An arbitration clause decides how a dispute is resolved and how the award is enforced. Learn validity, drafting, annulment and enforcement under Saudi law.
Short answer: An arbitration clause is a written agreement in your contract to send disputes to arbitration instead of the courts. It must be in writing or it is void (Article 9 of the Arbitration Law) and it survives the contract (Article 21). An award can only be challenged by an annulment action within 60 days of notification, after which you apply to the competent court for an enforcement order.
Many commercial contracts end with one line: "Any dispute arising from this contract shall be referred to arbitration." Drafted carefully, that line can save time and effort; drafted vaguely, it can create a second dispute. This guide explains what an arbitration clause is, when it is valid, how to draft it and what happens between the award and its enforcement, based on the Saudi Arbitration Law (Royal Decree M/34 of 24/5/1433H, as amended). For drafting or representation, see Kawkaba Law's commercial arbitration service.
What is an arbitration clause?
It is the parties' agreement, inside the contract, that future disputes about the contract will be decided by arbitration. Article 9 allows an arbitration agreement before a dispute arises, either as a standalone agreement or a clause in a contract, or after a dispute arises, even if a court case has been filed. A post-dispute agreement (submission agreement) must specify the issues covered, or it is void.
When is the clause valid?
Writing. The agreement must be in writing or it is void. A document signed by both parties, exchanged correspondence and electronic communications all count, as does a clear reference in the contract to a document or model contract containing an arbitration clause (Article 9).
Capacity. Only a person with capacity to dispose of their rights may agree to arbitrate. Government entities need the Prime Minister's approval unless a specific law permits otherwise (Article 10).
Arbitrability. The law does not apply to personal status disputes or matters that cannot be settled by compromise (Article 2).
Separability. Under Article 21 the clause is independent of the rest of the contract, so the contract's nullity, rescission or termination does not void a clause that is itself valid.
How do you draft a clear clause?
Scope: "any dispute arising out of or relating to this contract, including its existence, validity, interpretation, performance or termination".
Institutional or ad hoc: you may refer to an institution such as the Saudi Center for Commercial Arbitration, which publishes model clauses and suggests specifying the number of arbitrators, seat, language and governing law.
Number of arbitrators: must be odd, or the arbitration is void (Article 13).
Arbitrator qualifications: full capacity, good conduct and at least a university degree in Sharia or law; with a panel, the chair alone must hold the degree (Article 14).
Seat: inside or outside the Kingdom, failing which the tribunal decides (Article 28).
Language: Arabic by default unless the parties agree or the tribunal decides otherwise (Article 29).
Governing law: the tribunal applies the rules chosen by the parties, subject to Sharia and public order (Article 38).
Time limit: absent agreement, the award is due within 12 months of the start of proceedings, extendable by the tribunal by up to six months unless the parties agree longer (Article 40).
What if the other side sues in court anyway?
Under Article 11 the court must rule that it cannot hear the case if the defendant raises the arbitration agreement before any other request or defence. Timing matters: respond on the merits first and you risk losing the objection. A court case does not stop the arbitration from starting or continuing.
Can an award be challenged?
Awards cannot be appealed; the only route is an annulment action (Article 49) on the limited grounds in Article 50, such as no valid arbitration agreement, lack of capacity, lack of proper notice preventing a defence, disregard of the agreed governing rules, improper constitution of the tribunal, or deciding matters outside the agreement. The court will also annul on its own motion an award that violates Sharia or public order, and it does not re-examine the merits. The action must be filed within 60 days of being notified of the award (Article 51) before the Court of Appeal originally competent for the dispute; for international commercial arbitration, the Court of Appeal in Riyadh unless the parties agree another Saudi appellate court (Article 8).
How is an award enforced?
An award has res judicata effect and is enforceable (Article 52). The usual steps:
The tribunal deposits the award with the competent court, with a certified Arabic translation if needed (Article 44).
The enforcement request is only accepted after the annulment period has expired (Article 55).
The request attaches the original or a certified copy of the award, a copy of the arbitration agreement, any translation, and proof of deposit (Article 53).
The court checks that the award does not conflict with a Saudi judgment or decision, does not violate Sharia or public order, and was properly notified (Article 55).
Compulsory execution then proceeds through the competent enforcement authorities under the Enforcement Law.
An enforcement order cannot be challenged, but a refusal can be challenged within 30 days (Article 55). An annulment action does not automatically suspend enforcement; under Article 54 the court may suspend it on serious grounds if requested in the statement of claim, must rule on the request within 15 days, may require security, and, if it suspends, must decide the annulment within 180 days.
Illustrative example (hypothetical dates): a company is notified of an award on 1 March. It has 60 days to file for annulment. If it does not, the winning party may apply for an enforcement order once that period ends.
FAQ
Is there a mandatory wording for an arbitration clause?
No. A clear clause sets the scope, any administering institution, the number of arbitrators, seat, language and governing law. SCCA model clauses are a useful starting point, adapted to your contract.
Can an arbitral award be appealed?
Not in the ordinary way. The only route is an annulment action on the Article 50 grounds, within 60 days of notification.
Can family disputes be arbitrated?
The Arbitration Law does not apply to personal status disputes or matters not open to compromise (Article 2).
Can a foreign award be enforced in Saudi Arabia?
Yes, under the applicable laws and the international conventions to which the Kingdom is party, subject to Sharia and public order. Requirements vary, so each case is assessed individually.
Bottom line
A sound arbitration clause is written, clearly scoped, and names an odd number of arbitrators, a seat, a language and a governing law. After the award, watch the 60-day annulment window, then the enforcement order steps. Kawkaba Law is based in Jeddah and assists individuals and companies across Saudi Arabia, in person and remotely, with arbitration clauses and proceedings. For related reading, see our contract review checklist.
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This article is general information for awareness purposes and is not legal advice for any specific case. Outcomes depend on the facts and documents of each matter, so consult a licensed lawyer before making decisions.
