration as a means of resolving commercial disputes, there have always been two impeding issues that make it a little tough for non-Saudi business entities. These are:
i) Reciprocity.
The Kingdom of Saudi Arabia will only enforce awards made in countries which will also recognize awards made in arbitrations carried out in the territory of Saudi Arabia. This means that if a foreign award cannot be enforced in the kingdom unless it involves a Saudi entity and a national of a state which is a party to the Riyadh, New York or the GCC conventions.
ii) Islamic Law Consistency
A foreign award cannot be enforced in the Kingdom of Saudi Arabia unless it is consistent with the Islamic law. This makes it difficult for business entities from non-Islam states. The provision that the arbitrators should be Muslims makes the situation even more unfriendly to foreign business entities.
Many foreign arbitration awards may not be enforceable in Saudi Arabia due to the nature of the domestic law, although the situation seems to be improving pretty fast with the realization of the need to harmonize domestic and international trade regulations in order to take advantage of the global market.

Works Cited
Baker and Mackenzie (2004), International Arbitration Checklists JurisNet, NewYork
Cato, D. Mark (2002). Arbitration Practice and Procedure Informa Finance, US.
El Sheik, Abdalla and El Rahman, Fath (2003), The Legal Rrgime of Foreign Private Investment in Sudan and Saudi Arabia. Cambridge University Press, U.K.
Louis-Jacques, Lyonette(2003). University of Chicago Law School.
Direct Correspondence Related to International Commercial Arbitration Resources to llou@midway.uchicago.edu. Updated on 15 October 2003. Accessed April 20, 2010.
Mahan, A.T. (1992), Armaments and Arbitration. General Books, India.
Norton Rose Group Arbitration in the Middle East July 2008 Saudi Arabia
Paulson, Jan, (2008), International Handbook on Commercial Arbitration.
Recognition and Enforcement of Foreign Money Judgments Office of the Chief Counsel for International Commerce (2002), U.S. Department of Commerce
Redfern, Allan and Hunter, Martin (2004), Law and Practice of International Commercial Law; London, UK.
Smit, H and Pechota, V.(2007). National Arbitration Laws; JurisNet, New York.
Turner, Ray (2005), arbitration Awards: A Practical Approach. Blackwell Publishers, India.

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