Saudi Arabia: Model Arbitration Submission Agreement for Government Contracts Adopted

In brief

The recent issue of the Kingdom of Saudi Arabia’s (KSA) official gazette published in early June 2023 includes the Resolution No. 1321/1444 of 6 June 2023 (“Resolution“) issued by KSA’s Minister of Finance. The resolution adopts:

1. The model general arbitration submission agreement; and
2. The model arbitration submission agreement providing for the arbitration in the Saudi Center for Commercial Arbitration (SCCA).

The Resolution follows the liberalization of the dispute resolution regime in KSA, specifically allowing for broader use of arbitration in government contracts.

General Framework

The adoption by the KSA of the new Government Tenders and Procurement Law (Royal Decree No. M/128/1440 of 16 July 2019 or the “GTP Law“) was a major step towards a more investor-friendly framework for resolving disputes in government contracts. Article 92(2) of the GTP Law provides that a government agency may, following the Minister of Finance’s approval, agree to resort to arbitration, in accordance with the Implementing Regulations of the GTP Law.

The Implementing Regulations issued in furtherance of the GTP Law specify in Article 154 the conditions for submitting the disputes arising out of government contracts to arbitration, which include:

1. The value of the contract must exceed 100 million Saudi Riyals (approx. USD 26.66 million);
2. KSA law shall apply to the subject matter of the dispute;
3. Arbitration and its terms shall be provided in the contract documents; and
4. Arbitration before foreign tribunals is only permissible with foreign persons.

Ministerial Decision No. 402/1444 of 19 October 2022 extended the application of Article 92 of the GTP Law to contracts tendered or concluded prior to entry into force of the GTP Law, thus allowing the parties to agreements pre-dating the GTP Law to refer their disputes to arbitration.

The Resolution has been adopted following these developments and applies to the contracts predating the GTP Law.

Based on Article 13(2) of the GTP Law, the Minister of Finance shall approve the forms of tender documents, pre-qualification documents, contract forms and other forms. Article 91 of the GTP Law also requires that Government Entities use such forms.

Both the Standard General Arbitration Submission Agreement and the Standard SCCA Arbitration Submission Agreement are very detailed and address:

1. The matters covered by the arbitration submission agreement, which must be detailed
2. The arbitration centre or competent authority to oversee and administer the disputes (to be chosen in accordance with the law or SCCA)
3. The rules and procedures applicable to the arbitration
4. The constitution of the arbitral tribunal
5. The period for rendering the arbitral award (for the Standard General Arbitration Submission Agreement only)
6. The regulation of intervention and joinder 
7. The place and language of the arbitration
8. The law governing the matters covered by the arbitration submission agreement
9. Correspondence and notifications
10. Interim and precautionary measures 
11. Termination of the arbitration proceedings

The specific terms of the agreements provided by the Resolution are marked with colors, with some provisions (black) being “fixed” (i.e., mandatory), while others (green) being “variable” (i.e., which the parties can alter). The form also includes clarifications for users on specific provisions.

To speak to us in relation to dispute resolution, international arbitration or ADR matters, or issues more generally, please reach out to the Baker McKenzie contacts below.