Annulment of an arbitral award in Saudi Arabia: when can you challenge the award?

Not in the ordinary sense of a judicial appeal.

The Saudi Arbitration Law provides that arbitral awards are not subject to the ordinary routes of challenge, and the exception is an action to annul the arbitral award in the cases the Law specifies.

This is a fundamental difference.

An annulment action is not an appeal on the subject matter of the dispute, and it does not allow the evidence or the assessment of the facts to be re-argued merely because of dissatisfaction with the result. It does not mean:

or:

or:

The court in an annulment action does not re-run the arbitration; it asks: has one of the grounds of annulment the Law specifies been made out?

The statutory grounds can be organised in practice into five main groups:

The text also covers cases relating to excluding the statutory rules the parties had agreed to apply, and failure to observe the requirements of an award in a way that affected its substance. And there are grounds the court takes up of its own motion, such as contravention of the provisions of Islamic Sharia and public order, or the subject of the dispute not being arbitrable.

If there was never an arbitration agreement, or the agreement is void or voidable or has lapsed on expiry of its term, this may fall within the grounds for an annulment action.

And here it is not enough for a party to say:

One must assess:

Was the agreement signed by someone with the power to conclude it?

Is it in writing as the Law requires?

Does it cover this dispute?

Is it still in force?

That is why the quality of the arbitration clause before signing directly affects the soundness of the award years later.

One ground for annulment is that a party was unable to present its defence because it was not properly notified of the appointment of an arbitrator or of the arbitration proceedings, or for another reason beyond its control.

But the existence of a procedural violation does not automatically mean annulment.

In some of the grounds in Article 50, the defect must have affected the award.

So we must distinguish between:

a formal violation that had no real effect

and

a genuine breach that deprived a party of a fair opportunity to present its case.

Example

If a party never received notice of a hearing or an essential procedural step, and as a result did not submit a defence or essential documents, that is a different matter from a minor administrative error that did not affect participation in the arbitration.

If the tribunal was formed or the arbitrators were appointed in a way that contravenes the Arbitration Law or what the parties agreed, that is a ground for annulment.

The dispute may concern, for example:

the number of arbitrators.

the way they were appointed.

an agreed condition for forming the tribunal.

So the mechanism for choosing arbitrators should not be treated as a secondary detail of the contract.

If the award decides matters the arbitration agreement does not cover, that may be a ground for annulment.

But the Law offers a more precise remedy than striking down the whole award:

If the part that went beyond the scope of arbitration can be separated from the rest of the award, annulment applies only to the part not subject to arbitration.

This is a very important point.

An excess in one part of the award does not necessarily mean the legal result is to annul the whole award.

The Law also provides for annulment where the tribunal did not observe the requirements an award must meet in a way that affected its substance, or where the award rested on void arbitral proceedings that affected it.

And the key word here is:

So it is not enough to compile a list of minor procedural errors and then assume that their sum amounts to annulment.

We need to analyse:

What was the violating procedure?

Which provision or agreement did it violate?

How did it affect the course of the arbitration or the award?

And this is the core of assessing the grounds for annulment.

In principle, an annulment action is not a route for re-assessing the facts of the dispute and its evidence.

The Arbitration Law states expressly that the competent court considers the grounds for annulment without examining the facts and subject matter of the dispute.

Courts have therefore rejected annulment claims whose grounds were in reality an attempt to revisit the merits and the evidence on which the tribunal based its award, which falls outside the scope of an annulment action.

So

The phrase:

is not enough.

But if the objection is:

that is a different matter and may fall within the grounds of Article 50 depending on the facts.

This is one of the important cases, because the court may take it up of its own motion.

The court annuls the award if it contains anything contrary to the provisions of Islamic Sharia and public order in the Kingdom, or to what the parties agreed, or if the subject of the dispute is a matter that cannot be arbitrated.

But one must treat the phrase with caution:

It should not be used as a general umbrella to re-submit every objection on the merits that a party lost before the tribunal.

The court does not become, because of this plea, a body that re-examines the case on the merits.

The period is sixty days from the date the party is notified of the arbitral award.

This makes the first question after receiving the award:

and not:

In practice

When an award arrives, a rapid review file is opened at once, containing:

Time at this stage is a legal element, not just project management.

In principle, jurisdiction lies with the court of appeal that would originally have jurisdiction over the dispute.

If the arbitration is international commercial arbitration, whether held in the Kingdom or abroad, jurisdiction lies with the court of appeal that would originally have jurisdiction over the dispute in Riyadh, unless the parties agree on another court of appeal within the Kingdom.

This is a point that should be assessed early when preparing the action.

No.

Merely filing an annulment action does not automatically stop enforcement.

But the court may order a stay of enforcement if:

the stay is requested in the statement of claim for annulment

and

the request rests on serious grounds.

The Law requires the court to decide the stay request within fifteen days of its submission. If it stays enforcement it may require security or a financial guarantee, and it is bound to decide the annulment action within 180 days of the stay order.

The practical result

If the risk of enforcement is urgent, it is not enough to say:

The stay application must be assessed from the preparation of the statement of claim itself.

They are two related stages but not the same thing.

When enforcement of an arbitral award is requested, the competent judiciary verifies specified matters, including:

that the award does not conflict with a Saudi judgment or decision in existence on the subject.

and:

that it does not contravene the provisions of Islamic Sharia and public order.

and:

that the party against whom it was made was properly notified of the award.

An application to enforce is also not accepted until the annulment period has expired.

So it is important to build a single strategy covering:

Annulment + Stay + Enforcement

instead of treating them as separate files with no connection.

Not every problem in an award needs an annulment action.

The Arbitration Law provides other tools:

And this is an important point

If the objection is:

the first question may not be:

but:

Choosing the wrong tool may waste valuable time.

Not automatically.

The Arbitration Law provides that the arbitration agreement does not terminate merely because an award annulling the arbitral award is issued, unless the parties agree that it does or the judgment itself annuls the arbitration agreement.

And this is a very important practical result.

The annulment of the award does not always mean:

The arbitration agreement may remain in place, so one must analyse what happens procedurally after annulment according to the reason for the judgment and the parties' agreement.

If the court upholds the arbitral award it must order its enforcement, and its judgment on that is not open to challenge by any route of challenge under Article 51.

If it annuls the arbitral award, its judgment may be challenged within thirty days of the day following notification.

And the executive regulations make clear that challenge of the annulment judgment is before the Supreme Court.

We review the award along defined tracks instead of settling for a general answer of the kind "we can object" or "the award is final":

The output is an assessment memorandum on the award, a map of the possible grounds for annulment, an estimate of enforcement risk, and a recommendation on the right step.

The mistakes we most warn against: waiting until close to the end of the sixty days before analysing the file, rewriting the arbitration pleadings themselves as grounds of annulment, neglecting a stay application when there is an urgent risk, and failing to distinguish between a ground of annulment and mere dissatisfaction with the result.

Any procedural violation should also be addressed when it occurs; the Arbitration Law provides in certain cases that a party who continues in the proceedings knowing of the violation, without objecting within the prescribed period, may be treated as having waived its right to object to it.