Parties doing business in Saudi Arabia often select binding arbitration in the Kingdom, a preferred neutral foreign jurisdiction or another GCC state as the method for dispute resolution. In 2012 an arbitration law was enacted in Saudi Arabia confirming the right of parties to agree to settle their disputes through arbitration if the dispute is one in which conciliation would be permitted. Awards issued pursuant to the Arbitration Law are binding and enforceable through the competent authorities. Generally, the Board of Grievances (BoG) has jurisdiction with respect to the enforcement of foreign judgments and arbitral awards in Saudi Arabia.
To enforce a foreign judgment from outside the Arab League and GCC, the party seeking enforcement must demonstrate, among other things, that the judgment contains nothing that contravenes sharia or the public policy of Saudi Arabia and that, in the absence of a bilateral or multilateral agreement for the reciprocal enforcement of judgments, that the courts of such country would recognise and enforce a Saudi Arabian judgment in the same manner as a domestic judgment. The BoG may refuse to enforce a foreign judgment if a final judgment has been rendered by, or if an action was commenced before, a Saudi court in proceedings between the same litigants and involving the same subject matter.
Foreign Arbitral Awards
Saudi Arabia acceded to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. Any final and conclusive arbitral award rendered in any member state of the New York Convention will be enforceable in Saudi Arabia without re-litigation of the matters arbitrated upon, except – among other things – to ensure compliance with sharia principles and public policy.
Saudi Arabia acceded to the Arab League Convention for the Enforcement of Judgments of September 14, 1952 and the GCC Convention on Enforcement of Judgments and Judicial Representation and Notices among Members of the GCC. As a result, any final and conclusive judgment rendered in any member state of the Arab League or GCC and any final and conclusive arbitral award rendered in a GCC state will be enforceable in Saudi Arabia without re-examination of the merits of the case or re-litigation of the matters arbitrated upon, except, among other things, to ensure compliance with sharia principles and public policy.
Liquidation & Dissolution
Company liquidations and dissolutions are governed by the Regulations for Companies (RfCs) and the Ministry of Commerce and Industry. Liquidation under the RfCs is not available for insolvent entities. Under the voluntary liquidation and dissolution scheme there is little judicial supervision of the process. In a solvent company liquidation, the shareholders in a general meeting appoint the liquidator, who must first pay the debts of the company arising from the liquidation and then any other debts of the company (with a provision for debts which are payable at a later date or are contested). Any surplus must be distributed among the shareholders in accordance with the company’s articles of association or bylaws.
Insolvency, bankruptcy and creditors’ rights are governed by the Commercial Court Law and the Bankruptcy Avoidance Regulations (BARs). Either the bankrupt entity or a creditor may apply to the BoG for a declaration of bankruptcy, based on a statement of the bankrupt entity’s assets, liabilities and books of account. The BoG may issue an order declaring bankruptcy and seizing the bankrupt entity’s assets. With effect from the date of the order declaring bankruptcy, the bankrupt entity ceases to have legal capacity to contract. The BARs provide a framework in which a debtor which fears it may be about to become unable to pay its debts may seek “amicable conciliation” with creditors to avoid bankruptcy, or apply to the BoG for an order to convene settlement procedures with creditors under the supervision of the BoG, in order to avoid the possible operation of the Commercial Court Law.
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