An overview of the requirements for enforcing maritime arbitral awards in the Kingdom of Saudi Arabia
Transport & Insurance Focus
As a global business, the maritime industry is certainly prone to legal complications and disputes, some of which end up in one of the dispute resolution methods.
Law Update: Issue 366 - Transport & Insurance Focus
Omar N. OmarPartner, Head of Transport & Insurance
Jamal NattoAssociate,Transport & Insurance
As a global business, the maritime industry is certainly prone to legal complications and disputes, some of which end up in one of the dispute resolution methods. Due to the special nature of maritime cases that require specific knowledge for any dispute resolution to occur, relevant parties often resort to arbitration to resolve their disputes. Arbitration is therefore an important method of dispute resolution; therefore, enforcing arbitral awards is one of the challenges since they are usually enforced in other jurisdictions that have different legal regimes as well as different methods of practice. It is the purpose of this article to provide an overview of the requirements and challenges associated with enforcement applications pertaining to enforcing maritime arbitration awards in the Kingdom of Saudi Arabia "KSA" with regard to both the law and practice of enforcement applications.
In the first place, the KSA legal and judicial system is governed by Islamic principles called “Sharia principals”, which means that no law of the KSA will be effective or enforced if it does not comply with the Sharia principals. Therefore, a party must ensure that the arbitral decision follows the Sharia principals in order for the arbitral award to be enforced. In the event that the arbitral award contains a decision that does not comply, the enforcement court will avoid this decision, while the other decisions will still be enforced. A common sharia compliant comment received by the judge is that the decision involves an interest since it is prohibited by Sharia principles, and therefore will be avoided. Interest, however, should not be confused with demurrages or other penalties of the same nature that are Sharia complaint and is eligible to be enforced.
The Enforcement Law and its implementing regulation specify the requirements that must be met to accept a foreign arbitral award. These requirements must be examined by the enforcement judge in order to ensure that they are available, and he will include the enforcement endorsement, which will ensure that the enforcement application is accepted. Article 11 of the Enforcement Law states the following requirements must be met:
the courts of the Kingdom have no jurisdiction to review a dispute regarding a judgment or order is issued, and that the foreign courts issuing such judgment or order have jurisdiction over it in accordance with rules of international judicial jurisdictions stated in their laws.
the litigants of a lawsuit in which a judgment is rendered are summoned to appear, are duly represented, and are given the right to defend themselves.
the judgment or order becomes final in accordance with the law of the court issuing it.
the judgment or order is not in conflict with any other judgment or order issued on the same case by a competent judicial body in the Kingdom.
the judgment or order is not in conflict with public order in the Kingdom.
Usually, the enforcement applications are submitted online through the official judicial platform of the Kingdom of Saudi Arabia called "Najiz". Additionally, the enforcement applications may be submitted in person by visiting the Najiz centre for judicial services “Najiz centre”. The latter facilitates the entire process as it conducts a fast preliminary review on the same day it is submitted as well as referring it to the competent circuit and will be notified through a text message sent by the Ministry of Justice. At that time the competent circuit will review the application and decide to either accept it or return it to the applicants with some comments. The exchange of information and documents takes place through the Najiz platform on the Enforcement page where the applicant has access to all of their submitted applications, can see the comments, as well as respond to them. As maritime arbitral awards typically involve several parties related to the shipping business that may require explanation to the judge, the judge has the right to request that the applicant appear before the court to explain certain parts of the application. This depends on the type of case and is determined solely by the judge.
Furthermore, supporting documents should be submitted along with the enforcement document (arbitral award), including evidence that the counterparty’s jurisdiction enforces arbitral awards issued by the KSA (reciprocity principle). This is an important element to provide and is also outlined in the enforcement law. In most cases, the International Treaties to which the KSA is a member have to be submitted, and on some occasions, the applicant to provide evidence that the counterparty's jurisdiction enforces KSA arbitration awards. This can be achieved by contacting a law firm of the counterparty's jurisdiction to obtain previous enforcement orders for arbitration awards issued by the KSA. If any enforcement action is to be taken, it has to be filed in the official currency of the Kingdom of Saudi Arabia, the SAR, for that reason, the enforcement court will require the applicant to visit the Saudi Central Bank “SAMA” to exchange the currency pertaining to the claim amount and upload it to the Najiz platform. Moreover, It is also essential to provide documentation that the arbitral award is final and that there is no second stage of resolution of the dispute. Usually, maritime arbitral awards have a certificate attached to them which indicates that they are final, this certificate has to be provided.
An applicant may encounter difficulties due to the long period of time it takes for the enforcement court to review the application and respond to their comments. In some cases, the applicants may have to resubmit their entire application if certain requirements are not met exactly as the circuit requests. The circuit may also face difficulty in reviewing and understanding maritime arbitral awards themselves due to the differences in the nature of maritime cases, which may require the applicant or their representative to attend court as instructed to discuss the arbitral award.
When applying for enforcement application to enforce a maritime arbitral award, it is recommended to consult with a maritime lawyer who will review the initial application documents, advise on the essential documents as well as preparing of the documents that might be requested by the enforcement court, oversee the enforcement application process, responding to the circuit's comments, and if necessary, visiting the circuit. Consequently, the enforcement application process will be reduced and the chances of success for the enforcement application to be accepted and, therefore, issuance of the enforcement decision will be increased to a greater extent.
For further information,please contact Omar N. Omar and Jamal Natto.
Published in March 2024
