Dispute Resolution In Saudi Arabia Versus The United Arab Emirates

The Top 5 Things Every Company Should Know

Now with 2 bonus things!

Monica J. Palko, Deputy Chief Counsel, Platforms & Services, BAE SystemsArlington, Virginia, USA

Dr. Saud Al-Ammari, Chair, Saudi Arabia and Gulf Region, BlakesAl Khobar, Saudi Arabia

Ghada Qaisi Audi, Head of Legal, Ahmed Seddiqi & Sons LLCDubai, UAE

Shahram Safai, Partner, Dubai Office, Afridi & AngellDubai, UAE

Sara Biro, Former Senior European Counsel, Fitch Ratings London, England

1) Which are easier to enforce: Foreign ordomestic awards? Arbitral or court?UAE KSA

•UAE ratified the New York Convention in 2006 though Arbitral ratification may take up to 2 years under current enforcement regime.

• UAE is signatory to a number of bi-lateral/multi-lateral treaties on enforcement of court orders/judgments.

• Conditions for enforcement of foreign judgments are set out in Article 235 of the UAE Civil Procedure Code.

•Dubai Courts will not enforce a foreign judgment where it would have had original jurisdiction.

•DIFC Courts’ judgments over assets outside DIFC are readily enforceable by the “competent entity” or via “deputisation” to a Dubai Court judgment under Art. 221. of the UAE Civil Procedure Code.

•DIFC Courts supervise DIFC-seated arbitrations (domestically) and foreign awards where the assets are within the DIFC.

•DIFC Courts Practice Direction (forthcoming) allows for conversion of DIFC Courts’ judgments into DIFC-LCIA arbitral awards.

• Saudi Arabia is party to the New York Convention, Riyadh Agreement, and GCC Convention and therefore recognizes and enforces foreign arbitral awards.

•However, Saudi Arbitration Law requires that the arbitral award and process do not violate Islamic law (Shari’ah).

• The enforcement process is the same for both domestic and foreign arbitral awards.

•However, Saudi courts will more readily enforce a domestic award since the arbitral award is more likely to be Shari’ah compliant.

• Saudi courts will only enforce foreign court judgments if there is reciprocity between the two jurisdictions, which is often not the case.

• There must also be reciprocity for foreign arbitral awards, which is easier to meet because of international arbitration treaties.

2) What are options for alternative dispute resolution?

UAE KSA•Dubai Courts introduced Centre of Amicable Resolution of

Disputes with jurisdictional threshold up to AED 500,000 (USD 136,000); Settlement Agreements are confidential.

•Dubai International Arbitration Centre (DIAC), Abu Dhabi Chamber of Commerce and DIFC –LCIA are established centres.

•DIFC Courts Small Claims Tribunal with jurisdictional threshold up to AED 500,000 boasts resolution of disputes within 3 weeks.

• Saudi Courts: Shari’ah encourages mediation and Judges have a duty to encourage settlement between the parties.

• Saudi Arbitration Law: No requirement for mediation prior to arbitration. However, the arbitration tribunal can mediate if authorized by the parties.

• If arbitrators do act as mediators, any decision must be unanimous and decided in accordance with the rules of equity and justice.

3) If the company elects formal litigation,where should it file?

UAE KSA• Court heirarchy: Court of First Instance; Court of Appeal;

and Court of Cassation – civil law Arabic language

•Only 3 Emirates submit to a federal court system; Dubai and Ras Al Khaimah have independent court systems.

•DIFC Courts established in 2007 and located within the Dubai International Financial Centre is a common law, English language court applying DIFC Law (or parties’ choice of law).

•Opt-in jurisdiction introduced in 2011 for cases without contacts with the DIFC.

• Enforceability of judgments through GCC Protocol (regionally) and Riyadh Protocol (greater Middle East) may be easier than enforcement of foreign court awards.

• Commercial cases in Saudi Arabia are heard in the Board of Grievances (Diwan al-Mazalem).

• There are three branches of the Board of Grievances Courts: Commercial Circuit, and Administrative Circuit.

• The Commercial Circuit deals with business disputes amongst private parties, and is where you would file litigation in Saudi Arabia.

• The hierarchy of the courts starts with the Commercial Courts (which are the trial courts), followed by Courts of Appeals, and finally the Supreme Court.

• The court in the commercial circuit closest to where the defendant resides will have jurisdiction.

4) What law will apply?

UAE KSA• Civil Law : UAE courts recognize the principle of freedom

to contract.

•An express foreign choice of law clause in a contract will be recognized.

•UAE courts are reluctant to apply foreign laws due to issues involving public order or policy; if contrary to domestic laws.

• Common Law: In DIFC Courts, DIFC Law or parties choice of law will apply.

• The Rules of the DIFC Courts govern procedure, including preliminary hearings, evidentiary rules and case management.

• Saudi Court: Saudi law will apply.

• Saudi Arbitration Law: Allows parties to choose governing law for their contract and requires arbitrators to apply that law.

•However, governing law must be applied without violating Shari’ah. Otherwise, enforceability in Saudi courts is impacted.

• Saudi Arbitration Law, which covers both international and domestic arbitrations, is modeled after the UNCITRAL Model Law.

• It is a big improvement over prior arbitration law and more closely aligns Saudi law with international arbitration practice.

• It provides the parties greater flexibility in choosing arbitrators, arbitral rules, institutions, seat of arbitration, and language.

5) What are some procedural considerations,e.g., discovery, privilege?

UAE KSA• Lawyers are bound by duties of confidentiality, however,

the concept of privilege or “without prejudice” do not exist per se and no “duty to the court” per se.

• The scope/extent of any discovery process is restricted to requests for specific documents, which a party believes, are in its opponent’s possession.

•Arbitration: the parties generally prefer to agree to IBA Rules on Taking of Evidence.

• There is no DIFC legislation specifically dealing with privilege though grounds for excluding the production of documents are available under the RDC.

• Common law discovery applies in DIFC Courts, with ability to apply for limitations on scope of e-discovery.

•Written witness testimony and witness hearings are commonplace in DIFC Courts proceedings.

•DIFC Courts cases are public and judgments published on-line; high threshold to make proceedings private.

• There is limited discovery provided for in both Saudi courts and Saudi arbitration.

•However, Saudi Arbitration Law allows parties to select their procedural rules, which could include broad discovery rights (if the parties agree to it).

• There are no Saudi statutes or case law governing attorney-client privilege

•However, the principal-agent relationship (including attorney-client) has implicit fiduciary and confidentiality duties under Shari’ah.

6) What are the pros and cons ofbeing a foreign plaintiff or defendant?

UAE KSA• Pros:

• Existing civil law courts: follow the principle that all parties are equal before the law.

•Open to business and resolution of grievances in the court.

• Special Tribunal Related to Dubai World was created in 2009 to decide disputes related to the settlement of the financial position of Dubai World and its subsidiaries.

• Cons:

• Proceedings and documents intended to be relied on: in Dubai Courts must be in Arabic; and in DIFC Courts in English.

•No doctrine of stare decisis in UAE courts; outcome prediction can be problematic.

• Foreign Plaintiff Advantage: A foreign plaintiff that successfully sues a Saudi entity in Saudi courts can more easily enforce that court judgment in Saudi Arabia than a foreign arbitral or court award.

• Foreign Plaintiff Disadvantage: A Saudi party has home court advantage.

• Foreign Defendant Advantage: Saudis that successfully sue a foreign defendant in Saudi courts are not able to enforce the Saudi judgment in defendant’s home jurisdiction.

• Foreign Defendant Disadvantage: Same disadvantages as being a foreign plaintiff.

7) What are a company’s appellate rights?UAE KSA

• Right to appeal from the Court of First Instance to the Court of Appeal.

• The Court of Appeal: appeal in relation to findings of both fact and law.

• There is a right of further appeal to the Court of Cassation on a point of law, which can either give final judgment in the matter or remit the matter back to the Court of Appeal for further findings.

•An application to set aside an arbitral award can only be based on irregularities in the procedures that affected the validity of the award and not the substantive merits of the arbitration award.

•DIFC Courts provides 1 level of appeal from the court of first instance before a 3-judge appeal’s panel; Small Claims Tribunal matters are appealable to the court of first instance before 1 judge.

•As supervisory court in DIFC-seated arbitrations, the DIFC Arbitration law mirrors UNCITRAL presumption of “non-intervention;” grounds for setting aside or refusing recognition and enforcement of an arbitral award mirror Art. 5 of NY Convention.

•Under the new Saudi Arbitration Law, arbitral awards are not subject to appeal.

•However, parties can apply to the Saudi courts to nullify an arbitral award under limited public policy circumstances.

•A complaining party must submit its application within 60 days of being notified of the award.

• If the competent court rules that the arbitration award is valid and enforceable, there is no appeal allowed.

• If it rules the award is invalid, that ruling is appealable within 30 days of notification.

If further questions, contact:

Monica J. Palko, Deputy Chief Counsel, Platform & Services, BAE Systemsmonica.palko@baesystems.com, +703-907-8329

Dr. Saud Al-Ammari, Chair, Saudi Arabia and Gulf Region, Blakessaud.ammari@blakes.com, +966-13-847-5050

Ghada Qaisi Audi, Head of Legal, Ahmed Seddiqi & Sons LLCghada@seddiqi.com, +971 4 511 4439

Shahram Safai, Partner, Dubai Office, Afridi & Angellssafai@afridi-angell.com, +9714-330-3900

Sara Biro, Former Senior European Counsel, Fitch Ratingss.biro@btinternet.com