i A Critical Analysis of the Legal Problems associated with Recognition and Enforcement of Arbitral

316 Pages·2016·2.32 MB·English

A Critical Analysis of the Legal Problems associated with Recognition and Enforcement of
Arbitral Awards in Saudi Arabia: Will the New Saudi Arbitration Law (2012) Resolve the
Main Legal Problems?

By
Mohammed I. ALEisa
LL.B. King Saudi University
LL.M in International Trade Law, Essex University
Certified Lawyer and Arbitrator by the Saudi Ministry of Justice

A Thesis Submitted for the Degree of
Doctor of Philosophy in Law

School of Law
University of Essex

May 2016

i
To my Loving Parents, Brothers, Sisters
and most especially to
my Wife and Children!

ii
The Almighty Allah said,
Read! In the Name of your Lord, who has created (all that exists) (1),
He has created man from a clot (a piece of thick coagulated blood) (2).
Read! And your Lord is the Most Generous (3),
Who has taught (the writing) by the pen (4),
He has taught man that which he knew not (5).

(Surat Al-Alaq, the Clot: the Noble Quran)
i
Acknowledgements

First and foremost, All full praises and thanks are addressed to the God (Allah), the most
gracious and most kind, who gave me the strength, patience, and knowledge to complete my Ph.D.
study successfully.
I owe a special debt of gratitude to my great parents for their prayer, love, morale and
constant support. Sincere thanks are due to my sisters and brothers, who have continually
encouraged and supported me in the pursuit of my goals. I am indebted to my father-, mother- in-
law for their support and encouragement.
The accomplishment of this thesis would never have come without the kind, pleasant
support and encouragement of my wife, Dr. Monira ALOud, who thoughtfully followed every
single step of my Ph.D. study. I am also grateful to my children Ibrahim, Nora and Eissa for their
patient understanding of my continued work. With them, the Ph.D. journey was a pleasant
experience.
My sincere appreciation should go to my supervisor, Dr. Youseph Farah, for his invaluable
guidance, support and constant feedback in conducting and completing the thesis; this Ph.D. thesis
could not have been possible without his and his patience. I am looking forward to continuing
working together in the nearest future. Many thanks to all the administrative staff at the School of
Law.
Last but not least, I am deeply grateful to the Ministry of Education for their scholarship,
and to the Saudi Cultural Bureau in London for their services and support. I would like to express
my sincere thanks to everyone who offered kind assistance or support to me during my Ph.D.
study.
i
Contents
Table of Abbreviations .............................................................................................................. viii
Statutes............................................................................................................................................x
List of Cases................................................................................................................................. xii
Saudi Cases ................................................................................................................................. xiii
Abstract .................................................................................................................................... xviii
1 Chapter One: Introduction ...................................................................................................1
1.1 Motivation .........................................................................................................................1
1.2 Aim and Objectives ...........................................................................................................3
1.3 Research Questions ...........................................................................................................6
1.4 Thesis Structure ................................................................................................................7
1.5 Limitations of the Study ....................................................................................................8
1.6 Related Works ...................................................................................................................9
1.7 Research Methodology ...................................................................................................14
1.8 Significance of Contribution to the Arbitration Field .....................................................15
2 Chapter Two: A Brief Overview of the Saudi Arbitration, the Saudi Legal and
Judicial Systems ...........................................................................................................................16
2.1 Introduction .....................................................................................................................17
2.2 The Saudi Legal System .................................................................................................17
2.2.1 Foundations of the Saudi Legal System ...............................................................17
2.2.1.1 The Islamic Sharia Law .......................................................................................18
2.2.1.2 Saudi Regulations ................................................................................................19
2.2.2 The Legislative Authority ....................................................................................20
2.2.3 The Executive Authority ......................................................................................21
2.3 The Saudi Judicial System ..............................................................................................21
2.3.1 The Sharia Courts ................................................................................................26
2.3.1.1 The Supreme Court ..............................................................................................27
2.3.1.2 The Courts of Appeal ...........................................................................................28
2.3.1.3 The Courts of First Instance .................................................................................29
2.3.2 The Board of Grievances (Diwan AL-Mazalim) ..................................................30
2.3.2.1 The Supreme Administrative Court .....................................................................30
2.3.2.2 The Administrative Courts of Appeal ..................................................................31
2.3.2.3 The Administrative Courts ...................................................................................31
2.3.3 The Quasi-Judicial Committees ...........................................................................32
2.4 The Brief Background of Arbitration in Saudi Arabia ...................................................35
ii
2.4.1 The First Phase - the Law of Commercial Court (1931)......................................35
2.4.2 The Second Phase - the Labour and Labourers Law (1969) ................................36
2.4.3 The Third Phase - the Chamber of Commerce and Industry Law (1980)............36
2.4.4 The Fourth Phase - Saudi Arbitration Law (1983) ..............................................37
2.4.5 The Fifth Phase - the New Saudi Arbitration Law (2012) ...................................37
2.5 Conclusion ......................................................................................................................38
3 Chapter Three: The General Structure of Saudi Arbitration Law ................................40
3.0 Introduction....................................................................................................................41
3.1 The Arbitration Agreement .............................................................................................42
3.1.1 The Validity of an Arbitration Agreement ...........................................................42
3.1.1.1 The Formation of an Arbitration Agreement .......................................................43
3.1.1.2 The Disputing Parties to an Arbitration Agreement ............................................46
3.1.2 Arbitrators ............................................................................................................48
3.1.2.1 The Qualifications Required of an Arbitrator ......................................................48
3.1.3 Submission of an Arbitration Agreement and the Judicial Approval Decision ...50
3.2 The Arbitral Procedures ..................................................................................................52
3.2.1 Seat of Arbitration ................................................................................................52
3.2.2 Applicable Law ....................................................................................................55
3.2.2.1 Procedural Rules ..................................................................................................56
3.2.2.2 Substantive Law ...................................................................................................58
3.3 The Arbitral Decision .....................................................................................................62
3.3.1 Making the Arbitral Awards ................................................................................62
3.3.1.1 The Time-limit in Issuing the Arbitral Award .....................................................62
3.3.1.2 The Methods of Issuing the Arbitral Award ........................................................64
3.3.2 Challenge of Arbitral Awards ..............................................................................66
3.3.2.1 The Type of Judicial Review under the SAL (1983) ...........................................66
3.3.2.2 The Appeal Levels under the SAL (1983) ...........................................................69
3.3.2.3 The Grounds for Challenge that were Adopted by the SAL (1983) ....................70
3.3.3 Recognition and Enforcement of Arbitral Awards ..............................................71
3.3.3.1 Recognition and Enforcement of Domestic Arbitral Awards under SAL 1983 ..72
3.3.3.2 Recognition and Enforcement of Foreign Arbitral Awards .................................75
3.3.3.2.1 What were the formal requirements for recognising and enforcing the foreign
arbitral awards? ...............................................................................................................77
3.3.3.2.2 What were the grounds for refusal of recognition and enforcement of the
foreign arbitral awards in Saudi Arabia? ........................................................................79
iii
3.4 Conclusion ......................................................................................................................86
3.4.1 The main characteristics of Saudi Arbitration Law 1983 ....................................86
4 Chapter Four: A Comparison of the New Saudi Arbitration Law 2012 and SAL 1983
91
4.1 Introduction .....................................................................................................................92
4.2 The General Characteristics of the Saudi Arbitration Law .............................................93
4.2.1 The Definition of Arbitration Law’s Terms .........................................................93
4.2.2 The Concept of International Arbitration ............................................................94
4.2.3 Applying the Modern Legal Principles ................................................................96
4.3 The Characteristics Relating to Arbitration Agreement .................................................96
4.3.1 The Meaning of ‘Arbitration Clause’, ‘Submission Agreement’ and ‘Arbitration
Instrument’ .............................................................................................................................96
4.3.2 The Parties to an Arbitration Agreement .............................................................99
4.4 The Characteristics Relating to Arbitral Procedures ....................................................100
4.4.1 The Saudi Judicial Supervision over Arbitration Proceedings ..........................100
4.4.2 The Concept of ‘Applicable Law’ .....................................................................103
4.4.3 The Concept of ‘Lex Arbitrti’ or ‘Seat of Arbitration’ ......................................105
4.5 The Characteristics Relating to Arbitral awards ...........................................................106
4.5.1 The Type of Judicial Review .............................................................................107
4.5.2 The Levels of Applicable Appeal ......................................................................108
4.5.3 The Grounds for Challenge ................................................................................109
4.5.4 Applying the Principle of ‘res judicata’ on Arbitral Awards ............................111
4.5.5 The Basic Requirements in Terms of Enforcing an Arbitral Award ................112
4.6 Conclusion ....................................................................................................................113
5 Chapter Five: Recognition and Enforcement of Arbitral Awards under the New SAL
(2012) ...........................................................................................................................................115
5.1 Introduction ...................................................................................................................116
5.2 The Issuance of an Arbitral Award ...............................................................................117
5.2.1 The Method of Issuing an Arbitral Award .........................................................117
5.2.2 The Time-limit in terms of Issuing an Arbitral Award ......................................120
5.3 Challenge of Arbitral Awards under the New SAL (2012) ..........................................122
5.3.1 Competent Court to Decide the Challenge ........................................................123
5.3.1.1 Types of Competent Court in Saudi Arabia .......................................................124
5.3.1.2 Courts of Appeal in Saudi Arabia ......................................................................125
5.3.2 Time Limits for Challenge .................................................................................127
iv
5.3.3 The Grounds for Challenge ‘Setting Aside’ that are Adopted by the New SAL
(2012) 128
5.4 The Procedures of Enforcing Arbitral Awards in Saudi Arabia ...................................131
5.4.1 The New Enforcement Law of Saudi Arabia .....................................................133
5.4.1.1 What are the Expected Effects of the Saudi Enforcement Law? .......................134
5.4.1.2 The Impact of the Enforcement Law on the Execution of Domestic and Foreign
Awards 135
5.4.2 The Inadmissibility of the Competent Court to Review the Merits of the Dispute
138
5.4.2.1 When does the arbitral award in Saudi Arabia acquire the authority of res
judicata under the New SAL (2012)? ...............................................................................139
5.4.2.2 The Main Results from the Case of Jadawel (Saudi Arabia) vs. Emaar (UAE)140
5.4.3 Enforcing the Domestic or International Arbitral Awards under SAL 2012 .....141
5.4.3.1 The Documents that shall be Submitted at the Enforcement of the Arbitral
Award under the SAL 2012 ..............................................................................................142
5.4.3.2 Requirements that shall be Provided to Enforce Domestic or International
Arbitral Awards under the SAL 2012 ...............................................................................142
5.4.4 Enforcing Foreign Arbitral Awards under the Saudi Law .................................143
5.4.4.1 Requirements that shall be Provided to Enforce a Foreign Arbitral Award ......145
5.4.4.2 Procedural Requirements to Enforce the Foreign Arbitral Award ....................148
5.4.4.3 The Grounds for Refusal of Recognition and Enforcement of Foreign Arbitral
Awards in Saudi Arabia under the Most Recent Legislation ...........................................149
5.4.5 Conventions for Enforcement of Foreign Arbitral Awards ...............................153
5.4.5.1 The Arab League Countries Convention (1952) ................................................153
5.4.5.2 The New York Convention (1958) ....................................................................153
5.4.5.3 The Washington Convention (1965) ..................................................................154
5.4.5.4 The Riyadh Convention (1983)..........................................................................154
5.4.5.5 The Amman Convention (1987) ........................................................................155
5.4.6 Arbitration Institution Expected to be set up in Saudi Arabia ...........................155
5.5 Conclusion ....................................................................................................................156
6 Chapter Six: The Potential Legal Obstacles that could Face the Enforcement of
Arbitral Awards in Saudi Arabia .............................................................................................158
6.1 Introduction ...................................................................................................................159
6.2 Arbitration Agreement ..................................................................................................161
6.2.1 The Validity of an Arbitration Agreement .........................................................164
6.2.2 The Separability Doctrine of the Arbitration Clause: ........................................168
v
6.2.3 Can Women or Non-Muslims to be Arbitrators in the SAL 2012? ...................169
6.3 Arbitration Procedures ..................................................................................................172
6.3.1 The Applicable Law ...........................................................................................173
6.3.2 Seat (Place) of Arbitration .................................................................................178
6.4 Arbitration Decision ......................................................................................................181
6.4.1 Codification of Judicial Rules ............................................................................182
6.4.2 The Main Potential Prohibitions of Islamic Sharia Law that may be contained in
an Arbitral Award ................................................................................................................184
6.4.2.1 Usury (Riba) .......................................................................................................184
6.4.2.1.1 Compensation for Missed Opportunities (Lost Profits) ...............................187
6.4.2.1.2 Compensation for the Time Value of Money (Inflation Compensation) .....188
6.4.2.1.3 Compensation Due to Debtor’s Procrastination in Repaying .......................190
6.4.2.2 Gambling or Uncertainty (Gharar) ....................................................................191
6.4.2.3 Ignorance or not knowing (Jahaalah) ................................................................192
6.4.2.4 Injustice or deceit (Ghabn) ................................................................................192
6.4.3 Arbitration Award Contrary to Public Policy ....................................................193
6.4.4 Is the ‘Principle of Finality’ applied under the SAL 2012? ...............................199
6.4.5 Is the ‘Competence-Competence’ Principle applied under the SAL 2012? ......201
6.5 Conclusion ....................................................................................................................202
7 Chapter Seven: Conclusion ...............................................................................................205
Chapter 7- Conclusion .............................................................................................................206
7.1 Summary .......................................................................................................................206
7.2 Contributions .................................................................................................................209
7.3 Future Work ..................................................................................................................209
7.4 The Most Significant Results ........................................................................................210
7.5 Recommendations .........................................................................................................221
REFERENCES ..........................................................................................................................225
APPENDICES ............................................................................................................................242
Appendix A- The Saudi Arbitration Law (1983) ....................................................................243
Appendix B - The Implementation Rules (1985) of the Saudi Arbitration Law (1983) .........248
Appendix C- The Saudi Arbitration Law (2012) .....................................................................258
Appendix D- The Saudi Enforcement Law (2012)..................................................................274

vi
List of Figures
Figure 1.1 Thesis Plan .................................................................................................................5
Figure 2.1 The Structure of the Sharia Courts ..............................................................................27
Figure 3.1 The level of Friendliness to Enforce Foreign Arbitral Awards in the GCC Countries
.....................................................................................................................................................144

vii