by Michael Dunphy and James Bremen

The Kingdom of Saudi Arabia (KSA) has not been left behind in the construction boom, which has swept the Middle East in the past decade.

Strong growth supported by high oil prices has meant KSA has had increased demand for petro chemical projects, IWPP’s, power, infrastructure and new housing and retail developments.

But as the world moves into global recession and major projects reach completion, construction disputes will inevitably arise.

So what are the dispute resolution options for local and international developers, contractors and lenders to construction projects?

This article considers:

1. Dispute resolution options in KSA

2. Enforcement of foreign arbitral awards in KSA

3. Choice of contract law and language

Dispute resolution options

Within KSA there are a number of choices for dispute resolution processes. The two most common are arbitration and litigation before the Board of Grievances (BoG).

Arbitration is popular with non-KSA parties and ensures confidentiality is maintained. There are various venues available for arbitration in Riyadh, such as

the Riyadh Chamber of Commerce, which also provides a secretariat service.

Generally, international law firms who have Saudi qualified lawyers on their teams, are entitled to represent clients in arbitrations in the KSA. Where the firm has no KSA counsel, local co-counsel are often appointed to act in conjunction with the international firm.

Arbitrators may be selected by the parties but must be KSA nationals or Muslim males. Arbitration clauses are prohibited in government contracts without the consent of the Saudi Council of Ministers.

Like many Gulf states, KSA does not have specific laws relating to without prejudice privilege.  It is therefore vital that legal advice be sought prior to entering into any form of negotiation related to claims where there is a possibility that the dispute will proceed to arbitration or litigation.

Board of Grievances

While the predictability of judgments by the BoG has improved recently, international companies often still seek to include an arbitration procedure in their contracts where possible.

CW

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