The Impact of Public Policy Exception Under the New York Convention (1958) on the Enforcement and Recognition of Arbitral Awards in Saudi Arabia and the United Arab Emirates.

Abstract

uction Over the past few decades, international and regional trade has experienced an impressive degree of growth in the Middle East. This, consequently, has increased the number of cross border commercial disputes with parties both within the region and further afield, internationally. The Middle East is currently experiencing its own unique problems, caused primarily by the significant oil prices fluctuations experienced over the last five years and which are expected to continue. It is thought that the need for economies to diversify in the region, both in terms of products and markets, is essential to reduce the risk of over-reliance on oil revenues. However, one important measure of ease of doing business is the availability of a stable legal system and an efficient and effective dispute resolution mechanisms within a country. The choice of which method of dispute resolution to use will often be made at the start of a relationship, and be based on an examination of a country’s reputation as being arbitration-friendly or not, or whether national courts and national conflict of law rules are receptive to foreign parties and enforcement of foreign judgments. This can be fundamental to the parties, and being confident from the start that there will be an efficient and effective dispute resolution process can make or break a new investment decision or new contractual cross-border relationship.

Generally, the dispute resolution methods available in the region are traditional litigation in national courts, and the alternatives of international commercial arbitration, mediation and conciliation. Of course, if the aim to diversify is to be effective, then greater certainty is required with regard to creating an efficient and effective dispute resolution environment given the likely increase in commercial cross-border disputes with parties within the region and beyond. But some Middle Eastern countries have been criticized for being too parochial and not having an appropriate approach to dispute resolution with non-nationals. This is generally because of the inherent problematic nature of international dispute resolution, and specifically the lack of certainty, particularly in enforcement of foreign arbitral awards and foreign court judgments in the Middle East. Despite being members of the Cooperation Council for the Arab States of the Gulf (“GCC”) region and two of the major trading states in the Middle East, Saudi Arabia and the United Arab Emirates (“UAE”) have very different reputations in terms of efficient and effective dispute resolution processes involving foreign parties and their respective nationals. In terms of promoting litigation in national courts or reception of foreign judgments for enforcement against local assets, Dubai has been very proactive in introducing an international court to deal with disputes arising in the international financial centre. For international commercial arbitration, again Dubai has been proactive and has developed an internationally recognised seat of arbitration and is generally perceived as being arbitration friendly. Although party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards1958 (“NYC”), there had been some criticism in recent years to the use of the public policy exception by local courts to avoid enforcing foreign awards against local assets , again positive steps have been taken by law makers to address these problems. When compared to Saudi Arabia, this arguably puts Dubai in a more positive light in terms of encouraging cross-border trade and inward investment given the contrasting approach and reputation Saudi Arabia has with regard to these issues. In its 2030 plan, Saudi Arabia has set out its plans to shift its economy to be more diverse rather than be primarily dependent on oil trade , with th