Briefing

SCCA’s Report on Arbitration – what does it mean for Construction?

In our recent article, we examined the Saudi Center for Commercial Arbitration’s (SCCA) Country Report and considered what it reveals about the continued development of Saudi Arabia as a sophisticated and increasingly arbitration-friendly jurisdiction.¹ In addition to analysing appellate court decisions concerning arbitration, the Report compares the current Saudi Arbitration Law with both the UNCITRAL Model Law, and the Draft Arbitration Law, published in late 2025 and currently under consideration. The Report provides valuable insight into both the operation of the existing legislative framework and the direction of potential future reform.

In this article, we examine the findings most relevant to the construction sector and consider what they may mean for parties involved in major infrastructure and development projects in Saudi Arabia.

Finality of awards and limited grounds for challenge

One of the most significant themes emerging from the Report is the Saudi judiciary’s strong commitment to the finality of arbitral awards.

The Report confirms that Saudi courts continue to distinguish carefully between legitimate grounds for annulment and attempts to challenge the tribunal’s findings on the merits. The courts have repeatedly held that issues relating to the evaluation of evidence, findings of fact, contractual interpretation and application of the law are matters falling within the tribunal’s authority and do not justify setting aside an award. The Report identifies multiple decisions supporting this principle and demonstrates a consistent judicial refusal to transform annulment proceedings into a merits appeal.

For participants in a construction dispute, this provides an important degree of certainty. A successful award relating to extensions of time, prolongation costs, variations, defects, liquidated damages, or termination is unlikely to be revisited simply because the unsuccessful party disagrees with the tribunal’s conclusions.

Sharia, public policy and Riba

A topic that frequently arises in discussions concerning Saudi arbitration is the extent to which Sharia principles and public policy may affect the enforceability of awards.

The Report provides particularly useful data in this regard. While references to Sharia and public policy often generate concern among international contractors and investors, the statistics demonstrate that these grounds are rarely successful in practice.

According to the Report, Sharia was relied upon as a ground for annulment in only one case out of 194 annulment applications reviewed between January 2023 and June 2025. Public policy was raised in only three cases, one of which overlapped with the Sharia challenge. Across the broader dataset of more than 3,300 arbitration-related decisions reviewed in successive SCCA studies covering 2017 to 2025, only 13 annulments were granted on Sharia or public policy grounds combined.

Equally significant is the approach adopted by the courts where such issues do arise. Rather than annulling an award in its entirety, the courts have demonstrated a willingness to isolate and remove the offending provision whilst preserving the remainder of the award.

One example highlighted in the Report concerned a delay-related payment mechanism that was found to constitute riba (prohibited interest). The relevant portion of the award was not enforced, but the remaining parts of the award were upheld. This demonstrates a targeted rather than expansive approach to judicial intervention.

In terms of riba, parties operating in Saudi Arabia must remain aware that the Kingdom continues to maintain a strict prohibition on riba as a matter of public policy. The Civil Transactions Law indirectly prohibits interest through Articles 178 and 385. The practical consequence is that contractors facing delayed payment cannot assume that contractual interest provisions or conventional late payment charges will be enforceable in Saudi Arabia. Accordingly, the prudent course is to err on the side of caution by requesting that tribunals issue a partial final award dealing separately with any interest or late payment claims.

VAT claims and the risk of partial annulment

Another issue of particular relevance to construction disputes concerns VAT.

The Report notes that disputes concerning VAT fall within the jurisdiction of the Tax Disputes and Violations Resolution Committees. As a result, VAT issues may be regarded as non-arbitrable under Saudi law.

Where a tribunal includes a VAT determination within a broader arbitral award, Saudi courts may partially annul the award by removing the VAT component while maintaining the remainder of the award. Significantly, this is treated as an issue of arbitrability rather than a matter of public policy or Sharia compliance.

For construction practitioners, this serves as a reminder to consider carefully whether VAT issues should be carved out, pursued separately, or addressed through mechanisms aligned with the Saudi tax framework.

Mandatory time limits for arbitral awards

Under Article 40(1) of the current Saudi Arbitration Law, tribunals are generally required to issue a final award within 12 months from the commencement of proceedings unless the parties agree otherwise.

The Report identifies a number of court decisions dealing with challenges based on expiry of the tribunal’s mandate. Importantly, the courts have adopted a practical and fact-sensitive approach, focusing on whether the parties consented to extensions or whether their conduct amounted to a waiver of any objection.

The Report records that this requirement of issuing a final award within 12 months has been removed under Article 51 of the Draft Arbitration Law, whilst introducing a court-supervised mechanism for extending any time limits that parties have themselves contractually agreed. If this provision is adopted in the final version of the legislation, this reform would represent a significant and welcome development for complex construction arbitrations.

Electronic service and modern project administration

The widespread use of digital communication has transformed the administration of construction projects. Instructions, notices, progress updates and commercial correspondence are routinely exchanged electronically.

The Report confirms that Saudi courts have recognised electronic notifications, including text messages, designated email addresses, and similar communication platforms. Where communications are sent to agreed contact details and delivery can be established, the burden shifts to the recipient to demonstrate non-receipt.

This development may have implications beyond arbitration itself. While the Report concerns arbitral procedures, it is reasonable to anticipate that Saudi courts may continue to adopt a pragmatic approach to electronic communications more generally, including contractual notices commonly issued under construction contracts.

Given the importance of notice provisions under standard form contracts such as FIDIC, parties should ensure that contract administration procedures clearly identify authorised email addresses and communication channels and maintain appropriate records of delivery and receipt.

Greater flexibility in appointing technical arbitrators

The Report identifies that, under the current Saudi Arbitration Law, a sole arbitrator or the chair of the arbitral tribunal is required to hold at least a university degree in Sharia or law. Saudi courts have applied this requirement strictly, and non-compliance has been held to constitute a violation of public policy sufficient to preclude enforcement of the award.

The Report notes that this requirement is removed under the Draft Arbitration law (Article 20). An arbitrator will need only to be a natural person with full legal capacity and not deprived of civil rights by reason of criminal conviction. This is a significant development for construction arbitrations, where parties may want the flexibility to appoint arbitrators with deep technical expertise in engineering, delay, or valuation rather than a purely legal background.

Conclusion

Taken together, the Report and the proposed legislative reforms suggest a maturing arbitration framework that combines respect for international arbitration standards with the requirements of Saudi law. For construction parties participating in the Kingdom’s ambitious programme of infrastructure and development projects, that should provide increasing confidence that Saudi Arabia is not only a major construction market, but also an increasingly sophisticated and reliable forum for the resolution of construction disputes.

Footnotes