Joshua Coleman-Pecha is a senior international construction, infrastructure and technology dispute specialist working in the MENA region. He advises on construction and technology projects from inception to completion. Joshua is a qualified solicitor advocate, meaning he has rights of audience in the courts of England & Wales, and is a PRINCE 2 qualified project manager.

Joshua advises on all aspects of complex dispute avoidance and resolution. He has represented several clients in billion-dollar disputes before a variety of arbitral institutions including ICC, LCIA, UNCITRAL, DIAC, and SCCA. He has experience handling disputes under the governing laws of England & Wales, the UAE, Saudi, and Qatar.

Joshua’s recent significant work includes advising in relation to oil and gas processing facilities, drilling contracts (onshore and offshore), a water desalinisation plant, a battery energy storage park, the MENA region’s largest metro system, and a major railroad and metro project in the UAE and Saudi respectively. Joshua has experience of projects across the region having handled disputes in, for example, the UAE, Oman, Qatar, Saudi Arabia, Iraq, and Turkey. His clients include international oil & gas companies, refining and petrochemical companies, EPC contractors, oil & gas service companies, EPC employers, and international technology providers. Finally, he acts in a hybrid role as general counsel to a billion dollar pharmaceutical company based in the UAE.

Joshua was recently recognized as a ‘Key Lawyer’ in Oil, Gas and Natural Resources by Legal 500 2024. He is also a member of various construction industry associations and a contributing member of the Legal Funding Journal.

I think there have been a few factors that have limited funders’ interest in operating in the Saudi market, or, financing disputes that involve Saudi law and / or Saudi Courts.

First, the high-level point is that legal funding is not prohibited under Saudi law. However, until now, in Saudi and across the GCC, whilst the view has been that written laws do not prohibit legal funding, there has been a high degree of uncertainty as to how, in practice, the courts would treat parties backed by legal funders. Quite understandably, legal funders and litigants have been hesitant to be the ‘test cases’ on which this issue is examined. To some extent I think this hesitancy remains, though it is decreasing as GCC countries refine their laws and legal practice, and legal funders look to the growing markets across the GCC for new opportunities.

Second, for many years Sharia has been the dominant system of law in Saudi. Sharia law is a huge subject, and it is impossible to consider all the aspects of it here. However, in summary, it is a combination of several different texts and is subject to several schools of legal interpretation. As with other GCC countries, Saudi is a civil law system, and does not rely on binding precedent. It may be that legal funders have been hesitant to make investments in an environment that they don’t feel they fully understand. However, in recent times, Saudi has taken significant strides towards codifying its laws. All GCC countries are on this path to a greater or lesser extent, which helps provide certainty. In addition, with better recording and proliferation of court judgments and legal knowledge across the entire market, my sense is that international investors are becoming more confident in these surroundings.

Third, all GCC countries have been signatories to the New York Convention for some time. However, recent years have seen an acceleration of arbitration across the GCC, as recognition of the jurisdiction of arbitral tribunals and willingness to enforce arbitral awards increases. In Saudi, part of the country’s ‘Vision 2023’ is to have the leading arbitral institution in the Middle East, and be considered one of the leading arbitral institutions worldwide. Saudi has implemented a new Arbitration Law, and the Saudi Center for Commercial Arbitration (SCCA) has received significant investment, allowing it to hire globally recognised practitioners to join its senior ranks. Its rules are based on UNCITRAL rules and were updated in 2023 to reflect the most modern sets of arbitral rules globally.

Fourth, through discussion with various funders, my understanding of their view is that investing in Saudi is outside their commercial risk parameters. Factors such as uncertainty over duration of legal proceedings, lack of knowledge of Sharia, and questions over enforcement have made it difficult to determine likely ROI. Certainty over enforcement of arbitral awards in Saudi is increasing and the reasons for this are discussed below / later.

Finally, from the perspective of a funded party, and bearing in mind a lot of these parties are contractors in the construction industry, I think there is hesitancy to use legal funding as it can wipe out profit margins.

The market is huge. Focusing just on the projects sector alone, there are approximately USD 1.8trn of projects planned or underway in Saudi (USD 330bn of which are already underway), making it the largest market in the MENA region. Over the last five years, the Saudi projects sector has, on average, awarded USD 60bn of projects a year, which looks set to grow year-on-year to around USD 80bn by 2028.

It is impossible to accurately estimate the number or value of disputes emanating from these projects. Of course, arbitration is private, but also many issues or disputes will not come to light due to being settled through commercial negotiations. We do know that right now approximately 440 projects in Saudi are identified as being ‘on hold’ (which means there is almost certainly going to be some form of dispute arising) with a combined value of USD 231bn. As the number and value of projects approaching completion or achieving completion increases, I expect to see these figures grow.

For the reasons discussed above, legal funding has yet to proliferate in GCC countries. My experience is that, at best, many legal advisors (both in private practice and in-house) and potential litigants have limited knowledge about legal funding and are therefore sceptical of its merits. At worst, these parties may not know anything about legal funding at all, or, have a misunderstanding of what it is about and how it can help. I believe that education is needed before legal funding can be considered ‘mainstream’ in this region.

Where legal funding may be better known is amongst international entities (like international contractors) operating in Saudi or the wider GCC. However, even where there more understanding as regards the concept and a willingness to consider it as an option, barriers remain. For example, contractors are often put off legal funding when the cost is revealed.

Construction disputes are often fact heavy, require a significant amount of analysis before funders can begin to assess the merits, and, if they go to trial, will require lengthy investment periods. All this means that funder risk goes up, so the required returns go up, which can seriously damage contractor profits. There’s little point in a contractor taking funding if it’s going to wipe out the contractor’s profit margin on the underlying project.

My personal view is that discussion between contractors and funders can yield a solution. On the one hand contractors may be persuaded to take funding based on a holistic view of its financial benefits. Portfolio funding may make taking funding economically palatable to contractors. However, also in my view, the greatest opportunity for striking investment deals lies in the fact that both employers and contractors tend to want to settle disputes at the earliest opportunity. If legal funders are willing to take this into account, it may shift the investment metrics sufficiently to make legal funding attractive to all parties.

The laws

Saudi has been signatory to the New York convention since 1994. However, its arbitration friendliness has increased massively in the last few years, including the creation of the previously mentioned SCCA in 2016. In addition, two key rules have been promulgated:

In 2012, Saudi passed KSA Royal Decree M/34 concerning the approval of the Law of Arbitration (KSA Arbitration Law) (together with its Implementing Rules) and in 2013, Royal Decree M/53 (Enforcement Law). The KSA Arbitration law is modelled on the UNCITRAL model law, which is regarded as international best practice.

The KSA Arbitration Law curtailed the Saudi courts’ interventionist powers in relation to arbitrations seated in Saudi Arabia by recognizing for the first time the parties’ autonomy to tailor their arbitration procedure in certain important respects, including by explicitly recognizing the adoption of institutional arbitration rules. The KSA Arbitration Law also addressed a key concern under the old law – the power of the Saudi courts to reopen and effectively re-litigate awards on their merits.

The Enforcement Law has led to the creation of specialized enforcement courts, whose jurisdiction supersedes that of the Board of Grievances (the court previously competent to hear requests for enforcement of arbitral awards). This in turn has started to have a salutary effect on the enforcement of foreign arbitral awards, which until 2017 was an uncertain prospect. The Enforcement Law contains provisions that affect all aspects of enforcement of judgments and arbitral awards, both domestic and foreign. In practice, the Enforcement Law has resulted in the unprecedented enforcement of several foreign arbitral awards, which is welcome development. It is hoped that the Rules supplementing the KSA Arbitration Law will help to provide more certainty around how the courts will apply the KSA Arbitration Law, including with respect to enforcement of arbitral awards.

Domestic Arbitral Awards

Domestic arbitral awards must comply with the KSA Arbitration Law. The Enforcement Courts have jurisdiction to enforce domestic arbitral awards under article 9(2) of the Enforcement Law. For a domestic arbitral award, it must be declared as enforceable by the appeal court with initial jurisdiction over the dispute. Therefore, an application is needed to the relevant appeal court for a declaration that the award is enforceable by the party seeking enforcement. The declaration is normally represented by a court stamp, after which the request for enforcement can be registered with the Enforcement Court.

Domestic arbitral awards that are enforceable include:

• monetary awards
• specific performance
• sale or delivery of tangible and intangible property

Article 55 of the KSA Arbitration Law outlines the procedural and substantive requirements of a valid arbitral award. Pursuant to this provision, the competent court must verify the following conditions to issue an order for enforcement:

• The arbitral award must not contradict other court decisions or laws on the same subject in Saudi Arabia.
• The loser has been duly notified of the arbitral award.
• The arbitral award must not violate Saudi public policy (Sharia). My understanding is that where the Saudi Courts have been confronted with an award where part of it contradicts Sharia, in some instances, they have been willing to strike out the unenforceable part and enforce the remainder.

Furthermore, the arbitral award must comply with the formality requirements of the KSA Arbitration Law and be compliant with Sharia principles. Article 49 of the KSA Arbitration Law states that an arbitral award is not subject to appeal. However, under article 50(1), a party may apply to annul an arbitral award issued on the following grounds:

• “if no arbitration agreement exists, or if such agreement is void, voidable, or terminated due to expiry of its term;
• if either party, at the time of concluding the arbitration agreement, lacks legal capacity, pursuant to the law governing his capacity;
• if either arbitration party fails to present his defence due to lack of proper notification of the appointment of an arbitrator or of the arbitration proceedings or for any other reason beyond his control;
• if the arbitration award excludes the application of any rules which the parties to arbitration agree to apply to the subject matter of the dispute;
• if the composition of the arbitration tribunal or the appointment of the arbitrators is carried out in a manner violating this Law or the agreement of the parties;
• if the arbitration award rules on matters not included in the arbitration agreement; nevertheless, if parts of the award relating to matters subject to arbitration can be separated from those not subject there to, then nullification shall apply only to parts not subject to arbitration; and
• If the arbitration tribunal fails to observe conditions required for the award in a manner affecting its substance, or if the award is based on void arbitration proceedings that affect it.”

Furthermore, under article 50(2) of the KSA Arbitration Law, the court may, on its own jurisdiction, nullify the arbitral award if:

• it violates Sharia or Saudi public policy; or
• the subject matter of the dispute was not arbitrable, e.g., not capable of being resolved by arbitration, under Saudi law.

The application for nullification of the arbitral award must be made 60 days after the nullifying party was notified of the award.

Foreign Arbitral Awards

Foreign awards must comply with the Enforcement Law as well as the New York Convention for enforcement of foreign arbitral awards. For a foreign arbitral award, a party does not need a declaration that it is enforceable from the relevant domestic appeal court. Instead, the party requesting enforcement can apply directly to the Enforcement Court, with no statute of limitations applicable.

For foreign arbitral awards to be enforceable they must meet the following criteria:

• The award must be a final award and must not contradict another judgment or court order issued on the same subject in Saudi Arabia, or contradict the public policy of Saudi Arabia.
• Reciprocity must be established between Saudi Arabia and the jurisdiction in which the award is issued. The burden on proving reciprocity is on the party requesting enforcement.
• The award must have been issued by a tribunal with jurisdiction under the relevant foreign law, and the subject matter of the aware, should not be under mandatory jurisdiction of Saudi Arabia;
• All parties must have conducted the proceedings with all procedural regularities in place, with due representation If the respondent to the proceedings was notified, but was not represented, and this can be evidenced, such an award is still enforceable.

The Enforcement Court has jurisdiction to enforce foreign arbitral awards in accordance with the requirements of the Enforcement Law:

• Saudi courts must not have jurisdiction to decide the dispute.
• The tribunal issuing the award must have had jurisdiction over the dispute.
• The arbitral proceedings were conducted in accordance with due process, e.g., the parties had fair opportunities to present their cases.
• The arbitral award is final and not subject to appeal under the law of the seat of arbitration.
• The arbitral award must not contradict other court decisions or laws on the same subject in Saudi Arabia.
• The arbitral award must not violate Saudi public policy.

The New York Convention is considered the foundation for enforcing arbitral awards in a state other than where the arbitral award was issued (i.e., foreign arbitral awards). All arbitral awards not issued under the KSA Arbitration Law are considered foreign arbitral awards. Contracting states to the New York Convention must recognise foreign arbitral awards as binding and enforce them under their rules of procedure, and without imposing “substantially more onerous conditions or higher fees or charges” for foreign arbitral awards than the State would impose on domestic arbitral awards.

Process for Enforcement of Arbitral Awards

To enforce an arbitration award the application for enforcement must include:

• “the original award or an attested copy thereof;
• a true copy of the arbitration agreement;
• an Arabic translation of the arbitration award attested by an accredited authority, if the award is not issued in Arabic; and
• a proof of the deposit of the award with the competent court, pursuant to article 44 of KSA Arbitration Law.”

Article 6 of the Enforcement Law addressing all judgments and awards, states that all judgments issued by an Enforcement Court are subject to appeal and the court of the KSA Arbitration Law appeal’s judgment would then be final. However, for arbitral awards issued under the KSA Arbitration Law, article 55(3) of the KSA Arbitration Law does not allow appeal of an order to enforce an arbitral award. By contrast, an order refusing enforcement is appealable.

The enforcement procedure is as follows:

• An enforcement request is made through the Najiz application (the Ministry of Justice’s online portal) is made by the applicant.
• The request is reviewed procedurally by the Enforcement Court, and is then referred to an enforcement judge. This will require up to three days.
• If the enforcement judge is satisfied, an enforcement order will be issued (Article 34 decision), ordering one party to comply within five days of the notice.

The applicant must wait twenty days for the Enforcement Court to notify the relevant party of the Article 34 decision. If this is not done, the applicant may request for the notice to be served by publication in local press, by the Enforcement Court. Although the applicant will initially pay for the publication of the notice (three to five days are required for publication from payment), the costs are able to be reimbursed from the enforcement order.

If the Article 34 decision is not adhered to, within five days of notification, the enforcement judge may be requested to enforce sanctions against the non-complying party. Such measures, under Article 46 are issued up to ten days after the expiry of the Article 34 decision or from the date of applicant’s request to issue an Article 46 decision, provided that the request is made at least five days after the Article 34 decision is notified. All decisions by an enforcement judge are final, unless they relate to certain procedures or costs.

Other Considerations on Enforcing Arbitration Awards

The public policy exception to enforcing foreign arbitral awards has traditionally been very broad. An award that contradicts Sharia law or public policy will not be enforced by the Enforcement Court. However, if the part that contradicts public policy can be separated from the rest of the award, only that part should not be enforced.

The Enforcement Law sets out that the enforcement judge cannot enforce a foreign arbitral award if it includes what is contradictory to public policy. The implementing regulations of the Enforcement Law defines “public policy” as the Islamic Sharia. Saudi Arabia Royal Decree No. 44682/1443 dated 28 August 2021 limits the definition of public policy to general rules of Islamic law based on the Quran and the Sunnah. Recently successful grounds were:

• Late payment charges were found to amount to usury.
• Compensation for holding back money was found to amount to usury.
• The award involved the sale of property which the purported seller did not own.

Public policy is not limited to procedural deficiencies. The Saudi court can, of its own volition, refuse to enforce an award that contradicts Sharia, including any of the evidence relied on by the tribunal that is not acceptable under Sharia (for example, if the tribunal relied on the testimony of a person with a mental impairment). The court could also refuse enforcement if the award itself contradicts Sharia (for example, an award of interest).

Other Enforcement Mechanisms

Saudi Arabia is also party to Riyadh Arab Agreement for Judicial Co-operation and the GCC Agreement for the Enforcement of Judgments, Rogatory, and Judicial Publication.

Until recently, to participate in the Saudi market, international firms had to enter an alliance with a local partner firm. With the change of laws in this area, several international firms have now opened their own Saudi office, and HFW (the firm I work at) is one of those. This divergence perhaps causes some difficulty for clients seeking joined-up legal advice. Naturally, high quality Saudi firms focus on work in the local courts, where they have rights of audience. International firms are more likely to focus on international clients, working with contracts under foreign laws, with arbitration as a dispute resolution mechanism. In both cases, the proliferation of work requires additional legal practitioners, and this growth potentially comes at the cost of quality legal advice or, at least, relevant experience.

Of course, it is tempting for me to say that HFW should be every funder’s first call for Saudi related advice! The reality, as everyone knows, is that every dispute is different and requires different skill sets, sector knowledge, legal qualification(s), and price point. I’m sure it doesn’t really need to be said, as legal funders know their jobs better than I do, but I would always suggest seeking advice from firms and individuals who have wide experience in the jurisdiction, have advised on disputes in the relevant sector in that jurisdiction previously, and understand what legal funders need and want to be able to make their investment decision.