Arbitration · Contracts

How to write an arbitration clause for a Saudi commercial contract

Most arbitration clauses are copied from the last contract and never read again — until a dispute arrives and the clause decides how, where, in which language and by whom it will be heard. Under the Saudi Arbitration Law, a few missing words can make the clause void or hand the appointment of the tribunal to the court. These are the ten points I check in every clause, each tied to the article that governs it.

In short: put the clause in writing; choose an odd number of arbitrators and say how they are appointed; name the seat, the language and the governing law; set a realistic time limit; and draft with enforcement in Saudi Arabia in mind. References are to the Arbitration Law issued by Royal Decree M/34 dated 24/5/1433H.

1. Put it in writing — or it is void

An arbitration agreement must be in writing, otherwise it is void (Article 9(2)). Writing is interpreted broadly: a document issued by both parties, documented correspondence, telegrams or other electronic or written means all qualify, and so does a contract that refers to a document containing an arbitration clause, provided the reference clearly makes that clause part of the contract (Article 9(3)).

In practice, the risk is not the absence of paper but the absence of a clear reference: a purchase order that mentions "standard terms" without identifying them, or general conditions that were never attached. Name the document and the clause.

Article 9 also allows an agreement made after the dispute arises — even once a court case has been filed — but it must then specify the matters referred to arbitration, or it is void.

2. Choose an odd number of arbitrators

The tribunal may have one or more arbitrators, but the number must be odd; otherwise the arbitration is void (Article 13). One arbitrator is faster and cheaper; three suit larger or technical disputes where each party wants a say in the composition of the tribunal.

3. Say how the tribunal is appointed

If the parties have not agreed how arbitrators are chosen, Article 15 fills the gap: the competent court chooses a sole arbitrator; for three, each party appoints one and the two appoint the presiding arbitrator, with the court stepping in if a party fails to appoint within fifteen days of a request or the two arbitrators cannot agree within fifteen days. The parties can avoid that by agreeing a different mechanism — for example, the rules of an arbitral institution that acts as appointing authority (Article 15(2)).

4. Keep arbitrator qualifications realistic

The law requires every arbitrator to have full legal capacity and good conduct, and to hold at least a university degree in Sharia or law; where the tribunal has more than one member, the degree requirement is satisfied if the presiding arbitrator meets it (Article 14). Extra requirements — sector experience, nationality, language — are allowed, but an arbitrator can be challenged for lacking qualifications the parties agreed (Article 16(3)). Requirements so narrow that nobody meets them only create delay.

5. Name the seat

The parties may agree the place of arbitration inside or outside the Kingdom; if they do not, the tribunal decides, considering the circumstances of the case and convenience to the parties (Article 28). The tribunal can still meet elsewhere for deliberations, witnesses or inspections. The seat matters beyond logistics: it ties the proceedings to a legal system and its courts.

6. Decide the language

Arbitration is conducted in Arabic unless the parties agree, or the tribunal decides, on another language or languages. The choice covers written statements, oral hearings and every decision and award (Article 29(1)), and the tribunal may require translations of documents (Article 29(2)). With a foreign counterparty, agree the language up front: translating a full case file later is slow and costly.

7. State the governing law

The tribunal applies the rules the parties agree to the substance of the dispute; if they choose the law of a particular state, its substantive rules apply rather than its conflict-of-laws rules. Without a choice, the tribunal applies the law most closely connected to the dispute. In every case the result must not contravene Sharia or public order in the Kingdom, and the tribunal takes account of the contract terms and the customs of the trade (Article 38(1)). A tribunal may decide as amiable compositeur only if the parties expressly authorise it (Article 38(2)).

8. Set a realistic time limit

The award must be issued within the period the parties agree; failing agreement, within twelve months from the start of the proceedings. The tribunal may extend by up to six months unless the parties agree a longer extension, and after that either party may ask the competent court for more time or to end the proceedings (Article 40). A timetable that is too tight for a complex construction claim can push the case back to court.

9. Add steps before arbitration — with dates

Many contracts require negotiation or mediation first. That is sensible, provided each step has a clear trigger and a fixed period, so neither party can argue for months about whether arbitration may start.

10. Draft for enforcement

An award made under the law has the force of res judicata and is enforceable (Article 52). An enforcement order is granted only once the period for an annulment action has passed, and after the court is satisfied that the award does not conflict with a judgment or decision of a Saudi body with jurisdiction over the dispute, does not contravene Sharia or public order (a severable part may still be enforced), and was properly notified to the party against whom it was made (Article 55). Drafting for those conditions from the start avoids an award that cannot be used.

An illustrative clause

A starting point to adapt to the transaction — not a substitute for advice on a specific contract:

Any dispute arising out of or in connection with this Contract, including its existence, validity, interpretation, performance or termination, shall be finally resolved by arbitration under the [name of arbitration rules]. The tribunal shall consist of [one / three] arbitrator(s). The seat of arbitration shall be [Riyadh, Kingdom of Saudi Arabia]. The language of the arbitration shall be [Arabic / English]. The tribunal shall issue its final award within [twelve] months from the commencement of the arbitration. This Contract is governed by [the laws of the Kingdom of Saudi Arabia].

A note on independence

From appointment and throughout the proceedings, an arbitrator must disclose in writing every circumstance likely to raise justifiable doubts about their impartiality or independence (Article 16(1)). It is worth asking about conflicts before agreeing a name.

Source: Arbitration Law, Royal Decree M/34 dated 24/5/1433H, as published by the Bureau of Experts at the Council of Ministers — laws.boe.gov.sa. This article is general information, not legal advice on a particular matter.

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