Enforcement in Saudi Arabia and the UAE

In March 2013 a new Enforcement Law came into effect in Saudi Arabia, replacing the relevant provisions of the 1989 Rules of Civil Procedure before the Board of Grievances. With a particular impact on the enforcement of arbitral awards, whether domestic or international, this new Enforcement Law also contains provisions that affect aspects of domestic and foreign judgments and is a welcome change.

Saudi Arabia: before the new Enforcement Law

Prior to the new Enforcement Law, parties were required to bring applications for the enforcement of foreign judgments and arbitration awards before the Board of Grievances. This was a lengthy and rigid procedure as the Board of Grievances would undertake a full review of the merits of each award, ensuring that the award was compliant with shariah law. It also required all relevant documents from the arbitration to be submitted to the Board in Arabic to allow for the review.

An illustration of the old system is seen in an ICC case, Jadawel International (Saudi Arabia) v Emaar Property PJSC (UAE). In 2006 Jadawel commenced arbitration before a three-member tribunal seated in Saudi Arabia, claiming damages of US$1.2 billion based on a breach of contract by Emaar on a construction project. The lengthy arbitration took two years but was finally dismissed, with Jadawel being ordered to pay legal costs. The award was then submitted to the Board of Grievances for enforcement. In its review, the Board proceeded to re-examine the merits and not only did it decline to enforce the award, but it reversed the award and ordered Emaar to pay damages to Jadawel.

The new Enforcement Law

Abandoning the old system of enforcement proceedings before the Board of Grievances, the new Enforcement Law introduces an Enforcement Judge to deal with all enforcement issues.

The Enforcement Judge is required to follow shariah principles, unless the law stipulates otherwise, and Article 9 of the new Enforcement Law provides for compulsory enforcement upon the presentation of an executive deed, including a final arbitral award.

Also, notably, appeals of the Enforcement Judge’s decisions suspend enforcement. This goes against domestic law trends seen in other parts of the world such as France.

The Enforcement Judge may enforce foreign arbitral awards only on the basis of the principles of reciprocity, refusing to enforce arbitral awards from jurisdictions that would not enforce Saudi judgments or awards, and if the party seeking enforcement can ensure that:

• Saudi courts do not have jurisdiction with regard to the dispute;
• the award was rendered in compliance with due process requirements;
• the award is in final form in the law of the seat of the arbitration;
• the award does not contradict a judgment or order issued on the same subject by a judicial authority in the Kingdom of Saudi Arabia; and
• the award does not contain anything contradictory to Saudi public policy.

The new Enforcement Judge will be specialised in the enforcement of awards, and judgments should be more expedient.

Courts of the UAE

A similar situation can be seen in the courts of the UAE, as there are a number of technicalities which are peculiar to UAE law. Such technicalities include requirements that:

• a UAE award must be physically signed within the UAE;
• the legal representative of each party possesses a valid power of attorney to act in the proceedings; and
• witnesses should not be present in the evidentiary hearing except when they are giving evidence (however, it is worth noting that this is often relaxed by the agreement of the parties).

In the past, awards have been overturned by the courts for apparently insignificant errors such as the tribunal’s failure to sign each page of the award in full, instead simply initialling each page. The Bechtel case1 is an example of this, where the Dubai Court of Cassation overturned an arbitration award because the oath used to swear in witnesses during the arbitration did not follow the formula prescribed for UAE court hearings.

Notably, the Paris Court of Appeal upheld the award in favour of Bechtel, setting aside the Dubai Court of Cassation’s decision. The Paris Court of Appeal ruled that the arbitral award satisfied the requirement.

Positive trends in UAE courts

However, despite the history of technicalities, there are also positive developments in the UAE courts. There appears to be a general trend by the UAE courts away from overturning arbitration awards on purely technical reasons.
Although there are still exceptions to this trend, there seems to be a more arbitration-friendly climate in the UAE and the developments are positive.

Conclusion

The new Enforcement Law in Saudi Arabia is a positive step in the right direction. It should guarantee that the merit of the dispute is no longer revisited; however, it is yet to be determined what effect the provisions will have in practice. The new Enforcement Law does not protect parties or foreign awards that are unfamiliar to Saudi law or shariah law concepts.

Similarly, the positive advances in the UAE are encouraging, but while fewer technicalities are being flagged by the courts, it is still important to know the pitfalls that can arise.

By Nicholas Gould
Partner, Fenwick Elliott LLP

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• 1. Direction Générale de I’Aviation Civile de I’Émirat de Dubai v International Bechtel Co.