The Use of ‘Public Policy’ as Grounds for Refusing to Recognise and Enforce Foreign Arbitral Awards in Saudi Arabia

Abstract

In order to become part of the global business community, Saudi Arabia joined the New York Convention of 1958 and made several reforms to its national arbitration system. The reforms include the issue of the Saudi Arbitration Act 2012 that aims to make the arbitration process in the country easier and smoother particularly, for foreign parties. Although this was seen as an indicator to a shift in attitudes, the influence of Sharia on the new law and the arbitration system is clear and has negatively impacted the recognition and enforcement of foreign awards. Refusal decisions are frequently made on the grounds of public policy. Such decisions are often justified by the necessity of protecting Sharia rules in Saudi Arabia. This study seeks to examine issues related to the use of ‘public policy’ as a ground to uphold Sharia`s rules when refusing the recognition and enforcement of foreign awards in the country. The results reveal that there has been a historical resistance to international commercial arbitration and there is still a need for more reforms in terms of law and practise. It was found that the lack of clarity of Sharia’s sources affects the meaning and the understanding of ‘public policy’ and Saudi courts link the notion of public policy to dominated morals and social values. Arguments related to compromising the Islamic rules seem to still heavily influence the country’s arbitration system. The public policy’ ground is also used to the protect the interests and the sovereignty of the country.