Two sides of the Saudi public policy coin: reconciling domestic and transnational values in recognition and enforcement of international
commercial arbitration awards
Bander Alsaif
A thesis submitted in accordance with the requirements for the award of the
Degree of Doctor of Juridical Science,
Faculty of Law, University of New South Wales
2018
Surname/Family Name : ALSAIF Given Name/s : BANDER Abbreviation for degree as give in the : SJD University calendar Faculty : Faculty of Law School : School of Law Two sides of the Saudi public policy coin: Reconciling Thesis Title : domestic and transnational values in recognition and enforcement of international commercial arbitration awards
Abstract 350 words maximum: (PLEASE TYPE)
This thesis investigates how the legal system of Saudi Arabia responds to the application of the concept of public policy in the judicial review of international commercial arbitration awards. This thesis demonstrates the reasons why Saudi courts have refused to recognise and implement foreign awards using the public policy defence. The thesis makes an original contribution to knowledge by precisely addressing the fundamental legal issues of the Saudi concept of public policy.
The thesis offers a theoretical and practical understanding of the concept of public policy from the international and Saudi perspective, which enables this research to provide legal recommendations to reconcile domestic and transnational values. By extrapolating the available provisions of the Saudi Board of Grievances, executive courts and legislatures, and comparing them with equivalent provisions in other leading jurisdictions in the development of arbitration law, this thesis concludes that the judicial application of the Saudi concept of public policy to the international commercial arbitration awards is unsatisfactory.
This thesis shows that Saudi courts have refused to recognise and implement arbitration awards on the grounds of public policy when awards contravene the fundamental principles of national law (i.e., General Jurisprudential Principles) or Islamic law (i.e., Sharia). Metaphorically, the Saudi concept of public policy is a coin with two sides, and each side is imbued with many significant legal issues. However, the main argument to tame the unruly horse of Saudi public policy and bring it into line with the leading jurisdictions in the development of arbitration law is that lawmakers, the judiciary and the Saudi legal community must take steps to reformulate the scope of Saudi public policy. This thesis proposes and recommends such steps.
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Abstract
This thesis investigates how the legal system of the Kingdom of Saudi Arabia responds to the application of the concept of public policy in the judicial review of international commercial arbitration awards. This thesis demonstrates the reasons why Saudi courts have refused to recognise and implement foreign awards using the public policy defence. The thesis makes an original contribution to knowledge by precisely addressing the fundamental legal issues of the Saudi concept of public policy.
The thesis offers a theoretical and practical understanding of the concept of public policy from the international and Saudi perspective, which enables this research to provide legal recommendations to reconcile domestic and transnational values. By extrapolating the available provisions of the Saudi Board of Grievances, executive courts and legislatures and comparing them with equivalent provisions in other leading jurisdictions in the development of arbitration law, this thesis concludes that the judicial application of the Saudi concept of public policy to international commercial arbitration awards is unsatisfactory.
This thesis shows that Saudi courts have refused to recognise and implement arbitration awards on the grounds of public policy when awards contravene the fundamental principles of national law (i.e., General Jurisprudential Principles) or Islamic law (i.e.,
Sharia). Metaphorically, the Saudi concept of public policy is a coin with two sides, and each is imbued with many significant legal issues. However, the main argument to tame the unruly horse of Saudi public policy and bring it into line with the leading jurisdictions in the development of arbitration law is that lawmakers, the judiciary and the Saudi legal community must take many steps to reformulate the scope of Saudi public policy. This thesis proposes and recommends such steps.
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Acknowledgements
This SJD thesis at University of New South Wales (UNSW) is the most significant project I have completed. I lived with this project for many years, and without the unlimited support of many people and institutions, this project would not be accomplished.
First, I would like to thank Allah almighty for his support during this project. I also would like to thank King Abdullah bin Abdulaziz Al Saud—may Allah have mercy on him and accept him into paradise—and His successor King Salman bin Abdulaziz Al
Saud for their recommendations and unlimited support during this project. They were my inspiration and the engine that drove me to complete this fundamental project for our nation, the Kingdom of Saudi Arabia.
I am eternally obligated to my supervisor, the most prominent scholar I have ever worked with, Professor Leon E. Trakman, who continuously encouraged me and made suggestions based on his great experience as an international arbitrator during the SJD programme. I am also indebted to my second supervisor, Dr Alexandra George, for her enthusiasm, personality, charisma, critical suggestions and questions, which enabled my project to reach this level.
I thank the many UNSW staff members who assisted me during the programme; in particular, Dr Jenny Jarrett, Higher Degree Research Officer, deserves special thanks for her unforgettable kindness and support. Jenny was a safe haven during difficulties, a second mother and a great teacher during my expatriation period.
I am eternally obligated to my family: my father, Dr Saleh, and my mother Maha, my brother, my sisters and my daughter. Especial thanks to my lovely wife for the great
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sacrifices she made to provide me with assistance, even while she wasn’t well.
It is my pleasure to honour the contribution of the undersecretary of the Ministry of
Justice, Ahmad Al-Omairah, who authorised me with access to all courts under Ministry of Justice supervision to collect decisions that have been used in this thesis. Also, I would like to thank the Board of Saudi Grievances members for their kindness in allowing me to collect decisions from the library.
Finally, I am very thankful and acknowledge the support of Dr Richard Johnson, Dr
Anna Dickson, and Elite Editing for editorial intervention that was restricted to
Standards D and E of the Australian Standards for Editing Practice.
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Contents
Originality Statement...... ii Abstract ...... iii Acknowledgements ...... iv Contents ...... vi Glossary of Arabic and Legal Terms ...... ix Chapter I: Research Background Information ...... 1 A Introduction ...... 1 B Aim of the Study ...... 6 C Research Issue ...... 6 D Significance of the Study ...... 7 E Research Questions ...... 8 F Scope of the Thesis ...... 9 G Research Methodology ...... 10 1 Doctrinal Methodology ...... 11 2 Historical Methodology ...... 13 3 Comparative Methodology ...... 15 H Data Collection ...... 17 I Thesis Structure ...... 18 J Rationale for Selecting Saudi Arabia ...... 20 1 Strategic Location of Saudi Arabia ...... 21 2 Economic Cities ...... 21 3 King Abdullah Financial District ...... 23 4 Vision 2030 ...... 23 K Conclusion ...... 25 Chapter II: Controversies Surrounding the Concept of Saudi Public Policy ...... 27 A Introduction ...... 27 B Themes in the Literature on Saudi Public Policy ...... 28 1 An International Commercial Arbitration Award Conflicting with Sharia Necessarily Conflicts with Public Policy ...... 28 (a) Public policy corresponds precisely with Sharia ...... 29 (b) Public policy means ‘Sharia according to the Hanbali school’ ...... 32 (c) ‘Public policy’ is defined as fundamental principles of Sharia ...... 35 2 The Concept of Public Policy is Broader than the Scope of Sharia ...... 37 (a) Public policy consists of provisions of Sharia along with any violation of law in the country ...... 37 (b) Public policy consists of the general principles of Sharia together with essential administrative rules...... 39 (c) Public policy consists of Sharia, royal power and public morality ...... 40 (e) Public policy consists of mandatory rules of Sharia, public morality and royal decree ...... 43 (f) Public policy consists of Sharia rules, laws of Saudi Arabia and public interests ...... 45 (g) Public policy consists of Sharia and the statutes ...... 46 3 Public Policy is Only a ‘Safe Harbour’ ...... 46
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4 Academic Studies Are Liable to Make Specific Findings Even When Their Definition of Public Policy Is Ambiguous or Non-Existent ...... 48 C Conclusion ...... 49 Chapter III: General Jurisprudential Principles: One Side of the Public Policy Coin ...... 51 A Introduction ...... 51 B Overview of the Saudi Legal System ...... 52 C The New Arbitration Law and the Issue of Implementation ...... 55 D Major Laws Governing Arbitration in Saudi Arabia ...... 56 E Factors That Influence Public Policy Across Legal Systems ...... 59 F Domestic, International and Transnational Public Policy ...... 70 1 Domestic Public Policy ...... 72 2 International Public Policy ...... 73 3 Transnational Public Policy ...... 75 G Discussion and Analysis of One Side of the Saudi Public Policy Coin ...... 77 1 Conditions of Implementation Versus General Jurisprudential Principles ...... 78 (a) Conditions of implementation ...... 79 (b) General Jurisprudential Principles ...... 82 (i) Royal orders that require prior authorisation from the sovereign in his capacity as prime minister ...... 82 (ii) Rules of competence ...... 85 (iii) Identification of the legal status of parties ...... 86 (iv) Sovereign acts...... 87 (v) Arbitration in certain disputes ...... 87 (vi) Implementation management ...... 88 (vii) Nationality of parties to a dispute ...... 88 2 Change in the General Jurisprudential Principles ...... 89 H Conclusion ...... 90 Chapter IV: Sharia: The Other Side of the Public Policy Coin ...... 92 A Introduction ...... 92 B What Does Sharia Mean in the Saudi Legal System? ...... 93 C How Can a Saudi Judge Set Aside Arbitration Awards Using Islamic Public Policy? ...... 97 1 Ijtihad in Islamic Primary Sources ...... 99 (a) Ijtihad in the Quran ...... 100 (b) Ijtihad in the Sunnah/Hadith texts ...... 102 2 Ijtihad in the Secondary Sources of Sharia ...... 104 (a) Ijma, ‘consensus’ ...... 105 (b) Qiyas, reasoning by analogy...... 107 (c) Urf, local custom ...... 108 (d) Al-maslahah al-mursalah or ‘Maslahah’, ‘public interest’ ...... 110 3 Taqlid in Islamic Precedents ...... 112 D Discussion and Analysis of the Effect of Sharia on Arbitration Awards ...... 115 1 Substantive Islamic Requirements and the Weapon of Public Policy ...... 116 2 Islamic Procedural Requirements and the Weapon of Public Policy ...... 123 E Conclusion ...... 127 Chapter V: Reconciling Domestic and Transnational Values ...... 129 A Introduction ...... 129
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B Observations and Evaluations of the Application of the Saudi Concept of Public Policy ...... 130 1 Lack of Understanding or Conflict over Identity: Issue of the Main Pillar of the Concept of Public Policy ...... 131 2 The First Side of the Saudi Public Policy Coin: General Jurisprudential Principles ...... 134 3 The Second Side of the Saudi Public Policy Coin: Sharia ...... 137 4 Sharia Scholars or Law Scholars ...... 140 C Reforming Both Sides of the Saudi Public Policy Coin: Reconciling Domestic and Transnational Values ...... 143 1 Adopting the Concept of International Public Policy ...... 145 2 Adopting a Separate and Comprehensive New Arbitration Law for International Commercial Arbitration ...... 147 3 Codification of the Fundamental Principles of National Laws ...... 148 4 Codification of the Fundamental Principles of Islamic Sharia ...... 149 5 The Circuit of International Public Policy and Supreme Circuit of International Public Policy ...... 151 D Reconciling Domestic and Transnational Values ...... 154 Chapter VI: Concluding Remarks ...... 157 A Introduction ...... 157 B This Study ...... 157 C Brief Recap of the Argument ...... 158 D Significance of the Thesis ...... 159 E Summary of the Thesis ...... 160 F Originality and Contribution to the Literature ...... 162 G Responses to Traditional Research Limitations ...... 165 H Directions for Future Research ...... 166 Bibliography ...... 168 Appendices ...... 195
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Glossary of Arabic and Legal Terms
Fiqh Islamic jurisprudence
General Judicial principles that are largely derived from national laws and Jurisprudential normative social requirements Principles
Gharrer Islamic finance term that makes a contract forbidden
Hadd Criminal penalty prescribed by Allah almighty
Hanafi Oldest school of Sunni Islam founded by Hanafi Abu Hanifa Al- Noaman (699–767)
Hanbali Last major school of Sunni Islam founded by Imam Ahmad ibn Hanbal (780–855)
Ijma Unanimous agreement between Muslim jurists about a particular issue
Ijtihad Process of making an Islamic legal decision
Islamic Sunni schools of Islamic thought schools
Maliki Sunni Islam school of thought founded by Imam Malik bin Anas (715–796)
Al-maslahah Public interest—one of the fundamental sources of Islamic al-mursalah jurisprudence that helps jurists find Islamic legal solutions
Mecelle First Islamic Civil Law code that is considered the first attempt to codify Sharia
Mujtahid Islamic jurists who reach a sophisticated level of Islamic knowledge that qualifies them to exercise ijtihad
Public policy Term of art that generally means the fundamental principles of national laws
Qiyas Reasoning by analogy that extends the cause of a particular issue based on the purposes of Islamic law
Quran The sacred book in Islam that contains the words of Allah almighty
Riba Islamic finance term that means ‘interest’ and has several types
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Shafi’i Sunni Islam school of thought founded by Muhammad ibn Idris Al- Shafi’i (766–820)
Sharia Islamic law based on the teachings of the Quran and the traditions of the Prophet
Sunnah The traditional record of the words and acts of the Prophet Muhammed (Peace Be Upon Him)
Sunni Branch of Islamic faith described as orthodoxy
Taqlid Imitation of Islamic legal precedents issued by qualified Mujtahid
Urf Local custom that is not in conflict with the purposes of Islamic law
Usul al-Fiqh Principles of Islamic jurisprudence
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CHAPTER I: RESEARCH BACKGROUND INFORMATION
A Introduction
The Saudi concept of public policy is problematic in the context of the new Saudi arbitration law. Understanding and demonstrating the reasons why Saudi courts have set aside foreign awards using the public policy defence is the goal of this thesis. Previous academic studies have not accurately and comprehensively addressed the legal issues that obstruct the implementation of the international commercial arbitration award because of Saudi public policy. This study aims to fill this gap in the literature.
The thesis shows that Saudi courts have generally refused to recognise and implement arbitration awards when such awards would contravene the Saudi concept of public policy. The Saudi concept of public policy consists of the fundamental principles of national law; namely, General Jurisprudential Principles and Islamic law (Sharia).
Metaphorically, the Saudi concept of public policy is a coin with two sides, each imbued with many significant legal issues.
As this thesis will discuss, General Jurisprudential Principles are largely derived from national laws and normative social requirements, while Sharia generally refers to the thoughts of Sunni schools of Islam. This investigation of both sides of the Saudi public policy coin will facilitate an understanding of the legal consequences, obstacles and effects related to requiring international commercial arbitration awards to comply with the Saudi concept of public policy in order to be recognised and implemented in the
Saudi Arabia.
It is important to establish legal research on international commercial arbitration in general and, in particular, public policy. Financial globalisation is eroding trade and
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communication boundaries,1 creating global linkages that have become substantial in emerging markets as they become financially incorporated with the rest of the world.2
These linkages have created a new age of common interests among participating countries to promote the development of different facets of human life, such as knowledge, technology and financial developments.3 As a result, a variety of laws and regulations have emerged to align domestic and international law in response to these global changes, and to provide an appropriate environment for foreign trade and investments in host countries.4
International investors are becoming increasingly concerned about the divergence between domestic laws and international laws, which provide protection for their businesses in host countries.5 There is a simple cause-and-effect relationship between a government’s protection laws and a growing investment climate. As a result of this strong relationship, the 1958 New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (‘NYC’) was created as an essential pillar that provides legitimate protections to facilitate global transactions. 6 Most countries are parties to the convention because of the potential to increase commercial activities in
1 Eduardo Levy Yeyati and Tomas Williams, ‘Financial globalization in emerging economies: Much ado about nothing?’ (2014) 14(2) Economía 91. 2 Ibid. 3 Sergio L. Schmukler, ‘Benefits and risks of financial globalization: challenges for developing countries’ (2004) Globalization, Growth, and Poverty, World Bank Policy Research Report. See also Teodora Roman and Adriana Manolică, ‘Globalisation–advantages and disadvantages from the perspective of the manufacturer’ (2012) (4) CES Working Papers 747. 4 Cristoph Schreuer, ‘Investment protection and international relations’ (2007) The law of international relations—Liber amicorum Hanspeter Neuhold. Eleven International Publishing, The Netherlands 345. 5 Ibid. 6 The introduction of the NYC states that ‘The Convention’s principal aim is that foreign and non- domestic arbitral awards will not be discriminated against and it obliges Parties to ensure such awards are recognized and generally capable of enforcement in their jurisdiction in the same way as domestic awards An ancillary aim of the Convention is to require courts of Parties to give full effect to arbitration agreements by requiring courts to deny the parties access to court in contravention of their agreement to refer the matter to an arbitral tribunal’. 2
those countries and protect commercial interests outside of their country, including in states that are not signatories to the NYC.7
In addition, many other features promote the settlement of disputes through international commercial arbitration. Parties in conflict can use the law of a country with which they are familiar to settle a dispute,8 and arbitral proceedings can be chosen according to the United Nations Commission on International Trade Law (UNCITRAL
Model Law), or according to arbitral institutions. 9 Therefore, foreign investors in domestic legal systems can adopt a plan in advance to protect their commercial activities using familiar laws and procedures that are consistent with the NYC, rather than having to participate in legal systems with disparate laws, which may result in unpredictable outcomes.10
Confidentiality of judicial proceedings relating to international commercial arbitration is often essential because disclosure of confidential information arising in proceedings might affect a company’s reputation by revealing important information or leading to rumours during litigation that might undermine its current or future profits.11
Efficiency is another important aspect of international commercial arbitration proceedings because it enables commercial disputants to choose arbitrators who are experts in the field rather than remaining subject to the jurisdiction of judges with
7 The contract was signed by 157 countries. For further information, see contracting states of NYC at
potentially little or no experience in complex commercial cases. 12 In particular, resolving disputes through arbitration is generally faster than litigation. 13 This is important for commercial companies, especially those involved in large-scale disputes that might affect the future of the disputants and their ongoing business viability.
As a result of the advantages discussed above, international commercial arbitration has gained significance on the international stage. However, the NYC, which helped create these global advantages, also created legal issues in implementing international commercial arbitration awards. 14 For example, art V (2)(b) enables the court of a contracting state to refuse recognition and enforcement of an award when it finds that such recognition or enforcement would be contrary to the state’s public policy.15
Public policy is a flexible term that is understood differently among the NYC member nations.16 Each country has different reasons and conditions, grounded in public policy, to reject or accept international commercial arbitration awards. 17 Accordingly, the concept of public policy applied by an arbitrator to an international commercial dispute is important to the enforcement of that award in the host country. If the enforcement of such awards becomes increasingly tenuous on the grounds of domestic policy, international commercial arbitration as an alternative method of dispute resolution
12 Rashda Rana and Michelle Sanson, ‘International Commercial Arbitration’ (2011) 6(4) Construction law international 39. 13 Ibid. 14 For further discussion on the NYC and its legal issues, see Wolfgang Kuhn, ‘Current Issues on the Application of the New York Convention—A German Perspective’ (2008) 25 Journal of International Arbitration 743. 15 Richard A. Cole, ‘The public policy exception to the New York convention on the recognition and enforcement of arbitral awards’ (1985) 1 Ohio State Journal on Dispute Resolution 365. 16 For further discussion on the concept of public policy and its legal issues, see Anton G. Maurer, Public Policy Exception Under The New York Convention: History, Interpretation, and Application—Revised Edition (Juris Publishing, Inc., 2013). See also John Gwynne Tarlinton, International commercial arbitration and public policy: with principal reference to the laws of Australia, France, Switzerland, the United Kingdom and the United States (SjD Thesis Thesis, University of Technology, 2003). 17 Rana and Sanson, above n 12. 4
might lose its appeal as an effective method of solving disputes outside of the courtroom.
Therefore, it is important for legal experts in all countries to improve the field of international commercial arbitration by identifying legal issues and cooperating to resolve them. Highlighting, analysing and overcoming obstacles in recognising and enforcing international commercial arbitration awards via comprehensive academic studies is an essential step in supporting the arbitration environment. That is the goal of this study in relation to Saudi Arabia.
Saudi Arabia is a contracting state of the NYC and has its own distinctive understanding of the recognition and enforcement of international commercial arbitration awards. This understanding was initially reflected in the Saudi arbitration law known as Royal
Decree No. (M/46) dated 12/7/1403 AH–(24/4/1983). However, as a result of critical issues with the former Saudi arbitration law, Saudi Arabia issued a new arbitration law known as Royal Decree No. (M/34) dated 24/5/1433 AH–(16/4/2012) to improve the local and international arbitration environment.
The new arbitration law set forth conditions to recognise and enforce international commercial arbitration awards, and public policy as a substantive reason for refusing to recognise and implement them.18 Therefore, this study will analyse and discuss the concept of Saudi public policy in recognising and enforcing international commercial arbitration awards.
This thesis is presented in six chapters. Each chapter revolves around a specific topic, with the aim of arriving at an integrated analysis of the legal issues regarding both sides of the Saudi public policy coin, which affect the recognition and enforcement of
18 For more details, see Chapters III and IV. 5
international commercial arbitration awards in Saudi Arabia. This analysis forms the basis of the recommendations proposed in Chapter V to resolve these legal issues. Thus, this thesis is a first step towards the reformation of the Saudi arbitration environment.
B Aim of the Study
The aim of this study is to comprehensively investigate the Saudi concept of public policy and understand how the Saudi legal system responds to the application of the concept of public policy in the judicial review of international commercial arbitration awards. The study also aims to identify the legal issues that obstruct the implementing of international commercial arbitration awards and provide legal solutions to overcome them by comparison with the situation in leading jurisdictions in the development of arbitration law.
C Research Issue
As previously discussed, international commercial arbitration is an effective tool that many commercial parties and international investors depend on to resolve disputes.
However, countries react differently to international commercial arbitration awards because the recognition and implementation of awards depends on the legal context in which the interpretation occurs. Saudi Arabia has its own legal vision of international commercial arbitration awards, which was initially reflected in the Saudi Arbitration
Law of 1983.
As a result of several legal issues with the former arbitration law, Saudi Arabia passed a new arbitration law in 2012 to improve the international commercial arbitration environment. However, a recent doctoral thesis by Ahmed Almutawa involved a survey on the recognition and enforcement of international commercial arbitration awards in
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Gulf Cooperation Council (GCC) countries and presented many interesting facts about the international commercial arbitration environment:
A full recognition of arbitration is still facing various challenges in the GCC states. This includes the difficulties facing the enforcement of foreign arbitral awards in these states, which is largely due, as will be shown in this study, to the ambiguity of the procedures and the unpredictability of court practices. In the survey, the respondents gave the Kingdom of Bahrain (Bahrain) and the UAE the highest rating at 7.44 out of 10 and 7.43 out of 10, respectively, when asked to rate the friendliness of GCC states towards the enforcement of foreign arbitral awards. KSA, despite having recently passed the Saudi Arbitration Law of 2012, was rated low at 3.44 out of 10. The Sultanate of Oman (Oman) received a rating of 6.25 out of 10, the State of Kuwait (Kuwait) was rated at 5.78 out of 10, and the State of Qatar (Qatar) was rated at 5.74 out of 10. In other words, GCC arbitration practitioners see that much work is yet to be done with the GCC states to improve their enforcement of foreign arbitral awards, despite that all the GCC states are signatories to the New York Convention19 (emphasis added).
According to Almutawa, Saudi Arabia scored the lowest among the GCC countries in regard to recognising and implementing international commercial arbitration awards, despite recently reforming its arbitration law. Thus, there is a need to investigate the root cause of legal experts’ negative perceptions of Saudi Arabia. Identifying this is essential to developing a more productive international commercial arbitration environment in Saudi Arabia in light of its recent arbitration law.
D Significance of the Study
The significance of this study lies in the use of international commercial arbitration at national and international levels as a primary tool for alternative dispute resolution.20
Additionally, this study is significant because Saudi Arabia plays an important role in the world economy,21 attracting many international investors and still rapidly growing
19 Ahmed Almutawa, Challenges to the enforcement of foreign arbitral awards in the states of the Gulf Cooperation Council (PhD Thesis, University of Portsmouth, 2014) 5. 20 Harry T. Edwards, ‘Alternative dispute resolution: Panacea or anathema?’ (1986) 99(3) Harvard Law Review 668. 21 Nasser Al-Mawali, ‘Intra-Gulf Cooperation Council: Saudi Arabia Effect’ (2015) Journal of Economic Integration 532. 7
in terms of commercial transactions.22 The factors affecting this increase in foreign trade and investment are discussed below.
As discussed previously, there is a lack of academic research that comprehensively investigates the obstacles to the new Saudi Arabia arbitration law and its concept of public policy. Therefore, to improve the international commercial arbitration environment, it is important to identify and resolve the issues in the Saudi legal system that might form obstacles to recognising and implementing foreign arbitration awards.
Through a comprehensive literature review, this study will fill gaps in legal research on the Saudi regime and the arbitration environment in Saudi Arabia by addressing fundamental misunderstandings in several areas regarding Saudi public policy. It will also serve as a platform for international investors that want to establish a plan prior to investing in the Saudi market or other markets founded on different laws, traditions and philosophies.
E Research Questions
This thesis asks: What aspects of the public policy concept in Saudi Arabia form legal obstacles to the recognition and implementation of international commercial arbitration awards?
From this question, a number of sub-questions arise:
(a) What are the foundations upon which the Saudi concept of public policy rests?
(b) What is the nature of public policy as it is conceived and applied in the Saudi legal system?
22 For further discussion on investment opportunities in Saudi Arabia, see James Manyika Richard Dobbs, and Jonathan Woetzel, ‘Saudi Arabia Beyond Oil: The Investment And Productivity Transformation’ (McKinsey Global Institute, 2015). 8
(c) What are the sources of Saudi public policy?
(d) What is the significance of Islamic Sharia law in the Saudi legal system?
(e) How might national laws and Islamic Sharia affect the recognition and implementation of foreign arbitration awards, and what obstacles are involved?
(f) How have the provisions of the NYC been adopted in Saudi Arabia in determining the extent of the public policy defence and the degree to which Saudi judges interpret and apply the NYC distinctively in determining whether to recognise and enforce international commercial arbitration awards?
(h) What conclusions can be drawn from the Saudi approach? Is the Saudi approach different from other leading jurisdictions in the development of arbitration law, and if there are significant differences, is there a way to reconcile domestic and transnational values?
F Scope of the Thesis
Foreign arbitral awards are the primary focus of this thesis; therefore, domestic arbitral awards will be excluded from the analysis. The scope of this study encompasses:
A- the recent arbitration law governing the implementation of foreign arbitral
awards in Saudi Arabia
B- the Saudi concept of public policy (issues outside the scope of the above-
referenced issue in regard to substantive and formal requirements will not be
examined)
C- court provisions in adopting foreign judgements and international commercial
arbitration awards.
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This study compares the Saudi Arabia legal system with other legal systems in their approaches to the legal issues stated above. It is important to understand the similarities and differences among various legal perspectives and legal systems to find solutions to the issues raised in this thesis. Additionally, the study critically analyses legal texts and precedents connected to the legal issues that are the focus of this research.
G Research Methodology
Different aspects of this thesis employ different methodologies because the research issue requires the investigation of various legal sources, including Islamic sources, statutory law, case law and international law. Therefore, doctrinal, historical and comparative methodologies will be employed, with the primary methodology being doctrinal. This methodology is necessary to explore the legal issues arising out of Saudi law in a manner that is reasonable, both historically and in light of recent legal developments such as the new Saudi arbitration law.
The combination of methodologies is essential for this thesis because the Saudi legal system was originally a combination of traditional religious law and modern law.23 This unique combination requires an investigation into the historical background of the Saudi legal system to understand its philosophical, religious and traditional perspectives.
The critical analysis will highlight the legal issues present in the Saudi legal system, and the comparative methodology will assist in understanding how these issues are addressed by other leading legal systems similar to the Saudi legal system. Given that judicial decisions and governmental laws reflect the direction in which a legal system is moving, this study will include a doctrinal analysis of relevant legislation and
23 Hossein Esmaeili, ‘On a Slow Boat towards the Rule of Law: The Nature of Law in the Saudi Arabia Legal System’ (2009) 26 Arizona Journal of International and Comparative Law 1. 10
provisions to determine the direction of the Saudi legal system and highlight the legal issues that arise when addressing foreign arbitral awards.
1 Doctrinal Methodology
Legal research methodologies are tools that enable researchers to answer their research question or hypothesis. 24 Research objectives and the nature of the inquiry should determine the nature of the research methodology;25 thus, doctrinal methodology should be the primary tool used to answer the current research question regarding the Saudi legal context. 26 The doctrinal methodology is very important in academia and is described as the dominant methodology in legal research, known as ‘doctrinal analysis’.27 It is broad enough to address all of the essential aspects of this thesis and to answer the research questions and reach a rational conclusion.
To appreciate why this study employs this method in the Saudi legal context, it is important to discuss what doctrinal analysis involves. Posner explains doctrinal legal analysis as follows:
It involves the careful reading and comparison of appellate opinions with a view to identifying ambiguities, exposing inconsistencies among cases and lines of cases, developing distinctions, reconciling holdings, and otherwise exercising the characteristic skills of legal analysis… They [practitioners] consider not only whether an opinion is clear, well-reasoned, and consistent with the precedents, the statutes, and
24 For a further discussion on legal research methods, see Mike McConville, Research methods for law (Edinburgh University Press, 2007). See also Mark Van Hoecke, Methodologies of legal research: Which kind of method for what kind of discipline? (Bloomsbury Publishing, 2011). 25 Ibid. 26 The Pearce Committee defined doctrinal analysis as ‘research that provides a systematic exposition of the rules governing a particular legal category, analyses the relationship between rules, explains areas of difficulty and, perhaps, predicts future developments’. For more details, see ‘Pearce Committee’ (1987), cited in Terry C. Hutchinson, Researching and writing in law (Lawbook Co./Thomson Reuters, 2010) 7. McKerchar has described doctrinal legal research as ‘typically based on the “black letter” (or literal) analysis of formal legal rules and principles. It tends to rely on a distinctly deductive form of legal reasoning and on the researcher’s ability to develop arguments and provide reasonings that are based on the law (which includes case law)’. For more details, see Margaret McKerchar, Design and conduct of research in tax, law and accounting (Thomson Reuters/Lawbook Company, 2010) 1, 18. 27 Terry Hutchinson and Nigel Duncan, ‘Defining and describing what we do: Doctrinal legal research’ (2012) 17 Deakin Law Review 83, 102. See also Douglas W. Vick, ‘Interdisciplinarity and the Discipline of Law’ (2004) 31(2) Journal of Law and Society 163, 177–179. 11
the Constitution, but also whether it is right in the sense that it is consistent with certain premises about justice and administrative practicality.28
Doctrinal analysis examines cases and legislation to evaluate their practicality and justice.29 The Council of Australian Law Deans declares that ‘[d]octrinal research, at its best, involves rigorous analysis and creative synthesis, the making of connections between seemingly disparate doctrinal strands, and the challenge of extracting general principles from an inchoate mass of primary materials’. 30 Further, Van Gestel and
Micklitz state that ‘arguments are derived from authoritative sources, such as existing rules, principles, precedents, and scholarly publications’. 31 Bartie identifies
‘doctrinalism’ as a ‘unifying element in legal scholarship in England and Australia’.32
Hutchinson and Duncan describe it as ‘the tracing of common law precedent and legislation interpretation and change’.33
Accordingly, this study aims to understand the legal issues relating to public policy by investigating legislation, case law and primary treatises on Islamic jurisprudence to identify legal issues and reach tentative conclusions. Thus, the primary research methodology should be doctrinal analysis because it is the most appropriate method for
28 Richard A. Posner, ‘The present situation in legal scholarship’ (1981) 90(5) The Yale Law Journal 1113–1114. 29 Ibid. Posner stated that ‘Doctrinal analysts necessarily go outside the logic of the opinion or the series of opinions that they are examining—but they don’t go far. They use their study of cases, their experience as lawyers, their shared moral and political values of their society to evaluate the practicality and justice, as distinct from the clarity and consistency, of existing or proposed legal rules. But they do not use the theories or methods of the social sciences or of philosophy’. 30 Council of Australian Law Deans Statement on the Nature of Legal Research (2005) 3
reaching conclusions based on primary and secondary sources that require a library- based undertaking focused on conducting intensive, scholarly analysis.34
This methodology might be considered a laboratory for law scholars that has been used throughout history to reveal a variety of legal theories that have served legal communities worldwide. As Langdell states, ‘The work done in the Library is what the scientific men call original investigation. The Library is to us what a laboratory is to the chemist or the physicist, and what a museum is to the naturalist’.35
2 Historical Methodology
Given that the nature of the Saudi legal system combines the philosophy of Islamic legal traditions and modern legal traditions,36 this study requires an investigation into the historical background of Islamic Sharia. Understanding this legal position by tracking the historical background of Islamic Sharia can provide an understanding of the issues in the current legal system and the legal gaps in history that affect the current legal practices of Saudi Arabia.
Accordingly, this study will use historical methodology to study Islamic Sharia, to discover information that may assist in analysing the current legal issues to ultimately answer the research question presented. The use of historical methodology is significant in the field of legal research. Bakshi, in his essay entitled ‘Legal Research and Law
Reform’, explains historical research as follows: ‘On the Archives Building in
Washington, there is a famous inscription which reads: “ALL THAT’S PAST IS
34 Margaret A. McKerchar, ‘Philosophical paradigms, inquiry strategies and knowledge claims: applying the principles of research design and conduct to taxation’ (2008) 6 eJournal of Tax Research 1, 18–19. 35 Further, Langdell suggests that ‘the law ought to be studied from its own concrete phenomena, from law cases, in the same way that the laws of the physical sciences are derived from physical phenomena and experiments’. For more details see Bruce A. Kimball, The inception of modern professional education: CC Langdell, 1826–1906 (Univ of North Carolina Press, 2009) 349. 36 Esmaeili, above n 23. 13
PROLOGUE”. These are pregnant words and not mere rhetoric. The past often explains the present, most vividly’. 37 Ellinger and Keith, in their book Legal Research:
Techniques and Ideas, emphasise the significance of the historical approach to legal research as follows:
The historical approach is just as important in the comprehension of statutory law as it is in the study of case law. Any lawyer who hopes to comprehend the Companies Act 1955 or the Chattels Transfer Act 1924 without studying their historical backgrounds is setting himself an impossible task. The same goes for the Continental codes, which become clear only when read with an eye to the period in which they were enacted.38
In this study, it is important to conduct historical research to explore the circumstances giving rise to the present position. Therefore, this method will be used to form a solid historical foundation and to assist in reaching logical conclusions regarding the development of Islamic Sharia and its effect on the Saudi legal system. This analysis is
37 P. M. Bakshi, ‘Legal Research and Law Reform’ (1982) 24(2/3) Journal of the Indian Law Institute 391. Vibhute and Aynalem have similar views of the significance of the historical methodology: ‘Tracing history of a particular legal fact becomes significant for its following attributes. First, it becomes useful, rather warranted, when the present statute or statutory provision has raised meaningful queries and it becomes necessary to explore the circumstances in which the present position came out. In such circumstances, it gives a significant clue to the reasons why it (the particular law or legal provision) was framed in the form in which now it appears. It helps to remove certain doubts about the legal fact. Secondly, it supplies the researcher the reasons that justify the present position. It would also exhibit that a particular existing provision, fully justifiable at the time when it was introduced, is no longer so justifiable because the reasons and the circumstances that justified its inclusion are no longer valid or exist. Thirdly, it discloses the alternatives, different than the currently adopted ones, which were considered and rejected by the lawmakers and reasons therefor. Such a revelation not only exhibits the sound and valid reasons for rejection of an alternative but also discloses the comparative positive and negative attributes of different alternatives that were thought of (or rejected) and of that are adopted in the legislation under inquiry. In this way, it initiates or contributes in legal reforms. Fourthly, history of a legal fact, when traced deeply and arranged logically, shows the gradual evolution of the law or legal fact on certain lines, and thereby of general trend of its change. It shows the way the legal fact is evolved. Fifthly, historical background of law enables law-makers to know the principles used or followed by Legislature from home or abroad in earlier identical law(s) as very few pieces of legislation are original in the sense of being pure innovations of a skilled draftsman. In majority of the cases, Legislature consults and adapts earlier statutes or makes use of principles laid down or proposed in decided cases. Sixthly, historical background of law or a statutory provision helps judiciary (particularly in Common Law jurisdictions) in interpreting law in a more rational and pragmatic way as historical research helps it to know the historical and political spirit in which that particular law (or a legal provision) came into existence and for what reasons. Laws are not made in a vacuum. They are passed in order to meet some needs of society. Seventhly, a law may have relevant international background when it is enacted to give effect to the treaty obligations accepted by the government towards other countries. The practical importance of an understanding and knowledge of that wider political context is evidenced by the increasing willingness of the courts to take account of relevant international instruments when construing the legislation’; For more details, see Khushal Vibhute and Filipos Aynalem, Legal Research Methods. Teaching Material (Justice and Legal System Research Institute, 2009) 106–107. 38 E. P. Ellinger and K. J. Keith, ‘Legal Research: Techniques and Ideas’ (1999) 30 Victoria University Wellington Law Review 459. See also Shashi Kant Verma and M. Afzal Wani, Legal Research and Methodology (Indian Law Institute, New Delhi, 2015) 111. 14
significant because the philosophy underlying Islamic Sharia has developed over 14 centuries and must be accurately investigated.
3 Comparative Methodology
The ultimate purpose of this study is to further develop the international commercial arbitration environment in Saudi Arabia. Significantly, comparative legal methodology must be applied to Saudi Arabia to identify Saudi legal issues in the Saudi concept of public policy and provide recommendations to overcome them. To achieve this, the
Saudi approach to the development of arbitration law will be compared with other leading jurisdictions to address the issues underlying this thesis. Understanding the similarities and differences between how Saudi Arabia and other countries with different perspectives and legal environments address these issues will assist in resolving Saudi legal issues.
Thus, a comparative methodology that encompasses functional analysis will be adopted in this thesis. Functional analysis primarily focuses on ‘what they do’ in a legal system rather than ‘what they say about’ the legal system.39 It is oriented towards the practical aspects of a legal system rather than the theoretical aspects.40 According to Brand, comparative functional methodology focuses on the ‘function’ of rules and concepts rather than what they ‘say’. 41 This method has become a major methodology in comparative legal research, and many law scholars consider it the dominant method
39 For more details, see Oliver Brand, ‘Conceptual comparisons: Towards a coherent methodology of comparative legal studies’ (2006) 32 Brooklyn Journal of International Law 405, 409–421. 40 Ibid. 41 To appreciate why this study employs a comparative functional methodology, it is important to clarify its nature and scope. As Brand (ibid 409) notes, ‘Functionalism is so centrally relevant to contemporary comparative law because of its orientation towards the practical. It is particularly concerned with how to compare the law’s consequences across legal systems and therefore allows rules and concepts to be appreciated for what they do, rather than for what they say. Functionalists believe that the “function” of a rule, its social purpose, is the common denominator (tertium comparationis) that permits comparison’. 15
among comparative law methodologies. Brand explains the functional method as follows:
In the history of comparative law, periods of integrative comparison have continuously exchanged with those of contrastive comparison. Today, the hallmark of the former, the so-called ‘functional method,’ has risen to a position of dominance: functionalists author the major treatises on comparative law, fill the editorial boards of comparative journals, and preside over societies dedicated to the study of the subject.42
The comparative methodology will help illustrate that (1) different legal systems face similar issues;43 (2) for the same issues, each legal system adopts the same or different legal measures; 44 and (3) despite differing measures, different legal systems might obtain similar results.45 Therefore, this approach is appropriate because it adequately addresses the research issues being studied. Additionally, the comparative method is one of the most accepted academic research methods in legal studies. According to
Zweigert and Kötz, ‘Comparative law is an “école de vérité” which extends and enriches the “supply of solutions” and offers the scholar of critical capacity the opportunity of finding the “better solution” for his time of place’.46
According to Lord Steyn, a former Lord of Appeal in the United Kingdom (UK), comparative methodology enables courts to re-examine the merits and demerits of legal institutions in a rigorous manner.47 Given that the comparative method has been widely
42 Ibid 43 Ibid. See also Konrad Zweigert and Hein Kötz, Introduction to comparative law (Oxford University Press, USA, 1992) 6. For a more cautious analysis, see Hein Kötz, ‘Abschied von der Rechtskreislehre’ (1998) 6(S 493) Zeitschrift für Europäisches Privatrecht 505. 44 Ibid. 45 Ibid. 46 Zweigert and Kötz, above n 43, 15. 47 Lord Steyn stated that ‘is to throw light on the competing advantages and disadvantages of feasible solutions thereby showing what in the generality of cases is the most sensible and just solution in a difficult case. It enables courts to re-examine the merits and demerits of legal institutions in a rigorous manner’. For more details see Lord Steyn, ‘The Challenge of Comparative Law’ (2007) 8(1) European Journal of Law Reform 3, 5. 16
accepted and has helped the academic legal community to achieve sophisticated legal solutions,48 this study will employ this method to find solutions to the research issues.
H Data Collection
Primary and secondary sources will be analysed to understand each issue. To address government-made laws, the Islamic Sharia issue and treatises on legal jurisprudence, this study will analyse the opinions of Islamic scholars, academic publications, newspaper reports, case law and other important sources to understand the pillars of the
Saudi concept of public policy. Understanding the framework of Saudi public policy is essential to highlight the legal issues that are linked to the study questions.
A further aim of this study is to research the Saudi court provisions, officially published on the Saudi court’s website or gathered from Saudi court libraries. This study will analyse Saudi court provisions to understand the position of the Saudi judiciary in regard to foreign arbitral awards. Given that this study will investigate issues on both sides of the Saudi public policy coin to understand how Saudi courts interpret and implement the NYC, it is essential to investigate cases in which the recognition and enforcement of international commercial arbitration awards were rejected because of
Saudi public policy issues. Understanding the grounds for denying the recognition of international commercial arbitration awards is essential for understanding the direction of judicial authorities regarding the effects of public policy on the enforcement of foreign arbitral awards.
48 For more information about the advantages of a comparative study, see Esin Orucu, ‘Methodological aspects of comparative law’ (2006) 8 European Journal of Law Reform 29. See also Pier Giuseppe Monateri, Methods of comparative law (Edward Elgar Publishing, 2012) 62-65; and for the same author, see also W. J. Wagner, Research in Comparative Law: Some Theoretical Considerations (Boobs-Merrill, 1962) 511, 527. See also Walter Joseph Kamba, ‘Comparative law: A theoretical framework’ (1974) 23(03) International and Comparative Law Quarterly 485. 17
It is important to note that under Saudi law, Islamic law and public policy are interconnected, 49 as discussed in detail below. 50 However, Saudi public policy is broader than Islamic law philosophy. Therefore, this study will discuss the issue of the first side of the Saudi public policy coin (referred to in this thesis as ‘General
Jurisprudential Principles’), followed by a discussion of the second side (‘Sharia’). Each issue will be presented in a separate chapter. The Saudi court provisions that link each issue are essential to clarify the legal issues and address the research questions.
I Thesis Structure
This thesis is divided into six chapters, each with a different goal. Chapter I acts as a roadmap for the thesis. It presents the research issue, significance of the study, research question and sub-questions, scope, methodology, structure and the reasons for selecting
Saudi Arabia as the case study. This chapter lays the foundation for understanding the thesis.
Chapter II outlines the controversies surrounding the concept of Saudi public policy.
Here, the most relevant previous academic studies will be reviewed and critically analysed to identify the legal gaps. The chapter provides evidence that, to date, no academic studies have comprehensively analysed the legal issue of the concept of Saudi public policy in regard to the recent Saudi arbitration law and its effects on the recognition and enforcement of international commercial arbitration awards. Identifying the legal gaps through a comprehensive literature review will provide a springboard for the issues discussed in subsequent chapters.
49 For example, Art 50(2) of Saudi arbitration law states that ‘The competent court considering the nullification action shall, on its own initiative, nullify the award if it violates the provisions of Sharia and public policy in the Kingdom or the agreement of the arbitration parties, or if the subject matter of the dispute cannot be referred to arbitration under this Law’. 50 For more details, see Chapters III and IV. 18
Chapter III discusses the issue of public policy as a universal issue in general, along with the first side of the Saudi public policy coin—‘fundamental principles of national laws’—that is, the General Jurisprudential Principles. Understanding the Saudi perspective regarding the limits of public policy is essential to identify the obstacles that affect the recognition and enforcement of international commercial arbitration awards as a result of the Saudi understanding of public policy.
Chapter IV discusses how the second side of the Saudi public policy coin—‘Sharia’—is presented in the reformed arbitration law, and illustrates its potential effects on the recognition and enforcement of international commercial arbitration awards. To this end, this study will comprehensively explore several areas of Islamic Sharia in general, and specifically discuss how Islamic Sharia affects the Saudi legal system. Analysis of
Islamic Sharia and a discussion on how Saudi judges use Islamic Sharia to make decisions will assist in highlighting the legal obstacles that can affect the recognition and enforcement of international commercial arbitration awards.
Understanding and thorough analysis of both sides of the Saudi public policy coin leads to Chapter V, which reconciles domestic and transnational values. This chapter presents the findings and recommendations relating to the current study. It discusses the issues outlined in the current study and proposes solutions to improve the international commercial arbitration environment in the Saudi legal system. The suggestions presented in Chapter V aim to help Saudi Arabia develop its arbitration environment and assist international investors, international arbitrators, academics and other stakeholders to understand this unique legal system to assist in their future endeavours.
19
Chapter VI is the final chapter. It summarises the aim of the thesis, its main findings and contributions to the literature, research limitations and directions for future research.
J Rationale for Selecting Saudi Arabia
Saudi Arabia has the potential to be one of the preferred locus for international commercial arbitration. One of the primary rationales for this is its current success in attracting international investors, 51 ability to affect the world economy, 52 and the announcement of many new projects, as outlined below. However, there are significant factors that might affect the relationship between Saudi Arabia and international investors, with the lack of development of the international commercial arbitration environment one of these. The primary rationale for selecting Saudi Arabia is to analyse and solve the legal issues of the Saudi concept of public policy to enable Saudi Arabia to attract more international investors via development of the arbitration environment.
In other words, it is important to study Saudi Arabia to develop its arbitration environment and assist in increasing its attractiveness to foreign trade and investment in a manner that serves the interests of the global economy in general and international commercial arbitration in particular. The following sections present examples of Saudi strength in the world economy and justify why Saudi Arabia has the potential to be a locus for international commercial arbitration.
51 Jeddah Chamber, Foreign Direct Investment,
1 Strategic Location of Saudi Arabia
Saudi Arabia covers 2,149,690 km2, making it almost one-quarter the size of Europe,53 and bridges the East and the West. The Saudi government aims to exploit this strategic location by becoming a global hub that connects the world’s continents.54 The Chairman of the Council of Economic and Development Affairs, Prince Mohammad bin Salman bin Abdulaziz Al-Saud, states in this regard that:
The third pillar is transforming our unique strategic location into a global hub connecting three continents, Asia, Europe and Africa. Our geographic position between key global waterways, makes the Kingdom of Saudi Arabia an epicentre of trade and the gateway to the world.55
Saudi Arabia aims to provide new logistic services for the large number of world traders that pass through the Red Sea.56 Further, the new airport capacity of Jeddah city allows the kingdom to serve as a significant hub for many travellers around the world.57 Thus, the strategic location of Saudi Arabia is a key factor in its capacity to attract international investors to invest in the country and act as an ideal locus for international commercial arbitration.
2 Economic Cities
Saudi Arabia has been building economic cities to attract international investors.58 For example, King Abdullah Economic City (KAEC) is one of four cities in Saudi Arabia
53 The World Factbook.
that is developing according to modern standards;59 it aims to provide one million jobs.60 It is the new kingdom’s gateway to the world and has already attracted many of the leading companies to the KAEC industrial valley.61 The industrial valley aims to provide one of the top 10 ports in the world to assist companies to export their products to the rest of the world through the Red Sea, and to import all required raw materials.62
The port is estimated to cover 13.8 km2, and aims to handle the world’s largest vessels.63 The target capacity of the port is greater than 20 million 20-foot equivalent units of containers per year.64
In addition to the industrial valley, the KAEC aims to establish residential areas that include 260,000 apartments and 56,000 villas.65 Further, a sea resort, educational zone and central business district are under construction. The city aims to attract more international investors from around the world to help the kingdom reach its national transformation targets.
The other modern, developed cities are the Prince Abdulaziz bin Musaid Economic City in Hael, the Knowledge Economic City in Madinah and the Jazan Economic City in
Jazan. The expected cost to build these cities is US$69 billion, and they aim to provide more than 4.5 million jobs within their 428.8 million square metres. Each city will serve
59 Sylvia Smith, ‘Saudi Arabia’s new desert megacity’, BBC News 2015.
different regions in the kingdom and is designed to accommodate international investors. 66 As evidenced by these examples, Saudi Arabia is keen to be deeply involved with the world economy, creating economic cities that serve as major hubs.
3 King Abdullah Financial District
The King Abdullah Financial District (KAFD) is planned as one of the most advanced financial districts in the world.67 It is estimated to cost $7.8 billion68 and will serve as the financial district for the Middle East in general and Saudi Arabia in particular.69
According to Vision 2030, Saudi Arabia’s Public Investment Fund (PIF) will be located in the KAFD,70 making the Saudi capital a global financial centre with the world’s largest sovereign wealth fund.71
4 Vision 2030
On 25 April 2016, the Saudi government and Crown Prince Mohammed bin Salman announced Vision 2030, aimed at significant changes in the kingdom’s economic system.72 Vision 2030 plans to diversify the Saudi economy away from its dependence
66 Saudi Arabian General Investment Authority, Saudi Arabia’s Economic Cities.
on oil, 73 towards area including service sectors such as tourism, recreation and education.74 In addition, it aims to attract more international investors to increase non- oil industries such as manufacturing equipment and munitions.75
One strategy to assist the kingdom to achieve Vision 2030 is to offer less than 5% of the giant national oil company Aramco on the global stock exchange in an initial public offering (IPO).76 The IPO is expected to raise around $2 trillion, which would make it the largest IPO in history.77 In addition to other assets and investments, the IPO would help to create the largest global sovereign fund,78 the Saudi Sovereign Fund, which would control around 10% of global investment capacity and 3% of global assets.79 In addition, the sovereign fund will help to create an industrial revolution in the kingdom by increasing non-oil revenue to $267 billion annually instead of $43.5 billion.80 The kingdom’s non-oil exports are expected to reach 50% of GDP.81 This ambitious plan aims to place Saudi Arabia among the top 15 world economies.82
Further, other strategies are being implemented to help the kingdom reach its goals. For example, the kingdom aims to adopt a new green-card system to attract investors and
73 ‘Saudi Arabia announces “Vision 2030”’, Al Arabiya news 2016,
scientifically skilled workers.83 Tourism in general and religious tourism in particular is one of the most important pillars of Vision 2030,84 aiming to accommodate 30 million pilgrims per year and set up the largest Islamic museum in the world.85 Finally, it is important to note that Saudi Arabia is a member of the Group of Twenty (G-20)86 and is considered a major player in the world economy. However, it has the potential to expand its strength and become a preferred locus for international commercial arbitration because of a variety of factors, as identified above.
K Conclusion
The significance of international commercial arbitration and the powerful position of
Saudi Arabia in the world economy triggered the initial idea for this research. However, the new arbitration law enacted in Saudi Arabia suffers from areas of ambiguity, especially in regard to public policy. As a result, the study’s focus shifted to exploring this area for the benefit of Saudi Arabia, international investors and the legal community.
This study will employ doctrinal, historical and comparative functional methodologies to investigate both sides of the Saudi public policy coin—the fundamental principles of national law (namely, General Jurisprudential Principles) and Sharia. This thesis aims to understand why Saudi courts have refused to recognise and implement international commercial arbitration awards. It evaluates the Saudi court provisions that deny the
83 ‘Saudi green card is “for investors and scientifically skilled”’, ARAB NEWS 2017
enforcement of international commercial arbitration awards because they violate the
Saudi concept of public policy. Defining the legal issues that obstruct the enforcement of international commercial arbitration awards will enable this study to suggest legal solutions to facilitate the process of implementation.
26
CHAPTER II: CONTROVERSIES SURROUNDING THE CONCEPT OF SAUDI PUBLIC
POLICY
A Introduction
The meaning of public policy is contested, but in Saudi Arabia, it refers to the fundamental principles of national law, namely General Jurisprudential Principles87 and
Sharia. 88 This thesis has two aims: to provide a comprehensive explanation of the concept of public policy in Saudi Arabia and to identify legal issues relating to the
Saudi public policy concept as they affect the implementation of international commercial arbitration awards. This chapter analyses the views of various writers within the legal literature on Saudi public policy. It then works towards a precise formulation of a range of legal issues.
To describe the gap between arbitration awards and public policy in Saudi Arabia, this chapter discusses four main propositions in the existing literature on the Saudi concept of public policy, which will provide a deeper understanding of the legal issues involved.
The propositions are:
1 that an international commercial arbitration award that conflicts with Islamic law—Sharia—necessarily conflicts with Saudi public policy
2 that the Saudi public policy concept is broader in scope than Sharia
3 that Saudi public policy is only a ‘safe harbour’ formulation
4 that academic studies are liable to make specific findings even when their definition of public policy is ambiguous or non-existent.
Each proposition requires an examination of various viewpoints regarding the meaning of public policy in the Saudi legal system, as well as comments on valid legal issues
87 For further discussion of this point, see section (G) of Chapter III. 88 For further discussion of this point, see section (D) of Chapter IV. 27
represented in those viewpoints. Given the controversial nature of the relevant literature, this discussion is, in essence, a winnowing process, intended to initiate methodological analysis. The following chapters explore the legal issues involved and suggest measures for their resolution.
B Themes in the Literature on Saudi Public Policy
This chapter examines the work of writers who focus on the question of recognition and implementation of international commercial arbitration awards in the Saudi legal system. When assessing the value and insights of their research, it is important to consider the philosophical implications of Sharia and the way in which Sharia interacts with other aspects of the Saudi legal system. In the literature, there are often blurred lines between fundamental Islamic principles89 and general Islamic rules.90 At the same time, crucial issues such as provisions by Saudi courts and the role of Saudi judges are relevant. Further, the concept of public policy is not derived from Sharia, and the concept is largely undefined in Saudi Arabia. The fact that primary legal sources are inaccessible remains a key limitation.
The following discussion groups the various viewpoints according to the four themes described, including subdivisions under each theme.
1 An International Commercial Arbitration Award Conflicting with Sharia Necessarily
Conflicts with Public Policy
The first group of academic studies surveyed agreed that an international commercial arbitration award conflicting with Sharia necessarily conflicts with public policy. In
89 Fundamental Islamic principles are generally not subject to different legal interpretations between Islamic scholars (e.g., the prohibition of pork and consumption of alcohol). See Chapter IV for more information about sharia. 90 General Islamic rules were created by Islamic jurists and are subject to different legal interpretations. See Chapter IV for more information about sharia. 28
general, the academic literature has not clearly identified the precise role and scope of
Sharia in the Saudi legal system. While some studies have conducted detailed research on the precise role of Sharia in the Saudi legal system, the issue of Saudi public policy remains unclear.
This lack of clarity relates to issues in the philosophy of Islamic law, as well as limitations on access to Saudi court decisions. It also relates to judicial practice, because it is difficult to find a pattern in the way judges interpret Islamic sources to implement,91 or set aside, international commercial arbitration awards.
(a) Public policy corresponds precisely with Sharia
Three studies argue that public policy corresponds precisely with Sharia, without identifying the scope of Sharia in the Saudi legal system. In this regard, Al Jarba discussed commercial arbitration in Islamic jurisprudence in general and in the Saudi context in particular. 92 He showed how Islamic perspectives link to commercial arbitration. Further, Al Jarba touched on the fundamentals of contracts, as well as methods for establishing evidence in arbitral tribunals within Islamic jurisprudence; the arbitrator’s religion or gender, conditions under which arbitration occurs that imply challenges may be made to the arbitral award; and many other issues that are widely discussed among Islamic schools. Al Jarba generally focused on the developing Saudi arbitration environment in light of the old arbitration law.93 He pointed to philosophical aspects of Islamic jurisprudence in relation to commercial arbitration issues, and
91 Sharia is a noun means the entire body of Islamic jurisprudence and other Islamic knowledge. Sharia has developed over more than fourteen centuries and covers a vast array of differing legal opinions, doctrines, schools, debates and legal traditions. Only in a limited number of matters is there absolute consensus between Islamic scholars. For further discussion of Sharia, see section (C) of Chapter IV. 92 Mohammed A. H. Al Jarba, Commercial arbitration in Islamic jurisprudence: a study of its role in the Saudi Arabia context (PhD Thesis, Aberystwyth University, 2001). 93 The old Saudi arbitration law was issued on 12/7/1403 AH 24 April 1983, Umm Al-Qura Gazette No 3292, 22/8/1403 AH 1983. 29
considered that the rejection of international commercial arbitration awards on the grounds that they violate public policy results from the conflict between the awards and
Islamic law.
However, an issue requiring further investigation with regards to the Al Jarba study is the problematic nature of judicial practice: How do Saudi judges apply Islamic jurisprudence to accept or reject arbitration awards? Most cases are cited from Islamic history before the Saudi era;94 thus, the relationship between Sharia and public policy in the Saudi legal context remains elusive.
Almutawa’s thesis also discussed international arbitration enforcement and implementation issues relating to the GCC,95 including the issue of public policy in
Saudi Arabia in light of the new arbitration law. He considered that the GCC’s substantive and procedural rules for enforcing foreign arbitral awards need to be unified. Almutawa argued96 that the legal system in Saudi Arabia is deeply rooted in
Sharia, which therefore constitutes Saudi public policy with respect to the enforcement of a foreign arbitral award.97 He confines consideration of awards on public policy grounds to Sharia alone. However, as Chapter III98 will demonstrate, to understand it fully, the public policy coin must be flipped to show the other elements of Saudi public policy.
Almutawa concluded that, apart from Sharia public policy, public policy in Saudi
Arabia ‘could well be interpreted narrowly or broadly depending on the personal analysis and understanding of every [that is, any] single Saudi judge’.99 Yet where there
94 Ibid 4, pp. 496–497. 95 Almutawa, above n 19. 96 Ibid Section 5.4.7, pp. 234–236. 97 Ibid 234. 98 For more details, see section (G) of Chapter III. 99 Almutawa, above n 19, 235. 30
is consensus between Islamic scholars, personal analysis and understanding in relation to any single Saudi judge are excluded from any Islamic legal matter.100 In this regard,
Trumbull stated:
There are very few laws that bind all Muslims. Only laws that are explicitly stated in the Qur’an, or have been reached by the consensus of the Muslim community (ijma’) are considered binding on all Muslims. The prohibition of pork, for example, is an explicitly stated rule that is unanimously recognized by the Muslim community.101
Chapter IV will discuss the question of the acceptance of Islamic legal schools in Saudi
Arabia, and Chapter V will comment further on how Saudi judges apply Sharia to reach decisions in law.102
Nesheiwat and Khasawneh, discussing the old versus new Saudi concepts of public policy in the context of the 2012 Saudi arbitration law,103 identified conflict with Sharia as the reason for the rejection of international arbitration awards on the grounds of violation of public policy. Further, they warned international arbitrators and other stakeholders against issuing an award that does not comply with Sharia, given:104
… the lack of transparency, the unclear legislative process that usually centres on royal edicts rather than parliamentary debate, and the varying treatment and protections granted to contractual obligations of the government versus those of the private sector.
However, they were not able to identify the precise nature of the Sharia elements in awards complying with Saudi Arabia’s perspective on Sharia.
100 Ruling No. K/1/4248 of 1429 AH–(2007) For more details, see section (C2) of Chapter IV (Ijma ‘consensus’). 101 Charles P. Trumbull, ‘Islamic arbitration: A new path for interpreting Islamic legal contracts’ (2006) 59 Vanderbilt Law Review 609, 631. 102 For more details, see section (B) of Chapter IV. 103 Faris Nesheiwat and Ali Al-Khasawneh, ‘The 2012 Saudi Arbitration Law: A Comparative Examination of the Law and Its Effect on Arbitration in Saudi Arabia’ (2015) 13 Santa Clara Journal of International Law 443. 104 Ibid 462–464. 31
The implication is that to reach feasible conclusions on the effect of Sharia on international arbitration award acceptability in Saudi Arabia will require recourse to
Saudi primary sources.
(b) Public policy means ‘Sharia according to the Hanbali school’
One legal study argues that public policy in the Saudi legal system means ‘Sharia according to the Hanbali school’. Abdul Hamid El Ahdab and Jalal El Ahdab discussed many issues in the old arbitration law, including Saudi public policy, and concluded that
Sharia actually constitutes public policy.105 The authors held that Saudi Arabia applies the law of the Hanbali school alone;106 thus, they viewed public policy from the Hanbali perspective, notably to define the concept of Saudi public policy, citing the opinion of one of the school’s most eminent exponents, Ibn Taymiyyah—that is, Taqi al-Din
Ahmad (d. 1328). 107 The authors viewed ‘the rule in contracts and provisions’ as
105 Abdul Hamid El Ahdab and Jalal El Ahdab, The Riyadh Arab Convention on Judicial Cooperation, Arbitration with the Arab Countries (Kluwer Law International, 2011) 669–670. 106 According to Oxford Islamic Studies Online, ‘Hanbali school of law school’ is: [I]slamic school of legal thought (madhhab) whose origins are attributed to Ahmad ibn Hanbal in ninth- century Baghdad. The official school in Saudi Arabia and Qatar, with many adherents in Palestine, Syria, and Iraq. Recognizes as sources of law: the Quran, hadith, fatwas of Muhammad’s Companions, sayings of a single Companion, traditions with weaker chains of transmission or lacking the name of a transmitter in the chain, and reasoning by analogy (qiyas) when absolutely necessary. Encourages the practice of independent reasoning (ijtihad) through study of the Quran and hadith. Rejects taqlid, or blind adherence to the opinions of other scholars, and advocates a literal interpretation of textual sources. Ritualistically, the Hanbali school is the most conservative of the Sunni law schools, but it is the most liberal in most commercial matters. 107 According to Oxford Islamic Studies Online, ‘Ibn Taymiyyah’ is: [P]rominent and controversial Syrian thinker, theologian, Hanbali jurist, and political figure. His intellectual activities, preaching, and politics resulted in persecution and imprisonment. Main doctrine was the supremacy and authoritativeness of the Quran and Sunnah of Muhammad and the early Muslim community. Encouraged a literal interpretation of scripture and condemned the popular practices of saint worship and pilgrimages to saints’ tombs as worship of other than God. Rejected theology, philosophy, and metaphysical Sufism, although he encouraged pietistic Sufism. Opposed to blind obedience to tradition (taqlid), he favored ijtihad (independent reasoning). Tied Islam to politics and state formation and made a sharp distinction between Islam and non-Islam, noting the difference between a public proclamation of Islam and actions that are inconsistent with Islamic teachings and values. Issued fatwas against the Mongols as unbelievers at heart despite public claims to be Muslim. Influenced later thinkers such as Muhammad ibn Abd al-Wahhab, Hasan al-Banna, and Sayyid Qutb. His authority has been used by some twentieth-century Islamist groups to declare jihad against ruling governments’. 32
anything valid is permitted, and that ‘only what is forbidden or annulled by the text or by qiyas (“reasoning by analogy”) is forbidden’.108
El Ahdab and El Ahdab stated that arbitration awards that are rendered abroad or that apply foreign law are rejected by Saudi judges as contrary to public policy, while public policy in certain cases has been defined by the courts in very broad terms.109 They cited the fact that Saudi law was not applied in any international arbitration referred to the
International Chamber of Commerce between 1975 and 1979, arguing that this means that Saudi Arabia distrusts international arbitration carried out abroad. 110 Cases in international arbitration were cited to support these assertions.111
Abdul Hamid El-Ahdab referred to a situation in which Sharia courts rejected arguments and refused to consider arbitral agreements or clauses as obligatory:112
Indeed, if one of the parties resorted to arbitration, the other party only had to invoke jurisdiction of the Sharia courts—and this was quite frequently done—for the latter to declare themselves competent, despite the existence of an arbitration clause.
However, this statement was not supported by evidence from either Saudi court decisions or legal texts.
Attention must be drawn to four legal issues in relation to understanding the Saudi legal system in general and Islamic law in particular. These issues affect the conclusions relating to public policy made in both the 2011 and 1994 studies. Four refutations of erroneous views are set out below.
108 El Ahdab and El Ahdab, above n 105, 669–670. 109 Ibid 660–661. 110 Ibid. 111 Ibid. 112 Abdul Hamid El-Ahdab, ‘Saudi Arabia Accedes to the New York Convention’ (1994) 11(3) Journal of International Arbitration 88. 33
First, Sharia does not comprise the entirety of the public policy concept. There are other elements to be considered, which this study calls General Jurisprudential Principles.113
These will be considered in chapter III below.
Second, the Hanbali school is one of four Islamic schools accepted by Saudi Arabia in the judicial environment.114 Judiciary decision No. (3) of 5 July 1928 declared that
Saudi judges are legally allowed to consider other Sunni schools of thought in addition to the Hanbali school. For example, Ruling No. 189/T/4 of 1427 AH–(2007 in the
Gregorian calendar) showed that the Board of Grievances adopted an Islamic legal view that was contrary to the opinion of Hanbali scholars.115 In another case, Ruling No.
Q/1/343 of 1424 AH–(2003) concerned a US company seeking the implementation of a
US court decision that a Saudi party should pay an amount of approximately $326 million, a decision handed down by a female judge in Washington DC. The Saudi judge noted that the acceptance of a ruling by a female judge was controversial under Islamic law, and that most Islamic scholars did not agree that a woman should serve as a judge.
However, the judge noted that ‘the Hanafi school and some Maliki scholars’ accepted decisions by women in matters not connected with hudud116 or qiyas.117 Neither hudud nor qiyas were involved, and the court decided to implement the foreign decision.118
113 For more details, see section (G) of Chapter III. 114 For more details, see section (B) of Chapter IV. 115 For more details, see section (D) of Chapter IV 116 According to the Oxford Islamic Studies Online, an ‘Hadd’ is: [L]imit or prohibition; pl. hudud. A punishment fixed in the Quran and hadith for crimes considered to be against the rights of God. The six crimes for which punishments are fixed are theft (amputation of the hand), illicit sexual relations (death by stoning or one hundred lashes), making unproven accusations of illicit sex (eighty lashes), drinking intoxicants (eighty lashes), apostasy (death or banishment), and highway robbery (death). Strict requirements for evidence (including eyewitnesses) have severely limited the application of hudud penalties. Punishment for all other crimes is left to the discretion of the court; these punishments are called tazir. With the exception of Saudi Arabia, hudud punishments are rarely applied, although recently fundamentalist ideologies have demanded the reintroduction of hudud, especially in Sudan, Iran, and Afghanistan. 117 According to the Oxford Islamic Studies Online, an ‘Qisas’ is: [R]etribution. Prescribed in Islamic law for murder, voluntary manslaughter, involuntary killing, intentional physical injury, and unintentional physical injury. In cases of intentional killing and physical 34
Third, Sharia courts have no jurisdiction over foreign judgements and international commercial arbitration awards. According to the first article of the old Board of
Grievances Law, Royal Decree No. (M/51) dated 17/7/1402 AH–(11/5/1982), the Board of Grievances was the only authority with jurisdiction over international arbitration disputes:119
The Board is an independent judicial board, authorised to decide cases and disputes to which the administration is not a party. It is authorised to temporarily adjudicate criminal and commercial disputes, and to have sole authority over the enforcement of foreign judgments and foreign arbitration decisions.
Finally, although El-Alahdab and El-Alahdab asserted that public policy has been defined by the courts in very broad terms in certain cases, and that invoking Sharia court jurisdiction is a reason to revoke an arbitral agreement, they did not cite any Saudi court decisions to show how Saudi courts define public policy. Similarly, without citing any relevant Saudi court decisions, Abdul Hamid El-Alahdab asserted that Saudi Arabia distrusts international arbitration carried out abroad.
(c) ‘Public policy’ is defined as fundamental principles of Sharia
One legal study argues that ‘public policy’ is defined as a fundamental principle of
Sharia. Al-Jerafi aimed to improve the arbitration environment in Yemen by examining the grounds for invalidity of arbitration agreements, as well as the public policy violation embodied in arts V(1)(a) and V(2)(b) of the NYC.120 In relation to public
injury, the family or victim may waive retribution and exact monetary compensation. In other cases, only monetary compensation can be exacted. The perpetrator’s clan is responsible for payment of compensation, which is divided by the victim’s clan. 118 For more details, see section (D) of Chapter IV. 119 Currently, Saudi Executive Courts have the jurisdiction to implement international commercial arbitration awards according to Art (12) of Royal Decree No. (M/53) dated 13/8/1433 AH–(3/7/2012). For more information about the Board of Grievances’ history, see Mohammed Hassen Al-Qahtani, The Role and Jurisdiction of the Board of Grievances in Saudi Arabia (PhD Thesis, Newcastle University, 2008) 67–105. 120 Wasim Yahya Al-Jerafi, Yemen’s Ratification of the New York Convention: An Analysis of Compatibility and the Uniform Interpretation of Articles V (1)(a) and V (2)(b) (PhD Thesis, University of Leicester, 2013). 35
policy in Saudi Arabia, he stated that a violation of the Islamic law is a violation of
Saudi public policy (Section 4.6.3).121
Al-Jerafi further argued that the notion of public policy in enforcing of foreign arbitral awards was interpreted in Saudi Arabia more narrowly than in Yemeni law.122 He cited the Grievance Board Circular as evidence that ‘it is not possible in any case to grant execution of any foreign award that violates any general principle of Sharia’.123 Al-
Jerafi also found that the Saudi courts have distinguished between violations of Sharia principles and violation of Sharia general rules,124 arguing that only Sharia principles are deemed a violation of Saudi public policy.125
Al-Jerafi was primarily concerned with Yemen. In relation to Saudi Arabia, further evidence is needed from Saudi court decisions to show how Saudi judges apply Islamic law more narrowly than Yemen. Various decisions need to be analysed to demonstrate the nation’s legal direction, and the lack of sufficient case studies is a problem in Saudi
Arabia. The present thesis will demonstrate how Saudi court decisions prove that the violation of Sharia general rules has been sufficient to revoke many foreign decisions and international commercial arbitration awards (see Chapter IV, Section D).126
Ruling No. 3375/T/1 of AH–(2004) shows that the Twenty-Fourth Sub-Circuit refused to enforce a foreign judgement because it violated Sharia general rules.127 Thus, Al-
Jerafi’s distinction between Sharia principles and Sharia general rules appears not to be applied in practice, and there is again insufficient evidence available to detail relevant
Sharia issues within the Saudi legal system.
121 Ibid 183–185. 122 Ibid. 123 Ibid 124 Ibid. 125 Ibid 126 For more information, see section (D) of Chapter IV. 127 This case is discussed in section (D) of Chapter IV. 36
2 The Concept of Public Policy is Broader than the Scope of Sharia
The second group of academic studies generally agree that public policy amounts to more than Sharia principles. However, they have differing opinions with regard to
Sharia and other elements in the Saudi concept of public policy. This section will show that, among the existing academic studies, Sharia and other elements of public policy remain controversial issues.
(a) Public policy consists of provisions of Sharia along with any violation of law in the country
One legal study argues that public policy consists of provisions of Sharia along with any violation of law within the country. Abdulaziz Zaid conducted a comparative study of
Saudi Arabia and Australia that recommended reform of the arbitration law of both countries. 128 Touching on various issues in relation to international commercial arbitration, the study compared the old Saudi arbitration law and the regimes that govern arbitration in Australia. The old Saudi arbitration law 129 contains the Saudi concept of public policy. According to Zaid:
It is observed that violation of Islamic law means violation of provisions from the Sunnah and Qur’ān and Ijma’a in some cases. There should be direct texts from these, indicating any violations of Islamic law.130
Thus, Zaid distinguished between Islamic general rules and Islamic fundamental principles. 131 He analysed a variety of cases to show that the court would reject international commercial arbitration awards if there was a conflict with ‘direct’ texts
128 Abdulaziz Zaid, The Recognition and Enforcement of Foreign Commercial Arbitral Awards in Saudi Arabia: Comparative Study with Australia (PhD Thesis, The University of Wollongong, 2014) 289. 129 Ibid 19. 130 Ibid 332. 131 See Chapter IV for more information about the principles of Islamic Sharia. 37
from the Qur’ān, Sunnah and ijma’ (i.e., such texts that are clear and explicit in relation to specific issues).
However, there is a question of ‘indirect texts’ (i.e., texts from the Qur’ān or Sunnah), which may be argued to relate to a particular issue. Such texts also have the power to set aside international commercial arbitration awards on the grounds of violating public policy. This is clear from the Board of Grievances’ provisions on contradiction.132 For example, Zaid cited Ruling No. 189/T/4 of 1427 AH–(2007) to show that fundamental
Islamic principles are the main reason for the revocation of arbitral awards as a public policy defence. However, Ruling No. 3375/T/1 of 1424 AH–(2004), in which the circumstances are similar, proved that even general Islamic rules have the power to revoke a foreign judgement on the grounds of the public policy defence.133
Zaid suggested there are signs of the inconsistent application of Sharia in regard to public policy. He cited Ruling No. 235/T/2 of 1415 AH–(1995) on remedies for a breach of contract to prove that fundamental Islamic principles are the main reason to revoke arbitral awards using a public policy defence. However, Ruling No. 902/T/2 of
1420 AH–(1999) on a similar case showed that even general Islamic rules have the power to revoke a foreign judgement using a public policy defence.134
Drawing on the available provisions of the Saudi Grievances Board, it is clear that public policy is not only confined to the assets of Sharia, but extends to any violation of law within the country.135 Zaid presented various cases to support the proposition that national laws fall under the concept of Saudi public policy.136 However, the present
132 For more details, see section (D) of Chapter IV. 133 Ibid. 134 Ibid. 135 Zaid, above n 128, 295. 136 Ibid 295–299. 38
thesis argues that a main aim of international commercial arbitration is to transfer jurisdiction from national courts and laws, but that practical evidence from examining
Saudi provisions will prove that not every national law is subsumed under the concept of Saudi public policy.137 For example, in Ruling No. Q/1/482 of 1428 AH–(2007), the
Saudi Grievances Board implemented a domestic arbitral award even though it violated
Article 100 of the Company Law.138
The previous rulings demonstrate that conflict with Saudi law does not necessarily imply conflict with the Saudi concept of public policy. However, as discussed in the next chapter, there are fundamental principles of the Saudi legal system considered under the Saudi concept of public policy and not subject to violation.
(b) Public policy consists of the general principles of Sharia together with essential administrative rules
One legal study argues that public policy consists of the general principles of Sharia together with some essential administrative rules. Almuhaidb studied art (V) of the
1958 NYC from the Saudi perspective 139 and discussed issues in relation to the recognition and implementation of international commercial arbitration awards. The study concluded, ‘In Saudi Arabia, public policy pertains to the general principles of
Islamic Sharia and some essential administrative rules’.140 In regard to resolving issues of public policy in Saudi Arabia and contracting states, Almulhaidb observed that:
with regard to the public policy exception provided under Article V 2 (b) of the New York Arbitration Convention, it would seem simplistic to suggest that it be deleted
137 For more details, see section (G) of Chapter III. 138 Ibid. 139 Yasser Almuhaidb, The recognition and enforcement of foreign arbitral awards in Saudi Arabia: an examination of the function of Article (V) of the 1958 New York Convention in the Saudi legal order (PhD Thesis, University of Hull, 2013). 140 Ibid 199. 39
altogether, and the implementation of awards be made mandatory for all member nations.141
Almuhaidb argued that the general principles of Sharia and essential administrative rules are included under the concept of public policy. However, extensive reference to court decisions in the Saudi legal system would be needed to make a precise and accurate case to support this proposition. Such detailed material is not available, and it remains difficult to isolate elements of the Saudi public policy concept. Thus, the issue of public policy requires further investigation.
(c) Public policy consists of Sharia, royal power and public morality
There is one legal study argues that public policy consists of Sharia, royal power and public morality. Baamir examined various issues in arbitration in Saudi Arabia—in particular, arbitration in conventional banking disputes in regard to the old arbitration law.142 Public policy in the Saudi legal system was discussed because it is considered an essential factor in the recognition and implementation of international commercial arbitration awards in conventional banking disputes. However, the Saudi concept of public policy remains elusive.
Baamir regarded public policy in the Saudi legal system as derived from three principal sources: Islamic law, royal power and public morality. However, this was not supported by reference to legislation or decisions from the Saudi Grievances Board.143 While this study shows that Islamic law is the backbone of the Saudi legal system and one of the main reasons for the rejection of arbitral awards, it remains unclear how the judges apply Islamic jurisprudence to revoke arbitral awards. Baamir suggests:
141 Ibid 231. In fact, public policy in the NYC motivated countries around the world to sign it because it gave them power to accept or reject international commercial arbitration awards to maintain their sovereignty and historical values. 142 Abdulrahman Baamir, Saudi law and judicial practice in commercial and banking arbitration (PhD Thesis, Brunel University, 2009). 143 Ibid 180–185. 40
The judges decide on the basis of their personal opinions and are not obliged to adhere to any precedent, even if a decision of the Review Committee of the Diwan exists on a particular matter.144
However, Saudi case law proves that judges cannot make decisions based on their personal opinions in matters that have consensus between Islamic schools. For example, in Ruling No. 102/T/4 of 1424 AH–(2004), the court stated an important principle in regard to the limitations of Saudi judges:
Saying there is a violation from the rule that [is] meant to be implemented [in accordance with] Sharia is not supported by a clear evidence [evidence here means a direct text from the holy Qur’an or the Sunnah or an Ijma’ between Muslim Scholars], because it is not violating legitimately definitive texts and was not contrary to consensus ‘Ijma’, but it decides what Sharia decides.145
However, Baamir assumed that the Grievances Board would refuse to implement arbitral awards or foreign judgement on the grounds of violating public policy when the basis of the contractual relationship between the parties relates to musical songs, which are forbidden in Islam. 146 Yet Ruling No. 189/T/4 of 1427 AH–(2007) from the
Grievances Board showed that Saudi judges allowed such a contract.147
(d) Public policy consists of fundamental principles of the Saudi legal system and
Sharia
One legal study argues that public policy consists of fundamental principles of the
Saudi legal system and Sharia. Alenezi aimed to comprehensively analyse provisions pertaining to the recognition and enforcement of foreign awards under relevant regimes
144 Ibid 186. See also Abdulrahman Yahya Baamir, Shari’a Law in Commercial and Banking Arbitration: Law and Practice in Saudi Arabia (Ashgate Publishing, Ltd., 2013) 112. 145 Cited from Zaid, above n 128, 287. 146 Baamir, above n 142, 176. 147 For more details, see section (D) of Chapter IV. 41
in GCC states.148 He discussed issues relating to international arbitration, including the grounds on which a foreign arbitral award must be rejected in GCC states.
With regard to Sharia, Alenezi cited many references, precedents and legislative examples to conclude that ‘Saudi and other GCC courts affirm that applying a foreign law to an award will not be by itself sufficient to violate public policy unless the award conflicts with the fundamental principles of Sharia’.149 In addition, with regard to other elements of public policy, Alenezi concluded that public policy enables each GCC state
‘to refuse to give effect in its territory to foreign awards that it finds contrary to the fundamental principles of its own legal system’.150 There may be an implication that only fundamental principles of Islamic Sharia together with national laws are considered to lie within the concept of public policy in GCC state legal systems, including the legal system of Saudi Arabia. However, it is not clear how the study reached this conclusion without investigating any Saudi legislation or conducting an in- depth examination of Saudi court decisions.
The Saudi Board of Grievances has made contradictory decisions in cases in which the circumstances are the same or similar. Thus, Alenezi’s view is not accurate where
Sharia is concerned.151 Further, an extrapolation of judicial practice demonstrates that the Saudi judiciary has not created two levels of public policy, whereby domestic public policy would apply domestic considerations and policy at an international level, which is less restrictive in its approach. 152 However, as will be discussed later, General
148 Abdullah Alenezi, An analytical study of recognition and enforcement of foreign arbitral awards in the GCC states (PhD Thesis, University of Stirling, 2010). 149 Ibid 305. 150 Ibid 299. 151 For more details, see section (D) of Chapter IV. 152 For more details, see section (G) of Chapter III. 42
Jurisprudential Principles are considered under the concept of public policy in regard to domestic and international considerations.153
(e) Public policy consists of mandatory rules of Sharia, public morality and royal decree
One legal study argues that public policy consists of the mandatory rules of Sharia, public morality and royal decrees. Al-Shareef aimed to discover whether grounds for rejection under art (V) of the NYC would preclude the enforcement of foreign arbitral awards in Saudi Arabia.154 The study was significant in the theoretical and empirical data it assembled to provide perspectives from different experts on particular issues.
The study compared the Saudi and Egyptian legal systems to reach conclusions and make legal recommendations to improve the Saudi arbitral environment. The study used primary and secondary sources, but because Al-Shareef found judicial decisions difficult to access, his empirical research methodology was based on personal interviews in Saudi Arabia.155 Focusing on obstacles that might hinder international investment contracts in Saudi Arabia, he discussed the Saudi concept of public policy.
Al-Shareef found that Saudi public policy is derived from Sharia rules, public morality and royal decrees (Section 3.3.1), whereby Sharia rules are the mandatory rules of the
Qur’ān and the Sunnah. With respect to royal decrees, Al-Shareef declared that ‘Not all mandatory rules from royal decrees form part of Sharia public policy’.156
These references go to the heart of Al-Shareef’s conclusion on the nature of public policy in Saudi Arabia. However, there is a range of legal issues that may affect the
153 Ibid. For more details, see section (D) of Chapter IV. 154 Naif S. Al-Shareef, Enforcement of foreign arbitral awards in Saudi Arabia: grounds for refusal under article (V) of the New York Convention of 1958 (PhD Thesis, University of Dundee, 2000). 155 Ibid 6–13. 156 Ibid 128. 43
accuracy of his identification of public policy. Sharia includes different schools of thought that conflict with each other through their different interpretations of the main sources for Sharia, namely the Qur’ān and the Sunnah.157 Accordingly, each school tends to believe that it has the most appropriate legal interpretation of Islam that complies with the key sources.
It is clear from the study that being in conflict with Sharia is sufficient to revoke arbitration awards. However, if one states that an award will be revoked if it violates the mandatory rules of the Qur’ān and Sunnah, yet at the same time cannot define mandatory rules in the Saudi legal system, this does not provide accurate or helpful guidance. Indeed, it is important to examine judicial interpretations in different cases in which foreign judgements or arbitral awards have been revoked on the grounds of violation of the mandatory rules of Sharia. Unfortunately, perhaps because of difficulty in accessing Saudi legal provisions or the lack of official publication of court provisions, Al-Shareef did not compile various judicial decisions to show the effects of the mandatory rules of Sharia on investment contracts.
With respect to other elements of public policy, in Saudi Arabia, all national laws are issued by royal decree. It is important for arbitrators, investors and stakeholders to be able to differentiate in advance whether the royal decrees concern public policy. Judicial interpretations differentiating royal decrees are necessary if this is to occur. Al-Shareef noted that ‘every public policy rule is mandatory, but not every mandatory rule forms part of public policy’.158 If this is correct, stakeholders need to be able to find out in advance what the public policy rules are.
157 For more details, see section (C3) of Chapter IV. 158 Al-Shareef, above n 154, 129.
44
Al-Shareef observed that Islamic law, royal decrees and public morality have the capacity to revoke arbitral awards on the grounds of public policy. But his argument would benefit from illustrations which demonstrate how judges apply these elements to revoke such awards. Al-Shareef highlighted some of the main themes of the Saudi concept of public policy, but the specific rules remain elusive.
(f) Public policy consists of Sharia rules, laws of Saudi Arabia and public interests
One legal study argues that public policy consists of Sharia rules, laws of Saudi Arabia and public interests. Alassaf and Zeller critically analysed legal procedures in the 1983 and 1985 Saudi arbitration regulations. 159 Discussing international commercial arbitration issues, the article concluded that Saudi public policy is derived from the laws of Saudi Arabia, including Sharia rules and public interest:
The problem is that awards challenged on public interest grounds would be subject to the personal understanding of Saudi judges. Personal opinion as mentioned above could be different from judge to judge, place to place, and from time to time. As a result, identifying particular or individual points that would violate public policy is a risky process.160
The study analysed Saudi Arabia’s Basic Law of Governance along with Sharia principles to outline the concept of public policy. However, judicial decisions should be one of the main sources for the interpretation of legislation and legal direction. The study did not cite direct texts from Saudi courts’ decisions to support their propositions on public policy and the role of Saudi judges. The study showed that the personal insights and understanding of a Saudi judge play a significant role in applying the concept of public policy without limitations. However, extrapolation of the judicial practice demonstrates that there are limitations to the Saudi concept of public policy,
159 Abdullah Alassaf and Bruno Zeller, ‘Legal Procedures of Saudi Arbitration Regulations 1983 and 1985’ (2010) 7 Macquarie Journal of Business Law 187. 160 Ibid. 45
and the personal understanding of a Saudi judge is not permitted in certain Islamic matters161 or in General Jurisprudential Principles.162
(g) Public policy consists of Sharia and the statutes
One legal study argues that public policy consists of Sharia and the statutes. Sayen discussed many issues in relation to the old arbitration law, including the public policy issue, noting the suggestion of one commentator that ‘foreign legal principles might be applied as long as they are not contrary to Saudi public policy as expressed in provisions of the Sharia and the statutes’.163 This is a neat formulation of the public policy issue. However, again, this study did not provide any Saudi court decisions or direct texts from Saudi regulations to show how Saudi judges interpret Islamic law and statutes in connection with the acceptance or revocation of arbitral awards.
Islamic law is an ocean of legal debates. One might ask: Which Islamic viewpoints are acceptable as public policy in the Saudi legal system? Further, given that there are thousands of statutes under the surface of the Saudi legal system, which statutes are considered under the public policy concept? And which statutes contain definitions of public policy?
3 Public Policy is Only a ‘Safe Harbour’
A third group of studies have a different opinion regarding the Saudi concept of public policy. In this group’s published legal articles, although Islamic sources have been consulted and the Saudi legal system is a target of study, the conclusions lack support, undoubtedly because of a lack of accessible data and the complexity of the legal system.
161 For more details, see section (C2) of Chapter IV (Ijma ‘consensus’). 162 For more details, see section (G) of Chapter III. 163 George Sayen, ‘Arbitration, conciliation, and the Islamic legal tradition in Saudi Arabia’ (2003) 24 University of Pennsylvania Journal of International Economic Law 12. 46
For example, Roy suggested that Saudi Arabia should distinguish between domestic and international arbitral awards because:
Article V(2) (b) of the New York Convention provides a safe harbour wherein Saudi Arabia does not have to recognize a non-Saudi Arabian arbitral award that is contrary to its public policy.164
Roy believed that Saudi Arabia rejects international commercial arbitration awards on the basis of public policy because the awards come from foreign countries in general and Western countries in particular:
Saudi Arabia’s traditional rejection of Western international law is partially based on its belief that Western countries adopt treaties and international conventions to benefit their own self- interest and not to aid other nations or peoples.165
Roy appeared to find the ambiguity of the Saudi concept of public policy difficult to fit into a coherent policy. Wakim also noted that some countries, including Saudi Arabia, remain unclear about the public policy standards that will be invoked upon review during enforcement proceedings.166 He also noted that Saudi Arabia has been described as ‘traditionally hostile to the recognition and enforcement of non-domestic arbitral awards’, finding such awards contrary to Saudi Arabian law and public policy.167
However, in case No. 623/1/Q/1416 H (1996), for example, the Board of Grievances refused to enforce a portion of an Egyptian judgement resulting from the Arab League
Convention of 1952 because it involved usury, which is forbidden in Islam. In case No.
3045/2/Q/1328 H (2007), the Board of Grievances also refused to enforce a portion of a legal contract that involved usury between domestic parties. These findings were consistent and even predictable, and they showed that it is not a matter of parties being
164 Kristin T. Roy, ‘The New York Convention and Saudi Arabia: Can a Country Use the Public Policy Defense to Refuse Enforcement of Non-Domestic Arbitral Awards?’ (1994) 18 Fordham International Law Journal 953. 165 Ibid 950. 166 Mark Wakim, ‘Public Policy Concerns Regarding Enforcement of Foreign International Arbitral Awards in the Middle East’ (2008) 21(1) New York International Law Review 44. 167 Ibid 27. 47
‘foreigners’, but a matter of legal perspective, here involving Sharia. As discussed in the following chapters, Saudi judicial practices are indeed more liberal in relation to international considerations than domestic ones, and many major legal issues lie behind court decisions. In the legal ocean of Saudi Arabia, still waters run deep.
4 Academic Studies Are Liable to Make Specific Findings Even When Their Definition of Public Policy Is Ambiguous or Non-Existent
The fourth group of studies has different opinions regarding the Saudi concept of public policy. In the published legal articles, public policy is ‘ambiguous’, and this would virtually stymie the implementation of international commercial arbitration awards.
On this point, Childs stated that, ‘In practice, it appears to be almost impossible to obtain the enforcement of a foreign award in Saudi Arabia’. 168 This is an understandable, if somewhat exaggerated, statement, but Childs noted that ‘the Board’s decisions are not published’.169 This raises the question of whether other legal research methods to collect data—for example, an empirical study based on interviews or surveys—could be used.
A legal study by Zegers and Elzorkany discussed many issues in relation to the new arbitration law and reached a similar conclusion:
In practice…there is no certainty as to what constitutes a ground for refusal of enforcement, and often decisions are arbitrary. As a result, refusals to enforce foreign arbitral awards are the norm because public policy in kingdom of Saudi Arabia covers a vast area of practice.170
168 Thomas Childs, ‘Egypt, Syria and Saudi Arabia: Enforcement of Foreign Arbitral Awards in Egypt, Syria and Saudi Arabia’ Arbitration Newsletter, September 2010, 71–72. 169 Ibid. 170 Jean Zegers and Omar Elzorkany, ‘Kingdom of Saudi Arabia’ (August 2014) International Bar Association 8–9. 48
Thus, while Zegers and Elzorkany discussed many important areas of the new arbitration law, they did not deal effectively with the issue of public policy. Their main conclusion was that public policy is an ‘ambiguous’ concept that still requires identification in the Saudi legal system.171 Given that their conclusions were reached without solid legal evidence, their underlying assumptions require further investigation, and this is the focus of the present study.
C Conclusion
The studies discussed in this chapter are the most relevant studies on the issue of public policy in the Saudi legal system. However, other studies have had similar outcomes, facing the same legal issues affecting their conclusions.172 The discussion above shows that nearly all authors agree that Sharia is the backbone of public policy in the Saudi legal system. However, some authors also include statutory law, public morality, royal decrees and public interests. Detailed analysis of public policy requires precise analysis of Sharia as well as various elements of public policy.
171 Ibid. 172 For more information on the topic of this thesis, see Nancy B. Turck, 'Arbitration in Saudi Arabia' (1990) 6(3) Arbitration International 281; Mohammed I. E. Aleisa, A Critical Analysis of the Legal Problems Associated with Recognition and Enforcement of Arbitral Awards in Saudi Arabia: Will the New Saudi Arbitration Law (2012) Resolve the Main Legal Problems? (PhD Thesis, University of Essex, 2016) 193–199. See also Abdulaziz Aljohar, Finality of Arbitral Awards: Comparing Approaches in Sharia Law and International Law (PhD Thesis, University of Essex, 2016); Mohammad M. Althabity, Enforceability of Arbitral Awards Containing Interest: A Comparative Study between Sharia Law and Positive Laws (PhD Thesis, University of Stirling, 2016); Arthur Gemmell, ‘Commercial Arbitration in the Islamic Middle East’ (2006) 5 Santa Clara Journal of International Law 189; Radwa S. Elsaman, ‘Factors to be Considered Before Arbitrating in the Arab Middle East: Examples of Religious and Legislative Constraints’ (2011) 1 International Commercial Arbitration Brief 8; ibid; Saad Badah, ‘The Enforcement of Foreign Arbitral Awards in the GCC Countries: Focus on Kuwait’ (2014) 3 International Law Research 31; Yuliya Zeynalova, ‘The Law on Recognition and Enforcement of Foreign Judgments: Is It Broken and How Do We Fix It?’ (2013) 31 Berkeley Journal of International Law 198; Jean Zegers, ‘Recognition and Enforcement of Foreign Arbitral Awards in Saudi Arabia’ (2014) 1 BCDR International Arbitration Review 81; Saud Al-Ammari and A. Timothy Martin, ‘Arbitration in the Kingdom of Saudi Arabia’ (2014) 30(2) Arbitration International 390; Essam Al Tamimi, ‘Enforcement of Foreign Arbitration Awards in the Middle East’ (2014) 1 BCDR International Arbitration Review 98; Torki AlShubaiki, The Saudi Arabian Arbitration Law in the International Business Community: A Saudi Perspective (PhD Thesis, University of London, 2003); Mohammed Al Sewilem, The Legal Framework for Foreign Direct Investment in the Kingdom of Saudi Arabia: Theory and Practice (PhD Thesis, University of London, 2012) 225–233; Almas Khan, ‘The Interaction between Shariah and International Law in Arbitration’ (2005) 6 Chicago Journal of International Law 791–802. 49
More precisely, the studies reached different conclusions regarding Islamic law. For example, some concluded that Saudi judges follow the Hanbali school only, or that some follow only Islamic fundamental principles, while others believe that Islamic law is subject to the personal convictions of Saudi judges.
In relation to other elements of public policy, studies have arrived at different conclusions—for example, only essential administrative rules are under public policy; any statutory law comes under the public policy concept; and public policy covers only fundamental national principles. Others argued that Saudi Arabia rejects international commercial arbitration awards using a public policy defence that essentially relates to the awards coming from foreign countries in general and Western countries in particular.
The analysis of studies in this chapter found controversies surrounding Saudi public policy and a gap between what is generally understood about Saudi public policy and full and appropriate elucidation of public policy in the context of handling important issues in international commercial arbitration. The present study will address this legal gap by conducting in-depth research into the Saudi concept of public policy in the chapters that follow.
50
CHAPTER III: GENERAL JURISPRUDENTIAL PRINCIPLES: ONE SIDE OF THE
PUBLIC POLICY COIN
A Introduction
This chapter argues that in the Saudi legal system, there are fundamental principles that largely derive from national laws and normative social requirements and have been considered under the Saudi concept of public policy. These fundamental principles are
General Jurisprudential Principles, and international commercial arbitration must comply with them. Metaphorically, Saudi public policy may be seen as a two-sided coin, with General Jurisprudential Principles representing one side of this coin, and
Sharia on the other side. This thesis argues both are necessary to understand the Saudi principle of public policy. This chapter explores this concept.
The chapter is divided into separate themes, each theme with its own goal, which will form the conclusions of the chapter and serve as a foundation for Chapter IV.
Sections (A–D) act as an introduction to the themes and establish a platform to identify the legal issues and major laws that govern arbitration in Saudi Arabia to lay the foundation for an investigation into the concept of public policy.
Section (E) sets out to clarify the meaning of the concept of public policy and explains why public policy is different across legal systems. It also explains the general concept of public policy across the world’s legal systems. The theme concludes that at an international level, public policy is a vague concept and not susceptible to specific definition. It is capable of dynamic change and is acted upon by many factors from time to time and place to place; therefore, because there is no agreement on the concept at the
51
international level, Saudi Arabia and other countries have a legal right to their own definition of public policy.
Section (F) discusses the significance of domestic versus international public policy and introduces the problematic concept of transnational public policy It explains the kinds of public policy across world legal systems and justifies why this study suggests that
Saudi Arabia should adopt the concept of international public policy rather than domestic and transnational public policy, as discussed in Chapter V.
The last and the most significant part of this chapter (Section (G)) recalls the metaphor of the two-sided coin that represents the Saudi concept of public policy. This theme comprises the heart of this chapter and confines the discussion to General
Jurisprudential Principles. The other side of the Saudi public policy coin is Islamic law,
Sharia—issues pertaining to Sharia will be discussed in Chapter IV.
B Overview of the Saudi Legal System
Public policy is a term of art that represents principles that depend on the fundamental pillars on which social laws are based.173 To understand and demonstrate the concept of public policy in a legal system, it is important to identify these pillars. Thus, this chapter investigates the fundamental pillars of the Saudi legal system to explore the Saudi concept of public policy.
The Saudi legal system depends on two fundamental pillars: Sharia and statutory law.
However, according to the Basic Law of Governance adopted by royal decree in 1992, a statutory law will not be valid if it conflicts with Sharia. Further, the king must comply
173 For more details, see section (E) of this chapter. 52
with the principles of Islam as the Constitution of Saudi Arabia is formed from the
Qur’ān and the Sunnah, which record the teachings of the Prophet Muhammad.174
Art 1 of the Constitution, clearly prescribing the ranking of Islamic law, Sharia, over statutory law in the Saudi legal system, declares:
The Kingdom of Saudi Arabia is a sovereign Arab Islamic State. Its religion is Islam. Its constitution is formed from the Book of Almighty Allah, the Holy Qur'an, and the Sunnah (Traditions) of the Prophet, peace be upon him. 175 The language of the Kingdom is Arabic. The capital is the city of Riyadh.
Art 7 identifies the sources of Saudi laws and affirms that Sharia is at the summit of the legal system, above all statutory laws:
The Government of the Kingdom of Saudi Arabia derives its authority from the Book of Allah and the Sunna of the Prophet, peace be upon him, which are the ultimate sources of reference for this law and the other laws of the state.
Art 6 explicitly ranks Sharia above the power of the king and states that Sharia principles are the main pillars of bay’ah legitimacy.176 As government applies these principles, bay’ah—allegiance to the ruler by the ruled—is valid and obligatory. Art 6 states:
In support of the Book of Allah and the Sunnah of His Messenger, may peace be upon him, citizens shall pledge allegiance (bay’ah) to the King, swearing loyalty whether in times of ease or in times of hardship.
These statements of the Constitution explain why Saudi Arabia signs international conventions and treaties with reservation, generally stating, ‘The Government of Saudi
Arabia accedes with respect to all such articles as are not in conflict with the provisions
174 Royal Decree No. (A/90) dated 27/8/1412 AH–(2/3/1992). 175 In this and the following quotation, ‘peace be upon him’ is substituted for ‘(PBUH)’ in the published text. 176 According to the Oxford Dictionary of Islam, the ‘Bayah’ states: ‘[O]ath of allegiance to a leader. Unwritten pact given on behalf of the subjects by leading members of the tribe with the understanding that, as long as the leader abides by certain responsibilities toward his subjects, they are to maintain their allegiance to him. Representatives usually include religious scholars and political leaders. Bayah is still practiced in countries such as Saudi Arabia and Morocco. Like other concepts of classical tribal Islam, bayah is experiencing change as traditional tribal communities transform themselves into modern administrative states.’ 53
of Islamic law’.177 They also show why the Saudi regime has consistently required international commercial arbitration awards to comply with Sharia principles.178
The above articles and actions of the Saudi government rank Islamic law so highly because of relevant texts of Islamic law; for example, the Qur’ān states, ‘Those who do not judge by the laws of God are infidels’,179 and ‘Judgment on whatever matters where you differ rests with Allah. Such is Allah, my Lord; in Him I have put all my trust and to Him I always turn in devotion’.180 Conversely, laws that do not conflict with the laws of Allah may be permitted. Thus, the government may apply any law (whether drafted domestically or internationally) provided that there is no conflict with Islamic law.
Further, constitutionally, an individual has the right to challenge government laws and revoke commercial contracts, or any other legal practices, if that individual can prove that the action is against Islamic principles.181
In relation to second pillar of law in the Saudi legal system, Saudi Arabia is an absolute monarchy. Thus, these sources of law come directly from the king, and the king alone has legislative power; however, the king can delegate part of his legislative power to the executive government. Art 55 of the basic law states that ‘The King shall rule the nation according to Sharia. He shall also supervise the implementation of Sharia, the general policy of the State, and the defence and protection of the country’.
177 For more information about this issue, see Raj Bhala, ‘The Intersection of Islam and the WTO: Three Sharī’a Issues in the WTO Accession of Saudi Arabia’ (2003) 1(21) Law in Context 152; see also Human Rights Watch, Saudi Arabia: Follow U.N. Call to End Juvenile Death Penalty (January 2006)
In the Saudi legal system, the king has a number of governmental institutions that can assist in the drafting of legislation such as the Shura Council of Ministers (that is, the
Saudi parliament), the Council of the Senior Ulema (the Council of Senior Scholars), the Research Administration and the Office of the Mufti (Islamic Legal Experts). All these institutions are required to provide solutions from their expertise, but Art 44 states that:
The Authorities of the State consist of the Judicial Authority, the Executive Authority, and the Regulatory Authority. These Authorities will cooperate in the performance of their functions, according to this Law or other laws. The King is the ultimate arbiter for these Authorities.
Within the two main sources of the Saudi legal system, Islamic law and statutory law, there are various fundamental principles (discussed in this chapter and the next) that are considered to be essential pillars of the Saudi concept of public policy.
C The New Arbitration Law and the Issue of Implementation
The new Saudi arbitration law clearly shows the reasons for rejection of any arbitration awards,182 with public policy the main reason. Public policy includes Sharia,183 yet as well as being the most significant reason, with the power to set aside international commercial arbitration awards, public policy is also the most ambiguous reason.184
However, it is important to note that recognition of foreign arbitral awards is an entirely different matter from implementation:185 if an award has been implemented, this implies that it has been recognised, but if an award is recognised, this does not necessarily mean
182 Art 50 of the new Saudi Arbitration Law highlighted the reasons for rejecting the implementation of international commercial arbitration awards. 183 See Art 50 (2) of the new Saudi Arbitration Law. 184 For more information, see Chapter IV regarding the issue of Islamic law. 185 In regard to the difference between recognising and enforcing foreign awards, see Mark Dallal v Bank Mellat [1986] 2 W.L.R. 745. 55
that it will be implemented.186 For example, the national jurisdiction could recognise an international commercial arbitration award, but the courts responsible for its implementation have the right to refuse to enforce the award, for various reasons. One may be that it violates public policy.187 Recognition implies acceptance that the arbitral decision is correct and binding on the parties in conflict,188 but it is the implementation of the award that gives effect to its right to enforcement, even, if necessary, by force. In exploring one side of the Saudi public policy coin, this chapter identifies legal issues in implementation of international commercial arbitration awards.
D Major Laws Governing Arbitration in Saudi Arabia
Arbitration has been significant for Saudi Arabia in national and international contexts, and during its history, the kingdom has signed a number of treaties allowing arbitration to settle legal disputes. The kingdom itself has also promulgated two national laws governing arbitration in various contexts. Set out below are the major laws governing the arbitration process issued throughout the history of Saudi Arabia.
The first significant law governing international arbitration was issued in 1952 by the
League of Arab States as the Convention on the Enforcement of Judgments and Arbitral
Awards.189 This convention focused on the implementation of judicial decisions and arbitration awards issued among Arab countries. Art 2 (C) of this convention gives any contracting state the right to reject foreign judgments and foreign arbitration awards if they conflict with public policy. In this article, the Arab countries agreed that every
186 Ibid. 187 Richard Garnett and Michael Pryles, ‘Recognition and Enforcement of Foreign Awards under the New York Convention in Australia and New Zealand’ (2008) 25(6) Journal of International Arbitration 899. See also Michael Charles Pryles and Michael J. Moser, Asian Leading Arbitrators’ Guide to International Arbitration (Juris Publishing, Inc., 2007) 407. 188 Julian D M Lew, Loukas A Mistelis and Stefan Kröll, Comparative International Commercial Arbitration (Kluwer Law International, 2003) 690. 189 Convention of the Arab League on the Enforcement of Judgments and Arbitral Awards, 14 September 1952 (entered into force in 10 November 1952). 56
contracting state has the right to interpret public policy according to its particular circumstances and legal vision.
Saudi Arabia issued its first law of arbitration in 1983.190 In arts 1 and 39, this law required arbitration awards to comply with public policy, including Sharia. In 1983,
Saudi Arabia signed the Arab Agreement for Judicial Cooperation in Riyadh,191 which essentially replaced the 1952 Arab League Convention. Signed by 21 members of the
League of Arab States, the Agreement aimed to promote cooperation between
Ministries of Justice of the contracting states. Art 37 of the Agreement dealt with implementation of arbitration awards and gave the contracting states the right to reject awards for reasons including conflict with Sharia, issues of public order or rules of conduct as requested by a party.
For Saudi Arabia, there was still an important step to achieve with regard to international recognition of awards, and in 1994, Saudi Arabia signed the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which had been adopted by the United Nations in New York City in 1958 and is widely considered the definitive instrument for international arbitration. The NYC requires courts in member states to recognise and enforce arbitration awards made in other member states, but at this point, a crucial issue must be noted: Art V(2)(b) enables the court of a contracting state to refuse recognition and enforcement of an award when that court finds that such recognition or enforcement would be contrary to public policy.
In 1995, Saudi Arabia signed the Convention for the Execution of Judgments,
Delegations and Judicial Notifications in the Gulf Cooperation Council of Arab
190 This law was issued on 12/7/1403 AH 24 April 1983, Umm Al-Qura Gazette No 3292, 22/8/1403 AH 1983. 191 Convention of the Arab League on Judicial Cooperation between the League of Arab States, opened for signature 6 April 1983 (entered into force October 1985) (‘Riyadh Convention’). 57
Countries.192 Art 2 of this protocol article states that GCC member nations have the right to oppose the implementation in whole or in part of a judgement or arbitration award that violates Islamic law, the constitution or public order in the ‘Recipient
State’.193
Saudi Arabian courts’ right to deny the implementation of awards that conflict with public policy was further validated in Art 11(f) of the United Nations Convention on
Jurisdictional Immunities of States and Their Property,194 which Saudi Arabia signed in
2010.
Finally, in 2012, Saudi Arabia issued a new arbitration law that replaced the old arbitration law of 1983. The new law was an important step towards the reformation of arbitration environment and based on the United Nations Commission on International
Trade Law (UNCITRAL)195 Model Law on International Commercial Arbitration, with amendments as adopted in 2006.196 As we will clarify later in this and the next chapter, the law requires international commercial arbitration awards to comply with the Saudi concept of public policy and Sharia. However, these requirements remain ambiguous, particularly because public policy is construed differently under Saudi legal vision.
Domestic laws and international conventions are the main sources of law underpinning arbitration awards, but Saudi Arabia has also signed other accords where arbitration has been applied to settle commercial disputes. For instance, Saudi Arabia has signed conventions of the International Centre for Settlement of Investment Disputes (ICSID),
192 Convention for the Execution of Judgments, Delegations and Judicial Notifications, opened for signature 10April 1994 (entered into force 4 December 1995). 193 For more details, see Essam Al Tamimi, Practitioner’s Guide to Arbitration in the Middle East and North Africa, (Juris Publishing LLC, 2009) 11. 194 United Nations Convention on Jurisdictional Immunities of States and Their Property, opened for signature 17 January1995. 195 Al-Ammari and Martin, above n 172, 387. 196 Ibid; and see (UNCITRAL) Model Law on International Commercial Arbitration at
the Islamic Corporation for the Development of the Private Sector (ICD), the World
Trade Organization Agreements and the Convention establishing the Inter-Arab
Investment Guarantee Corporation (1971).197 In all of the domestic, transnational and international dealings where Saudi Arabia has been a party, comprising laws, conventions and all other treaties, public policy has been a prime consideration.
E Factors That Influence Public Policy Across Legal Systems
Having identified references to public policy in the international instruments relevant to
Saudi Arabia, the next step in resolving issues of public policy in Saudi Arabia is to consider the concept of public policy across legal systems in general. The concept of public policy has been devised to enshrine ‘fundamental principles of society’.198 The culture of a nation is shaped gradually over centuries to represent the totality of its values and standards, and varying political, economic, religious, legal and social factors play a role in developing the concept of the public policy of a state.199 Thus, the public policy of a state is a dynamic concept corresponding with its legal system and social development.
Scholars and judges tend to perceive public policy, whether in theory or practice, as a vague concept that is not susceptible to definition.200 English Judge Burrough saw it as
‘a very unruly horse, and when once you get astride it you never know where it will carry you. It may lead you from sound law’. He added that public policy is never
197 For commercial arbitration in all of the treaties signed by Saudi Arabia between 1923 and 2014, see Abdulaziz Abdullah Al-Slim, The Legal Atlas for the Commercial Arbitration in the Kingdom of Saudi Arabia During Ninety Five Years (Al Humaidhi press, 2014) 12–14. [Text in Arabic]. 198 Thomas G. Guedj, ‘The theory of the lois de police, a functional trend in Continental private international law—A comparative analysis with modern American theories’ (1991) 39(4) American Journal of Comparative Law 661. See also Haoqian Chen, Hailin Bao and Tianyi Zhang, ‘Piercing the veil of public policy in the recognition and enforcement of foreign-related awards in China’ (2016) 7 Beijing Law Review 23. See also Case 30/77, Regina v. Pierre Bouchereau [1977] ECR, 1999. 199 Karl Heinz Bockstiegel, ‘Public Policy and Arbitrability’ in Comparative Arbitration Practice and Public Policy in Arbitration (Kluwer Law International, 1986) 177–179. 200 Geoffrey Chevalier Cheshire, ‘Private international law’ (1987) 51 Law Quarterly Review 131. 59
argued, except ‘when other points fail’.201 However, in one functional definition, public policy has been said to be a ‘mechanism that corrects the choice of law designation for substantive reasons, namely the defence of the forum’s fundamental legal principles and moral values’.202
Public policy is subject to change, but it is very difficult to point to all the reasons that might help change the concept of public policy in a particular state. The phenomenon differs between states, and it is virtually impossible to agree on a unified international concept of public policy.203
History also affects the public policy concept. Before World War II, for example, the concept of hard power was dominant, 204 with dominant concepts of empire and colonies.205 The vast losses of human life in World War II206 led the nations of the world to reconsider their ways of thinking; among them, the concept of public policy as it applied to legal systems. For example, the adoption of the Universal Declaration of
201 Richardson v Mellish [1824] 2 Bligh 229, 242. 202 Guedj, above n 198, 679. 203 An important study that shows the contested concept of public policy across legal systems was conducted by the International Law Association. The study concluded that ‘fifty years on, public policy remains the most significant aspect of the Convention in respect of which such discrepancies might still exist’. For more information, see Pierre Mayer and Audley Sheppard, ‘Final Report on Public Policy as a Bar to Enforcement of International Arbitral Awards’ (Paper presented at the International Law Association New Delhi Conference Committee on International Commercial Arbitration, New Delhi, 2002), 5–6. 204 For more information about the forms of power and the significant difference between them, see Colin S. Gray, Hard Power and Soft Power: The utility of military force as an instrument of policy in the 21st century (Lulu. com, 2011) 28. 205 Ibid. 206 The National WWII Museum, WWII by the Numbers,
Human Rights by many countries207 has meant emphasis on human rights in public policy.208
Events have a flow-on effect in many areas of human life in general and public policy in particular. Similarly, public policy in various nations has changed because of developments in ideology and ways of thinking. For example, the publication of The
Communist Manifesto by Karl Marx and Friedrich Engels in 1845 led eventually to the development of socialism and, in 1917, the Russian Revolution. The rise of the Soviet
Union followed, along with communist parties in various countries, including China.209
Socialism and Marxist ideology have necessarily affected the nature of public policy in relevant nations. 210 With the dissolution of the Soviet Union, capitalist economic policies have affected governments in Russia and East Europe. However, China, Cuba,
Laos, North Korea and Vietnam 211 remain under communist governments. 212 The economic and political nature of public policy in various nations of the world are accordingly shaped by their history, ideology and society.
From medieval times, religion has been a key element in the identity of European nations,213 and religion is still an important part of the public policy concept in some nations. In England, the ecclesiastical courts under their ex officio jurisdiction dealt with
207 United Nations, Yearbook of the United Nations,
many criminal offences214 as well as matters such as adultery and usury, as well as jurisdiction over deceased estates.215
The important role of the Church in England is reflected negatively in other nations of
Europe.216 For example, the bloody Thirty Years’ War between Protestants and Roman
Catholics is but one example of how a religious perspective is required in following the history of Europe.217 After religious wars in the 17th century following the Protestant
Reformation, religious conflict and the suffering that it caused provoked serious thought. Thinkers such as Thomas Hobbes and John Locke proposed the separation of church and state, 218 and this secular theory changed the concept of public policy dramatically.219 Currently, secularism is one of the fundamental principles of public policy in the constitutions of many European legal systems.220
However, the success of secularism in Europe has not necessarily eliminated religious influence entirely. For example, the House of Lords, which can influence decisions relating to the entire UK, has seats for two Archbishops and 24 senior diocesan Bishops of the Church of England.221 In Norway, the government is not a separate legal entity from the Church of Norway.222 The influence of religion and secularism illustrate the
214 John Hamilton Baker, The Oxford History of the Laws of England: 1483–1558 (Oxford University Press on Demand, 2003) 511–593. 215 Ibid 293. 216 For further discussion on the role of the Church of England in European history, see Clifford R. Backman, The worlds of medieval Europe (Oxford University Press 2nd ed. ed, 2009). 217 For more discussion on the Thirty Years’ War, see Geoffrey Parker and Simon Adams, The Thirty Years’ War (Psychology Press, 1997). 218 For more discussion on the social contract theory, see Patrick Riley, Will and political legitimacy: A critical exposition of social contract theory in Hobbes, Locke, Rousseau, Kant, and Hegel (Cambridge, Mass: Harvard University Press 1982). 219 Duncan B. Forrester, Christian justice and public policy (Cambridge University Press, 1997) 13–18. 220 For example, see Art 1 of France consultation, Art 44.2.1 of the Constitution of Ireland, Art 2 of the Charter of Fundamental, Rights and Basic Freedoms of Czech Republic, Art E (1) Constitution of Hungary and Art 20 of Belgium Constitution. 221 Church of England, The Church in Parliament,
point that the concept of public policy in various legal systems can be traced through the history of the particular nation concerned.
A similar story is true in the Middle East but the scenarios differ. After the death of the
Prophet Muhammad,223 the Companions of the Prophet continued to establish Islamic societies in the Arabian Peninsula and surrounding areas.224 The philosophy of Islam was central in uniting the Arabian tribes and spreading Islam to other civilisations.225
The Islamic philosophy spread across the entire Middle East and different Islamic empires across Asia and Europe.226 Converts to Islam from non-Arab countries also played a significant role in spreading the Islamic faith, as can be seen from the fact that after the decline of the last Arab empire, the Abassid Caliphate, 227 other non-Arab empires spread Islam, notably the Seljuk, Mughal and Ottoman Empires.228 Islam is not just a religion but a way of life, and Islamic law in such all-Islamic empires was a fundamental part of the concept of public policy; Islamic law was also the principal philosophy assisting the government of the state.
The Sunni doctrine was the official doctrine of the Islamic empires, and from the
Abbasid Empire until the end of the Ottoman Empire, the Hanafi school was dominant
223 According to Oxford Islamic Studies Online, ‘Prophet Muhammad’ is: [M]uslims believe that Muhammad (ca. 570–632) was God’s Messenger sent to proclaim in Arabic the same revelation that had been proclaimed by earlier Jewish and Christian prophets, first to the Arabs and then to all people. The Quran provides some historical information about Muhammad’s life, but fuller accounts are available in sirah (traditional biographies), hadith (reports of Muhammad’s sayings and deeds), and general histories. 224 Fuad Jabali, The companions of the prophet: a study of geographical distribution and political alignments (Brill Academic Pub, 2003). 225 Ameer Ali Syed, A short history of the Saracens (Islamic Book Service, 1993) 5–55. 226 Ibid. 227 For more information on the Abbasid empire, see Peter M. Holt, ‘Some observations on the Abbāsid caliphate of Cairo’ (1984) 47(03) Bulletin of the School of Oriental and African Studies 501. 228 For more information on Islamic empires, see John L. Esposito, The Oxford History of Islam (Oxford University Press, 1999). 63
among other Islamic doctrines.229 Sunni Muslims comprise the majority of Muslims in the world, and the Hanafi school of jurisprudence, fiqh, is considered the official, most popular school in the Middle East. It is a fundamental aspect of the concept of public policy in many contemporary Middle Eastern countries.230
However, Islamic historical literature attests to conflict between Muslims, either within the same Islamic sect or with other Islamic sects, and this conflict has significantly affected the concept of public policy up to the present. The bloody conflict between Ali ibn Abi Talib and Muawiyah within the same Muslim sect hundreds of years ago was a major event leading to the emergence of various doctrines, including the two major doctrines of Sunni and Shia.231
The case of Iran demonstrates how history has influenced the concept of public policy.
Iran did not officially follow Shi’a doctrine until the country was governed by the
Safavid dynasty in the 16th–18th centuries, at one of the crucial turning points in
Muslim history. In the context of the historical conflict between Ali and Muawiyah, the
Safavid dynasty established 12 schools of Shi’a Islam as the official religion of their empire,232 and to the present time, this decision has left its mark through the spread of
Shi’a Islam in Iran as well as in major parts of the Caucasus, Anatolia and
Mesopotamia.233 The political and legal system of the Islamic Republic of Iran depends
229 Christie S. Warren, The Hanafi School, Oxford Bibliographies, available at
heavily on Shi’a philosophy, especially since after the Iranian Revolution in 1979234
Shi’a was declared to be essential to the concept of public policy.235
A comparison of the histories of the Republic of Turkey and Saudi Arabia illustrates the part played by the distinctive histories of each of these countries in imprinting their concepts of public policy. In principle, Turkey was the heart of the Ottoman Empire, and Islamic law held the empire together for centuries.236 However, on the collapse of the Ottoman Empire after the First World War and the occupation of some parts of the country by the Allied Powers, Mustafa Kemal led the Turkish national movement to expel the occupying armies.237
The Treaty of Lausanne of 24 July 1923 was a turning point in Turkish history, and led to international recognition of the Republic of Turkey as the successor state to the
Ottoman Empire,238 with Mustafa Kemal as the first President. According to the second article of Characteristics of the Republic, secularism became the heart of Turkey’s public policy, rather than Islamic law.239 Analysis of the historical background and circumstances of the Republic of Turkey is therefore essential to understanding its current concept of public policy.
234 It is important to note that secularism ceased in Iran as state policy after Reza Shah was forcibly deposed and sent into exile. For further discussion, see Ariela Keysar and Barry Alexander Kosmin, Secularism & Secularity: Contemporary International Perspectives (Institute for the Study of Secularism in Society and Culture, 2007) 139. See also Eric Inafuku, ‘How Does the 1979 Iranian Revolution Affect Current Iranian Fundamentalism and International Politics?’ (2010) 5(3) Journal of Applied Security Research 414. 235 The Iranian constitution stated in the first chapter of the second Art (5) that ‘continuous leadership (imamah) and perpetual guidance, and its fundamental role in ensuring the uninterrupted process of the revolution of Islam’. The Oxford Islamic studies online explains the concept of imamah as ‘The Imami or Twelver Shii understanding of the imamate is based on the need for an infallible leader and authoritative teacher to guide humanity to prosperous life. Consequently, disregarding and disobeying a rightfully appointed imam is the equivalent of disobeying Muhammad for Shiis’. 236 For more theoretical discussion about the role of Islamic law in Muslim communities, see Rainer Grote and R. Tilmann, Constitutionalism in Islamic Countries: Between Upheaval and Continuity (Oxford University Press, 2012). 237 Malcolm Edward Yapp, Mustafa Kemal and the Turkish War of Independence, Encyclopedia Britannica,
Parts of the territory of Saudi Arabia were under Ottoman influence at the beginning of the 20th century, but a political and religious movement under Abdul-Aziz bin
Abdurrahman Al Saud gradually took back Arab tribal land,240 aiming to return to a pure religion of Islam with an approach characterised as an al-salaf al-salih, ‘righteous predecessors’ interpretation. 241 Control over the Arabian Peninsula grew until the independence of Saudi Arabia was declared. Since then, Sunni Sharia in general, and the Hanbali school in particular, have been at the heart of the Saudi concept of public policy.242
Public policy is a dynamic concept shaped by many factors, and public policy may well differ from country to country. A closer look at the current concept of public policy across legal systems shows that public policy is contested, not only between countries that share similar values, but in different legal systems within the same country.
For instance, the protection of moral values and national culture is an essential part of the concept of public policy across many legal systems.243 Yet the concept of protecting moral values differs among legal systems, 244 even for countries that have similar cultural backgrounds. For example, prostitution is illegal and against the concept of
240 Hassan S. Abedin, Abdul Aziz Al-Saud and the Great Game in Arabia, 1896–1946 (PhD Thesis, King’s College London, 2002) 92–199. 241 Ibid 16–20. 242 On 28/2/1346 AH–(1927), King Abdulaziz issued a royal request to codify Islamic law according to the right interpretation of Sunni Schools. However, this was changed to incorporate all Sunni Schools in general and the Hanbali School in particular. For more information, see The General Presidency of Scholarly Research and Ifta, Council of Senior Scholars,
public policy in many secular legal systems of European societies,245 but legalised in other countries.246 To take another case, same sex marriage, which is recognised as against public policy in many European societies 247 but legal in other European societies.248 Thus, the concept of moral values differs between legal systems.
Similarly, the majority of Middle Eastern countries declare in their constitutions that principles of Islamic law are at the heart of the legal system and public policy.249 Yet these countries have different interpretations of the Islamic law sources,250 and some of them differentiate civil law from commercial law.251 For example, in the Saudi legal system, usury is legally prohibited and against public policy,252 while the percentage of usury is fixed at different levels in the United Arab Emirates (UAE),253 Kuwait,254
Jordan 255 and other Islamic countries. Further, commercial activity in regard to alcoholic beverages is a matter of criminal law in Saudi Arabia256 and Kuwait,257 while accepted with various restrictions in many Islamic countries including Egypt258 and
245 For more information about the sex industry and public policy, see Suzanne Hatty, ‘The desired object: prostitution in Canada, United States and Australia’ (Paper presented at the Sex Industry and Public Policy: Proceedings of a Conference held May 6–8, 1991). 246 For more information about the legalisation and decriminalisation of prostitution, see Elaine Mossman, ‘International approaches to decriminalising or legalising prostitution’ (2007) New Zealand: Ministry of Justice. 247 For example, Hungary, Poland, Serbia, Slovakia, Armenia, Montenegro, Lithuania and many other European countries do not recognise same-sex marriage. 248 For example, Austria, Andorra, the Czech Republic, Finland, France, Italy, the United Kingdom and others have recognised same-sex marriage. However, it took several years to achieve because the countries believed it was against public policy. For more details, see Kelly Kollman, ‘Same‐sex Unions: The Globalization of an Idea’ (2007) 51(2) International Studies Quarterly 329. 249 See Art 37 of Convention of the Arab League on Judicial Cooperation between the League of Arab States. For example, see article seven of UAE constitution, first article of Qatar constitution, second article of Oman constitution, second article of new Egypt constitution, second article of Jordan constitution, first article of new Tunisia constitution, first article of Saudi Arabia Basic Law of Governance and second article of Kuwait constitution. 250 For example, in regard to civil law, the UAE, Palestine and Egypt have generally adopted the Hanafi school of thought, while Saudi Arabia and Qatar have generally adopted the Hanbali School of thought. 251 Almutawa, above n 19, 38–39. 252 For more information, see section (C2) of the fourth chapter (Qiyas, Reasoning by Analogy). 253 See Art 76 of Commercial Transactions Law of Federal Law No. (18) of 1993. 254 See Art 102 of Kuwait commercial Code No. 68 of 1980. 255 See Art 176 of Jordanian Civil Code No. 24 of 1988. 256 See the first article of the Saudi Drugs and Narcotics Control Law. 257 Art 206 of the Penal Code of Kuwait No. 16 of 1960. 258 Art 63 of the Constitution. 67
Jordan. Prostitution is legally prohibited in all Middle Eastern countries, but Tunisia has legalised prostitution.259
Such cases show that societies that share similar cultures and values may have differing concepts of public policy. In addition, public policy can be contested within the same country. For example, in Hinduism cows are sacred animals260 and 24 out of 29 Indian states have laws prohibiting the slaughter of cows, the consumption of their flesh or their export to other Indian states.261 The five remaining states do not prohibit these activities.262 This particular issue is controversial in India and has led to many cultural clashes between sects. Shashi Tharoor, a Member of Parliament and a former diplomat, warns of a growing ‘reflexive desire to ban one thing or another’ in India: ‘Suddenly, this is no longer a matter of individual taste, but of public policy—which it should not be’.263 A contested concept of public policy exists in the UAE with reference to Sharjah, the only state in the country that, in accordance with Islamic law, prohibits the sale or possession of alcohol—in the other states, alcohol is allowed with varying restrictions.264
All these cases may indicate why national legislatures have ruled on many exceptions in regard to implementation of international commercial arbitration awards on grounds of public policy. For instance, in Romania and Tunisia, such awards are required to be
‘public policy as understood in private international law’, while Portugal and France
259 Kasme Maroney, Alarife newspaper, The debate over regulating prostitution in the Arab world,
require these awards to comply with ‘principles of international public policy’. 265
However, the legislatures of Japan, Oman, Qatar, 266 among others, refer simply to
‘public policy’ or ‘public order and good morals’. China rejects such an arbitration award if it ‘goes against social and public interest’.267 Sweden and Austria require international commercial arbitration awards to comply with basic principles of their legal systems.268
The difference between concepts of public policy has created long debates between legal scholars. Some authors argue that there should be a ‘blanket’ concept of public policy, allowing the relevant competent judicial authority to define public policy in view of the particular case.269 Other scholars argue that the public policy concept should be made more precise and explicit.270 Yet others argue the public policy concept should be modified or removed from the NYC.271 Currently, there are three important and legally controversial categories of the concept of public policy across various legal systems: domestic, international and transnational public policy.272
To conclude, the concept of public policy is not fixed; rather, it is a changeable concept whose variations can be attributed to many factors. It is entirely likely that the factors that shaped the concept of public policy in one country are different from factors in other countries, and contested concepts of public policy across legal systems will tend to exist, even in countries that share similar cultural backgrounds.
265 Vesselina Shaleva, ‘The “public policy” exception to the recognition and enforcement of arbitral awards in the theory and jurisprudence of the central and east european states and russia’ (2003) 19(1) Arbitration International 67–84. 266 Ibid. 267 Ibid. 268 Ibid. 269 Ibid. 270 Many scholars have suggested the concept of international and transnational public policy to narrow down the concept of public policy. For more details, see the following sections. 271 Roy, above n 164, 958. 272 For more details, see the following sections. 69
Some scholars are attempting to create transnational public policy to facilitate implementation of international commercial arbitration awards, as discussed in the next section. This study agrees with scholars who have demonstrated that there is no agreement on the concept of public policy at the international level. However, it is possible to understand the concept of public policy in every legal system, to highlight the legal issues involved in the concept and to recommend legal solutions to overcome the issue of public policy in each legal system.
Thus, this study argues that the best method to improve the Saudi arbitration environment is to first understand the concept of public policy and identify relevant legal issues, and then recommend legal solutions to facilitate the implementation of international commercial awards. The study argues that this is a more rational approach than either removing the concept of public policy from the NYC, or trying in vain to create a unified universal concept of public policy.
F Domestic, International and Transnational Public Policy
Section (E) above showed that public policy is a vague entity, capable of dynamic change and influenced by many factors. As Mistelis observes, public policy by its very nature is ‘a dynamic concept that develops continually to meet the changing needs of society, including political, social, cultural, moral, and economic dimensions’.273 While section (E) discussed the factors that affect the concept of public policy in general, this section aims to identify the categories of public policy.
273 Loukas Mistelis, ‘Keeping the Unruly Horse in Control or Public Policy as a Bar to Enforcement of (Foreign) Arbitral Awards’ (2000) (Paper presented at the International Law Forum Du Droit International, l248, 252 (2000). 70
Various theories address the root causes shaping the concept of public policy.274 Yet, despite the significant efforts of many scholars to elucidate the concept, public policy embodies ambiguities. The fact that the concept has not been amenable to definition at a universal level has caused many states to formulate independent definitions,275 to the point at which every state might conceivably be found to have its own unique concept of public policy.276
The NYC has itself played a major role in developing the concept of public policy, as it required international commercial arbitration awards to comply with public policy without explicitly defining this specific ‘public policy’. However, across legal systems, the public policy concept has been a major reason for the setting aside of arbitral awards.277
This impasse has triggered the idea of international and transnational public policy adopting an alternative legal approach to facilitate the implementation of arbitration awards. To explore this issue, it is important to first elucidate the three major contemporary approaches in the world legal system; it will then be possible to identify the approach followed in the Saudi legal system.
274 For more information about the theories that assist in developing the concept of public policy, see Frank Fischer and Gerald J. Miller, Handbook of public policy analysis: theory, politics, and methods (crc Press, 2006). 275 Richard H. Kreindler, Transnational litigation: a basic primer (Oceana Publications, 1998) 239. 276 Martin Hunter and Gui Conde E. Silva, ‘Transnational Public Policy and its Application in Investment Arbitrations’ (2003) 4(3) The Journal of World Investment 367. 277 To understand the complexity of the concept of public policy across legal systems, see Veena Anusornsena, ‘Arbitrability and Public Policy in Regard to the Recognition and Enforcement of Arbitral Award in International Arbitration: the United States, Europe, Africa, Middle East and Asia’ (2012) GGU Law Digital Commons 33. 71
1 Domestic Public Policy
Domestic public policy is a very broad concept touching on many legal areas,278 with laws on many matters, including moral issues, health, the environment, sovereignty, security, discrimination, corruption and procedural unfairness.279 According to Fry:
Domestic public policy generally is seen as being the fundamental notions of morality and justice determined by a national government (either a legislature or court) to apply to purely domestic disputes within their jurisdiction. These mandatory rules of public policy are found in a State's laws and are designed to protect the public interests of that State, not of any particular private individual or entity.280
The force and flexibility of domestic public policy combine to make its rule in an international commercial arbitration environment highly debatable. Berg, in an authoritative commentary on international arbitration, states:
In fact, the grounds for refusal of enforcement are restricted to causes which may be considered as serious defects in the arbitration and award: the invalidity of the arbitration agreement, the violation of due process, the award extra or ultra petita, the irregularity in the composition of the arbitral tribunal or the arbitral procedure, the nonbinding force of the award, the setting aside of the award in the country of origin, and the violation of public policy.281
Domestic public policy is a significant instrument that allows a national court to refuse to implement an international commercial arbitration award.282 On the basis of domestic policy, any state is legally allowed, under the NYC, to interpret the concept of public policy according to its national perspective,283 in the absence of any guidelines to define
278 For more information about the type of public policy, see James E. Anderson, Public policymaking (Cengage Learning, 2014) 6–19. 279 Julian D. M. Lew, Loukas A. Mistelis and Stefan Kröll, Comparative international commercial arbitration (Kluwer Law International, 2003) 187–222. 280 James D. Fry, ‘Désordre Public International under the New York Convention: Wither Truly International Public Policy’ (2009) 8(1) Chinese Journal of International Law 81. 281 Sameer Sattar, ‘Enforcement of Arbitral Awards and Public Policy: Same Concept, Different Approach?’ (2011) 8(5) Transnational Dispute Management (TDM) 4–5. 282 Ibid. 283 Fifi Junita, ‘Experience of Practical Problems of Foreign Arbitral Awards Enforcement in Indonesia’ (2008) 5 Macquarie J. Bus. L. 369. 72
the limits or scope of the concept. 284 Accordingly, countries have taken different approaches to interpret the term, both broad and narrow.285
The issue of domestic public policy has thus created a situation of conflict in relation to the implementation of international commercial arbitration awards,286 motivating the
International Law Association (ILA) to formulate a universally accepted concept of international public policy,287 discussed in the next section. The ILA proposition aims to distinguish between domestic and international public policy to specifically define the concept of public policy and so facilitate the implementation of arbitration awards in the NYC contracting states.288
The ILA proposition is that domestic public policy should only relate to domestic private law transactions without foreign elements. If foreign elements are involved that require implementation of an international public policy concept, this should relate to the legal area of private international law.289
2 International Public Policy
The main idea of international public policy is to distinguish two levels of public policy: policy applying domestic considerations and a less restrictive international approach.290
International public policy provides an efficient method to prevent an international
284 Sattar, above n 281. 285 Margaret L. Moses, The principles and practice of international commercial arbitration (Cambridge University Press, 2012) 208–209. 286 Obinna Ozumba, ‘Enforcement of Arbitral Awards: Does the Public Policy Exception Create Inconsistency’
arbitration award being set aside for purely domestic policy considerations.291 In this way, it can be said that international public policy is more liberal than domestic public policy.292 As Fry says:
International public policy generally is seen as being the fundamental notions of morality and justice determined by a national government (either a legislature or court) to apply to disputes that have an international element, either from the underlying transaction's nature or from the nationality of the parties, though those disputes still are within that State's jurisdiction. This international public policy is the notion of public policy that is applied in the area of private international law.293
The concept of international public policy as applied in practice has been considered in
France,294 Italy,295 Portugal,296 Algeria297 and other jurisdictions.298 Many legal systems have not considered the concept, no doubt because what should constitute international public policy is still not entirely clear.299 Further, some scholars argue that international public policy is actually wider than domestic public policy.300 There is also an objection that ‘international’ public policy is in fact national and at the heart of domestic public policy.301 The Supreme Court of India, for example, has explicitly rejected the concept of international public policy for lack of a ‘workable definition’.302 Sanders in this regard argues that ‘international public policy, according to generally accepted doctrine,
291 Ibid. 292 Anusornsena, above n 277, 11. 293 Fry, above n 280, 86–87. 294 Arts 1498 and 1502 of Title V of the New Code of Civil Procedure (1981). 295 See decision dated 4 December 1992, reported in (1997) XXII Yearbook 725. 296 Art 1096(f) of the Code of Civil Procedure (1986). 297 Art 458 bis 23(h) of Decree No. 83.09 (1993). 298 Maurer, above n 16, 128–129. 299 Ozumba, above n 286. 300 Albert Jan van den Berg, The New York Arbitration Convention of 1958: towards a uniform judicial interpretation (Erasmus Universiteit Rotterdam, 1981) 382. 301 For more details regarding international public policy and its legal issues, see Winnie Ma, Public policy in the judicial enforcement of arbitral awards: lessons for and from Australia (SJD Thesis, Bond University, 2005) 83. 302 See Renusagar Power Co. Ltd v. General Electric Co., reported in (1995) XX Y.B. Comm. Arb. 681. 74
is confined to violation of really fundamental conceptions of legal order in the country concerned’.303
3 Transnational Public Policy
The concept of transnational public policy, or in other words ‘truly international public policy’, has been created by a number of scholars.304 The main purpose of this concept is to create a universal application representing international consensus on accepted norms of conduct. 305 Identifying this category and relevant legal sources, the ILA describes transnational public policy as a universal application:
Comprising fundamental rules of natural law, principles of universal justice, jus cogens in public international law, and the general principles of morality accepted by what are referred to as ‘civilised nations’.306
This concept of public policy has been accepted in a general context in some court decisions. 307 However it still has not been unambiguously defined, leading Fry to comment:
Truly international public policy is not well defined in the literature. That said, truly international public policy generally is the type of public policy consideration that is quasi universal in nature…308
Further, some scholars totally reject this concept as ‘unclear and unnecessary’,309 while others accept the concept of truly international public policy only as applied by arbitrators who do not belong to any particular legal system.310
303 Pieter Sanders, “Commentary” in 60 Years of ICC Arbitration—A Look at the Future (ICC Publishing, Paris 1984). 304 For more discussion on transcontinental public policy, see Lalive, Pierre, Transnational (or truly international) public policy and international arbitration,
A transnational public policy concept may arguably have the potential to pin down the meaning of public policy in specific ways. However, in view of the many fundamental differences across world legal systems, especially in regard to some Middle Eastern countries, it would be very difficult to create a universal application representing international consensus on accepted norms of conduct. Even if the contracting states were hypothetically to agree on this general concept, there would be disagreement on what the concept specifically involved, given the complex nature of public policy itself.
And, because each state would have a different interpretation of transnational public policy, the same issues of domestic versus international public policy would be sure arise again.
A country may face a complex series of decisions in relation to either implementing or rejecting international commercial arbitration awards; for example, the legal traditions of many countries may contain essential elements that would justify a country’s rejection of arbitral awards.311 In this regard, Slade writes:
A ‘legal culture’ is the product of fundamental values of society as reflected in its history, language, and views about social justice. We in the international arbitration community should undertake the responsibility for understanding these values and how they affect the quality of the process or viewpoint of the parties. We need to recognize cultural prejudices and be sensitive to cultural traditions lest we unintentionally offend our real and would-be friends. At the same time, we need to pay attention to culturally induced personal behaviours of our own that could be perceived in an unflattering light.312
This observation is particularly incisive if Western and Middle Eastern jurisprudence are compared. Western legal philosophy has been affected by many legal theories,
309 Van den Berg, above n 300, 360. 310 Berthold Goldman, Fouchard, Gaillard, Goldman on international commercial arbitration (Kluwer law international, 1999) 955. 311 Leon E. Trakman, ‘“Legal Traditions” and International Commercial Arbitration’ (2006) 17 Am. Rev. Int’l Arb. 1. See also Joanna Jemielniak, Legal interpretation in international commercial arbitration (Routledge, 2016) 103–105. 312 William K. Slade II is the President and CEO of the American Arbitration Association. The speech of the 17th ICCA Conference in China, ‘Culture Connection in International Commercial Arbitration’, is reproduced in the Dispute Resolution Journal (August–October 2004). 76
including the theory of natural law.313 However, Middle Eastern countries have felt the influence of philosophies of Islam, where there is a certain clash with the philosophy of natural law, in the context of belief that Islamic law has been handed down by Allah.314
The same or similar legal issues might thus be perceived quite differently owing to different philosophical starting points or different legal sources.315 How, then, can the legal community create a universal application representing international consensus on accepted norms of conduct while the sources of legal traditions are completely different in many areas of law across the legal systems of the world?
G Discussion and Analysis of One Side of the Saudi Public Policy Coin
The metaphor of the coin is intended to convey the reality of public policy in the Saudi legal system: that it depends on two indispensable pillars, namely Islamic law (that is,
Sharia) and General Jurisprudential Principles, that constitute the fundamental national laws and principles of Saudi Arabia. The rest of this chapter examines Saudi Arabia’s
General Jurisprudential Principles. These principles contain ambiguity, and analysis in this chapter seeks to clarify the overall legal environment.
Chapter IV will then examine Sharia, the other side of the coin. Sharia is at the heart of the concept of public policy in the Saudi legal system, and at the same time, it has largely been the source of legal grounds that have set aside foreign arbitral awards and judgements.
313 For more detail on Western legal philosophy, see J. M. Kelly, A Short History of Western Legal Theory (Oxford University Press, 1992). 314 For more detail on Islamic law philosophy, see Wael B. Hallaq, An introduction to Islamic law (Cambridge University Press, 2009). See also Denis MacEoin, Sharia Law or ‘One Law for All?’ (Civitas/Inst for the Study of, 2009). 315 Ibid. 77
1 Conditions of Implementation Versus General Jurisprudential Principles
Analysis from the extrapolation of the available provisions of the Saudi Grievances
Board, as well as other legislation, essentially shows that—if they are to be enforced— foreign judgements and international commercial arbitration awards need to be compatible with the Saudi concept of public policy and conditions of implementation.
This chapter will assess the role of the General Jurisprudential Principles, which are judicial principles derived largely from national laws and norms. Conditions of implementation are formal, procedural and substantive requirements derived from the new arbitration law and international conventions.
There is significant difference between violating public policy, on the one hand, and violating the relevant conditions of implementation, on the other. Violation of public policy is a significant reason to reject the implementation of foreign judgements and international commercial arbitration awards in full—unless, however, the award is divisible, in which case ‘an order for execution of the part not containing the violation can be issued’.316 Thus, divisibility of an international commercial arbitration award can be a fundamental difference that assists in creating an attractive environment and diminishes the issue of public policy.317
Investigation into the conditions of implementation themselves is beyond the scope of this research, which focuses on the Saudi concept of public policy. The following sections aim to identify the differences between implementation conditions and the
General Jurisprudential Principles in terms of Saudi judicial practice and Saudi
316 Art 55(b) of the new arbitration law, referring to a case where ‘the award does not violate the provisions of Sharia and public policy in the Kingdom’. 317 In fact, this manner was originally applied as ‘Internal laws’ according to the provisions of the Saudi Board of Grievances as declared in Ruling No. 269/ES/4 of 1431 AH–(2010). However, after Art 55(b) of the new arbitration law, this manner became mandatory. 78
legislation. The following section provides an example of formal, procedural and substantive conditions of implementation to demonstrate the kind of differences in the
General Jurisprudential Principles that may occur.
(a) Conditions of implementation
Saudi Arabia has signed many international conventions with different countries in regard to the implementation of foreign judgements and foreign arbitral awards. The conventions have generally required formal, procedural and substantive requirements that must be met in the request for implementation. The new arbitration law also requires formal, procedural and substantive requirements that must be met in the request to implement international commercial arbitration awards. The provisions of the
Grievances Board show that the conditions of implementation must be strictly applied.
A clear example of a substantive requirement is the published case of Ruling No. Q
/1/1550 of 1408 AH–(2007). The plaintiff in this case sought the implementation of a foreign decision in regard to child custody issued by the Court of Personal Status in
Kuwait, and supported by the Kuwaiti Court of Appeal. The defendant mainly argued that the Sharia court in the city of Khobar in Saudi Arabia had originally issued a judicial decision in regard to this case, and had decided that a mother had the right to custody over her son until he reached the age of seven, or until she married. It noted that the boy was now seven years old. The Saudi Grievances Board decided to reject implementation of the foreign decision, because it would violate the substantive conditions of an international convention. The Board referred to Art 2(c) of the
Convention for the Execution of Judgments, Delegations and Judicial Notifications in the Gulf Cooperation Council of Arab Countries, which stated that:
79
… if the dispute in respect of which the judgment is issued was the subject matter of a former judgment issued on the merit of the dispute as between the same litigants; is related to the same right in terms of its subject matter and grounds; and is issued in its final form in the state where the judgment is required to be executed or in any other member state which is a party to this agreement.
Since it was clear that the plaintiff had not achieved the required conditions to implement the foreign judgements, the court ruled that the judgement was ‘invalid for implementation’.
A formal requirement, as shown in the provisions of Saudi Grievances Board, must be met in the request to implement foreign arbitral awards and foreign judgement. A clear example is Ruling No. Q/2/3135 of 1428 AH–(2007) in regard to a commercial dispute.
In this case, the plaintiff sought to implement a foreign decision issued by the Court of
First Instance in North Cairo in the Arab Republic of Egypt, that the defendant was liable to pay contractual damages including five per cent interest along with other compensation. The plaintiff requested the court to implement the judgement according to the 1952 Convention of the Arab League on the Enforcement of Judgments and
Arbitral Awards. The Grievances Board requested the plaintiff to provide relevant official documents according to the Art 5 of the Convention. However, the plaintiff failed to provide all necessary documents, and after five sessions, the court dismissed the case, also according to Art 5.
A procedural requirement, according to the provisions of the Saudi Grievances Board, must be met in the request to implement foreign arbitral awards and foreign judgements.
A clear example is Ruling No. Q/3/624 of 1430 AH–(2010). The plaintiffs sought to implement a foreign judgement issued by the Kuwait Court of First Instance and approved by the Court of Appeal. The plaintiffs asked the Saudi Grievances Board to exclude their sister from their father’s inheritance because she had already received her
80
share, but the Board refused to implement the foreign judgement because the plaintiff did not provide any evidence that the defendant had been given proper notice.
The Saudi Grievances Board relied on Art 2(b) of the Convention for the Execution of
Judgments, Delegations and Judicial Notifications in the Gulf Cooperation Council of
Arab Countries, which requires a court to refuse to implement foreign judgements and arbitral awards in many cases, including where a judgement has been issued in the absence of a debtor and debtor has not been properly notified of the suit or the judgement. On the same grounds, the Saudi Grievances Board refused to implement
Ruling No. Q/3/1721 of 1430 AH–(2010) from the Criminal Court of the state of
Bahrain.318
These cases clearly emphasise that the requests to implement foreign judgements and awards must meet conditions stated in the international conventions. They also indicate that the Saudi Grievances Board will strictly apply these international convention rules in relation to implementing foreign judgements and international commercial arbitration awards. To begin with, international commercial arbitration awards will have to comply with the NYC or be rejected out of hand. In principle, the new arbitration law’s formal,319 procedural320 and substantive321 conditions are required to be met in a request to implement such arbitration awards.322
318 According to these cases, the court expected to reject implementing international commercial arbitration awards according to Art V (b) of the NYC, which stated that ‘The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case’. 319 For example, the new arbitration law stated that the arbitration agreement must be in writing or via any other electronic or written means of communication (see Art (9)). The request and documents of implementation must be translated to the Arabic language (see Art (44)). The documents shall be certified and the award has been notified to all parties (see Art (44)). 320 For example, arbitration procedures must comply with Sharia (see Art 25). The award shall be made unanimously, if the arbitration tribunal is authorized to settle the dispute amicably (see Art 39(4)). The arbitration award shall be made in writing and include date of pronouncement and place of issuance; names and addresses of parties and many other requirements (see Art 42). Documented evidence of proper notification (see Art 50 (c)). 81
(b) General Jurisprudential Principles
Underlying the provisions of the Saudi Grievances Board are General Jurisprudential
Principles. They are fundamental principles of national laws contained within the concept of public policy and cannot be violated, whether in domestic or international matters. Examples of the application of these principles follow.
(i) Royal orders that require prior authorisation from the sovereign in his capacity as prime minister
Not all royal orders fall under General Jurisprudential Principles, but some do. One such case was covered by Ruling No. Q/1/482 of 1428 AH–(2007). The plaintiff sought to set aside a domestic arbitration award in regard to an arrangement to the value of 5,950,000 riyals. The plaintiff argued that the arbitral award infringed public policy because the defendant, who had originated these founder’s shares, had no right to commercialise the shares in cash. The shares had been underwritten according to Art 100 of the
Companies’ Law, which clearly states that:
It is not permissible to commercialize shares in cash underwritten by the founders, or shares in kind, or the foundation portions, before the publication of the balance sheet and the profits and losses account for two complete fiscal years of not less than twelve months for each from the date of founding the company.
The Saudi Grievances Board implemented the arbitral award, dismissing the plaintiff’s plea. This demonstrates that not all national laws are within the concept of public policy. However, it is clear in many cases that national laws that are considered to fall within the General Jurisprudential Principles will have court support. Thus, the Saudi
321 For example, the arbitration award must comply with Sharia and public policy (see Art 55(2b)). The award shall comply with a judgment or decision issued by a court, committee or commission having jurisdiction to decide the dispute in Saudi Arabia (see Art 55 (2a)). 322 For more details, see Al-Ammari and Martin, above n 172. See also Zegers and Elzorkany, above n 172. 82
Grievances Board will refuse to implement either domestic and international arbitral awards if they conflict with the country’s General Jurisprudential Principles.
A clear case demonstrating that the court may reject a domestic arbitral award even where the award relates to General Jurisprudential Principles may be seen in Ruling No.
Q/1/1550 of 1408 AH–(1998). This related to a dispute between a Saudi bank and a
Saudi company that had been settled by domestic arbitration. The plaintiff asked the
Saudi Grievances Board to implement the arbitral award. However, the Saudi
Grievances Board refused to do so because the arbitral award was in conflict with Royal
Order No. (8/729) dated 10/07/1407 AH–(11/03/1987), which prevents courts and special committees from hearing a lawsuit against or from a bank before obtaining approval from the prime minister, that is, the king.
To examine the reason for the rejection by the Grievances Board, it must be noted that royal orders requiring prior prime ministerial authorisation are considered to be General
Jurisprudential Principles that also represent the orientation or policy of the king. This means that the Saudi Grievances Board does not have the power to rule against any matter with such an orientation, whether in domestic arbitration or international commercial arbitration.
The legal consequences from Saudi Arabia versus Arabian American Oil Co.
(Aramco)323 support this conclusion. The agreement had given Aramco the exclusive right to transport the oil it extracted from its concession area in Saudi Arabia. The contract provided that arbitration would be according to the law of Saudi Arabia as well
323 Saudi Arabia v. Arab Am. Oil Co. (ARAMCO), 27 ILR 117 (1963). See Stephen M. Schwebel, ‘The kingdom of Saudi Arabia and Aramco arbitrate the Onassis agreement’ (2010) 3 The Journal of World Energy Law & Business 245. See also Todd Weiler, International investment law and arbitration: leading cases from the ICSID, NAFTA, bilateral treaties and customary international law (Cameron May, 2005) 355. See also ibid; Francis M. Ssekandi, ‘Contracts between a State and a Foreign Private Company—Reflections on the Effectiveness of the Arbitration Process’ (1966) 2 East African Law Journal 281. 83
as Sharia principles. The arbitration tribunal held that the law of Saudi Arabia should be
‘interpreted or supplemented by the general principles of law, by the custom and practice in the oil business and by notions of pure jurisprudence’, and so Aramco’s rights could not be ‘secured in an unquestionable manner by the law in force in Saudi
Arabia’. The Saudi government continued to honour the contract according to the tribunal’s decision, but the government’s dissatisfaction with the decision led to the issue of Decree No. 58 of 1963 by the Saudi Council of Ministers prohibiting any government agency from signing an arbitration agreement without prior authorisation from the prime minister.324
Since then, with one exception, there has been no case of signature of an arbitration agreement between a government agency and another party without prior prime ministerial authorisation. The exception is case No. 32/D/A/9 of 1918 AH (1998), where the Saudi Grievances Board refused to implement an international commercial arbitration award due to the Council of Ministers Resolution. This case was originally a commercial dispute between a Dutch company and a Saudi public university in regard to construction works that was settled by international commercial arbitration. The arbitration tribunal held the public university liable and ruled in favour of the Dutch company. The public university implemented many parts of the award but refused to implement some parts, amounting to 1.28 million riyals.
The Dutch company applied to the Grievances Board for implementation of the arbitral award. The university argued that Council of Ministers Resolution No. 58 (1963) disallowed government entities from entering arbitration: thus, it argued that the
324 The new arbitration law continues along this track because it does not allow government bodies to resort to arbitration except when approved by the Prime Minister in Art 10(2), which states that: ‘Government bodies may not agree to enter into arbitration agreements except upon approval by the Prime Minister, unless allowed by a special provision of law’. 84
agreement and arbitral award were both invalid, and the Grievances Board had the original jurisdiction to solve the dispute. However, deciding to implement the arbitral award even though a state body resorting to arbitration is prohibited under national law, the 9th Sub-Circuit stated that this decision was based on Sharia in the interest of an impartial result, considering that Sharia strongly maintains that a moral obligation to carry out any contract or undertaking must be fulfilled, quoting the Qur’ān: ‘O ye who believe! Fulfil all obligations!’325 However, on appeal by the university, the First Audit
Circuit overruled the decision by the 9th Sub-Circuit, reiterating Council of Ministers
Resolution No. 58 of 1963.
It is clear from these cases that royal orders requiring prior prime ministerial authorisation follow the General Jurisprudential Principles, giving effect to the concept of public policy with regard to both domestic and international matters. However, there are other issues to be considered under the General Jurisprudential Principles.
(ii) Rules of competence
Rules of competence—royal orders that identify court jurisdiction—also fall under the
General Jurisprudential Principles.326 Case No. Q /2/1115 of 1429 AH (2008) is a clear demonstration. The case related to a dispute between an international investor and a
Saudi partner in regard to distribution of profits from a jointly established limited liability company in Saudi Arabia. The court declined to hear a lawsuit on this matter, citing Art 13 and Internal Statute Art 26 of the Foreign Investment Law issued by Royal
Decree No. (1/M) dated 5/1/1421 AH–(10/4/2000), which prevents the Grievances
325 Almuhaidb, above n 139, 138. 326 For more details regarding the rules of competence, see Art 13 of the Law of Procedure before the Board of Grievances. 85
Board from hearing investment disputes. In a very significant statement relating to rules of competence, the judge declared:
Rules of competence are a primary issue that needs to be settled before discussion of a particular lawsuit because these rules belong to public policy, and the judge can raise this issue without a request from any party to a dispute.
Further, in case No. Q / 4 / 1123 of 1429 AH (2008), the Saudi Grievances Board refused to implement a foreign decision because of court jurisdiction. The plaintiff sought implementation of a judgement issued by the Court of Appeals of Alexandria in the Arab Republic of Egypt against his previous employer in Saudi Arabia. The court was unwilling to implement this foreign judgement because the foreign court did not have jurisdiction, as jurisdiction belonged originally to Saudi labour offices according to the work contract between the parties to the dispute.
(iii) Identification of the legal status of parties
Identification of the legal status of parties is considered an essential element of the public policy concept, whether in domestic or international matters.327 In Ruling No.
Q/3/367 of 1429 AH–(2000) in regard to a dispute confined to Saudi Arabia—thus a domestic matter—the court rejected the plaintiff’s request for compensation because of the legal status of the respondent. The plaintiff argued that he had had a commercial agency agreement with a foreign company for 20 years up until the respondent had convinced the foreign company to transfer the commercial agency agreement to him from the plaintiff, with considerable loss to the plaintiff. The plaintiff could not prove that defendant has any relationship to withdraw the commercial agency agreement from plaintiff, and therefore, the plaintiff had no right to sue the defendant.
327 The new arbitration law noted this principle in Art 10(1): ‘An arbitration agreement may only be concluded by persons having legal capacity to dispose of their rights (or designees) or by corporate persons’. 86
The Saudi Grievances Board refuses to implement foreign judgements for the same reason. In Ruling No 236/T/4 of 1426AH–(2006), the court refused to implement a foreign ruling issued by the Federal Court of Appeal in Abu Dhabi, Civil Division V.
The plaintiff sought to implement this foreign decision against the Saudi agent of a
Swiss company, while the original decision was against the Swiss company itself, not the agent. The Grievances Board dismissed the plaintiff’s request for this reason.
(iv) Sovereign acts
Sovereign acts—orders coming directly from the king as commander, without reference to the Council of Ministers—are specifically excluded from review by courts of the
Board of Grievances, as stated in Art 14 of the Law of the Board of Grievances. For example, Ruling No. Q/1/1476 of 1430 AH–(2001) related to a plaintiff seeking to return to his position of employment, with retroactive salary, after being arrested on a drug charge. The court declined to hear the case because the plaintiff had been dismissed by royal order, as a sovereign act. 328 Thus, sovereign acts can form an element in the concept of public policy. In other words, any order coming directly from the king is considered a law that is not subject to violation or even discussion.
(v) Arbitration in certain disputes
Arbitration in disputes over personal status or matters not subject to reconciliation are prohibited. Disputes over personal status are generally linked to inheritance, family law and so on. Matters that are not subject to reconciliation may relate to Sharia or to public policy. 329 Sharia prohibits arbitration in regard to criminal matters. 330 Public policy
328 For more details regarding sovereign acts, see case Ruling No. Q/2/3092 of 1428 AH–(1999) and Ruling No. Q/1/3313 of 1427 AH–(1998). 329 The second article of the new arbitration law states that, ‘The provisions of this Law shall not apply to personal status disputes or matters not subject to reconciliation’. 330 See the next chapter in regard to Sharia. 87
prohibits arbitration in matters that affect the nation as a whole, such as forgery, criminal activity or terrorism; while there are no published cases in regard to this principle, many scholarly articles discuss this issue from a Saudi perspective.331 Other
Islamic countries follow the same principle in regard to public policy.332
(vi) Implementation management
Implementation management—where the court has the right to reject parts of an international commercial award that conflict with Islamic Sharia or public policy— according to the provisions of the Saudi Grievances Board is seen as declared in Ruling
No. Q/1/343 of 1422 AH–(2003) and Ruling No. 269/ES/4 of 1431 AH–(2010). In these two cases, the court implemented the foreign judgements, with the exception of the
‘usury’ element, which conflicted with Islamic principles on riba. It follows that the court has the right to manage implementation according to its legal assessment.
(vii) Nationality of parties to a dispute
Saudi parties to a dispute are not allowed to resort to international commercial arbitration. The Board of Grievances has annulled many such cases by the use of the public policy defence. For example, in Ruling No. 143/1412 AH–(1992), the Board of
Grievances considered the arbitration clause null and void because Saudis referring a dispute to another jurisdiction is against public policy. The Board of Grievances stated that:
This dispute is subject to Saudi law, and the arbitration clause providing for the settlement of the dispute by means of arbitration in Zurich under the rules of the International Chamber of Commerce (ICC) is null and void. Even apart from its contradiction with the Saudi law of arbitration and its Implementing Rules, this is an
331 Khalid Alnowaiser, The Matters that Fall Outside the Jurisdiction of The Arbitration, Al-Eqtisadiah newspaper [Arbic]
attempt to eliminate the jurisdiction of the Saudi judiciary over the dispute, and it is against the public policy of Saudi Arabia.333
The Review Committee in the Board of Grievances in Ruling No. 54/1411 AH in 1991 stressed that:
Referral of disputes to the International Chamber of Commerce in Switzerland amounts to robbing the Saudi Judiciary of its authority. This implies violating Saudi General Law and it is considered invalid.334
The Review Committee, in Ruling No. 125/1417 in 1997 in a case in which the two parties to a dispute were both Saudis, reaffirmed that they were ‘not entitled to agree on arbitration outside Saudi Arabia because this would contradict public policy on the ground that it would rob the Saudi Judiciary’ of its jurisdiction.335
2 Change in the General Jurisprudential Principles
Finally, it is important to note that the Supreme Court has the exclusive right to change the General Jurisprudential Principles as long as the change does not conflict with the orientation or policy of the king. 336 Art 13 (2a) of the Judiciary Law 337 gives the
General Panel of the Supreme Court the right to establish General Jurisprudential
Principles. It states that, ‘The General Panel of the Supreme Court shall undertake the following: (a) Determining general principles in issues relating to the judiciary’. Art 14 of the same law gives the Supreme Court the right to change the principles:
If a Supreme Court panel decides—in connection with a case before it—not to follow a precedent adopted by it or by another panel in the same Court, or if a Court of Appeals panel decides not to follow a precedent established by a Supreme Court panel, the matter shall be put before the Chief Judge of the Supreme Court to refer to the General Panel of the Supreme Court to decide.
333 The case was cited from Abdulrahman Baamir and Ilias Bantekas, ‘Saudi law as lex arbitri: Evaluation of Saudi Arbitration Law and judicial practice’ (2009) 25 Arbitration International 256. 334The case was cited from Abdulrahman A. I. Al-Subaihi, International commercial arbitration in Islamic law, Saudi law and the model law (PhD Thesis, The University of Birmingham, 2004) 398. 335 Ibid. See also the published Ruling No. Q/1/3050 of 1431 AH–(2010) in the Appendix. 336 According to Art 44 of the Basic Law of Governance, the King shall be the final authority on all branches of government. 337 Royal Decree No. (M/78) dated 1428 AH– (2007). 89
The General Jurisprudential Principles are thus a dynamic concept able to adapt to circumstances in Saudi Arabia. Yet it is difficult to provide a full compendium of the
General Jurisprudential Principles because the Saudi Board of Grievances has published only selective provisions, and these give only an overview of the judicial environment.
Further, Saudi legislation does not distinguish the General Jurisprudential Principles from other national legislation.
H Conclusion
The main finding in this chapter is that there are fundamental principles in the Saudi legal system considered under the Saudi concept of public policy. In defining and explaining one side of the Saudi public policy coin, this chapter built a solid platform by identifying the major laws that govern the arbitration environment. The chapter began the in-depth investigation into the concept of public policy, along with the factors that affect the concept across world legal systems. This is an essential step in understanding and justifying the unique Saudi concept of public policy.
The chapter investigated the first side of the public policy coin (General Jurisprudential
Principles), concluding that General Jurisprudential Principles are not subject to violation by foreign judgements and international commercial arbitration. Thus, an international commercial arbitration award conflicting with General Jurisprudential
Principles necessarily conflicts with the Saudi concept of public policy.
As the General Jurisprudential Principles are not clearly identified in the Saudi legal system, analysis had to proceed through a painstaking study of available decisions of the Saudi Board of Grievances and other legislation. The lack of publications of primary legal sources makes it difficult for international arbitrators and investors to identify the
General Jurisprudential Principles. Accordingly, this thesis argues that Saudi Arabia
90
needs to develop its legal environment to improve clarity and objective analysis. Yet the approach of judges to public policy in relation to Sharia raises issues that are more complex and more significant than those relating to the General Jurisprudential
Principles. Chapter IV will discuss the other side of the public policy coin—namely,
Sharia.
91
CHAPTER IV: SHARIA: THE OTHER SIDE OF THE PUBLIC POLICY COIN
A Introduction
Islamic law—Sharia—is at the heart of the concept of public policy in the Saudi legal system. It is also arguably the source of most legal grounds on which foreign judgements and arbitral awards are set aside. In this thesis, Sharia is discussed after the
General Jurisprudential Principles because its fundamental and prominent role in Saudi public policy can be more effectively explained by first clarifying the general legal environment of Saudi Arabia. This chapter will highlight the ways in which interpretations of Sharia affect the international commercial arbitration environment as far as Saudi Arabia is concerned.
This chapter is separated into themes that lay the foundations for Chapter V. Following this introduction (A), theme (B) identifies Sharia in the Saudi legal system and concludes that Saudi Arabia has adopted the philosophy of the Sunni schools. Also, there are competing Sunni schools of thought that influence on the Saudi legal system and arbitration in particular differently.
The theme (C) investigates and analyses the ways and processes by which a Saudi judge can set aside an arbitration award by applying Islamic public policy. The theme concludes that the philosophy of the Sunni authorises judges to apply ijtihad and taqlid.
This means that judges are legally authorised to apply their independent judgement, ijtihad and legal reasoning based on imitation, taqlid, to reach a legal decision that accepts or sets aside an arbitration award.
The theme (D) analyses the effects of the application of Sharia on international commercial arbitration awards. The theme concludes that every judge is free to use the
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weapon of public policy on the grounds of violating Sharia according to their particular interpretation; therefore, arbitration awards are at the discretion of the judiciary. Thus, the legal freedom to apply ijtihad and taqlid without legal restrictions has already led to negative outcomes because many provisions have similar facts and yield conflicting and unpredictable outcomes. This outcome is fundamental and necessary to Chapter V’s discussion of the root problems in applying Sharia to public policy that often impede the implementation of international commercial arbitration awards.
B What Does Sharia Mean in the Saudi Legal System?
Sharia is a fundamental pillar of the Saudi concept of public policy, and therefore, it is crucial to make clear what Sharia means in the Saudi legal system to assist this study to identify the impact of Sharia on the Saudi concept of public policy. Sharia may be compared to a vast net of different legal opinions on countless issues of life338—many and varied, because Islamic legal sources, both primary and secondary, are capable of being interpreted flexibly. 339Here, Jamar argues that, in many ways, though not in everything, Islamic law is indisputably flexible in meeting commercial realities. He notes the dictum of the Majalla that times change, and with them the requirements of the law, and observes that the Aramco Arbitration ruling340 recognises this flexibility— which is to be found, for example, in the injunction of the Qur’ān to ‘enjoin goodness and prohibit evil’.341
338 For more discussion on Sharia, see Abd al-Karim Zaidan, introduction to islamic law [Al-Madkhal li- Dirasa al-Sharia al-Islamia] (Dar Omar bin Alkhatab, 2001) 50–57 [Arabic]. 339 Ibid. 340 Saudi Arabia v. Arab Am. Oil Co. (ARAMCO), 27 ILR 117 (1963). 341 Steven D. Jamar, ‘The protection of intellectual property under islamic law’ (1992) 21 Capital University Law Review 1079. 93
Such a perspective shows that Sharia is not static but dynamic in nature. Sharia can co- exist with other legal opinions, 342 if such opinions are not in conflict with the fundamental principles of Islam. 343 Thus, Islamic law is dynamic and flexible in practice but—by definition—fundamental Islamic principles must be upheld in the law’s interpretation and application. Between these two poles—flexibility and adherence to fundamental Islamic principles—clearly there is broad scope for interpretation. Thus, it is necessary to enquire about the actual function and meaning of
Sharia in the Saudi legal system.
In fact, in the academic literature, attempts to identify Islamic law within the Saudi legal system are frequently confused. In particular, as this study has pointed out, most academic commentary in this area does not focus on the practical realities of the Saudi judicial environment.
Many studies argue that Saudi Arabia follows the Islamic interpretations of Muhammad ibn Abd al-Wahhab, which is generally known as 'Wahhabism’. Moussalli explains that how Wahhabism, originally ‘a movement of a revolutionary jihad and theological takfiri purification’, became a conservative social and political movement that contained an element of proselytising da‘wah but also, very significantly, upheld loyalty to the
Saudi royal family and obedience to the king.344
342 See also M. A. Ramli, ‘Postmodernism approach in Islamic jurisprudence (fiqh)’ (2013) 13(1) Middle- East Journal of Scientific Research 33. 343 Yusuf Al-Qaradawi, The lawful and the prohibited in Islam (Al-Halal wal Haram fil Islam) (kamal El- Hwlbawy and M. Moinuddin Siddiqui Shukry trans, American Trust Publications, 1999) 14–36. 344 Ahmad Moussalli, ‘Wahhabism, Salafism and Islamism: Who is the enemy?’ (Paper presented at the A Conflict Forum Monograph, 2009) 7. See also David Commins, The Wahhabi Mission and Saudi Arabia (IB Tauris, 2009). See also Natana J. Delong-Bas, Wahhabi Islam: from revival and reform to global jihad (Oxford University Press, 2008). See also Joseph Nevo, ‘Religion and national identity in Saudi Arabia’ (1998) 34(3) Middle Eastern Studies 34. 94
As some academic studies argue that Saudi Arabia applies only Hanbali thought,345 while others argue that Saudi Arabia follows Sunni schools,346 clearly it is essential to identify the precise scope of Sharia, given that various legal issues are dependent on the application of Sharia. One such issue is the nature of public policy.
The founder of Saudi Arabia, King Abdul-Aziz bin Abdul Rahman Al Saud, in an editorial in the Umm al Qura Gazette in 28/2/1346 AH–(27/8/1927), asked the judiciary to codify Islamic Sharia to guide decisions regarding the most accurate legal opinions among Sunni schools. After almost a year of judicial negotiations, judiciary decision
No. (3) in 17/1/1347 AH–(5/7/1928) encouraged Saudi judges to follow the legal rulings of Imam Ahmad bin Hanbal347 (founder of the Hanbali school) because it was easy to review his books, and Hanbali scholars were committed to justifying legal opinions with strong evidence. However, if application of a Hanbali opinion might negatively affect the public interest, judges were authorised to consider opinions from other Sunni schools.
345 Joseph A. Kechichian, ‘The role of the Ulama in the politics of an Islamic state: The case of Saudi Arabia’ (1986) 18(01) International Journal of Middle East Studies 53. See also El Ahdab and El Ahdab, above n 105, 669–970. 346 Faris Nesheiwat and Ali Al-Khasawneh, ‘The 2012 Saudi Arbitration Law: A Comparative Examination of the Law and Its Effect on Arbitration in Saudi Arabia’ (2015) 13 Santa Clara Journal of International Law 464. See also Mohamed Fahmi Ghazwi, Ahmad Masum and Nurli Yaacob, ‘Recognition and Enforcement of International Arbitration Awards: A Case Study of Malaysia and Saudi Arabia’ (2014) 4(2) International Journal of Accounting and Financial Reporting 547. See also Ahmad Alkhamees, ‘International arbitration and Shari’a law: context, scope, and intersections’ (2011) Journal of International Arbitration 263. 347 According to the to Oxford Islamic Studies Online, an ‘Ibn Hanbal, Ahmad’ is: [E]ponym of Hanbali school of Islamic law. Native of Baghdad. Known for literal and legalistic interpretation of the Quran and hadith. Reputed to be the greatest hadith scholar of his time. Introduced the principle of istislah (the best solution in the public interest) as the purpose of legal rulings not clearly specified by the Quran and hadith. Taught that the written word of the Quran is authoritative over human interpretation, leading to a dispute with Caliph al-Mamun over the caliph’s authority to interpret religious texts. Argued that Islamic religious obligations were derived from fundamental texts as interpreted by recognized leading scholars, not by caliphal decree. Believed the caliph’s role was to serve as executor of the Islamic community, not as the source of its beliefs. Islamic scholars were to serve as advisers and admonishers to ruling elites to induce them to observe and implement Islamic law. This politico-religious alliance is the basis for the modern Islamic state of Saudi Arabia. His collection of the traditions is the Musnad. 95
This decision led to a royal order that characterised Saudi Arabia’s judiciary when the state was formed.348 The judiciary was free to draw opinions from all Sunni schools, in the sense that Saudi judges were required to address public interest within the boundaries of the Sunni schools in general and the Hanbali school in particular.349
In 1975, Royal Decree No. (M/64), issued to replace the 1928 royal order, established the first Law of the Judiciary. This law gave the judiciary legal freedom to apply Sharia.
However, the actual scope of Sharia was not restricted in legal terms. The first article of the law stated:
Judges are independent and, in the administration of justice, they shall be subject to no authority other than the provisions of Sharia and laws in force. No-one may interfere with the Judiciary.
In 2007, Royal Decree No. (M/78) lay down a new law of the judiciary, replacing the
1975 Royal Decree. The 2007 Law gave the same legal freedom to the judiciary to apply Sharia without any legal restrictions. In a magazine article, the Royal Embassy of
Saudi Arabia in Washington, in relation to the freedom of application of Sharia, traced the beginnings of the Saudi legal system to the incorporation of the concept of ijtihad in the 1926 Constitution of Hijaz in the west of the kingdom by King Abdulaziz. The
Embassy explained further that ijtihad, which it defined as ‘personal reasoning’, permitted judges ‘to make decisions concerning cases that fall outside of the provisions covered by the Sharia’.350
The role of ijtihad becomes highly significant in the context of the legal history of
Saudi Arabia, where the application of Sharia is not legally restricted. Ijtihad, which may be explained more clearly as ‘independent judicial assessment’ in Islamic
348 Abd al-Aziz ibn Baz, ‘Codify the Most Accurate Opinion of Islamic Scholars for the Judiciary’ (2001) 3. The General Presidency of Scholarly Research and Ifta 424–439. 349 Ibid. 350 The royal embassy of Saudi Arabia in Washington DC
philosophy, allows judges to reach a judicial decision by applying their own legal reasoning. At the same time, judges are free in a process of taqlid (known in English as
‘imitation’ and explained further below)—to refer to any relevant Islamic (Sunni) legal opinions as precedents on the legal issue in question.
This then defines Sharia as what is considered by the judge to be Islamic law according to the judge’s view with reference to the total body of Sharia sources. To express this idea in negative terms, it means what the relevant judge believes is against Sharia will, by definition, be unacceptable in the judicial system. Thus, in the Saudi legal system, where the definition of Sharia in a specific case is unregulated, for a proposal to be in conflict with Sharia means that it will conflict with public policy. Acceptance of an international commercial arbitration award depends on a decision based on the principle of ijtihad by the judge or judges concerned.
C How Can a Saudi Judge Set Aside Arbitration Awards Using Islamic Public Policy?
In principle, the new arbitration law of Saudi Arabia requires international commercial arbitration awards to comply with the provisions of Sharia as a fundamental part of the concept of public policy.351 Yet Sharia is not codified in the Saudi legal system. How, then, is the Saudi judge able to set aside arbitration awards by reference to Islamic public policy?
Evidence from extrapolation from available judicial findings, as will be discussed below, demonstrates that judges are authorised to use ijtihad—their own independent reasoning based on reference to primary and secondary Islamic sources—to make legal
351 Art 50(2) states that: ‘The competent court considering the nullification action shall, on its own initiative, nullify the award if it violates the provisions of Sharia and public policy in the Kingdom or the agreement of the arbitration parties, or if the subject matter of the dispute cannot be referred to arbitration under this Law’. 97
decisions; and it demonstrations that this occurs in actual practice. Such a decision may also take the form of selection of an existing legal opinion from among the Sunni schools; that is, on the basis of taqlid, ‘imitation’. Taqlid may be regarded as complementary to ijtihad, to the extent that taqlid does not demand detailed examination of the scriptural basis of the opinion or the reasoning by which it was formed.
Thus, in dealing with an international commercial arbitration award, the primary role of judges is to examine primary and secondary Islamic sources and apply their own independent reasoning to decide whether the award is compatible with Sharia as seen in the light of Islamic jurisprudence. If, however, a similar case has originally been discussed in a Sunni school, judges will be authorised to adopt a Sunni precedent to decide whether to implement or set aside the arbitration award in question. In this way, either through ijtihad or taqlid (either through current legal reasoning or application of an earlier Sunni process of reasoning), the disposition of an arbitration agreement is at the discretion of the judiciary. Implementation of an award completely depends on independent judicial assessment of whether the award conflicts with Saudi public policy. In other words, the different meanings and interpretations of Sharia influence whether international commercial arbitration awards are recognised and enforced under
Saudi law.
Ijtihad and taqlid are the two main criteria on which judges decide whether international commercial arbitration awards are compatible with Islamic public policy. It is thus important to explore these two concepts in detail, examining their relation to primary and secondary Islamic sources to specifically identify how each concept is tied into a legal issue that opposes the implementation of arbitration awards on public policy grounds. 98
1 Ijtihad in Islamic Primary Sources
The Arabic word ijtihad is derived from the root jihad, ‘struggle’, 352 because the mujtahid—the one who applies ijtihad through independent interpretation of traditional
Islamic sources—must struggle to achieve a decision most appropriate to the purpose of jurisprudence according to the holy law revealed by Allah.353 It is essentially then a critical thinking process with a defined aim. 354 Ijtihad comes into play where the primary sources—the Quran and the Sunnah—are ‘silent’, and do not address the issue.
To achieve the purpose of Islamic jurisprudence is not an arbitrary process. The mujtahid needs to master many important areas of Islamic legal knowledge—a deep foundation in knowledge of sacred texts and the principles of Islamic jurisprudence, usul al-fiqh ‘deep comprehension’ 355 —the practice of ijtihad then demands a sophisticated ability for legal reasoning.356 The principles of Islamic jurisprudence were developed from the 8th to the 13th century, during the Golden Age of Islam,357 and have been maintained since. Theorist Hallaq goes so far as to say:
Except for a relatively few Quranic and Prophetic statements which were unambiguous and which contained clear and specific normative rulings, the rest of the law was the product of ijtihad.358
Ibrahim bin Nasser Hamoud, a professor in the Institute of Higher Judiciary of Saudi
Arabia, explains that in the Saudi legal environment ijtihad means considering detailed
352 Laura U. Marks, ‘A Deleuzian Ijtihad: Unfolding Deleuze’s Islamic sources occulted in the ethnic cleansing of Spain’ (2012) Deleuze and Race 51. 353 Mohamed A. Abdelaal, ‘Taqlid v. Ijtihad: The Rise of Taqlid as the Secondary Judicial Approach in Islamic Jurisprudence’ (2012) 14 The Journal Jurisprudence 151. 354 Hallaq, above n 314, 27. See also Lawrence Rosen, The anthropology of justice: Law as culture in Islamic society (Cambridge University Press, 1989) 18. 355 Tariq Ramadan, ‘Ijtihad and Maslaha: The Foundations of Governance’ (2006) Islamic Democratic Discourse 12. See also John Makdisi, ‘Legal logic and equity in Islamic law’ (1985) The American Journal of Comparative Law 63. 356 John L. Esposito, The oxford dictionary of Islam (Oxford University Press, 2004) 134. 357 Wael B. Hallaq, ‘Was the gate of ijtihad closed?’ (1984) 16(01) International Journal of Middle East Studies 3. See also Adham A. Hashish, ‘Ijtihad institutions: the key to Islamic democracy bridging and balancing political and intellectual Islam’ (2010) 9 Richmond Journal of Global Law & Business 61. 358 Hallaq, above n 314, 27. 99
evidence in the primary sources of the Quran and Sunnah as well being guided by ijma,
‘unanimity’, and in the absence of a clear text to achieve an appropriate legal ruling, from secondary Sharia sources.359
The upshot is: whether or not Saudi Arabia accepts an international commercial arbitration award hinges on whether the award is compatible with Sharia. To assess the award in terms of its implications in the Saudi legal environment where Sharia is a critical component, judges will need to apply ijtihad to decide whether to implement such arbitration awards, or set them aside. 360 It follows that an observer of the submission of cases of international commercial arbitration awards to the judiciary— where once again, compatibility with Islamic law is a sine qua non—to identify potential and actual obstacles to the implementation of such awards in Saudi Arabia, will need to try to understand the process of ijtihad within the judiciary. Accordingly, this thesis now investigates the key guidelines adopted by Saudi judges in deciding whether to implement or set aside international commercial arbitration awards.
(a) Ijtihad in the Quran
To recapitulate, the main sources of Islamic law, Sharia, are the Quran and Sunnah.361
To understand the working of ijtihad, it is essential to understand the main characteristics of these two primary sources. It is also necessary to understand the mechanisms used by Islamic scholars and judges over the centuries to arrive at decisions on matters in Islamic law through reference to these two sources.
359 Abdulla Al Nasser et al, Judicial System in Saudi Arabia (Center for Global Thought on Saudi Arabia, 2015) 320. ‘The Judicial System in Saudi Arabia’ is an important book in which a group of elite academics, professionals and judges discuss and analyse the philosophical and practical aspects of the Saudi legal system. For more details about the use of secondary sources of Sharia, see section (C2) of this Chapter. 360 Ibid. 361 Majid Khadduri, ‘Nature and Sources of Islamic Law’ (1953) 22 The George Washington Law Review 3. See also Irshad Abdal-Haqq, ‘Islamic law—an overview of its origin and elements’ (2002) 7 Journal of Islamic Studies and Culture 27. 100
The Qur’an is the holy book of Islam, accepted as revealed by Allah to humankind, dictated to the Prophet Muhammad by the archangel Gabriel.362 The Quran consists of
114 units of varying lengths which relate to matters of doctrine, social organisation, and law. This unit is the sura. To go more deeply into the nature of the Quran, Muslim communities are drawn to this central revealed source363 through the information the
Quran conveys in relation to faith, ethics and jurisprudence.364 This can occur through ibadat, the religious duties of worship (including ‘pillars of Islam’, namely, the profession of faith, ritual prayer, almsgiving, fasting and pilgrimage), or mu’āmalāt, that is, other civil acts, especially rulings on commercial transactions. Apart from such information, the Quran speaks to the faithful in varied ways, through stories from the past, commands, recommendations, and even stories about the projected future.365
As a matter of course, a judge will be familiar with the text of the Quran. Yet information in the Quran that is relevant to a specific case may be ‘silent’. Or it may be scattered,366 and need to be drawn together to form a coherent response to the issue under consideration.367 Additionally, while some of the texts in the Quran are very clear and do not require intensive interpretation, others require specific procedures, together with deep understanding, to achieve the interpretation that is considered most appropriate.368
362 Oxford Dictionary, Koran
In the process of accurately clarifying the meaning and implications of a Quranic text, understanding of the Arabic language itself is crucial.369 Typically, an Arabic stem may consist of three consonants, which can have added affixations; inserted vowel sounds will also vary. This enables a very large potential lexicon, and there is the possibility that a subtle difference in meaning might occur that could affect a ruling. Needless to say, the reasoning behind a decision might be extremely difficult to understand if approached through an English translation.
The range of knowledge required by a judge is described in the uloom ul-qur’ān
‘Quranic sciences’, covering the fundamental principles of Quranic interpretation.
These relate to tafsir ‘interpretation’, which includes the difference between muhkam
‘decisive’ and mutashabih ‘allegorical’ verses. The Quran might speak of a legal issue that is also discussed in the Sunnah, in which case understanding will involve reference to both, and naskh ‘abrogation’ might arise in terms of an apparent contradiction between the two primary sources. Wahyu ‘revelation’ is a key issue, including the differences between revelations in Mecca and those after Muhammed and his followers journeyed to Medina in 622 AD. A judge must also have extensive, in-depth knowledge of Islamic literature.370
(b) Ijtihad in the Sunnah/Hadith texts
The Sunnah is the traditional record of the words and acts of the Prophet Muhammed. It is essential to full understanding of Islamic jurisprudence as well as to understanding
369 Nadirsyah Hosen, ‘Nahdlatul ulama and Collective ijtihad’ (2004) 6 New Zealand Journal of Asian Studies 5. 370 For more information on the significance of Quranic sciences, see Abdulla Al Nasser et al, above n 359, 401–407. See Abu Ammaar Yasir Qadhi, An Introduction to the Sciences of the Qur’aan (Al- Hidaayah, 1999) 19. See Muhammad Taqi Usmani, Uloom Ul Quran An Approach to the Quranic Sciences, (Darul Ishaat, 2011). 27–30. See also Ahmad Von Denffer, Ulum al Qur’an: An Introduction to the Sciences of the Qur’an (Koran) (Kube Publishing Ltd, 2015). Also Abu Ameenah Bilaal Philips, Usool at-Tafseer: The Methodology of Qur’anic Interpretation (International Islamic Publication House, 2005). 102
the five pillars of the faith and various other religious and civil matters.371 It is accepted as complementary to the Quran and is an independent source of law where a matter is not mentioned in the Quran.372
However, Sunnah as a primary source has been associated with controversial legal and other Islamic issues. This can be seen in its historical background, part of which relates to issues in Sunni versus Shia doctrines and the authenticity of what was recorded about the words and acts of the Prophet.373 The content of the Sunnah was collated from the records of the Companions of the Prophet and subsequent generations, who linked texts back to the words of the Prophet.374 Ultimately, thousands of texts were compiled with a view to investigation of their authenticity.375 Islamic scholars devised methodologies for this purpose, referred to as ‘The Science of Hadith’376—where hadith means a statement within a Sunnah text. The ‘Science of Hadith’ covers matters such as independent confirmation, the soundness of the narrative chain, the credibility of narrators in the chain and the consistency of a hadith with the Qur’ān and other Sunnah texts.377 Various books within Islamic literature discuss the history and veracity of Sunnah texts.378 Some books on the fundamental principles of Sunnah show how to approach texts and use
371 For more information on the significance of Sunnah, see Jamaal al-Din M. Zarabozo, The Authority and Importance of the Sunnah (Al-Basheer Publications & Translations, 2000); Nasir al-Din Albani, The status of Sunnah in Islam: a declaration that it cannot dispense with al-Qur’an, Aldahieh (Society of the Revival of Islamic Heritage, 1990). 372 Ibid. Mana Alkatan, Excerpts of Hadith Sciences (Dar ibn Al Qasim, 2015) [Arabic]. 373 Wael B. Hallaq, ‘The Authenticity of Prophetic Ḥadîth: A Pseudo-problem’ (1999) Studia Islamica 75. For example, Shia Muslims do not accept the Sunnah that Sunni Muslims depend on in their life matter, which is generally known as Kutub al-Sittah (six major hadith collections), as this study will discuss later. Instead, they have different Sunnah references that were written by three authors known as the ‘Three Muhammads’: Kitab al-Kafi by Muhammad ibn Ya’qub al-Kulayni al-Razi (329 AH), Man la yahduruhu al-Faqih by Ibn Babawayh, and Tahdhib al-Ahkam and Al-Istibsar, both by Shaykh Tusi. Accordingly, clashes have occurred in theory and practice between Shia and Sunni. For more details, see Momen Moojan, Introduction to Shi’i Islam (Yale University Press, 1985) 174. 374 Ibid. 375 Ibid. 376 Ibid. 377 For further discussion on the Science of Hadith, see Suhaib Hasan, An introduction to the science of Hadith (Al-Quran Society London, 1994). See also Yusuf Al-Qaradawi, Approaching the Sunnah: Comprehension & Controversy (International Institute of Islamic Thought (IIIT), 2007). 378 Ibid. 103
them in legal rulings, others provide a rich store of background information that can also be referred to in such rulings.379 Examination would generally show whether a text could not be accepted because it was fabricated or forged.380 If accepted, it would be classed according to criteria of reliability: sahih ‘authentic’, hasan ‘good’, or dhaif
‘weak’, for example.381 A judge’s legal decision that would affect lives negatively if the texts on which the decision depended are classed as ‘weak’.
Books of value that remain the main sources for Sunni include the Sahih Bukhari, Sahih
Muslim, Sunan Abu Dawood, Jami al-Tirmidhi, Sunan al-Sughra, Sunan ibn Majah and
Muwatta Malik.382 These collections of hadith are popular because they include the most acceptable texts on issues in a Muslim’s life.383 The popular Sahih Bukhari and
Sahih Muslim in particular are considered very accurate.
Where a legal dispute involves a new issue with no direct reference available from the primary sources—such as intellectual property rights or online business—the Saudi judge can refer to secondary sources of Sharia.
2 Ijtihad in the Secondary Sources of Sharia
Ijtihad involves the study of secondary sources as well as the Quran and Sunnah, and it is necessary to discuss the most acceptable secondary sources in the Saudi judicial environment as well as those that are the most relevant secondary sources to decisions on public policy as reason to reject international commercial arbitration awards.384 The
379 Ibid. 380 Ibid. 381 Bilal Philips, Usool Al-Hadith: The methodology of Hadith Evolution (International Islamic Publishing House). 382 Scott C. Lucas, Constructive Critics, Ḥadīth Literature, and the Articulation of Sunnī Islam: The Legacy of the Generation of Ibn Saʻd, Ibn Maʻīn, and Ibn Ḥanbal (Brill, 2004) 106. 383 Ibid. 384 H. Patrick Glenn, Legal traditions of the world: Sustainable diversity in law (Oxford University Press (UK), 2014) 182–198. 104
major secondary sources are ijma ‘consensus’, qiyas ‘reasoning by analogy’, urf ‘local custom’ and al-maslahah al-mursalah ‘public interest’.
(a) Ijma, ‘consensus’
According to the analysis of available provisions of the Grievances Board, any foreign judgements or international commercial arbitration awards that are in conflict with ijma have consistently been directly revoked on the grounds of public policy. Ijma means literally ‘unanimous agreement’ or ‘total consensus’ (it is derived from a root jama’a
‘everybody’).385 Ijma is a substantial secondary source for Sharia in general,386 and in the Saudi legal environment in particular.
Zaid bin Abdul Karim Al-Zaid, Professor of Comparative Jurisprudence and former
Dean of the Higher Judicial Institute in Imam Mohammad Ibn Saud Islamic University, states that ijma ‘unanimous agreement’ is an original source for ensuring Sharia- compliant rules in general, and for the administration of justice in particular, as judges are obliged to apply rules that have been achieved through ijma. 387 Similarly, the
Hamoud warns that, in exercising discretion, a judge should be wary of unwittingly contradictory provisions that have been unanimously agreed upon by imam, ‘Islamic scholars’. Yet when it comes to fact situations that have not previously been encountered, judges are permitted to exercise discretion in accordance with previously decided Sharia principles.388
Although ijma is a secondary source in determining principles of Sharia, ijma can have a deciding role when it comes to Saudi public policy. There is debate over whose
385 Judith Romney Wegner, ‘Islamic and talmudic jurisprudence: The four roots of Islamic law and their talmudic counterparts’ (1982) 26(1) The American Journal of Legal History 25. 386 Glenn, above n 384. 387 Abdulla Al Nasser et al, above n 359, 23. 388 Ibid 23. 105
opinions are relevant for ijma, and the Islamic literature speaks of different forms of ijma. For the purposes of this thesis, the most important question is the form of ijma accepted by the Saudi judiciary. A survey of the available provisions of the Saudi
Grievances Board clearly shows that, in any era after the death of the Prophet, the Board considered something as ijma only if there was the unanimous agreement of Mujtahidin scholars. Al-Zaid defines ijma as a Sharia ruling reflecting the unanimous agreement of the Mujtahid in a given era. Ijma must therefore come from eminent Islamic scholars, and when it concerns a new Sharia issue, must be unanimously reached at a given point of time.389
Blanket prohibitions, however, are not envisaged. In Ruling No. 189/T/4 of 1427 AH–
(2007), a judge stated that ‘the prohibition of songs is not in accordance with the explicit text of the Quran or Sunnah or in accordance with the ijma between Muslim scholars; thus, the judge should not force people to accept his beliefs in matters of non- consensus’. Bearing this in mind, when examining unanimous agreements by major jurists relating to arbitration awards in light of Sunni treatises, there have been unanimous prohibitions of eating pork, drinking alcoholic beverages, adultery, usury and many other issues, but all these issues must be considered to be limited compared to the total body of Islamic law. 390 According to Hallaq, the cases where there was consensus constituted less than one per cent of the total body of law but ‘because these cases were subject to this extraordinary instrument, they were deemed especially important’.391
389 Ibid. 390 Abdullah bin Hamid Ali, ‘Scholarly consensus: Ijma’: between use and misuse’ (2010) 12(2) Journal of Islamic Law and Culture 92. 391 Hallaq, above n 314, 22. 106
(b) Qiyas, reasoning by analogy
Saudi judges have used qiyas in deciding whether to implement or set aside foreign judgements or international commercial arbitration awards on Islamic public policy grounds.392 Arguably, this is one of the most significant Islamic sources that might set aside foreign judgements or international commercial arbitration awards.393
The word qiyas is a noun, derived from the verb qis, literally meaning ‘analogise’.394
For Sharia generally395 and especially for the Saudi judiciary, qiyas is a significant recognised source, as a survey of the available provisions of the Saudi Grievances
Board shows, but it is less strong than ijma. Ijma indisputably falls within the concept of public policy, while qiyas is subject to judicial assessment. Yet, though after ijma,
392 Analysis of extrapolated Saudi Grievances Board provisions demonstrate that Saudi judges on many matters have made legal decisions that were originally based on qiyas. For example, the issue of riba ‘usury’ is particularly problematic. Ruling No. 269/ES/4 of 1431 AH–(2010) related to the application of a foreign arbitral award issued by the International Court of Arbitration in London in Case No. 10142 of January 2004, where the plaintiff sought enforcement of the arbitration court’s ruling requiring the defendant to pay the arbitration fees (totalling US$300,000), annual interest equal to 6 per cent, and 450,000 British pounds for expenses incurred by the plaintiff. The Fifteenth Sub-Circuit declined to enforce the foreign award on the grounds that the contract included riba that is; it was contrary to public policy in the Saudi Arabia as it violated Islamic principles. The Fifteenth Sub-Circuit cited the Decision of the President of the Grievances Board stating that no foreign provision to be implemented in Saudi Arabia should be contrary to Sharia. However the Audit Circuit revoked the Fifteenth Sub-Circuit ruling. In an important clarification of the significance of Sharia public policy, it stated that a foreign provision that includes a part that is contrary to the law or to public order cannot be implemented if it is not possible to separate the non-offending part from the offending part. However, if the two parts can be severed and considered separately, so that one part of the provision can be implemented without the offending part, there is no reason to refuse to implement the provision if this has been so decided by the court. As a result, the court was obliged to implement the arbitration award, except for the part involving riba, which was contrary to public policy. Another case Ruling No. Q/1/2496 of 1425 AH–(2004), concerning a commercial dispute led to foreign judgment from the First Instance Court in South Cairo and approved by the Court of Appeal in the Arab Republic of Egypt. The Saudi Grievances Board refused to implement part of the judgement in relation to 4 per cent annual interest, which was contrary to public policy due to riba. Analysis of this ruling showed that qiyas was the main source justifying the ruling that set aside the contrary part. It is important to note that there is disagreement among Islamic scholars as to whether contemporary currency should be treated in the same manner as the gold and silver of the Prophet's era. However the court took the position that it should be treated in the same way, because paper currency, and gold and silver share the same illa, ‘operative/effective cause’, gold and silver perform all the thaman ‘functions of money’, and both have intrinsic value. For a detailed discussion on riba, see Abdullah Saeed, Islamic Banking and Interest: A Study of the Prohibition of Riba and Its Contemporary Interpretation (E J Brill, 1996). 393 Ibid 394 Wegner, above n 385, 44. 395 ВG Weiss, The Search for God’s Law: Islamic Jurisprudence in the Writings of Sayf Al Dln Al-ÂmidF (University of Utah Press, 1992) 633. 107
qiyas ranks higher than the other secondary sources. Al-Zaid notes that, where there is no Sharia provision in the Quran and the Sunnah, and ijma is not reached, ‘qiyas— finding a new Sharia ruling based on reasoning and inference—will apply’.396
Through qiyas, a ruling in the Quran or the Sunnah may be extended to apply to a new problem, as long as the asl ‘precedent’ and far—the new problem—share the same illa
‘operative/effective cause’. For example, the reason for proscribing alcohol is that it intoxicates the mind; thus, by analogy, the prohibition should be extended to narcotic drugs. ‘Although various schools of thought in Islamic history have vigorously debated the legitimacy of the use of analogy, qiyas has played a central role in the development of Islamic law’.397 In the hands of a Saudi judge aiming to accord with the purposes of
Islamic jurisprudence in a legal dispute, qiyas is a powerful instrument if used properly.398 Necessary steps in using qiyas have been set out by Islamic jurists; for example, in Uṣūl al-fiqh ‘principles of Islamic jurisprudence’.399
(c) Urf, local custom
Halsbury’s Laws of England describes a ‘custom’ as:
a particular rule which has existed either actually or presumptively from time immemorial and has obtained the force of law in a particular locality, although contrary to or not consistent with the general common law of the realm.400
396 Abdulla Al Nasser et al, above n 359, 33. 397 Esposito, above n 228, 254. 398 For more detail regarding Conditions of Qiyas, see Shah Abdul Hannan, ‘Usul Al Fiqh’ (2004) Muslims Internet Directory 20–23. 399 Ibid. It is important to note that judges can also apply istihsan ‘juridical discretion’, with respect to a ruling that was originally in conflict with qiyas principles, thus favouring a ruling that will tend to lessen hardship and bring relief. Istihsan means departing from precedent to decide on a certain case for a reason that is stronger here than in the other similar cases. This could result in a favouring a public policy decision in a certain case. For more details about istihsan see Saim Kayadibi, Istihsan (juristic preference): the forgotten principle of Islamic law (Durham University, 2006) 114. See also Oxford Islamic Studies Online, Istihsan
In most jurisdictions of the world, customs and traditions are sources of law.401 Urf,
‘local custom’ or ‘unwritten customary law’, refers to the way common people maintain order, interact socially and conduct local business.402 It is an ancient and significant source of Sharia403and Saudi jurisprudence.404 However, its unregulated state means it will tend to vary between locales. Islamic jurists have instituted various conditions to determine when and how to use urf in legal decisions.405
Analysis of extrapolated Saudi Grievances Board provisions show that urf is a significant source for the Saudi legal system with regard to domestic considerations, and many decisions have depended on this source to settle disputes. In fact, there are many legal citations to prove that Saudi judges have set aside judgements or awards by applying urf in matters that link to Islamic legal traditions. For example, earning interest from moneylending is a normal activity, and features in legal contracts. However, riba is illegal in Saudi Arabia, and Saudi judges have set aside awards on this basis.
Public morals and local customs and traditions form significant parts of the public policy concept in many legal systems, and it may be expected that through independent judgement and legal reasoning, urf will also play a significant role in Saudi public policy.406
401 Hafiz Abdul Ghani, ‘Urf -o-Ā dah (Custom and Usage) as a Source of Islamic law’ (2011) 1 American International Journal of Contemporary Research 178, 178. See also Leon E. Trakman, ‘“Legal Traditions” and International Commercial Arbitration’ (2006) 17 American Review of International Arbitration 1. 402 Esposito, above n 228, 328. 403 Ghani, above n 401. 404 Abdulrahman Baamir and Ilias Bantekas, ‘Saudi law as lex arbitri: Evaluation of Saudi Arbitration Law and judicial practice’ (2009). 405 For more discussion on the conditions of a valid custom in Islam, see Hafiz Abdul Ghani, ‘Conditions of a Valid Custom in Islamic and Common Laws’ (2012) 3(4) International Journal of Business and Social Science. 406 For more details on Saudi legal traditions, see Joseph L. Brand, ‘Aspects of Saudi Arabian Law and Practice’ (1986) 9 Boston College International and Comparative Law Review 1. 109
(d) Al-maslahah al-mursalah or ‘Maslahah’, ‘public interest’
Implementation of international commercial arbitration awards requires compatibility with public policy. The NYC specifically mentions in article 5, ‘the public policy of that country’ is a defence to the recognition and enforcement of a foreign arbitration award by a domestic court; here, a Saudi court.
Saudi courts apply the principles of Sharia in legal issues.407 They examine Islamic primary sources to find legal rulings to settle disputes.408 Where primary sources do not present a solution, judges must turn to secondary sources.409 An important secondary source similar to the Western concept of public policy is al-maslahah al- mursalah/Maslahah ‘public interest’.410
Public interest is an independent legal source. It is a concept in Islamic jurisprudence411 based on the key Islamic objective of helping humankind attain benefits ‘both in this world and the next’.412 ‘Maslahah or public interest’, states Islamic philosopher Faisal
Kutty, ‘is an essential influence in the development of Sharia and is known as the overriding objective of Sharia that is to encompass all measures beneficial to people’.413
Another Islamic philosopher, Al-Ghazali, sees maslahah as securing benefit and preventing harm, in harmony with the objectives of Sharia.414 He says these are the
407 Knut S. Vikør, Between God and the sultan: A history of Islamic law (Oxford University Press, USA, 2005) 7–8. 408 Jamal J. Nasir, The Islamic law of personal status (Graham & Trotman Publisher 1990) 6–7. 409 Vikør, above n 407, 156. 410 Faisal Kutty, ‘The Shari’a Factor in International Commercial Arbitration’, (2006) 28 Loyola of Los Angeles International and Comparative Law Review 565. 411 Mohammad Hashim Kamali, Principles of Islamic jurisprudence (The Islamic Text Society, 1991) 235–241. 412 Muhammad Hashim Kamali, ‘Source, Nature and Objectives of Shari’ah’ (1989) 33(4) Islamic Quarterly 215. 413 Kutty, above n 410, 565. 414 Nora Abdul Hak, ‘Application of maslahah (interest) in deciding the right of hadanah (custody) of a child: the practice in the Syariah Court of Malaysia’ (2011) 7(13) Journal of Applied Sciences Research 2182. 110
preservation of religion, life, intellect, lineage and property415—anything against these is mafsadah ‘evil’, and any measure that secures these values is maslahah ‘good’.416
Contemporary Islamic theorist Yusuf Al-Qaradawi, on the other hand, argues that
Islamic law is broader—protecting human dignity, achieving security and justice, maintaining morality, solidarity, care of public rights and freedoms, and all that serve human welfare.417
According to Islamic literature, the independent legal source of ‘public interest’ should be taken into consideration after the end of an investigation into other Islamic sources.418 It goes without saying that it is not permissible to use this source in matters that conflict with primary source texts. 419 For example, legalisation of alcoholic beverages, usury and pork products is not permissible, even if this might have significant financial benefits for the country.420 Accordingly, many steps would need to be taken in using the ‘public interest’ as an independent source before concluding that public interest is neither validated nor invalidated by any text.421
Maslahah theory essentially assesses maslahah and mafsadah; that is, good and evil.422
Where there is no Islamic text either to validate or invalidate a matter, maslahah theory considers the weight of evidence to reach a legal ruling for the purpose of serving
Islamic society. This requires in-depth investigation. 423 A great deal of legislation during Islamic history has been achieved through this independent source. Examples are
415 M. A. Muqtedar Khan, Islamic democratic discourse: theory, debates, and philosophical perspectives (Lexington books, 2006) 5. 416 Ibid. 417 Yusuf Al-Qaradawi, Al-maslahah Al-mursalah, Yusuf Al-Qaradawi official website at webarc.بها20%العمل20%وشروط20%المرسلة20%المصلحة/المرسله20%المصلحة/file:///Users/banderalsaif/Desktop> hive> [Arabic]. 418 Ibid. 419 Ibid. 420 Ibid. See also Mohamad Akram Laldin, Islamic law: An introduction (Research Centre, International Islamic University Malaysia, 2006) 54–127. 421 Ibid. 422 Ibid. 423 Muhammad Ibn Ali Al-Shawkani, Irshad ul Fuhool (Dar alsalam 2010) 226. 111
the codification of Quran in the era of the Companions,424 and the regulation of traffic, family matters, and tax.425 The former Justice Minister, Abdullah Al-Sheikh, went so far as to say that procedural and judicial regulations in Saudi Arabia were based upon the al-maslahah al-mursalah concept.426
To compare the al-maslahah al-mursalah concept with Western public policy: both concepts work to protect fundamental social principles, both can adapt to the country’s overall circumstances and both depend on justification in terms of the philosophy of law and legal sources. However, while the West focuses on individual rights, Sharia generally focuses on collective rights.427
3 Taqlid in Islamic Precedents
The discussion in this chapter has examined the relationship between Sharia sources and judicial decisions in the Saudi legal system. Precedents from Islamic scholars exist in treatises in each school of jurisprudential thought and every decision contains evidence from Islamic sources.428 Currently in the Islamic world, there are four dominant schools
424 Issa Qaed et al, ‘Maslahah as an Islamic Source and its Application in Financial Transactions’ (2014) 2(2014) Quest Journals 66. 425 Ibid 426 Abdullah Al-Sheikh, Procedural and judicial systems in the kingdom based on public interest, Alyoum Newspaper. 2%في20%اإلجرائية20%القضائية20%األنظمة20%:20%اليوم/المرسله20%المصلحة/file:///Users/banderalsaif/Desktop> . of Islamic jurisprudence:429 the schools of Imam Abu Hanifa,430 Imam al-shafi,431 Imam Malik432 and Imam Ahmad ibn Hanbal. Each school has volumes of jurisprudence that serve as references for its followers.433 The discussion in this chapter has demonstrated the complexity involved in making a judicial decision through dependence on primary and secondary sources. However, ijtihad applies only when making a new legal decision or changing an existing precedent from mujtahid (qualified scholars).434 The Board of Senior Ulema of Saudi Arabia’s (Council of Senior Scholars) main role is to apply the concept of ijtihad to issue decisions on new Islamic issues for the Saudi judiciary and government.435 429 For more discussion on schools of Islamic jurisprudence, see Christopher M. Blanchard, ‘Islam: Sunnis and Shiites’ (Paper presented at 2005). 430 According to Oxford Islamic Studies Online, ‘Hanafi School of Law’ is: Islamic school of legal thought (madhhab) whose origins are attributed to Abu Hanifah in Kufa, Iraq, in the eighth century. Most widespread school in Islamic law, followed by roughly one-third of the world’s Muslims. Dominant in the Abbasid caliphate and the Ottoman Empire. Remains the dominant legal authority in successor states for personal status and religious observances. Uses reason, logic, opinion (ray), analogy (qiyas), and preference (istihsan) in the formulation of laws. Legal doctrines are relatively liberal, particularly with respect to personal freedom and women’s rights in contracting marriages. First school to formulate contract rules for business transactions involving resale for profit and payment for goods for future delivery. 431 According to Oxford Islamic Studies Online, ‘Shafii School of Law’ is: School of Islamic law founded by Muhammad ibn Idris ibn al-Abbas ibn Uthman ibn Shafii in the eighth century. Prominent in Egypt, Palestine, and Jordan with a significant number of followers in Syria, Lebanon, Iraq, Hejaz, Pakistan, India, and Indonesia and among Sunnis in Iran and Yemen. Official school for Ayyubid dynasty in Egypt, and prominent during the Mamluk regime that followed. Displaced by the Hanafi school there when the Ottomans occupied Egypt in 1517. Combined knowledge of fiqh as practiced in Iraq with that of Hejaz. Considers hadith superior to customary doctrines of earlier schools in formulation of Islamic law. Denies preference (istishan) as source of law. 432 According to Oxford Islamic Studies Online, ‘Maliki School of Law’ is: School of law attributed to Malik ibn Anas al-Asbahi in the eighth century in the Arabian Peninsula. Originally referred to as the School of Hejaz or the School of Medina. Predominant in North Africa and significantly present in Upper Egypt, Sudan, Bahrain, United Arab Emirates, and Kuwait. Characterized by strong emphasis on hadith; many doctrines are attributed to early Muslims such as Muhammad’s wives, relatives, and Companions. A distinguishing feature of the Maliki school is its reliance on the practice of the Companions in Medina as a source of law. Additionally, Malik was known to have used ray (personal opinion) and qiyas (analogy). 433 For more discussion on schools of Islamic jurisprudence, see Abdullah Saeed, Islamic thought: An introduction (Routledge, 2006). 434 Rudolph Peters, ‘Idjtihād and Taqlīd in 18th and 19th century Islam’ (1980) Die Welt des Islams 139. See also Frank Edward Vogel, Islamic law and legal system studies of Saudi Arabia (Harvard University, 1993) 245–313. See also Frank E. Vogel, ‘Shari’a in the Politics of Saudi Arabia’ (2012) 10(4) The Review of Faith & International Affairs 18. 435 The Saudi Basic Law of Governance declared in Art 45 that ‘The source for fatwa (religious legal opinion) in the Kingdom of Saudi Arabia shall be the Book of God and the Sunnah of his Messenger 113 Saudi judges are legally authorised to imitate/follow these decisions in a process of taqlid.436 Taqlid means literally ‘placing a collar (qilådah) around the neck’; Imam al- Ghazali explains taqlid as ‘accepting the independent interpretation of Islamic legal sources by qualified Mujtahidin “qualified scholars”’.437 Taqlid can be characterised as an essentially conservative, traditional approach compared with ijtahid and its independent reasoning based on revelation in relation to new ideas.438 In practice, taqlid is widely accepted by Islamic jurists. 439 However, it is evident from a survey of available judicial decisions that the Saudi legal system gives the judiciary freedom to follow Sharia,440 without being bound by precedents from any particular school or even the Council of Senior Scholars.441 (PBUH). The Law shall set forth the hierarchy and jurisdiction of the Board of Senior Ulema and the Department of Religious Research and Fatwa’. 436 Ibid. 437 Abū Ḥāmid Muḥammad ibn Muḥammad al-Ghazālī, Al-Mustasfa (Al-Madina Printing & Publishing Co) 387. 438 Oxford Islamic Studies Online, Taqlid, Finally, it is important to notice that while precedent does not apply formally to the interpretation of the NYC by domestic courts of signatory states, there is nevertheless some significance attached to courts seeking to arrive at consistent interpretations, or at least, to avoid unduly divergent ones. D Discussion and Analysis of the Effect of Sharia on Arbitration Awards The contracting states interpret the fifth article of NYC differently. In Saudi Arabia, Islamic law is the second side of the public policy coin. Being contrary to principles of Sharia means being contrary to the Saudi concept of public policy. In matters outside the scope of ijma, the judge applies ijtihad and taqlid to reach legal decisions, without judicial restrictions as to how these two concepts should be applied. The main goal of the judge in the application of Sharia is to address public interest. And yet, as the discussion below shows, this freedom to apply ijtihad and taqlid without any legal restrictions is no doubt the major threat to the implementation of international commercial arbitration awards. The following sections will show how the application of Sharia affects, or is likely to affect, the scope and application of the public policy defence. 189/T/4 above, the Sub-Circuit ruling followed the opinion of the majority of Hanbali scholars regarding the prohibition of songs and instruments as well as the opinion of the Council of the Senior Ulema of Saudi Arabia. Notwithstanding these opinions, the Audit Circuit accepted a contrary Islamic legal opinion from other jurists that songs and musical instruments are permissible. The Audit Circuit's ruling in this case demonstrates clearly that the judiciary has the legal freedom to choose between Islamic precedents according to its own assessment, and is not required to follow a specific Islamic school of thought or even an opinion of the Saudi Council of the Senior Ulema. This case was cited from Zaid, above n 128, 433. For more information in regard to the songs and instruments legal opinions under Islamic Sharia, see Seyyed Hossein Nasr, ‘Islam and music’ (1976) 10(1) Studies in Comparative Religion 37. See also Lois Ibsen Al Faruqi, ‘Music, musicians and Muslim law’ (1985) 17(1) Asian Music 3. See also Abd al-Aziz ibn Baz, ‘Evidence from the Qur’an and Sunnah prohibiting and warning against singing and musical instruments: Ruling on singing and people gathering to listen to musical instruments and songs’ (2003) 3 The General Presidency of Scholarly Research and Ifta 424–428. 115 1 Substantive Islamic Requirements and the Weapon of Public Policy The application of ijtihad and taqlid lead to a substantial and, in fact, a fundamental issue in the Saudi legal environment. The issue is that similar facts may yield unpredictably different outcomes, except in cases where there is ijma among Muslim scholars.442 However, out of the total body of Islamic law, cases based on ijma only amount to approximately one per cent.443 In other words, there are no legal restrictions on the use of the public policy defence under the NYC if the judge claims that the international commercial arbitration award was in contrast with Sharia. Is it an exaggeration to conclude that the matter of implementation of international commercial arbitration awards is at the discretion of the Saudi judiciary? The next section will provide evidence to support an argument that follows. The context, according to relevant Saudi court decisions that have been available for review, is the substantial number of decisions to set aside arbitration awards on the basis of Islamic public policy that occur because judges are authorised to adopt their own legal reasoning and, at the same time, empowered to disregard previous judgements. Two propositions emerge from the following discussion. First, there is no clear standard to determine the scope of Sharia. Second, the power to use Islamic public policy as a weapon is therefore unregulated in the Saudi legal system. Do these propositions mean that the judiciary has the right and the power to make discretionary judgements on whether international commercial arbitration awards will damage public opinion? 1. Songs and musical instruments. Ruling No. 189/T/4 of 1427 AH–(2007), provides an example related to songs and musical instruments. The plaintiff sought in Saudi Arabia 442 For more details, see section (C) of the fourth chapter (How Can a Saudi judge Set Aside Arbitration Awards by Using Islamic Public Policy?). 443 Hallaq, above n 314, 22. 116 to enforce a foreign judgement against a Saudi company that was issued by the Court of First Instance in North Cairo in the Arab Republic of Egypt. The Seventeenth Sub- Circuit of the Saudi Grievances Board, by taqlid ‘imitation’, implemented the foreign judgement, accepting an Islamic legal opinion allowing songs and instruments despite conflicting opinions (as discussed earlier). This demonstrates that the Saudi court does not necessarily rule in favour of the most acceptable Islamic view. Each judge may hold a different Islamic legal view of the case, and each may have a different opinion on what constitutes Islamic public policy. Thus, similar facts may yield different and unpredictable results. Another case that exemplifies the conclusion stated above is Ruling No. 3375/T/1 of 1424 AH–(2004). In this case, the plaintiff sought to implement in Saudi Arabia a foreign judgement, issued by the Court of First Instance in North Cairo in the Arab Republic of Egypt, against a Saudi company for compensation for nearly US$70,000 as a result of breach of contract. Again, the Twenty-Fourth Sub-Circuit refused to enforce the foreign judgement because music was the basis of the contractual relationship between the parties and songs in Islam are prohibited. The facts of each case are indisputably similar, and yet different results emerged. 2. Lost potential profits (Gharar Principle). Another significant ruling demonstrating a discrepancy in regard to Sharia law, is Ruling No. 235/T/2 of 1415 AH–(1995). This involved an application to enforce a foreign judgement issued by the Sharia Court in Dubai. The case involved the plaintiff’s request for damages for breach of contract after the defendant failed to purchase vehicles and spare parts according to the agreement made by the parties. The plaintiff requested lost potential profits and also damages in respect of the quality of the work, which had been significantly affected by the dispute between the parties. The Tenth Sub-Circuit refused to enforce the foreign judgement on 117 the grounds that the award was in conflict with Sharia. Its argument was that remedies for breach of contract are restricted under Islamic law to direct and actual damages. Damages based on anticipated profits would be gharar444 ‘uncertain’, and therefore prohibited. However, the Second Audit Circuit revoked this ruling on the grounds that the Sub-Circuit did not show conclusive evidence of violation of Sharia from the Quran, Sunnah or ijma’a regarding the prohibition of a claim for the loss of potential profits.445 Nevertheless, the issue of compensation for the loss of potential profits is not settled, and it remains a controversial issue among scholars.446 In the Dubai case above, many Islamic jurists consider compensation for the loss of potential profits as gharar, and thus in violation of Sharia principles.447 Other Islamic jurists do not consider that it violates Sharia.448 This means, in effect, that the rulings from the Tenth Sub-Circuit and the Second Audit Circuit were both originally acceptable under Islamic law, but the Sub-Circuit’s ruling was revoked because the jurisdiction of the Audit Circuit is superior to that of the Sub-Circuit. The existence of two mutually contradictory legal opinions is, in effect, subordinated to the principle that it is the responsibility of the 444 According to Investopedia’s website, Gharar is: ‘[a]n Islamic finance term describing a risky or hazardous sale, where details concerning the sale item are unknown or uncertain. Gharar is generally prohibited under Islam, which explicitly forbids trades that are considered to have excessive risk due to uncertainty. There are strict rules in Islamic finance against transactions that are highly uncertain or may cause any injustice or deceit against any of the parties. In finance, gharar is observed within derivative transactions, such as forwards, futures and options, in short selling, and in speculation. In Islamic finance, most derivative contracts are forbidden and considered invalid because of the uncertainty involved in the future delivery of the underlying asset’. See also the doctoral dissertation for Ryan M. Rittenberg, Gharar in Post-formative Islamic Commercial Law: A Study of the Representation of Uncertainty in Islamic Legal Thought (PhD Thesis, University of Pennsylvania, 2014) 30. 445 Zaid, above n 128, 284–285. 446 For more discussion on compensation for the loss of potential profits, see Gayle E Hanlon ‘International Business Negotiations in Saudi Arabia’ in James R Silkenat, Jeffrey M Aresty and Jacqueline Klosek (eds) The ABA Guide to International Business Negotiations (American Bar Association, 3rd ed, 2009) 918. See also Nili Cohen and Ewan McKendrick, Comparative Remedies for Breach of Contract (Hart Publishing, 2005) 73; David J Carl ‘Islamic Law in Saudi Arabia: What Foreign Attorneys Should Know’ (1991–1992) George Washington Journal of International Law and Economics 131, 162; and Peter D Sloane, ‘The Status of Islamic Law in the Modern Commercial World’, (1988) 22 International Law 743, 746–747. 447 Hanlon, above n 446, 918. 448 Ibid. 118 judge of a case to determine, according to his understanding of Islamic law, what complies with the law and what does not. Another important case where the ruling clearly conflicts with the Dubai case ruling is case No. 902/T/2 of 1420 AH–(1999). Here, the plaintiff requested remedies on multiple grounds, including lost potential profits. The plaintiff was the author of a book about the judiciary in Saudi Arabia, which, after review of its content, had been approved and licensed by the Ministry of Culture and Information for publication. However, inaccurate statements concerning the judiciary were then found. After the sale of a large number of copies of the book, the Ministry withdrew the book from the market and prohibited its sale within the borders of Saudi Arabia. The plaintiff requested the Ninth Sub-Circuit allow him to continue selling the book and requested compensation from the defendant, the Ministry, for material damage, and potential lost profits for the suspended period for a total of SAR 1,314,420. The Ninth Sub-Circuit ruled that the plaintiff should only be compensated for direct and actual damages in the amount of 294 thousand riyals, and it disregarded the plaintiff’s remaining requests. The Ninth Sub-Circuit refused to compensate the plaintiff for lost potential profits for the suspended period, on the basis that the plaintiff’s request of compensation for potential profits and moral damages was against Islamic law. This was due to uncertainty, and it said remedies are restricted to direct, actual damages. The First Audit Circuit approved the ruling to compensate the plaintiff only 294 thousand riyals. It ruled that all remaining copies of the book be sent to the defendant, and disregarded the plaintiff’s other requests. In case No. 902/T/2 of 1420 AH–(1999), to focus only on the issue of loss of potential profits, the Sub-Circuit ruling, approved by the First Audit Circuit, was that a claim on 119 the grounds of loss of potential profits was against Sharia, and that the plaintiff deserved compensation for direct, actual damage only. It has been noted with the Ruling No. 235/T/2 of 1415 AH–(1995), where the Second Audit Circuit revoked the Tenth Sub- Circuit’s ruling on the grounds of loss of potential profit, compensation for the potential lost profit remains a controversial issue among scholars. It can thus be seen that the conditions that require a ruling to comply with Sharia can be flexible. There is no consistency in the court rulings regarding non-direct and non-actual damages. This continues to be a controversial issue in the context of the wide range of Islamic legal opinions on the matter. Lack of consistency because of differing legal opinions is also the case for many other issues,449 including international commercial arbitration awards, where requirements may be adjusted in different ways. The situation with regard to the recognition and enforcement of arbitration awards is that the very conditions imposed by Islamic law are themselves subject to judicial assessment. 3. Child custody. As a general rule, the primary concern is the best interests of the child.450 However, there is extensive debate in the Islamic literature with respect to details of child custody.451 A case demonstrating inconsistency in the application of Sharia is Ruling No. Q/3/1133 of 1430 AH–(2009). The Family Court of the State of Qatar issued legal decision No. (158) in 2007, requiring inter alia the Saudi father to transfer custody of the children to the mother. This was approved by the Court of Appeal Ruling No. (102) of 2008. The Saudi Grievances Board declined to implement the foreign decision on the basis that, according to Hanbali school opinion, child custody belongs to the mother until the age of seven. After that, a girl will go to her 449 Almas Khan, ‘The Interaction between Sharia and International Law in Arbitration’ (2006) 6 Chicago Journal of International Law 791, 791–799. 450 Abdullahi An-Na’im, Islamic family law in a changing world: A global resource book (Zed Books London, 2002) 196. 451 Ayesha Rafiq, ‘Child Custody in Classical Islamic Law and Laws of Contemporary Muslim World (An Analysis)’ (2014) 4(5) International Journal of Humanities and Social Science 267. 120 father, and a boy can choose between the two parents. In the Qatar case, there were three children—two boys over ten and a younger girl. The ruling was that child custody should remain with the father because the Qatar ruling was not consistent with Hanbali opinion. Another important ruling was No. Q/3/1315 of 1431 AH–(2010), which concerned child custody, judicial divorce, alimony and other issues in favour of the plaintiff, the mother. The mother asked the Saudi Grievances Board to implement the decision of the Abu Dhabi Circuit of Personal Status and related Court of Appeal No (756) of 2009. The Saudi Grievances Board implemented the foreign decision on the basis that it did not violate the provisions of Sharia and public policy in the Kingdom. Further, the Court dismissed the argument of the defence that the Court of Cassation’s decision did not comply with Hanbali legal thought, stating that, ‘The Board should consider the request to implement the foreign decision without investigating the facts and subject matter of the dispute’. From analysis of these cases, it is clear that the conditions that require foreign judgements and international commercial arbitration awards to comply with Sharia are flexible and depend on judicial assessment of the cases at hand. In the first case, the court declined to implement a foreign judgement because it conflicted with a Hanbali opinion, regardless of the other Islamic opinions on the same legal issue.452 However, in the second case, the court implemented the foreign judgement even though that 452 Shabnam Ishaque and Muhammad Mustafa Khan, ‘The Best Interests of the Child: A Prevailing Consideration within Islamic Principles and a Governing Principle in Child Custody Cases in Pakistan’ (2015) International Journal of Law, Policy and the Family ebu015. 121 judgement conflicted with the opinion of a majority of Islamic scholars and Hanbali school opinion in particular.453 4. Jadawel v. Emaar. Jadawel International (Saudi Arabia) v. Emaar Property PJSC (United Arab Emirates)454 was a controversial case that attracted public attention. The case related to a construction project under a joint venture agreement, where Emaar had allegedly formed a partnership with another party in breach of the joint venture agreement.455 In 2006, Jadawel made a claim for damages in the amount of US$1.2 billion before a three-member tribunal seated in Saudi Arabia.456 After two years in arbitration, Jadawel’s claim was dismissed and Jadawel was ordered to pay Emaar’s legal costs. However, the Board of Grievances revoked the arbitration award on the grounds that it violated Islamic law, and ordered Emaar to pay Jadawel over US$250 million in damages. Because the details of the case were not officially published and the precise circumstances are not clear, it is difficult to know the specific grounds on which the arbitration award was found to have violated Islamic law. The arbitration tribunal comprised legal and Islamic studies experts, law scholar Abdulaziz bin Sattam bin Abdulaziz Al Saud, law scholar Saad bin Ghoneim and Islamic scholar Abdullah bin Saad bin Ihnen,457 member of the Council of the Senior Ulema of Saudi Arabia and 453 Abdullah Ibn Ahmad Ibn Qudama al-Maqdisi, ‘Al-Mughni’ in (Dar Ahlam Al kutub, vol 9, 305 [Arabic]. 454 For more discussion on Jadawel v. Emaar, see Claudia T. Salomon and J. P. Duffy, ‘Enforcement Begins When the Arbitration Clause is Drafted’ (2011) 22 The American Review of International Arbitration 275. See also Essam Al Tamimi, The Practitioner’s Guide to Arbitration in the Middle East and North Africa (Juris Publishing, 2009) 371. 455 Ibid. 456 Jones Day—Cleveland Office, ‘The New Enforcement Law of Saudi Arabia: An Additional Step Toward a Harmonized Arbitration Regime’ (2013). 457 Abdullah bin Saad bin ihnen, former judge of the Court of Appeals (for 29 years).458 It is hard to believe that such prominent Islamic scholars issued an award that contradicted with Islamic law. However, apparently the judge who reviewed the case had a different view based on his understanding of Islamic law. 2 Islamic Procedural Requirements and the Weapon of Public Policy The recent arbitration law not only requires that international commercial arbitration awards comply with Islamic law as a substantive requirement, it requires that the entire arbitral proceedings comply with Sharia procedural requirements. Art 5 states: If both parties to arbitration agree to subject the relationship between them to the provisions of any document (model contract, international convention, etc.), then the provisions of such document, including those related to arbitration, shall apply, provided this is not in conflict with the provisions of Sharia. Procedural requirements, then, might well prevent recognition and enforcement of international commercial arbitration awards. There are many controversial Islamic issues with respect to arbitral proceedings, and if there is a question of violation of Sharia, Islamic procedural requirements may be subject to judicial assessment. Some Sharia opinion prohibits female arbitrators, so international awards issued by women might not be recognised and enforced.459 There are even some Islamic legal views that prohibit non-Muslim arbitrators.460 Testimony is another issue. For instance, a woman’s testimony may carry less weight than that of a man, on the principle that the testimony of one man equals that of two women; thus, court acceptance of testimony by two men might prove a claim, while proof of the same claim could require the litigant to present 458 Paddy Badrani, ‘Jadawel International Wins a Lawsuit of 4.5 Billion Riyals Against the Company Emaar Property PJSC’, Alriyadh Newspaper (Alriyadh), 11 April 2009, available at testimony by four women, or one man plus two women. 461 Thus, while a man’s testimony can be taken individually, women must give testimony in pairs.462 In addition, a non-Muslim’s testimony against a Muslim is not accepted in any matter, whether criminal or civil.463 Further, testimony should be taken from a person who is just; yet the concept of ‘just’ is largely unique to Sharia. 464 In any case under consideration, any person who consumes alcohol, commits adultery, has a criminal report, or any other characteristic against Islamic principles, will not be considered a reliable witness, able to testify.465 In relation to international commercial arbitration matters, the standard of proof in civil matters relates to the ‘balance of probabilities’, meaning the weight of evidence in a civil matter must be ‘more probable than not’.466 This is a very important standard for an arbitrator to use in determining the award; however, Islamic law does not apply 461Mohammad Fadel, ‘Two women, one man: knowledge, power, and gender in medieval Sunni legal thought’ (1997) 29(02) International Journal of Middle East Studies 185. 462 This mechanism is officially applied in Saudi courts through Art 123 of the Law of Procedure before Sharia Courts, which states that ‘[t]he testimony of each witness shall be heard individually in the presence of the litigants but not in the presence of the other witnesses whose testimony had not been heard, though their failure to attend does not preclude hearing it. A witness shall state his full name, age, occupation, place of residence and whether he is related to the litigants by kinship, service, etc., if applicable, and his identity shall be verified’. The first regulation of this article makes an exception in cases where the witnesses are women because they are to be heard together instead of individually (in cases where the witnesses are women, the court should hear the testimony of every two together). The main justification for this legal position is the text of Quran that states, ‘And bring to witness two witnesses from among your men. And if there are not two men [available], then a man and two women from those whom you accept as witnesses—so that if one of the women errs, then the other can remind her’. 463 Saad U. Rizwan, ‘Foreseeable issues and hard questions: The implications of US courts recognizing and enforcing foreign arbitral awards applying Islamic law under the New York Convention’ (2012) 98 Cornell Law Review 494–499. 464 Ma’amoun M. Salama, ‘General principles of criminal evidence in Islamic jurisprudence’ (1982) 113 The Islamic Criminal Justice System (New York: Oceana Publishers, 1982) 109–117. 465 Matthew Lippman, ‘Islamic criminal law and procedure: religious fundamentalism v. modern law’ (1989) 12 Boston College International and Comparative Law Review 53. These rules are officially applied in the Saudi courts through Art 124 of the Law of Procedure before Sharia Courts, which states that ‘Testimony shall be given orally. The use of written notes during testimony is permitted only with the judge’s consent provided that the nature of the case justifies it. A litigant against whom the testimony is made may indicate to the court whatever prejudices the testimony by impeaching the witness or the testimony’. 466 Inan Uluc, Corruption in International Arbitration (SJD Dissertations Thesis, Pennsylvania State University, 2016); ibid. 124 specific standards to consider of weight of evidence in a civil case, as opposed to a criminal case. Thus, the testimony of two men might be enough to establish proof, whether in a capital punishment case or to revoke a legal contract.467 Yet, in weighing testimony, some judges might attribute heavier testimony to a matter such as an official contract between the parties.468 Furthermore, under Sharia, an oath is considered evidence. In fact, under Sharia, there are various mechanisms to determine the merits of a case, even if the plaintiff has no evidence or if his or her evidence is not strong enough to determine the outcome of the case.469 The system of Islamic law allows for the concept of ijtihad. Thus, the new Saudi arbitration law does not specify a particular standard of proof or refer to differences in the weight of certain types of evidence. There is a long history of debate in the Islamic literature regarding procedures in Islamic public policy. The weight of evidence is just one example of different approaches in Sharia as compared with Western systems of law. Given that the new Saudi arbitration law does not go into the meaning of Sharia provisions, the primary question for international arbitrators, investors and other stakeholders is: What are the requirements in determining the application of recognition in arbitral proceedings? The review in this thesis of provisions of the judiciary, gathered from data collected in the Saudi executive courts, relies on available practical evidence. In matters involving 467 Ibid. 468 In contrast with other legal systems that accept Islamic law in their courts, the UAE has distinguished between the weights of evidence. For example, the UAE in general gives documents higher value than testimony according to Art 35 of the UAE Federal Law No. 10 of 1992 on the Issuance of Evidence Act for Civil and Commercial Transactions. This is also the case in Egypt in Arts 60 and 21 of the Egypt Evidence Act of 1968, Kuwait in Arts 39 and 40 of the Kuwait Evidence Act of 1980, Jordan in Arts 28 and 29 of the Gordon Evidence Act of 1952, and Qatar in Arts 260 and 261 of the Qatar Evidence Act of 1990. 469 The law of procedure before the Sharia court has considered the ‘oath’ as Islamic Evidentiary Law, as declared in Arts 111–115. 125 foreign elements, the review clearly shows that strict Islamic procedural requirements have tended not to be applied. Instead, the courts have taken the Islamic legal view that, out of necessity, the legal position was changed from ‘unlawful’ to ‘permissible’.470 Here, the justification through ‘necessity’ might be that Saudi Arabia needs to work within the international economic system, given that following the strict Islamic procedural requirements illustrated in this thesis would make it almost impossible to implement international commercial arbitration awards. Dr Abdullah Al-Khudairi, a practising judge in the Executive Court of Riyadh, writes that foreign judgements that are rendered by non-Muslims or that are not in compliance with Islamic principles, as a general principle, should be rejected. However, he qualifies this rule: ‘in the case of treaties or conventions with other countries, the Islamic country should implement the foreign judgements out of necessity’.471 For example, in a 2016 dispute involved a Japanese company, working with construction equipment, and a Saudi company. A contractual breach allegedly led to extensive damages to the Japanese company, and the Japanese company, as the plaintiff, asked the Executive Court in Jeddah to implement the default arbitration award issued by the Japan Commercial Arbitration Association, located in Tokyo. In unpublished Ruling No. (36251089) dated 11/9/1436 AH–(17/6/2016), the Executive Court in Jeddah city implemented the international arbitration award, despite the fact that the award—which had been rendered by non-Muslim arbitrators, and that involved non- Muslims witnesses—contradicted Islamic procedural requirements. 470 For more details regarding the concept of necessity/adversity under Islamic Sharia, see Mansour Z. Al- Mutairi, Necessity in Islamic law (University of Edinburgh, 1995). See also Mohd Safian and Yasmin Hanani, Necessity (darura) in Islamic law: A study with special reference to the harm reduction programme in Malaysia (University of Exeter, 2010). 471 Abdullah bin Ibrahim Al-Khudairi, Implementing Foreign Judgment in the Kingdom of Saudi Arabia (Saudi Center for Commercial Arbitration, 2016) 20. 126 In another 2016 case, involving a dispute between an Egyptian company in the steel industry and a Saudi company, the Egyptian company suffered substantial damages due to a breach of contract. The Egyptian company, as the plaintiff, asked the Executive Court in Riyadh to implement the default arbitration award issued by the International Court of Arbitration in Switzerland. In unpublished Ruling No. (38158742) dated 02/03/1438 AH–(02/12/2016), the Riyadh Court implemented the international arbitration award, despite the fact that this was in conflict with Islamic procedural requirements: the award was issued by non-Muslim arbitrators, and one of the two witnesses was not a Muslim. The available decisions demonstrate that the Saudi judiciary have demonstrated a lenient approach to Islamic procedural requirements; there are no available published cases that have rejected an arbitration award due to Islamic procedural requirements, (e.g., that the award was issued by a non-Muslim or a woman, or the witnesses were not ‘just’). E Conclusion The chapter has investigated the second side of the Saudi public policy coin, and has found that violation of Sharia means violation of the Saudi concept of public policy. Judges apply independent judgement, ijtihad, and legal reasoning based on imitation, taqlid, to investigate whether or not foreign judgements and international commercial arbitration awards are in compliance with Sharia. In relation to any legal issue, a Saudi judge is legally authorised to follow a precedent from dozens of Islamic cases discussed in the volumes of Islamic jurisprudence. However, if the Saudi judge does not want to follow an Islamic precedent, he can apply the concept of ijtihad to reach a decision that is in compliance with the purposes of Islamic jurisprudence. 127 The significance of the second side of the Saudi public policy coin is that Sharia depends on independent judgement and legal reasoning, and judges are empowered to disregard previous judgements and even pan-Islamic precedents. Every judge is thus legally free to adopt a view on a legal issue based on his particular interpretation of Sharia, regardless of the existence of previous judgements, and even regardless of opposing Islamic legal views on that very same issue. The review of Saudi court decisions in this chapter has shown that there are many contradictions between court decisions on precisely the same legal issues in regard to Islamic public policy. The legal freedom to apply ijtihad and taqlid leads to a fundamental issue in the legal environment: that similar facts yield conflicting and unpredictable outcomes—except in cases where there is ijma among Muslim scholars, which comprise approximately one per cent of the of total body of Islamic law. Accordingly, the power to use the weapon of public policy on the grounds that the award violates Sharia is unregulated in the Saudi legal system. It is no exaggeration to state that, in Saudi Arabia, the recognition and adoption of international commercial arbitration awards is at the discretion of the judiciary. The next chapter discusses legal implications of this further, and recommends legal solutions that could narrow the scope of Islamic public policy. 128 CHAPTER V: RECONCILING DOMESTIC AND TRANSNATIONAL VALUES A Introduction This thesis has analyzed provisions gathered from the Saudi Board of Grievances, and the decisions of Saudi executive courts, to investigate Saudi Arabia’s approach to the implementation recognition of international commercial arbitration awards. Conclusions about Saudi judicial attitudes to questions of public policy were formed from the available provisions and decisions, and were considered alongside published Saudi laws and the philosophical, theoretical and procedural content of Islamic law. These combined sources create a solid platform from which findings have been drawn about how Saudi Arabia’s courts have cited public policy as a reason for refusing the implementation of most international commercial arbitration awards. Chapter V will summarise these findings, present overall conclusions, and make recommendations for improvement. The following section (B) compares and contrasts the Saudi understanding of public policy with the theory and practice of other leading jurisdictions in relation to arbitration law. 472 The comparison concludes that the Saudi legal system has ‘incontestable’ differences in relation to the concept of public policy with leading jurisdictions in the area of arbitration law. This conclusion is reached because, in cases involving many fundamental issues regarding the concept of public policy, the Saudi legal system has assumed different legal practices from common international practices. 472 England, France, Switzerland, the US, Singapore and other countries have been recognised as leaders in the field of international arbitration; for more detail, see Jan Paulsson, ‘Arbitration-Friendliness: Promises of Principle and Realities of Practice’ (2007) 23(3) Arbitration International 477. See also Shu Zhang, The Public Policy Exception in the Judicial Review of International Commercial Arbitral Awards: Lessons from and for China (PhD Thesis, University of New South Wales, 2015) 315,389, and Steven Seidenberg, ‘International Arbitration Loses Its Grip: Are U.S. Lawyers to Blame?’ (2010) 96 ABA Journal 50. 129 These fundamental issues need to be resolved to reconcile domestic and transnational values. Part C of this chapter proposes legal recommendations to tame the unruly horse of Saudi public policy by reconciling domestic and transnational values. It recommends narrowing the scope of Saudi public policy by using the weapon of public policy only in legal matters that are considered ‘fundamental’. These are ‘exceptional cases’ that involve serious national concerns. In addition, the study recommends other legal solutions, including adopting the concept of ‘international public policy,’ adopting a separate and comprehensive new arbitration law for international commercial arbitration, codifying the fundamental principles of national laws and Sharia and creating specialised legal circuits to handle cases involving Saudi public policy. B Observations and Evaluations of the Application of the Saudi Concept of Public Policy From observing and evaluating the concept of public policy in Saudi Arabia, the overall conclusion of this study473 is that the application of this concept is unsatisfactory: ‘It seems impossible to define “public policy” considering its multi-dimensional character’, according to Farshad Ghodoosi, who sees public policy as ‘a trump card against contracts, judgments, and foreign rules’.474 Nevertheless, it is very important for any legal system to clarify, declare and explain the fundamental principles of its laws that work against public policy, to facilitate the process of implementing international commercial arbitration awards and foreign judgements. This thesis has shown that it is 473 This conclusion was reached on the basis of the analysis of Saudi concept of public policy in Chapters III and IV. 474 Farshad Ghodoosi, ‘The Concept of Public Policy in Law: Revisiting the Role of the Public Policy Doctrine in the Enforcement of Private Legal Arrangements’ (2015) 94 Nebraska Law Review 720. For more details, see section (E) of Chapter III. 130 very difficult to predict the likely interpretation of the Saudi concept of public policy in many legal matters, and—as examined further below—the legal position in regard to many significant elements of public policy remains ambiguous. 1 Lack of Understanding or Conflict over Identity: Issue of the Main Pillar of the Concept of Public Policy In many cases, the Saudi judicial system has set aside arbitral awards and foreign judgements due to possible ‘misunderstanding’ or ‘disagreement’ regarding the fundamental principles of Saudi society.475 This legal practice is primarily in conflict with the opinion of law scholars and the judicial practices of leading jurisdictions in the development of arbitration law, who agree that public policy should only link to the ‘fundamental principles’ as a main pillar of the concept of public policy.476 Thus, it is commonly held in international legal circles that non-fundamental issues should be excluded from consideration of public policy in regard to acceptance of an arbitration award or foreign judgement. Guedj defines public policy or ordre public as ‘a mechanism which corrects the choice of law designation for substantive reasons, namely the defence of the forum’s fundamental legal principles and moral values’.477 Blom explains the exclusionary role of public policy as an intervention ‘to avoid an unacceptable derogation from values that the court sees as fundamental to its own legal system’.478 In the important case of 475 This observation was reached after the analysis of the Saudi Provisions in Chapter IV. 476 For more details in regards to the meaning of ‘fundamental principles’ and the use of public policy, see Farshad Ghodoosi, International Dispute Resolution and the Public Policy Exception (Routledge, 2016). See also Arthur W. Rovine, Contemporary issues in international arbitration and mediation (Brill, 2013) 223. See also IV Recommendations in regard to fundamental principles of 70th Conference of the International Law Association (New Delhi April 2002). 477 Guedj, above n 198, 679. 478 Joost Blom, ‘Public Policy in Private International Law and Its Evolution in Time’ (2003) 50(3) Netherlands International Law Review 373. 131 Loucks v. Standard Oil Co. in the US, Judge Cardozo stressed that refusal to enforce a foreign right should relate to a fundamental principle: The courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit the individual notion of expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal.479 In relation to Canadian public policy, Walker and Castel state: Canadian courts will not recognize or enforce a foreign law or judgment or a right, power, capacity, status or disability created by a foreign law that is contrary to the forum’s fundamental public policies, its ‘essential public or moral interest’, or its ‘conception of essential justice and morality’.480 The English legal system applies the same norm in practice, according to Dicey, Morris and Collins on the Conflict of Laws: English courts will not enforce or recognize a right, power, capacity, disability or legal relationship arising under the law of a foreign country, if the enforcement or recognition of such right, power, capacity, disability or legal relationship would be inconsistent with the fundamental public policy of English law.481 In the case of Krombach v. Bamberski (2000), the European Court of Justice states: Recourse to the public policy clause in article 27, point 1 of the Convention can be envisaged only where recognition or enforcement of the judgment in another Contracting State would be at variance to an unacceptable degree with the legal order of the State in which enforcement is sought inasmuch as it infringes a fundamental principle.482 Further, one of the main recommendations of the ILA at its New Delhi Conference (2002) stated that: A court verifying an arbitral award’s conformity with fundamental principles, whether procedural or substantive, should do so by reference to those principles considered fundamental within its own legal system rather than in the context of the law governing 479 Loucks v. Standard Oil Co. of New York. 120 NE 198 (1918) Court of Appeals of New York. 480 Janet Walker and Jean-Gabriel Castel, Canadian conflict of laws (LexisNexis Butterworths, 2005). 481 Albert Venn Dicey, John Humphrey Carlile Morris and Lawrence Antony Collins, Dicey and Morris on the Conflict of Laws (Sweet & Maxwell, 2000). 482 Dieter Krombach v André Bamberski [2000] ECR I-1935. 132 the contract, the law of the place of performance of the contract or the law of the seat of the arbitration.483 This review of available case law from leading jurisdictions shows that public policy amounts to a legal weapon484 that judges can use as a reason to refuse to enforce arbitration awards and foreign judgements. This weapon may be used when enforcing such decisions would undermine values that the court sees as fundamental to its legal system. Accordingly, misunderstanding or disagreement regarding the fundamental values of the legal system may lead to disorder in the legal system and have serious legal consequences for parties to cases.485 Thus, in Richardson v. Mellish, Burroughs remarked that, ‘Considerations of public policy can never be exhaustively defined, but they should be approached with extreme caution’.486 Against this backdrop, this review of the available provisions of the Saudi Grievances Board and executive courts (see chapter IV above) provides evidence of different and unpredictable outcomes487 due to contradictory decisions have been made in regard to similar fact cases. This demonstrates clear confusion amongst judges concerning the fundamental values of the Saudi legal system. For example, there have been contradictory decisions in many cases regarding the permissibility under Islamic law of songs and instruments, the gharar, the ‘uncertainty’ principle, the custody of children and other issues previously discussed.488 If the legal issues regarding these contradictory 483 Blom, above n 478. 484 Sattar used the same metaphorical term when stated that ‘Public policy is one of the most important weapons in the hands of the national court which allows it to refuse enforcement of an arbitral award which is otherwise valid’. See Sattar, above n 281. 485 For more information generally, see Edna Sussman and John Wilkinson, ‘Benefits of arbitration for commercial disputes’ (2012) 20 Retrieved June 2014. 486 See Richardson v. Mellish, (1824) 130 Eng. Rep. 294, 303. John Bell suggests of the three models under which policy arguments in judicial decisions are justified that ‘Judges should not enter areas that are contentious and where no consensus exists on fundamental values’. For more information, see John Bell, Policy arguments in judicial decisions (Oxford University Press, USA, 1983) 157. 487 For more details, see section (D) of Chapter IV. 488 Ibid. 133 decisions are to be regarded as ‘fundamental’, surely the Saudi courts should have a consistent legal view regarding cases that have similar facts. The contradiction in these court decisions may be because of conflicting opinions inside the Saudi judiciary in defining and assessing the fundamental values of Saudi society, or misunderstandings of the concept of public policy. However, regardless of the reasons behind the contradictory decisions, an overall observation and conclusion can be drawn that Saudi courts, in many legal issues, are free to refuse to enforce foreign judgments and international commercial arbitration awards. This freedom is based on judicial discretion, in the face of the main pillar of the concept of public policy, which requires a court to set aside international commercial arbitration awards only in response to fundamental principles. 2 The First Side of the Saudi Public Policy Coin: General Jurisprudential Principles The new arbitration law of Saudi Arabia requires international commercial arbitration awards to comply with the first feature of Saudi public policy—summarised in this thesis as ‘General Jurisprudential Principles’.489 However, because lawmakers have not distinguished between General Jurisprudential Principles and other Saudi laws, compliance with this feature of Saudi public policy cannot be guaranteed. There is another issue. The provisions published by the Saudi Grievances Board, ostensibly with the aim of providing an overview of the judicial environment, are selectively compiled. Decisions of Saudi executive courts, which recently attained jurisdiction to implement international commercial arbitration awards and foreign 489 Art 50(2) of Royal Decree No. (M/34), dated 24/5/1433 AH–(16/4/2012), requires that ‘The competent court considering the nullification action shall, on its own initiative, nullify the award if it violates the provisions of Sharia and public policy in the Kingdom or the agreement of the arbitration parties, or if the subject matter of the dispute cannot be referred to arbitration under this Law’. 134 judgements, have not been published at all. The result is that there are insufficient primary legal sources for a legal researcher to identify the totality of the General Jurisprudential Principles bearing on arbitration and foreign judgement cases with regard to public policy.490 Therefore, many important questions regarding the first feature of the Saudi concept of public policy—the General Jurisprudential Principles—cannot be answered. Such questions involve the standards concerning the appointment and conduct of arbitrators,491 arbitral proceedings,492 composition of the arbitral authority493 and due process requirements,494 which are among the significant elements of procedural public policy in any legal system.495 Leading jurisdictions in the development of arbitration law have established many standards for the examination of past issues in case law,496 but there are no available Saudi court decisions illustrating the standards that have been applied with respect to these important legal issues in earlier cases. The absence of access to primary legal sources makes it difficult to understand the Saudi legal environment. Such lack of transparency is a fundamental problem that needs to be addressed to overcome legal issues concerning Saudi public policy, and in fact it 490 For more details, see section (G) of Chapter III. 491 Danish buyer v. German seller, Yearbook of Commercial Arbitration Vol. IV (1979), 260. See also Philippe Fouchard et al, Fouchard, Gaillard, Goldman on international commercial arbitration (Kluwer law international, 1999) 958. 492 Schwebel S., Lahne S., Public Policy and Arbitral Procedure, in ICCA Congress series no. 3 (New York/1986), 216. 493 See Art V of NYC clause 1(d). 494 Ibid clause 1(b). 495 For more information, see Shu Zhang, The Public Policy Exception in the Judicial Review of International Commercial Arbitral Awards: Lessons from and for China (PhD Thesis, University of New South Wales, 2015) 199–252. 496 Prof. Burkhard Hess and Prof. Thomas Pfeiffer made comprehensive analysis of the interpretation of the public policy exception in EU instruments in 23 members of European States and conclude that procedural public policy is the most reason that set aside international commercial arbitration awards. The stud shows different standards in examining the procedural public policy between EU members. For more information, see B. Hess and T. Pfeiffer, ‘Interpretation of the Public Policy Exception as Referred to in EU Instruments of Private International and Procedural Law’ (2011) 453 study PE. 135 applies more generally across the Saudi legal environment. Open justice 497 is a significant principle in leading jurisdictions that enables the development of many legal issues, including the issue of public policy; 498 this principle would be a valuable addition to the Saudi legal environment. Lord Chief Justice Hewart, in R v. Sussex Justices; Ex parte Macarthy, stated that, ‘It is not merely of some importance but is of fundamental importance, that justice should not only be done, but should manifestly and undoubtedly be seen to be done’. 499 The principle of open justice requires openness and transparency, whereby the details of the judicial environment can be examined by public and legal professionals in most circumstances (exceptions to this rule might arise).500 Jeremy Bentham wrote of open justice, ‘Publicity is the very soul of justice. It is the keenest spur to exertion, and the surest of all guards against improbity. It keeps the judge himself, while trying, under trial’.501 497 Open justice is a legal principal in common law legal systems describing legal processes characterised by transparency and openness. For more details about this significant legal principle, see James Spigelman, ‘The Principle of Open Justice: A Comparative Perspective’ (2006) 29(2) UNSW Law Journal. 498 Ibid. 499 R v Sussex Justices; Ex parte Macarthy [1924] 1 KB 256, 259 (‘R v Sussex Justices’). 500 The open justice principle includes many exceptions, such as cases that link to terrorism and safety of conflicted parties. For more details, see Jonathan Barrett, ‘Open Justice or Open Season? Developments in Judicial Engagement with New Media’ (2011) 11 Queensland University of Technology Law and Justice Journal 1. 501 Cited from Garth Nettheim, ‘The Principle of Open Justice’ (1984) 8 University of Tasmania Law Review 25. In R v Legal Aid Board ex p Kaim Todner, Lord Woolf expressed the reasoning behind the this concept and stated that ‘This is the reason it is so important not to forget why proceedings are required to be subjected to the full glare of a public hearing. It is necessary because the public nature of proceedings deters inappropriate behaviour on the part of the court. It also maintains the public’s confidence in the administration of justice. It enables the public to know that justice is being administered impartially. It can result in evidence becoming available which would not become available if the proceedings were conducted behind closed doors or with one or more of the parties’ or witnesses’ identity concealed. It makes uninformed and inaccurate comment about the proceedings less likely. If secrecy is restricted to those situations where justice would be frustrated if the cloak of anonymity is not provided, this reduces the risk of the sanction of contempt having to be invoked, with the expense and the interference with the administration of justice which this can involve’. For more details, see R v Legal Aid Board ex p Kaim Todner [1999] 1 QB 966. 136 The principle of open justice does exist in Saudi laws.502 However, in practice, this principle requires further work if it is to align with its equivalents in other leading jurisdictions, especially in important matters, such as the meaning of public policy. It is therefore important for the Saudi judiciary to devote greater effort to providing increased transparency in the legal system by publishing numerous cases to demonstrate the workings of the Saudi legal system. 3 The Second Side of the Saudi Public Policy Coin: Sharia The new arbitration law requires international commercial arbitration awards to comply with the provisions of Sharia (the second side of the Saudi concept of public policy).503 However, compliance is an almost-impossible legal requirement, because Sharia is not codified and does not possess binding precedents. In the total body of Islamic law, there are different legal opinions on every single issue among the different schools of thought. In only one per cent of the total body of Sharia is there ijma ‘consensus’ between Islamic jurists, 504 and even within this one per cent, there are significant Islamic scholars who argue that ijma is impossible and has never been attained.505 It is fair to say that compliance with Islamic provisions is a flexible requirement that could have the capacity to pull the Saudi legal community and international arbitrators into the vast ocean of debates that exist in the Islamic literature. Even if an arbitrator is experienced in dealing with Islamic literature, there could still be a ruling against an international commercial arbitration award, because any individual Saudi judge might 502 For example, Law of Procedure before Sharia Courts states in Art 61 that ‘Proceedings shall be in open court unless the judge on his own or at the request of an litigant closes the hearing in order to maintain order, observe public morality, or for the privacy of the family’. 503 Art 50(2) of Royal Decree No. (M/34), dated 24/5/1433 AH–(16/4/2012), requires that ‘The competent court considering the nullification action shall, on its own initiative, nullify the award if it violates the provisions of Sharia and public policy in the Kingdom or the agreement of the arbitration parties, or if the subject matter of the dispute cannot be referred to arbitration under this Law’. 504 Hallaq, above n 314, 22. 505 Recep Dogan, Usul al-Fiqh: Methodology of Islamic Jurisprudence (Tughra Books, 2015) 80. 137 have a different legal assessment of the ‘fundamental values of Sharia’ within the Saudi legal system. These can lead to different interpretations of Islamic public policy. As long as there has been no codification or binding precedents to assist in determining the fundamental values of Sharia in regard to large proportion of issues where consensus is lacking, cases with similar facts can yield different and unpredictable outcomes. The only exception is found in cases that theoretically have ijma among Muslim scholars. This thesis’ analysis of the available decisions of the Saudi courts concludes that the description given in the previous paragraph does in fact align with actual Saudi judicial practice. The overall situation is that assessments of Islamic public policy in any particular case will be based on an assessment that may be differ between judges. Thus, even if international arbitrators issue an international commercial arbitration award that complies with the opinions of some Islamic jurists, a Saudi judge may reject the award because it is at variance with his own interpretation of Sharia. For example, in Ruling No. Q/3/1133 of 1430 AH–(2009), the Saudi Grievances Board refused to implement a foreign decision on the basis that it contrasted with Hanbali jurists’ opinions. In contrast, in Ruling No. Q/3/1315 of 1431 AH–(2010), the court implemented a foreign decision that contrasted with Hanbali jurists’ opinions. Further, in Ruling No. Q/1/343 of 1424 AH–(2003), the court implemented a case that opposed the opinion of a majority of Islamic scholars, but not that of Hanafi scholars. These cases, as well as many discussed above in Chapter IV, demonstrate that the requirement that international awards and foreign judgements comply with Sharia law is in fact a flexible obligation that depends on the assessment of the particular judge hearing a given case. 138 Saudi judicial practice is primarily in conflict with the opinion of legal scholars and the judicial practices in leading international jurisdictions in the development of arbitration law. These agree that, ‘The finality of awards rendered in the context of international commercial arbitration should be respected save in exceptional circumstances’.506 Thus, authorisation of the judiciary to set aside international commercial arbitration awards in ‘non-exceptional circumstances’ is in conflict with the use of the concept of public policy compared with other leading jurisdictions in the development of arbitration law.507 In the context of defining the scope of public policy, Juliane Oelmann stated that: There is one feature to the clause, which all Member States of the Brussels I Regulation and outsider states with similar devices in an international treaty agree upon. That is that the public policy provision is to be handled as an escape clause to review only such cases that touch upon severe national concern. In other words, the clause should only operate in exceptional cases.508 In D. Krombach v. A. Bamberski, the court held that ‘recourse to the public-policy clause must be regarded as being possible in exceptional cases’.509 In addition, a report from the Commission to the European Parliament stated that, ‘As to public policy, the study shows that this ground is frequently invoked but rarely accepted. If it is accepted, this mostly occurs in exceptional cases’.510 Presenting a comprehensive analysis of the interpretation of public policy exceptions in European Union instruments for 23 European states, Professors Burkhard Hess and Thomas Pfeiffer concluded that ‘public 506 See also II Recommendations General of 70th Conference of the International Law Association (New Delhi April 2002). 507 See also the objectives of the NYC at policy is often invoked, but seldom applied’.511 They suggest that the main reason for this attitude is the narrow interpretation of the scope of public policy exceptions that operate in exceptional cases.512 According to the this analysis, there is a clear difference in interpretations of the scope of public policy exceptions in the Saudi judicial system and in the leading jurisdictions in the development of arbitration law, leading to different judicial practices. Therefore, it is important to refine the almost-impossible requirement by reformulating the scope of the public policy exception in the Saudi legal system. This reformulation must define the Islamic matters that are ‘fundamental’, and the exception must operate only in ‘exceptional cases’ that only involve matters of serious national concern. 4 Sharia Scholars or Law Scholars An understanding of the legal training of Saudi jurists and scholars is important to understanding how public policy is conceived and construed in Saudi jurisprudence. There are two types of legal training in the Saudi legal system.513 The first comprises Sharia school graduates, who study topics linked to Islamic law such as the Quran, Hadith texts, fiqh ‘Islamic juersoudenc’ and Uṣūl al-fiqh ‘principles of Islamic jurisprudence’.514 The other type of legal training produces law graduates who study topics linked to law, such as civil law, commercial law, criminal law and international law, in addition to principles of Islamic law.515 511 For more information regarding the interpretation of the public policy exception in EU instruments, see Hess and Pfeiffer, above n 496. 512 Ibid. 513 Abdulla Al Nasser et al, Judicial System in Saudi Arabia (Center for Global Thought on Saudi Arabia, 2015) 320. 514 Ibid 515 Ibid 140 The Saudi legal system is a hybrid system of Western legal traditions516 and Islamic legal traditions.517 Many Western legal traditions have been imported into the Saudi legal system, such as the concept of public policy 518 and the modern method of codification of laws.519 Other important areas of Saudi law depend on Islamic Sharia traditions, and thus depend on the concept of ijtihad, which requires judges to investigate Islamic primary and secondary sources to reach a legal solution that complies with the purposes of Islamic jurisprudence.520 Theoretically, and according to the nature of the Saudi legal system that integrates these two traditions, the judiciary should defer to legal scholars who understand the legal aspects of the Western legal traditions imported into Saudi Arabia. This is because public policy was originally a Western concept521 developed over hundreds of years.522 Public policy is a complex term that has its own legal roots and philosophy.523 Thus, importing this Western concept to Saudi Arabia without a deep understanding of the legal roots and philosophy of the public policy concept could create significant disorder in the legal community. Accordingly, Saudi legal scholars who have studied and 516 For a discussion of the effect of Western legal traditions on the Saudi legal system, see Otto Jan Michiel, Sharia Incorporated. A Comparative Overview of the Legal Systems of Twelve Muslim Countries in Past and Present (Leiden University Press, 2010) 157. For more information generally, see Noel James Coulson, Commercial Law in the Gulf States: The Islamic Legal Tradition (Kluwer Law International, 1984). 517 For more details about ijtihad, see section (C) of Chapter IV. For more details about the effects of Islamic and Western legal traditions on the Saudi legal system, see Fouad Farsy, Modernity and tradition: the Saudi equation (Routledge, 1990) 34–51. 518 Arthur Nussbaum, ‘Public Policy and the Political Crisis in the Conflict of Laws’ (1940) 49(6) The Yale Law Journal 1027. 519 For more details about the history of modern codification and how it is primarily linked to Western civilization, see Csaba Varga, Codification as a Socio-historical Phenomenon (Akadémiai Kiadó, 1991). See also Damiano Canale, ‘The many faces of the codification of law in modern Continental Europe’ in A treatise of legal philosophy and general jurisprudence (Springer, 2009) 135. 520 For more information about ijtihad, see section (C) of Chapter IV. 521 Yongping Xiao and Zhengxin Huo, ‘Ordre Public in China’s Private International Law’ (2005) 53(3) The American Journal of Comparative Law 653–654. 522 For more details about the effect of medieval Law Merchant and international dispute resolution, see Leon E. Trakman, ‘The twenty‐first‐century law merchant’ (2011) 48(4) American Business Law Journal 775. 523 For more information, see Veena Anusornsena, ‘Arbitrability and Public Policy in Regard to the Recognition and Enforcement of Arbitral Award in International Arbitration: the United States, Europe, Africa, Middle East and Asia’ (2012). 141 understand the imported Western legal traditions should be involved in the Saudi judiciary. In practice, the Saudi legal system prohibits legal scholars and professionals from becoming judges. All judicial members are graduates of Sharia schools, which prepare students to understand the legal aspects of Islamic law traditions.524 The main reason for prohibiting legal scholars from becoming judges is the argument that legal scholars lack an understanding of Islamic Sharia. 525 A Professor of Jurisprudence at the Higher Judiciary Institute of Saudi Arabia, Ibrahim Al Hamoud, stated that: Restricting appointment to the judiciary hierarchy in Saudi Arabia to graduates of Sharia schools is attributable to the fact that such graduates satisfy the conditions/requirements for Sharia judges, and that the graduates from law schools do not fulfill such conditions/requirements. All in all, this is not an underestimate of graduates from law schools as they may excel in other disciplines of law such as investigation and prosecution, legal advice and advocacy in both the public and the private sectors.526 While it may be true that law graduates and scholars have no knowledge of Islamic Sharia, it may also be true that Sharia school graduates and scholars have no knowledge of the important Western legal traditions that exist in the Saudi legal system. Thus, logically, both should cooperate to overcome the other’s shortfalls in legal knowledge. It could be that the appointment of Sharia experts in cases that require a completely different body of legal knowledge is the main reason that the Saudi legal system has ‘incontestable’ differences regarding the concept of public policy when compared with leading jurisdictions in the area of arbitration law. Thus, there is an urgent need to 524 According to Art 31(d) of the Law of Judiciary issued by Decree No. (M/78) dated 19/9/1428 AH– (1/10/2007), being appointed as a judge requires a candidate to graduate from Sharia schools by declaring that ‘He shall hold a degree from one of the Sharia colleges in the Kingdom or any equivalent degree, provided that, in the latter case, he shall pass a special examination to be prepared by the Supreme Judicial Council’. 525 Abdulla Al Nasser et al, above n 359, 315–331. 526 Ibid. 142 integrate both Islamic and legal scholars in the judiciary. This would reflect the nature of the Saudi legal system, which merges Western and Islamic legal traditions. C Reforming Both Sides of the Saudi Public Policy Coin: Reconciling Domestic and Transnational Values Public policy is considered an ‘unruly horse’ due to its multidimensional character.527 However, it is possible to control this unruly horse, as stated by Lord Denning: I know that over 300 years ago Hobart C. J. said the ‘Public policy is an unruly horse’. It has often been repeated since. So unruly is the horse, it is said [per Burrough J. in Richardson v Mellish (1824) 2 Bing. 229, 252], that no judge should ever try to mount it lest it run away with him. I disagree. With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles. It can leap the fences put up by fictions and come down on the side of justice.528 Taming the unruly horse is a primary step towards reforming the concept of public policy in any legal system. It can be concluded from the above analysis of the fundamental problems of the Saudi legal system that the definition of Saudi public policy needs be reformed. The rest of this section makes recommendations to guide such reform. The existing legal problems may be summarised as follows: 1. When compared with the situation in leading jurisdictions in the development of arbitration law, there is a lack of understanding, or a disagreement, in regard to the fundamental principles of Saudi public policy. This lack of understanding or disagreement leads to unpredictable legal decisions to set aside arbitration awards and foreign judgements in cases involving non-fundamental legal issues that do not raise questions of serious national concern. 527 Ghodoosi, above n 476. 528 Enderby Town Football Club Ltd v The Football Association Ltd [1971] Ch 591. 143 2. The power to use the weapon of public policy is unregulated by the judiciary. This lack of regulation of the use of public policy weapon causes judges to reject arbitration awards and foreign judgements in cases involving non-fundamental legal issues. 3. The sources of Saudi public policy are not organised or clear. There are large areas of laws that have not been codified and that generally rely on the judgement and legal reasoning of individual judges. Precedents are not binding. Thus, judges are empowered to disregard previous judgements. Further, there are few published decisions, which makes it impossible to understand the Saudi legal position in regard to many important elements of Saudi public policy. On the basis of these conclusions, I argue that the most important recommendation to tame the ‘unruly horse’ of Saudi public policy is to reformulate the scope of Saudi public policy. The Saudi legal system should only use the weapon of public policy in cases involving legal matters that are considered ‘fundamental’. 529 In order to correspond with the leading jurisdictions in the development of arbitration law, this should only occur in ‘exceptional cases’530 that involve serious national concern.531 This recommendation would require many steps from lawmakers, the judiciary and the Saudi legal community before it could be achieved, the most important of which are outlined below. 529 For more details, in regard to the fundamental values, see section (B1) of this chapter. 530 For more details, see section (B4) of this chapter. 531 For more details, see section (B4) of this chapter. 144 1 Adopting the Concept of International Public Policy The most appropriate category of public policy for the Saudi legal system is arguably international public policy. 532 Requiring an award to comply with domestic Saudi public policy is a real threat to the acceptance of international commercial arbitration awards due to significant differences in legal perspectives. Key differences between Islamic and other legal philosophies include Islamic procedures and the conditions of Islamic contracts.533 By contrast, transnational public policy does not align with fundamental Islamic principles with respect to many legal issues. For example, commerce in alcoholic beverages and pork products is universally acceptable and does not conflict with transnational public policy, while these types of goods are completely forbidden under Islamic Sharia. Thus, while Saudi public policy is not compatible with international needs, transnational public policy would conflict with fundamental Islamic values. However, international public policy occupies a middle position between domestic and transnational public policy, where Saudi Arabia could create two levels of public policy: domestic public policy, which applies to domestic considerations, and international public policy, which is less restrictive in its approach.534 By adopting only the fundamental principles of Sharia that operate in ‘exceptional cases’, the adoption of international public policy would help the Saudi judiciary avoid involvement in a large number of Islamic legal debates evident in the Islamic literature. Similarly, Saudi Arabia would be able to exclude consideration of a large number of 532 For more details on international public policy, see section (F2) of Chapter III. 533 This thesis discussed in detail some of the Islamic procedural requirements and the weapon of public policy. For more details see section (D) of Chapter IV. 534 This thesis discussed in detail the concept of domestic, international and transnational public policy and the fundamental differences between these categories in section (F) of Chapter III. 145 national laws by adopting only the fundamental principles of the national laws that operate in ‘exceptional cases’. For example, by adopting international public policy, Saudi Arabia could prohibit judges from using a public policy justification in matters giving rise to controversy between Islamic scholars. An example would be contractual relationships between parties with respect to musical songs and riba ‘usury’ in contemporary currency. On the other hand, use of international public policy would allow judges to use a public policy defence justification when the contractual relationship between parties was in relation to alcoholic beverages and pork products, because both are major and fundamental sins under Islamic law. To clarify, usury in contemporary currency is prohibited according to domestic Saudi concept of public policy.535 However, by adopting international public policy, Saudi Arabia can still prohibit usury in contemporary currency for domestic considerations but allow it for international considerations (international commercial arbitration awards and foreign judgements). The proposed Saudi international public policy means that Saudi Arabia needs to adopt a special tolerant approach for international considerations. This is due to the fact that it is not rational to ask international arbitral awards originating from different legal systems and cultures to comply with the conservative Saudi culture and values. This narrowing of the scope of public policy would enable a significant improvement in the implementation of arbitration awards because it would restrict use of the public policy weapon. 535 For a detailed discussion on riba, see Abdullah Saeed, Islamic Banking and Interest: A Study of the Prohibition of Riba and Its Contemporary Interpretation (E J Brill, 1996). 146 2 Adopting a Separate and Comprehensive New Arbitration Law for International Commercial Arbitration Adoption of international public policy would require the creation of a new arbitration law in Saudi Arabia. The current Saudi arbitration law was promulgated to regulate domestic arbitration and international commercial arbitration in Saudi Arabia. However, the law is very confusing because it does not clearly distinguish between international commercial arbitration and domestic arbitration in its requirements. The new arbitration law established many substantive and procedural requirements to implement arbitral awards, and judges may set aside an arbitration award by using public policy or another legal justification when the award conflicts with the articles of the new Saudi arbitration law. There are no official legal instruments regulating the use of public policy as a reason for rejecting an award. For example, Art 55(2) states, ‘Arbitral awards shall comply with Saudi judgment or decision issued by a court, committee, or commission having jurisdiction to decide the dispute’. This article does not distinguish between international commercial arbitration and domestic arbitration. Thus, acceptance of an international commercial arbitration award completely depends on judicial assessment of the circumstances and the relevant law. Yet the main purpose of engaging in international commercial arbitration is to enable the resolution of disputes outside national courts and laws. It is likely that the lawmakers drafted this article with domestic arbitral considerations in mind. However, it now appears that the lawmakers should have made a clear distinction between domestic arbitration and international commercial arbitration—in this article of the statute, and in all its other articles—to limit contradictions between the various judicial interpretations that exist in regard to the definition of Saudi public policy. 147 As the conclusion from the aforementioned review of judgements implies, the creation of a separate law concerning international arbitration would assist the Saudi judiciary to distinguish between domestic and international arbitration requirements, and it could dramatically reduce contradictory judicial interpretations with respect to public policy. A separate law that exclusively regulates the international arbitration environment would require the adoption of the concept of international public policy. This legal recommendation has been officially adopted in many countries. For example, Singapore 536 and France 537 —both world leaders in arbitration—have adopted this recommendation. The measures suggested in this recommendation would not be new to the international legal community. They have already proved their efficacy in the leading jurisdictions in the development of arbitration law, and, in the author’s opinion, will provide clarity in the Saudi legal system. 3 Codification of the Fundamental Principles of National Laws The history of trade and business between Saudi Arabia and other countries implies that there must be a large number of General Jurisprudential Principles under the concept of Saudi public policy. However, the lack of published cases makes it difficult, if not impossible, to identify all of these principles. Based on an analysis of the available provisions of the Saudi Grievances Board and executive courts,538 this thesis has been able to determine some of the principles. However, seems likely that there are many other principles accessible to judges through their library that are still not available to the public. Lack of transparency is thus the major obstacle in identifying the General Jurisprudential Principles relating to public policy. 536 See chapter 143A of International Arbitration Act of 1994 (Revised Edition 31st December 2002). 537 See French Code of Civil Procedure, Decree No. 2011-48 of 13 January 2011, reforming the law governing arbitration. 538 See section (G) of Chapter III. 148 This thesis recommends that the Saudi legal system make available all the General Jurisprudential Principles that have arisen from previous Saudi court decisions. As well as distinguishing between the principles for domestic and international considerations, it would be desirable for all fundamental principles used when considering international awards to be published separately. This codification of fundamental principles exclusively for cases involving international awards would explain the Saudi concept of international public policy, thus enabling international investors to clearly understand the fundamental values of the Saudi legal environment in order to manage investment risks before entering the Saudi market. Codification would also help Saudi judges facilitate implementation of arbitration awards, as any international commercial arbitration award not in conflict with Saudi international public policy would be implemented. To clarify, the Saudi legal system should codify its financial, commercial and investment rules. For instance, the Saudi legal system might prohibit interest and contracts that contain Gharrer. Also, the Saudi legal system might codify other rules, such as prohibiting arbitration in matters that touch on environmental issues, social safety, national resources and government institutes. The main purpose of this recommendation is make Saudi Arabia clarify in advance—in English and other languages—the fundamental principles of Saudi laws, to allow international legal committees and other stakeholders to prepare their investment and business plans before they engage in Saudi markets. 4 Codification of the Fundamental Principles of Islamic Sharia The second feature of public policy in the Saudi legal system is Sharia. The main concern raised in this thesis with respect Sharia is that it depends on independent 149 judgement and legal reasoning, and judges are empowered to disregard previous judgements.539 Any individual judge may therefore hold a different understanding of the fundamental values of Sharia from any other judge, resulting in contradictory interpretations of Saudi public policy.540 This thesis argues that Saudi Arabia should narrow the concept of public policy by adopting the concept of international public policy for Sharia. Thus, two levels of Sharia would be used in Saudi Arabia. The domestic Sharia would apply to cases involving only domestic considerations, and a less restrictive international concept would apply in international cases. Codifying the fundamental principles of Islamic Sharia that operate in exceptional cases would dramatically narrow the concept of Saudi public policy. As a result, the implementation of foreign judgements and international commercial arbitration awards would increase, because judges would not be empowered to disregard the codification. This would be likely to encourage foreign investment in Saudi Arabia as outcomes in cases involving foreign awards would be more predictable. To clarify, the Saudi legal system could codify Islamic financial and commercial rules, or Islamic rules such as prohibition of products that contain pork. Also, the Saudi legal system might codify other rules, such as prohibiting arbitration in matters that link to the Islamic way of dividing inheritance and businesses that involve gambling. The main purpose of this recommendation is make Saudi Arabia clarify in advance—in English and other languages—fundamental principles of Sharia to allow international legal committees and other stakeholders to prepare their investment and business plans before they engage in Saudi markets. 539 For more details, see section (B4) of this chapter. 540 For more details, see section (B4) of this chapter. 150 Finally, it is important to note that the idea of codifying Islamic Sharia originated in the late Ottoman Empire, through the creation of the Mecelle, 541 and it then spread to almost all Middle Eastern countries under Ottoman Empire rule.542 Nowadays, Islamic Sharia is codified in all Middle Eastern countries 543 except Saudi Arabia. 544 The principle of codifying Islamic Sharia is thus legally accepted in other Islamic countries, and could not be said to be foreign to Islamic legal communities. However, this thesis recommends the codification of the fundamental principles of Sharia that would apply only in cases that have foreign elements; it would not apply to the entire body of Sharia. In legal terms, this is a pioneering solution. It might be a turning point for Saudi Arabia and other Islamic countries in facilitating international trade while maintaining the Islamic values that are widely accepted in Middle Eastern countries. 5 The Circuit of International Public Policy and Supreme Circuit of International Public Policy Public policy is a dynamic concept that requires adaption to different countries’ circumstances. There is a need to create a new approach that enables this dynamic concept to maintain stability and continuity. This dissertation recommends that to respond to the needs of the dynamic concept of public policy, Saudi Arabia should create a ‘circuit of international public policy’ within the Court of Appeal, and a ‘supreme circuit of international public policy’ within the Supreme Court. 541 Aharon Layish, ‘The Transformation of the Shari’a from Jurists’ Law to Statutory Law in the Contemporary Muslim World’ (2004) 44 Die Welt des Islams 85. 542 Ibid. 543 Paul H. Robinson, ‘Codifying Shari’a: International Norms, Legality and the Freedom to Invent New Forms’ (2007) 2 Journal of Comparative Law 1. 544 Najmaldeen K. Kareem Zanki, ‘Codification of Islamic Law Premises of History and Debates of Contemporary Muslim Scholars’ (2014) 4 International Journal of Humanities and Social Science 134– 135. 151 As argued above, this thesis recommends codifying the Saudi fundamental principles of national laws and Islamic Sharia. However, as every judge could still interpret the articles differently, such codification might not be sufficient to limit contradictions between judicial decisions of the lower courts in regard to the concept of international public policy. In addition, there is a probability that new legal issues will appear. Thus, this thesis recommends that lower courts be given the discretion to apply their own legal reasoning when foreign judgements and international commercial arbitration awards conflict with the concept of international public policy. In any event, the circuit of international public policy would be tasked with reviewing the lower court decisions and approving or rejecting their conclusions. The jurisdiction to use the justification of public policy to reject an arbitration award would lie in the hands of the circuit of international public policy. If the circuit of international public policy were to approve the lower court decision, the decision would be published and would be binding on all lower courts. However, if the circuit were to reject the decision, the circuit would be required to reopen the case to identify the relevant international public policy that Saudi Arabia must adopt in its legal system. Meanwhile, the supreme circuit of international public policy would have the right to change the case law of the circuit of international public policy. This thesis recommends that the circuit should have a tribunal of five members—two who are Islamic scholars and two who are law scholars, with these four members deciding on the fifth. However, the supreme circuit of international public policy should have a tribunal of seven members—three who are Islamic scholars and three who are law scholars, with these six members deciding on the seventh. The main justification for having a mix of members who are Sharia scholars and law scholars is to overcome the perceived shortage of legal knowledge of the Sharia members to make decisions with an 152 objective and rational approach that balances domestic and transnational values. The importance of the concept of public policy justifies large panels in each tribunal because their decisions will significantly affect international investors’ decisions and other stakeholders. If this recommendation were to be adopted, the circuit of international public policy would have a duty to supervise lower courts by reviewing their decisions, choosing an appropriate interpretation of the concept of international public policy and making case law. However, of special significance, the supreme circuit of international public policy would have a duty to choose the appropriate interpretation of the concept of international public policy to create new case law. The main purpose of this recommendation is to encourage legal restrictions on the use of public policy weapon. The weapon needs to be in the hands of the most prominent scholars in the Saudi legal system. In other words, legal restrictions suggest who should use and determine the Saudi concept of the public policy, rather than how to use it. Finally, it is important to state that this recommendation was inspired by the common law tradition of precedents that bind lower courts, 545 and civil law traditions of codifying the legal system.546 However, it would be a pioneering approach to act on this author’s recommendation to prevent the lower courts from making case law, to create special tribunals to determine the scope of the Saudi concept of public policy, and to apply the doctrine of precedent only in decisions of the circuit of international public policy and the supreme circuit of international public policy. 545 David Vong, ‘Binding precedent and English judicial law-making’ (1984) Jura Falconis; Stephen R. Perry, ‘Judicial obligation, precedent and the common law’ (1987) 7(2) Oxford Journal of Legal Studies 215; David Vong, ‘Binding precedent and English judicial law-making’ (1984) 1985 Jura Falconis 318. 546 Joseph Dainow, ‘The civil law and the common law: Some points of comparison’ (1966) The American Journal of Comparative Law 419. See also Vincy Fon and Francesco Parisi, ‘Judicial precedents in civil law systems: A dynamic analysis’ (2006) 26(4) International Review of Law and Economics 519. 153 D Reconciling Domestic and Transnational Values The significant legal issues in the Saudi concept of public policy became evident when this research compared the Saudi legal concept of public policy to the concept that exists in the leading jurisdictions in the development of arbitration law. In comparing both international practice and Saudi judicial practice, the overall conclusion of this research is that the application of the Saudi concept of public policy is unsatisfactory and needs to be reformed urgently to correspond with leading international practice. Based on detailed examination of the available provisions of the Saudi Grievances Board, executive courts, and laws and legislations, it is clear that the Saudi legal system has established many steps to reform the arbitration environment. These aim to facilitate the implementation of international commercial arbitration awards. For example, lawmakers have transferred jurisdiction from the Saudi Grievances Board to executive courts to decrease the comprehensive judicial review of international commercial arbitration awards.547 In addition, lawmakers have issued a new arbitration law that is generally based on the UNCITRAL Model Law to facilitate the implementation of international commercial arbitration awards. 548 Moreover, to facilitate the implementation of international commercial arbitration awards, the judiciary does not investigate procedural requirements from a strict Islamic legal point-of-view for matters that involve foreign elements.549 However, there has been no significant improvement in regard to the Saudi concept of public policy—this concept remains ambiguous because there are no clear standards to 547 See first and second section of the implementing regulations for the new Saudi arbitration law, issued on 9/6/2017 in the Umm Al-Qura Gazette. 548 For more details about the new Saudi arbitration law, see Nayla Comair-Obeid, ‘Salient Issues in Arbitration from an Arab Middle Eastern Perspective’ (2014) 4 Arbitration Brief 57. 549 For further information on this point, see section (D) of Chapter IV. 154 determine the application of public policy exceptions and their scope. Because of the lack of regulations that identify clear standards for the application of public policy exceptions, this thesis observes that many court provisions contradict each other in regard to the Saudi concept of public policy. These contradictions in court provisions are probably due to conflicting perspectives in the Saudi judiciary. One part of the Saudi judiciary is conservative and wishes to maintain local identity and values, regardless of the legal and economic consequences of globalisation. However, another part of the Saudi judiciary is more liberal and seeks to engage with globalisation by creating a flexible environment that offers many benefits to Saudi Arabia. The conflict between these two streams may have clouded the view of the Saudi legal system in the eyes of foreign legal scholars. For example, this blurred view might lead Kristin T Roy to state that, ‘Article V(2) (b) of the New York Convention provides a safe harbor wherein Saudi Arabia does not have to recognize a non-Saudi Arabian arbitral award that is contrary to its public policy’.550 This study’s analysis offers a probable theory that explains the contradictions of Saudi court decisions. However, there is no doubt that the overall practice of the Saudi legal system has ‘incontestable’ differences with leading jurisdictions in the area of arbitration law in regard to the concept of public policy. This seems to be an unavoidable conclusion when it is considered that the Saudi legal system has assumed different legal practices to international practices (with respect to many fundamental issues regarding the concept of public policy that are found in other legal systems). For example, it is often difficult to predict judicial outcomes with respect to the Saudi concept of public policy because the power to use public policy is unregulated. Thus, 550 Roy, above n 164, 953. 155 the Saudi judiciary can set aside foreign judgements and international commercial arbitration awards that concern non-fundamental legal matters. Further, it is very difficult to challenge the Saudi judiciary because there are no codifications that identify the national laws and principles of Islamic Sharia that are considered under the concept of Saudi public policy. Moreover, precedents are not binding. Thus, judges are empowered to disregard earlier judgements. Perhaps one of the main factors explaining the conflict between Saudi judiciary practice and international practice is that all members of the Saudi judiciary are Sharia graduates who may not be familiar with the international legal debate and practice in regard to the concept of public policy. In other words, there is a lack of appropriately qualified judges who can address the important and complex legal concepts that were originally imported from Western legal traditions into the Saudi legal system. For all the reasons discussed above, this thesis argues that, without significant political intervention from lawmakers, Saudi legal problems will continue with respect to the implementation of foreign arbitration awards. In addition, without cooperation between lawmakers, Sharia scholars and law scholars, difficulties identifying the Saudi concept of public policy will not be resolved, and the differences between Saudi practice and international practice will remain. For the purpose of solving these problems in the Saudi legal system, this research has recommended a series of fundamental legal solutions that would dramatically narrow the scope of public policy to reconcile domestic and transnational values. The essential reason for these research recommendations is assist the Saudi legal system to attain its goals of national transformation by creating a transparent legal environment that will attract more international investors to participate in the Saudi economy. 156 CHAPTER VI: CONCLUDING REMARKS A Introduction This chapter reviews the main themes discussed in this thesis. It outlines how the research findings have filled the gaps in the literature, provides an overview of the thesis, discusses the significant and original findings and contributions made to the literature, and explains possible directions for future research. B This Study The primary aim of this thesis has been to fill the gap in the literature in relation to the Saudi concept of public policy and its effects on the enforcement of international commercial arbitration awards. The study aimed to answer the following research question: What aspects of the public policy concept in Saudi Arabia form legal obstacles to the recognition and implementation of international commercial arbitration awards? Thus, the goal of this thesis was to understand and demonstrate the reasons why Saudi courts have set aside foreign awards using the public policy defence. The thesis also made recommendations about how weaknesses could be addressed in practice. The thesis has shown that Saudi courts have generally refused to recognise and implement arbitration awards on the grounds of public policy when such awards would contravene the fundamental principles of Saudi public policy—that is, the fundamental principles of national law (General Jurisprudential Principles) and Islamic law (Sharia). Metaphorically, the Saudi concept of public policy is a coin with two sides, each imbued with many significant legal issues. 157 C Brief Recap of the Argument This thesis has illustrated that the Saudi concept of public policy depends on two fundamental pillars: the fundamental principles of national law (General Jurisprudential Principles) and Islamic law (Sharia). General Jurisprudential Principles are largely derived from national laws and normative social requirements. An international commercial arbitration law that conflicts with Saudi judicial principles necessarily conflicts with the Saudi concept of public policy. This thesis has argued that General Jurisprudential Principles lack transparency and clarity; therefore, if Saudi Arabia wishes to attract investors who rely on commercial arbitration for dispute settlement, the Saudi legal system needs to provide clarity to support the implementation of international commercial arbitration awards. This thesis has also argued that the new arbitration law requires international commercial arbitration awards to comply with the second feature of Saudi public policy—‘provisions of Sharia’—as a fundamental pillar of the Saudi concept of public policy. However, compliance with the second feature of Saudi public policy is a requirement that is almost impossible to achieve consistently, except in cases that theoretically have ijma among Muslim scholars. This is because Sharia depends on independent judgement and legal reasoning, and judges are empowered to disregard previous judgements. Each judge can therefore have a different interpretation of Sharia, and this has resulted in mutually contradictory interpretations of Saudi public policy. Arbitration awards are at the mercy of independent judicial assessment. Where Sharia will take us is uncertain. The Saudi judicial system may have set aside arbitral awards and foreign judgements in many cases because of possible ‘misunderstandings’ or ‘disagreements’ regarding the 158 fundamental principles of Saudi society. However, the overall argument of this thesis is that Saudi courts have misused the weapon of public policy in many cases because there are no legal restrictions in place that control the use of the public policy defence. Thus, it is important to adopt multiple legal restrictions to minimise the use of the public policy defence, as suggested in Chapter V. D Significance of the Thesis Saudi Arabia has been trying to attract more international investors and businesses in different ways to participate in the Saudi economy. Signing the NYC was a significant step that was primarily aimed at attracting international investors. However, it is claimed that Saudi Arabian courts have not yet demonstrated sufficient clarity in their construction of public policy due to undue variations in their construction of Art V (2)(b), which enables the court of a contracting state to set aside an award when it finds that such recognition or enforcement would be contrary to the state’s public policy. Unfortunately, the Saudi government has not provided a clear definition or explanation of its approach to Art V (2)(b) of the NYC. In addition, no academic studies have adequately discussed the issue of Saudi public policy to provide a clear and satisfactory explanation of this legal gap. This thesis has provided an explanation of the Saudi concept of public policy and outlined the legal issues that have the capacity to affect the investment climate and business. Further, this study has suggested legal solutions to overcome these problems and bring Saudi Arabia in line with other leading jurisdictions in the development of arbitration law. 159 E Summary of the Thesis Saudi Arabia was chosen because the author is a trained Saudi legal practitioner, qualified in both Sharia and legal studies. He was interested in the significant effect of international commercial arbitration on facilitating world transactions in general, and the powerful position of the Saudi economy and its effects on international trade and investment in particular. The thesis has investigated the Saudi concept of public policy to highlight legal obstacles that stand in the way of recognising and implementing foreign arbitration awards in light of the recent Saudi arbitration law. The preceding five chapters discussed the Saudi concept of public policy—each with a different goal. Chapter I acted as a platform to guide the reader in understanding the thesis. It outlined the research question and various sub-questions, set out the significance of the study and various research issues, and showed why the study was conducted in the field of international commercial arbitration awards. Chapter II aimed to identify the legal gap in the most relevant academic research on the Saudi concept of public policy. It analysed the literature to demonstrate that although many of the relevant academic studies have discussed the Saudi concept of public policy, none have accurately and comprehensively addressed the legal issues that affect the implementation of international commercial arbitration awards as a result of this public policy concept. This chapter thus constituted a justification of the rationale for the study of the Saudi concept of public policy in relation to international arbitration awards. 160 Chapter III examined the first side of the Saudi public policy coin to highlight legal issues. The important themes were the new Saudi arbitration law, the implementation issue, the major laws that govern arbitration in Saudi Arabia, and the factors affecting public policy across legal systems. This analysis demonstrated that Saudi public policy comprises judicial principles that are largely derived from national laws and normative concepts. In legal terms, these principles are General Jurisprudential Principles,551 and an international commercial arbitration award that conflicts with these judicial principles ipso facto conflicts with the Saudi concept of public policy. Chapter IV explored the second side of the Saudi public policy coin, Sharia, to highlight legal issues. It demonstrated that compliance with Sharia is almost impossible to achieve consistently. The chapter concluded that Sharia renders arbitral awards uncertain, because it depends on independent judicial assessments. Chapter V identified the most significant study findings and observations that demonstrated the root problem of the Saudi public policy concept. Comparing the Saudi public policy concept with public policy thinking in leading international jurisdictions in the development of arbitration law, the chapter demonstrated Saudi Arabia’s currently irreconcilable differences regarding the concept of public policy in arbitration law. Hence, to reconcile domestic and transnational values through the reform of features of Saudi public policy, a number of recommendations emerge, including the adoption of the concept of international public policy, the adoption of a separate, comprehensive new arbitration law for international commercial arbitration and codification of the fundamental principles of national laws and Sharia. The purpose of 551 Judicial principles that are considered under the Saudi concept of public policy include royal orders that require prior authorisation from the prime minister, rules of competence, identifying the legal status of parties, arbitration in personal status disputes or matters not subject to reconciliation, managing of implementation and other legal matters. For more details, see section G (discussion and analysis of the first side of the Saudi public policy coin). 161 recommending these legal restrictions is to restrict use of the concept of public policy to legal matters that are considered ‘fundamental’, and in ‘exceptional cases’ that involve serious national concerns. F Originality and Contribution to the Literature Of the academic studies most relevant to the subject of this thesis, many discussed the Saudi public policy concept, but none accurately and comprehensively addressed the resulting effects on arbitration awards. Researchers have examined controversies over the Saudi public policy concept, but have only scratched the surface. The in-depth discussion of the Saudi concept of public policy in this study provided new knowledge and insights. Points that demonstrate the originality of this thesis are summarised below. First, this study is the first specialised legal study on the Saudi concept of public policy and its legal implications since the new Saudi arbitration law was officially published in 2012. Second, this thesis identified that the four types of conclusions typically reached by other academics and practitioners regarding the Saudi concept of public policy and related issues have been, either incomplete or inaccurate, or both. These limitations have included: (1) that an international commercial arbitration award that conflicts with Islamic law (Sharia) necessarily conflicts with Saudi public policy, (2) that the concept of public policy is broader in scope than Sharia, (3) that studies are liable to make specific findings even when their definition of public policy is ambiguous or non- existent, and (4) that public policy is nothing more than a safe harbour. Third, this study agrees with the many legal scholars who claim that public policy is a vague concept that is not amenable to definition. Yet public policy is a legal 162 instrument—even a weapon—that allows judges to refuse to enforce international commercial arbitration awards and foreign judgements. This weapon may be used when a judge considers that someone is attempting to undermine values that the court sees as fundamental to its legal system. The values that Saudi courts see as fundamental to the legal system are derived from Saudi law and Sharia (Islamic law). The Saudi concept of public policy has grown out of the Saudi legal system, which combines traditional and modern values. This study found that the Saudi concept of public policy is a coin with two sides: General Jurisprudential Principles and Sharia. General Jurisprudential Principles are largely derived from national laws and normative social requirements. International commercial arbitration must comply with General Jurisprudential Principles, and the Supreme Court of Saudi Arabia has the legal right to change the General Jurisprudential Principles according to its assessment. The scope of Sharia public policy is very broad in the Saudi legal system. Thus, complying with the provisions of Sharia is almost impossible to achieve consistently because Sharia depends on independent judicial assessments and legal reasoning, which differ from judge to judge and time to time, except in limited cases that have ijma. An international commercial arbitration award that conflicts with ijma necessarily conflicts with the Saudi concept of public policy. Fourth, according to the available decisions from the Saudi executive courts, the Saudi judiciary has had a tolerant approach towards Islamic procedural requirements. There are no available published cases that have rejected an arbitration award because of Islamic procedural requirements—for example, the award being issued by a non- Muslim, by a woman or involving a witness who was not ‘just’. 163 Fifth, the Saudi judicial system has set aside arbitral awards and foreign judgements in many cases because of possible ‘misunderstandings’ or ‘disagreements’ regarding the fundamental principles of Saudi society. This interpretation of judicial behaviour has been reached because decisions made regarding similar facts have yielded different and unpredictable outcomes. The Saudi legal system prohibits law graduates from participating in the judicial environment. Judicial members are exclusively graduates from Sharia schools, which prepare students to understand the traditions of Islamic law. The appointment of only Sharia experts may be the main reason why, in the area of arbitration law, the Saudi legal system has ‘incontestable’ differences with leading jurisdictions regarding the concept of public policy. It is necessary to appoint law experts in the judicial environment beside Sharia experts to provide a balanced environment that can investigate a legal matter from different angles. Sixth, the scope of Saudi public policy is very broad, and significant steps need to be taken to narrow the scope, including adoption of the concept of international public policy as applied in practice in France, Italy, Portugal, Algeria and other jurisdictions; adoption of a separate, comprehensive new arbitration law for international commercial arbitration; codification of the fundamental principles of national laws; codification of the fundamental principles of Sharia; and the establishment of a Circuit of International Public Policy and a Supreme Circuit of International Public Policy.The author argued that these legal recommendations can be implemented successfully when cooperation exists between lawmakers, Sharia scholars and law scholars. The significance of these legal recommendations lies in taming the unruly horse of Saudi public policy via reconciling domestic and transnational values. Reconciling domestic and transnational values requires the Saudi legal system to use the weapon of public policy in legal 164 matters that are considered ‘fundamental’, and should only operate in ‘exceptional cases’ that involve serious national concerns. The overall purpose and value of implementing these legal recommendations lies in providing a sophisticated Saudi arbitration environment that corresponds with the leading jurisdictions in the development of arbitration law. However, how to implement these recommendations in a manner that suits Saudi society is a significant research question that needs to be answered. Finally, the legal aftermath of the Aramco Award remains as it was in 1958. According to Art 10(2) of the new arbitration law, government bodies are prohibited from entering into arbitration agreements, except on approval by the King of Saudi Arabia in his role as prime minister. This requirement is an obstacle that needs to be overcome to develop the international commercial arbitration environment. G Responses to Traditional Research Limitations The researcher struggled with bureaucratic attitudes of government officials during the visit to Saudi Arabia to collect extra provisions from Saudi court libraries. During the visit to the courts, it was clear that Saudi courts treat their provisions as secret. The judges refused to reveal any documentary material, despite the official authority that identified the researcher and the reason for the research. The researcher was obliged to obtain official permission from senior officials at the Board of Grievances and the Ministry of Justice to obtain judicial provisions. Fortunately, the researcher was able to obtain official permission from the Ministry of Justice that allowed him to access important cases relating to the research issues. The Ministry of Justice’s authority gave the researcher access to important provisions in the Saudi executive court library. 165 However, the Board of Grievances rejected the researcher’s request to obtain material from its library except published cases. H Directions for Future Research This study raises the possibility of further research in various areas. It is important to investigate why the Saudi judiciary has many mutually contradictory provisions in relation to Sharia, why Sharia is the source of most legal grounds on which foreign judgements and arbitral awards are set aside, and why Saudi Arabia has not codified Islamic law like other Islamic countries, as well as the best way to codify Sharia. It will be important to investigate these issues to find new solutions for modern legal issues. In addition, a significant step would be to institute an empirical study to assess the validity of the recommendations in this thesis. An explanatory sequential mixed method design 552 is highly recommended because the mixed methods approach reveals the weaknesses and enhances the strengths of the research process. Therefore, the author recommends establishing a questionnaire and a structured interview to obtain a clear understanding of legal perspectives and perspectives from other specialists. Questionnaires are one of the most useful techniques for collecting quantitative data in the legal studies area, to obtain facts, knowledge, attitudes and perspectives. In addition, the interview approach is important for collecting information because it probes the opinions, attitudes and belief systems of the participants. Interviews should help to provide a clear understanding of investors’ perspectives, to reach an accurate outcome for the benefit of this study. The interview questions are recommended to be open- ended, which will enable the researcher to probe the experts’ responses more deeply, 552 John W. Creswell et al, 'Advanced mixed methods research designs' (2003) 209 Handbook of mixed methods in social and behavioral research 240 166 request elaborations and clarifications, and follow up their views and perspectives. Validity of the dissertation recommendations by instituting an empirical study might prove or disprove the author’s argument, and open the door to new different legal recommendations that assist in handling the issues of the Saudi concept of public policy. Alternative ways of developing the international commercial arbitration environment in Saudi Arabia should be investigated, with a view to assisting in the recognition and implementation of arbitration awards. 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