Arbitration in Saudi Arabia: How to Start and What It Costs

Your contract says disputes go to arbitration, and the other party has not paid for months. You know arbitration is the route, but you do not know where to start or how much it will cost. The second question sometimes decides the first: is arbitration better than court for this amount?

The first step is a written request for arbitration delivered to the other party in a way that proves receipt. Arbitration proceedings start on the day it is received (Article 26 of the Arbitration Law). The tribunal is then formed, you file your statement of claim, and the award is issued within 12 months unless agreed otherwise. The main cost is the arbitrators' fees and the centre's fees, if any, compared with court costs of no more than 5% of the claim in court.

When does arbitration start, and what goes in the request for arbitration?

Arbitration proceedings start on the day one party receives the request for arbitration from the other, unless the parties agree otherwise (Article 26 of the Arbitration Law). So the first step is a written request delivered to the other party in a way that proves receipt, or filed with the arbitration centre if the clause refers to a centre.

The Implementing Regulations of the Arbitration Law set out what the request contains: your details and those of your representative, the other party's name, a short statement of the contract, the arbitration agreement and the facts of the dispute, a summary of your claims, and a proposed sole arbitrator, or notice of the arbitrator you have chosen if the tribunal is three members (Article 9 of the Regulations). A disagreement over whether these details are sufficient does not delay the formation of the tribunal. If there are several parties, proceedings start on the day the last of them receives the request (Article 11 of the Regulations).

How is the arbitral tribunal formed?

The tribunal has one or more arbitrators, and the number must be odd, or the arbitration is void (Article 13). An arbitrator must have full legal capacity and good conduct, and hold at least a university degree in Sharia or legal sciences. If there are several arbitrators, it is enough that the chair has this degree (Article 14).

If the other party does not appoint its arbitrator within 15 days of receiving your request, the competent court makes the appointment at your request (Article 15). Silence does not stop the arbitration.

Statement of claim and defence

Within the period agreed or set by the tribunal, the claimant sends a written statement of claim with the parties' details, the facts, the claims and their grounds. The respondent sends its defence, which may include a counterclaim related to the dispute or a set-off (Article 30).

Deadlines matter. If the claimant does not file the statement of claim without an acceptable excuse, the tribunal ends the proceedings. If the respondent does not reply, the tribunal continues the arbitration (Article 34). Arbitration is conducted in Arabic unless the parties agree on another language or the tribunal decides otherwise (Article 29).

How much does arbitration cost in Saudi Arabia?

• Arbitrators' fees: if not agreed, the competent court sets them by a decision that cannot be appealed (Article 24).
• Arbitration centre fees, if the arbitration is institutional. They vary with the value of the dispute.
• Lawyers' and experts' fees.

In comparison, a case in court is subject to court costs of no more than 5% of the claim, up to SAR 1 million (Article 3 of the Law of Judicial Costs). If an annulment case against an arbitral award is filed and rejected, costs of 1% of the amount awarded are imposed (Article 5).

A claim of SAR 2 million. In court, court costs are no more than 5% of the claim, so SAR 100,000 at most, and the Regulations set the criteria for calculating them.

In arbitration with a sole arbitrator, the parties agree the arbitrator's fees with him. They may be more or less than that, depending on how complex the dispute is, plus the centre's fees if the arbitration is institutional.

For a claim of SAR 100,000, the cost of three arbitrators may come close to the value of the dispute itself. So calculate the cost before choosing arbitration with enthusiasm.

How long does arbitration take in Saudi Arabia?

The award is issued within the agreed period. If there is none, it is issued within 12 months of the start of proceedings, and the tribunal may extend this by six months unless the parties agree on more. If the award is not issued on time, either party may ask the court to set an additional period or to end the proceedings (Article 40).

Each party receives a copy of the award within 15 days of its issue, and the tribunal deposits it with the competent court (Articles 43 and 44). Then comes the 60-day period for an annulment case, and after that the request for an enforcement order.

This is general information based on the official Arabic texts of Saudi laws, which prevail over any translation. It is not legal advice for your specific case.

Practical solutions for the claimant and the respondent

If you are the claimant:

• Read the arbitration clause: institutional or ad hoc? How many arbitrators? Which seat and language?
• Send the request for arbitration in a way that proves receipt, because proceedings start from it.
• Estimate the full cost against the value of the dispute before you start.
• Agree the arbitrators' fees in writing to avoid a dispute about them.

If you are the respondent:

• Reply on time, and include any counterclaims in your reply.
• Review the formation of the tribunal and the arbitrators' qualifications from the start.
• Settling at the beginning of the arbitration saves most of its costs.

Arbitration starts with a correct first step and ends with an enforceable award. Send us the contract, a summary of the dispute and the amount claimed on WhatsApp, and we will estimate the cost with you and prepare the request for arbitration.