What You Should Know About Arbitration Agreements In Saudi Arabia

An arbitration agreement is a contract through which the parties agree to settle their existing and future disputes through Arbitration and not through litigation. In Saudi Arabia, the Saudi Arbitration Law, promulgated by Royal Decree No. M/34 of 2012 governs these agreements, which are largely based on the UNCITRAL Model Law. For an arbitration agreement to be legally binding, it must be in writing and must clearly reflect the parties' intention to submit their disputes to binding arbitration.

The Saudi law recognizes two types of arbitration agreements – clause-based agreements (included as a clause within the main contract) and stand-alone agreements (entered into after a dispute arises). However, the effectiveness and enforceability of each depend on its careful drafting and lack of ambiguity. Saudi courts have historically encouraged arbitration when the agreement is properly drafted and procedural requirements are met.