Investment Treaty Arbitration

Investment Treaty Arbitration: Saudi Arabia

Overview of investment treaty programme

1. What are the key features of the investment treaties to which this country is a party?

Saudi Arabia

BIT Contracting Party or MIT

Substantive protections

Procedural rights

Fair and equitable treatment (FET)

Expropriation

Protection
and security

Most-favoured-nation (MFN)1

Umbrella clause

Cooling-off period

Local courts

Arbitration

Austria (30 June 2001)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Azerbaijan (not in force) 2

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Belarus (20 July 2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Belgo-Luxembourg Economic Union (11 June 2004)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

China (1 May 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes3

Yes

Czech Republic (18 November 2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Egypt (not in force)

No4

Yes

No5

No6

No

No

No

No

France (18 March 2004)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Germany (29 October 1996)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

India (20 May 2008)

Yes

Yes7

Yes

Yes

Yes

6 months

Yes

Yes

Indonesia (15 September 2003)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Italy (22 May 1998)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Japan (not in force)

Yes8

Yes

Yes9

Yes

No

6 months

Yes

Yes

Korea, Republic of (4 April 2002)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Malaysia (25 October 2000)

Yes10

Yes

Yes

Yes

No

6 months

Yes

Yes

Philippines (11 November 1996)

No

No11

Yes12

No13

No

No

No

No

Singapore (10 April 2006)

Yes14

Yes

Yes

Yes

No

6 months

Yes

Yes

Spain (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Sweden (11 March 2008)

Yes

Yes

Yes15

Yes

Yes

6 months

Yes

Yes

Switzerland (9 August 2008)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Taiwan (not in force)

Yes

Yes

Yes16

Yes

No

6 months

No

Yes17

Turkey (20 February 2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Ukraine (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Uzbekistan1 8 (not in force)

               

Agreement of Promotion, Protection and Guarantee of Investments among Member States of the Organisation of the Islamic Conference (February 1988)

No

Yes

Yes

Yes19

No

No

Yes

No20

Unified Agreement for the Investment of Arab Capital in the Arab States (7 September 1981)21

Yes22

Yes

Yes

Yes23

No

Yes

No

No24

The Unified Economic Agreement between the Countries of the GCC (1 December 1981)

No

No

No

No2 5

No

No

No

No

Qualifying criteria - any unique or distinguishing features?

2. What are the distinguishing features of the definition of “investor” in this country’s investment treaties?

Saudi Arabia

Issue

Distinguishing features in relation to the definition of ‘investor’

Seat of the investor/place of

business

In order to qualify as Saudi investors, the investment treaties of Saudi Arabia generally require entities to have their head office in Saudi territory. A standard phrasing is incorporated in 15 of Saudi Arabia’s BITs (Indonesia, Czech, Malaysia, Germany, Switzerland, Azerbaijan, Belarus, Spain, China, BLEU, India, Austria, Korea, Singapore and Sweden). Those BITs incorporate, what appears to be the standard form for the second Contracting Party. The remaining bilateral investment treaties contain definitions which encompass both Contracting Parties and are very wide.

Legal personality

Natural persons with the nationalities of the Contracting Parties are recognised as investors under all of Saudi Arabia’s investment treaties.

In relation to other entities, 13 treaties (Indonesia, Germany, Italy, Azerbaijan, Belarus, Spain, China, BLEU, Ukraine, Austria, Korea, Singapore and Sweden) stipulate that entities with or without legal personality and constituted in accordance with the laws of Saudi Arabia qualify as investors, whereas the BITs with Czech Republic, Malaysia and India require Saudi entities to have legal personality. The legal requirements for the investors of the other Contracting Party vary.

The OIC Agreement also appears to require legal personality for investors from Contracting Parties stipulating that ‘any entity established in accordance with the laws in force in any contracting party and recognised by the law under which its legal personality is established’.

Control

The majority of investment treaties of Saudi Arabia do not contain any control requirements, however the BIT with Switzerland extends its ambit to investments in the territory of a Contracting Party ‘owned or controlled by investors of the other Contracting Party’. The BIT with France further widens such definition to a legal person ‘directly or indirectly controlled by nationals of one of the Contracting Parties….’

The BIT with Japan limits the definition of investor by providing control and ownership requirements for enterprises. Contracting Party may deny benefits of BIT to ‘an enterprise of the other Contracting Party and to its investments if the entreprise is owned or controlled by an investor of a non-Contracting Party and the denying Contracting Party: (a) does not maintain diplomatic relations with the non-Contracting Party’, (b) adopts or maintains measures with respect to the non-Contracting Party…that would be violated or circumvented’.

The BIT with Japan also allows a Contracting Party to deny the benefits of the BIT if ‘the entreprise is owned or controlled by an investor of a non-Contracting Party and the entreprise has no substantial business activities in the other Contracting Party’. The latter limitation seems to be aimed at preventing forum shopping. Further, the BIT explicitly provides that a branch of an enterprise of a non-Contracting Party, which is located in the other Contracting Party, shall not be deemed an investor of that Contracting Party.

The Unified Agreement premises protection on the definition of ‘Arab citizen’. An Arab citizen is a natural person having citizenship or an Arab League State or a corporate body having the nationality of one of the Arab League States ‘provided that no part of the capital of such body corporate belongs either directly or indirectly to non-Arab citizens’. The Amended Unified Agreement expands the scope of definition of investor such that the investor is only required to own ‘Arab capital’ which the investor ‘invests in the territory of a State Party of which it is not a national, provided that the Arab investor holds directly at least 51% of the share capital.’

Inclusion of government and sovereign wealth funds

In line with other investment treaties of Gulf Arab states, investment treaties of Saudi Arabia generally ensure that government and its national wealth funds fall within the definition of investor. A standard definition to this effect appears in the BITs with Indonesia, Czech Republic, Malaysia, Germany, Italy, Azerbaijan, Belarus, Spain, China, BLEU, India, Ukraine, Austria, Korea, Singapore, Sweden. More general definitions are included in the BITs with Indonesia, France, Turkey, Taiwan, the Unified Agreement and the OIC Agreement.

3. What are the distinguishing features of the definition of "investment" in this country’s investment treaties?

Saudi Arabia

Issue

Distinguishing features in relation to the concept of ‘investment’

Assets which qualify for protection

All analysed BITs contain a wide and standard definition of ‘investment’ as ‘every kind of asset, owned or controlled by an investor of a Contracting Party in the territory of the other Contracting Party’ according to its laws/regulations providing a non-exhaustive list of examples of investments. Note here that investments must be in accordance with host state’s laws and regulations.

Alteration of the form of investment

The majority of Saudi BITs add a standard phrase that the alteration of the form of the investment does not affect its qualification, eg, in the Malaysia BIT, ‘Any alteration of the form in which assets are invested or reinvested shall not affect their classification as investment, provided that such alteration is not in conflict with the legislation of the Contracting Party….’ The BIT with BLEU omits the requirement that the alteration or change does not conflict with the laws and regulations of the host State.

Commencement of treaty

protection

All reviewed Saudi BITs apply to investments before or after the date of entry into force of the Agreement in accordance with the host state’s laws and regulations or national policies. However, the BITs with Czech Republic and Turkey exclude disputes concerning investments which arose, or claims which have been settled, before the BITs entry into force. The BIT with Spain excludes application to disputes or claims arising before its entry into force in relation to which a settlement was reached or a legal settlement process to resolve the claim or dispute continues. In a further variation, the BIT with Switzerland limits the application from applying to disputes relating to events that occurred before that date.

Admission/approval of an

investment

The analysis of investment treaties shows that the acceptance of investments and their compliance with local laws is crucial to protection in Saudi BITs. This is unsurprising given that in Saudi Arabia every foreign investment needs an authorisation pursuant to national laws. In this vein, the BITs with Indonesia, Malaysia, Czech, Germany, France, Turkey, Spain, China, Taiwan, Austria, Korea, Singapore and Sweden as well as the Unified Agreement and the OIC Agreement specifically require investments to be in accordance with the host state’s laws and/or regulations. Further, the majority of BITs only apply to investments ‘once admitted’.

Specific definition of returns

The majority of the analysed BITs (Indonesia, Belarus, Turkey, Singapore, Korea, Czech, Malaysia, Germany, Switzerland, France, Taiwan, India, Ukraine, Austria, Sweden, Italy, Azerbaijan, Spain, China, BLEU, Japan) include a specific and highly standardised definition of ‘returns’ meaning the amounts yielded by an investment including profit, dividends, royalties, capital gains and any similar payments. The OIC Agreement includes a similar definition.

Inclusion of investment returns

The BITs with France and Italy specifically set out that investment returns and, in the case of reinvestment, income from reinvestment enjoy the same protection as the investment.

Substantive protections - any unique or distinguishing features?

4. What are the distinguishing features of the fair and equitable treatment standard in this country’s investment treaties?

Saudi Arabia

Issue

Distinguishing features of the fair and equitable treatment standard

Illustrations of the FET standard

The majority of Saudi Arabia’s BITs contain a simple obligation to promote investments by the investors, admit such investments in accordance with its laws and regulations, and accord such investments fair and equitable treatment. There are several slight variations of the wording. The BITs with Czech, Malaysia, Germany, France, Italy, Azerbaijan, Belarus, Turkey, China, India, Ukraine, Austria, BLEU, Singapore, Korea and Sweden oblige the Contracting Parties to ‘promote as far as possible investments by the investors of the other Contracting party and admit such investments in accordance with its laws and regulation/ national policies’ and it shall ‘in any case accord such investments fair and equitable treatment’.

Some of the BITs, such as with Turkey, Spain, Taiwan and Sweden fuse the FET clause with the protection and security standard.

The Taiwan and Sweden BIT read: ‘Investments…shall be accorded fair and equitable treatment and protection’. The BIT with Malaysia only refers to equitable treatment. The Singapore BIT excludes the FET paragraph from application to disputes that arose before the Agreement’s entry into force.

No FET

The BIT with Egypt does not include a FET standard as such but specifies that investments and capital are to be accorded all the basic guarantees, particularly in relation to expropriation. One may argue that such basic guarantees include the FET standard, national treatment and protection and security.

The Amended Unified Agreement stipulates that Arab investments shall benefit from fair and equitable treatment; the original Unified Agreement does not.

Non-impairment obligation

The majority of BITs (ie, with Indonesia, Czech, Malaysia, Germany, Switzerland, Italy, Azerbaijan, Turkey, France, Belarus, Spain, China, BLEU, India, Korea, Singapore, Sweden, Austria, Korea and Ukraine) impose an explicitly obligation not to ‘impair by arbitrary or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its territory of investors of the other Contracting Party’.

FET as international law standard

The BIT with Japan explicitly equates fair and equitable treatment and full protection and security standard to the international law standard.

FET standard explicitly accorded MFN treatment

The BIT with Switzerland explicitly accords MFN treatment as regards the host state’s obligations under the FET standard: ‘Each Contracting Party shall accord to investments and returns of investors of the other Contracting Party fair and equitable treatment. This treatment shall in no case be less favourable than that accorded to investments and returns of investors of any third State.’

5. What are the distinguishing features of the protection against expropriation standard in this country’s investment treaties?

Saudi Arabia

Issue

Distinguishing features of the ‘expropriation’ standard

Illustration of expropriation standard

In line with international standards, the majority of Saudi BITs (Indonesia, Czech, Switzerland, Spain, BLEU, Ukraine, Sweden, Singapore, Korea, Italy, Turkey, Azerbaijan, Taiwan, India, OIC, Unified Agreement, Malaysia, Germany, Belarus, China, Japan and Austria) protect against expropriation ‘except for the public benefit/purpose’…and ‘against prompt, adequate and effective compensation’ ‘provided that these measures are not discriminatory’ and ‘in accordance with domestic laws of general application’. The India BIT requires ‘speedy, fair and equitable compensation’ in line with the aforementioned. The Egypt BIT only calls for ‘fair and prompt’ compensation for acts of illegal expropriation or nationalisation, illegal asset freeze or compulsory seizure, or guardianship, and in particular prompt cash which is equivalent to what national investors would get in the same situation.

Measures substantially diminishing the economic substance

In the case of the Germany and Italy, the BITs explicitly extend the investor’s right to compensation to state measures, which substantially diminish the economic substance of the entity in question.

The OIC Agreement (and the Unified Agreement to a similar extent) prohibits ‘the adoption of any measure … if such a measure may directly or indirectly affect the ownership of the investor’s capital or investment by depriving him totally or partially of his ownership or of all or part of his basic rights or the exercise of his authority on the ownership, possession or utilization of his capital, or of his actual control over the investment, its management, making use out of it, enjoying its utilities, the realization of its benefits or guaranteeing its development and growth.’ However, the OIC Agreement allows the adoption of ‘preventive measures issued in accordance with an order from a competent legal authority and the execution of measures of the decision given by a competent judicial authority’.

Indirect expropriation

Saudi Arabia’s BITs with Indonesia, Malaysia, Germany, Switzerland, Belarus, Turkey, Spain, China, BLEU, India, Japan, Ukraine, Korea, Sweden, Singapore, Austria, Azerbaijan and Italy explicitly protect against indirect expropriation, eg, the Malaysia BIT states ‘investments … shall not be … subjected to any other measures, the effects of which would be tantamount to expropriation or nationalization’. The BIT with Taiwan does not.

The BIT with France mentions ‘the freezing of assets or any other measure the effect of which is to dispossess the investors of the other Contracting Party of its investments made’. The BIT with Czech Republic suggests that the measure can be either ‘permanent or temporary’. The Egypt BIT’s expropriation provision covers deprivation of property, both directly and indirectly, through expropriation, nationalisation, compulsory seizure, freezing of assets and guardianship.

Guidance on what measures constitute indirect expropriation

Only the BIT with India offers guidance on what constitutes indirect expropriation:

‘…a case-by-case fact based inquiry shall be made in accordance with the provisions of this agreement and the principles of customary international law, and shall consider, inter alia, the economic impact, the purpose and context of such action and the extent to which it interferes with distinct, reasonable investment backed expectations. The mere fact that an action or series of actions by a Contracting Party has an adverse effect on the economic value of an investment, standing alone, would not establish that an indirect expropriation has occurred. Also any action of a Contracting Party taken as a part of normal business activities would not, by itself, constitute an indirect expropriation unless the prima facie intention to create adverse impact on the economic value of the investment is apparent.’

Regulatory action for the public benefit (health, safety, environment) excluded from ambit of expropriation provision

Only the BIT with India specifically excludes regulatory action for the public benefit (health, safety, and environment) from the ambit of the expropriation provision.

Legality of expropriation and amount of compensation subject to review ‘under due process of law’

In line with the international standard, the Saudi BITs afford the investor whose investments are subject to expropriatory measures recourse to legal procedures to determine the measure’s legality and the amount of damages awarded. The BITs with Indonesia, BLEU, India, Ukraine, Austria, Sweden, Azerbaijan, Singapore, Czech Republic, Japan and Belarus specify that such recourse should occur prior to or at the time of the expropriatory measure, whereas the BITs with Malaysia, Germany, Switzerland, Belarus, Turkey, Spain, Singapore, Korea, Sweden and Italy omit such reference.

The Unified Agreement gives the affected investor the right to challenge the legitimacy of the dispossession and the amount of compensation before the domestic courts.

Market value

The analysed Saudi investment treaties with expropriation provisions all specify that the compensation should be equivalent to the value of the investment.

The BITs with Indonesia, Turkey, India, Japan, Singapore, Sweden and Korea require compensation to be ‘equivalent to the [Japan: fair] market value of the expropriated investment immediately before the date on which the actual or threatened expropriation, nationalization or comparable measure has become publicly known…’ In contrast, the BITs with Czech, Malaysia, Germany, Switzerland, BLEU, Ukraine, Austria, Belarus, China, and Taiwan omit the reference to ‘market’.

More detailed than Saudi Arabia’s other BITs, the recent BIT with Japan clarifies that ‘the fair market value shall not reflect any chance in the value occurring because the expropriation has become publicly known earlier’.

Definition of rate of return

The majority of Saudi Arabia’s BITs (Indonesia, Czech, Malaysia, Germany, Turkey, Spain, BLEU, India, Ukraine, Singapore, Sweden, Korea, Austria, Korea, Italy, Azerbaijan, France and Japan) require a ‘rate of return’ to be added to the awarded damages; to be paid from the date of the expropriation until payment, avoiding the reference to interest:

‘…compensation shall be paid without delay and shall carry a rate of return (Japan: at a commercially reasonable rate, Ukraine: LIBOR) determined on the basis of the market prevailing rate of return from the date of expropriation (Malaysia, Germany, Switzerland: underlined omitted) until the date of payment. It shall be effectively realizable and freely transferable.’

Only the BITs with Egypt, France and Azerbaijan specifically refer to ‘interest rate’.

Right to repurchase expropriated investment at market price

The BIT with Italy gives the affected investor an explicit right to repurchase the expropriated asset at market price, ‘if, as a result of the expropriation, the property in question has not been used in whole or in part for a public purpose’.

Most favoured nation treatment regarding expropriation

The BITs with Malaysia, Germany, Italy, Azerbaijan, Belarus, Turkey, BLEU and Ukraine explicitly extend most-favoured-nation treatment to the expropriation provisions.

6. What are the distinguishing features of the national treatment/most-favoured-nation treatment standard in this country’s investment treaties?

Saudi Arabia

Issue

Distinguishing features of the ‘national treatment’ and/or ‘most favoured nation’ standard

Common exceptions

Saudi Arabia’s BITs (Indonesia, Czech, Malaysia, Germany, Switzerland, France, Italy, Azerbaijan, Belarus, Turkey, Spain, China, Taiwan, BLEU, India, Japan, Ukraine, Austria, Singapore, Korea, Sweden and OIC) that contain an MFN clause do not extend to the benefits of membership of a customs union, economic union, a common market or free trade area and to tax matters.

Uncommon exceptions

The BIT with Italy clarifies that the MFN clause does not oblige a Contracting Party to extend to natural persons or companies resident in the territory of the other Contracting Party the privileges, exemptions and tax reductions which, according to its tax laws are granted only to individuals and companies resident in its territory.

The OIC Agreement prevents the extension of MFN treatment to rights and privileges given pursuant to international agreements, laws and those given in relation to a specific project.

Scope of MFN treatment

The need for investments to have been admitted/ approved is also evident in the MFN clauses of Saudi Arabia’s BITs. In this vein, the BITs with Indonesia, Czech, Germany, France, Italy, Belarus, Turkey, China, BLEU, India, Ukraine, Austria, Singapore, Korea, and Sweden grant MFN protection to ‘investments once admitted/approved’ and ‘returns on investments’. In contrast, the BITs with Malaysia, Switzerland and Spain omit the reference to ‘investments and returns of investors’. The BIT with Taiwan simply mentions ‘investment’.

The Malaysia BIT explicitly provides ‘national’ treatment of investments and most-favoured nation treatment to be subject to the host state’s laws and regulations.

Protection of activities associated with investments

19 (Indonesia, Czech, Malaysia, Germany, Switzerland, France, Italy, Azerbaijan, Belarus, Turkey, Spain, China, BLEU, India, Ukraine, Austria, Singapore, Korea and Sweden) of Saudi Arabia’s 24 publicly available BITs expressly extends MFN treatment to the protection of ‘activities associated with investments in connection with the management, maintenance, use, enjoyment or disposal of investments or with the means to assure their rights to such investments like transfers and indemnification, or with other activity associated with this in its territory’.

MFN treatment as regards access to justice

The BIT with Japan grants MFN treatment as regards access to justice.

Limitation on national treatment

The majority of Saudi Arabia’s BITs (Indonesia, Czech, Germany, France, Azerbaijan, Belarus, China, Egypt, BLEU, India, Japan, Ukraine, Austria, Singapore, and Sweden) stipulate that the obligation to provide national treatment of investments is explicitly subject to the host state’s laws and regulations. The BITs with Switzerland, Italy, Belarus, Turkey, China, BLEU, India, Japan, Ukraine and Sweden further state that national treatment of investments is explicitly limited to investments and investment returns once admitted.

The Japan BIT allows for suspension of its obligations as regards national treatment and free transfers ‘in the event of serious balance-of-payments and external financial difficulties or threat thereof’.

Specific definition of ‘less favourable’

The BITs with Germany and Italy provide guidance as to what treatment constitutes ‘less favourable’ treatment: different treatment in the case of limitation and supply of natural resources and auxiliaries, power and fuel as well as operation and production resources; the different treatment in the case of interference with the sale of products domestically or abroad or other measures with similar effect.

The clause also excludes measures taken on account of public security, order, public health and morals.

7. What are the distinguishing features of the obligation to provide protection and security to qualifying investments in this country’s investment treaties?

Saudi Arabia

Issue

Distinguishing features of the ‘protection and security’ standard

Scope

Saudi Arabia’s BITs employ a standard wording with slight variations. Some provide investments ‘full protection and security’ (eg, Czech Republic, BLEU, India, Korea, Sweden, Belarus, Italy and China), ‘full and adequate protection and security’ (eg, Malaysia), or ‘full protection and full security’ (Germany and Ukraine). Others simply require ‘protection and security’ (eg, Indonesia and Azerbaijan), ‘full protection of their investments’ (Turkey), ‘full protection and security in accordance with this Agreement’ (Singapore), ‘adequate protection and security’ (OIC Agreement). Others not only mention investments but explicitly grant returns of investment protection and security (eg, Switzerland and France).

Whereas the Unified Agreement does not utilize the term ‘protection and security’, it requires Contracting States to ‘protect the investor, safeguard his investment and its related revenues and rights and, to the extent possible, to ensure the stability of the pertinent legal provisions’.

8. What are the distinguishing features of the umbrella clauses contained within this country’s investment treaties?

Saudi Arabia

Issue

Distinguishing features of any ‘umbrella clause’

Scope

The BITs with Germany, Switzerland, BLEU, Austria, Korea and Sweden contain a simple umbrella clause: ‘Each of the contracting parties shall ensure compliance with any other obligation, which it has in respect of its territory assumed with regard to investors of the other Contracting Party.’

The BIT with Austria adds that disputes under the umbrella clause ‘shall be decided, absent other agreement, in accordance with the law of the Contracting Party, party to the dispute, including its rules on the conflict of laws, the law governing the authorisation or agreement and such rules of international law as may be applicable.’

9. What are the other most important substantive rights provided to qualifying investors in this country?

Saudi Arabia

Issue

Other substantive protections

Free transfer of payments

The majority of Saudi investment treaties (Indonesia, Czech, Malaysia, Germany, Switzerland, France, Italy, Azerbaijan, Belarus, Turkey, Spain, China, Taiwan, BLEU, India, Japan, Ukraine, Austria, Singapore, Korea, Sweden, Egypt, OIC and Unified Agreements) contains a provision which requires the Contracting Parties to permit investors to transfer investments and investment returns freely and without delay.

The BIT with BLEU explicitly mentions the right of nationals authorized to work in connection with an investment being permitted to transfer an appropriate portion of their earnings to their country of origin.

The BITs with Malaysia, Italy and Belarus clarify that this is the case only ‘after all taxes and obligations have been met’. The BITs with Japan and Singapore restrict the right of free transfer in the case of bankruptcy, or penal offenses, among other matter. The original Unified Agreement stipulated that the right is not to prejudice the right of States to ‘prevent the outflow abroad of the assets of its citizens’. This limitation has now been removed.

Free transfers to be without delay

The BITs with Indonesia, Czech, Belarus, Turkey, Spain, China, BLEU, Ukraine, Singapore, Korea, Italy and India further suggest that the transfers are to be ‘without delay at the prevailing rate of exchange applicable on the date on which the investor applies for the related transfer ’, whereas the BITs with Malaysia, Switzerland, Germany, Austria, Sweden, Azerbaijan and Japan omit the underlined.

The BITs with Malaysia, Germany, Switzerland, Italy, Belarus, Turkey, Spain, BLEU, India, Japan, Ukraine, Austria, Singapore, Korea and Sweden suggest that ‘in the absence of delay, the rate of exchange is to be the cross-rate obtained from those rates which would be applied by the International Monetary Fund on the date of payment for conversion of the currencies concerned into Special Drawing Rights.’

Some BITs give guidance on the meaning of ‘without delay’: ‘if effected within such period as is normally required for the completion of transfer formalities’ and to be completed no later than one month (eg, Indonesia and Austria) or two months (eg, Czech, Germany and India) or three months (OIC Agreement) of the request.

Sympathetic consideration for entry, sojourn and residence

The BITs with India, Japan and Sweden contain a clause requiring Contracting Parties to give sympathetic consideration for entry and sojourn and, in the case of the Japan BIT, also residence of persons travelling in connection with investments.

The OIC Agreement (and similarly the Unified Agreement) requires the Contracting Parties to grant required permits for entry, exit, residence and work for the investor and his family and for all those whose work is permanently or temporarily connected with the investment…’

Armed conflict/civil unrest – compensation of losses

A standard clauses included in the BIT with Indonesia, Czech, Malaysia, Germany, Switzerland, Italy, Azerbaijan, Belarus, Turkey, Spain, China, Taiwan, BLEU, India, Ukraine, Austria, Japan, Singapore, Korea and Sweden guarantees investors of Contracting Parties MFN and national treatment as regards compensation paid to other investors of other states in the case of war or other armed conflict, revolution, a state of national emergency, revolt as regards restitution, indemnification, compensation or other valuable consideration, whereby ‘payments shall be freely transferable’.

The BIT with Czech Republic limits the ambit of the clause carving out ‘measures necessary for the maintenance of public order, the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interest…’

More favourable treatment

The BITs with Indonesia, Czech, Malaysia, Germany, Switzerland, France, Italy, Azerbaijan, Belarus, China, Turkey, Spain, BLEU, India, Ukraine, Korea and Sweden stipulate that more favourable provisions of the law of either Contracting Party or obligations under international law [China: omits underlined] established between the Contracting Parties prevail over the Agreement.

The BITs with Belarus, Turkey, Spain, India, Ukraine, Austria and Sweden extend the time horizon of that provision to those obligations established subsequently, whether general or special rights.

The BITs with Japan and Spain specify that nothing in the BIT should be construed as to derogate such rights.

Right to compensation for damages

The OIC Agreement entitles an investor to ‘compensation for any damage resulting from any action of a contracting party or one of its public or local authorities or its institutions’ in the case of (a) violating the guarantees under the agreement, (b) breach of international obligations or undertakings and arising under the Agreement, (c) non-execution of a judicial decision connected with the investment, or (d) causing damage to the investor in violation of the host state’s laws.

Respect for public order and morality

The OIC Agreement requires the investor to ‘refrain from any action which might violate public order and morality or involve illegitimate gains’. This was previously the case under the Unified Agreement, but the Amended Agreement no longer does so.

Procedural rights in this country’s investment treaties

10. Are there any relevant issues related to procedural rights in this country’s investment treaties?

Saudi Arabia

10. Are there any relevant issues related to procedural rights in this country’s investment treaties?

Issue

Procedural rights

Fork-in-the-road

Fork-in-the-road provisions appear in most of Saudi Arabia’s BITs. They do however vary in their ambit and how they limit recourse to arbitration.

The BITs with Indonesia and Spain suggest that choosing one dispute procedure precludes the other. The BIT with Switzerland and Sweden suggest that choosing to resort to local courts dispenses with the option to resort to International Arbitration. The Singapore BIT mentions: ‘a dispute shall be submitted to only one forum’. Likewise, Unified Agreement suggests that: ‘where the Arab investor brings an action before one authority, he must refrain from doing before the other’.

The BITs with Czech, Malaysia, BLEU, India, Ukraine, Azerbaijan France, Italy, Belarus, Turkey, and Singapore stipulate that if a dispute is submitted to the competent Court of Law of the Contracting Party, the investor cannot at the same time seek international arbitration. This wording however appears to allow for subsequent resort to the dispute procedures.

In the BIT with Germany, the fork in the road applies only to German investors, ie, after a Saudi court has rendered a decision on the matter, the investor no longer can pursue a claim in international arbitration. In contrast, a Saudi investor may pursue a claim in international arbitration even after a German court has rendered a decision.

In the BIT with Austria, the fork-in-the-road provision only bites if a local court in either Contracting Party has rendered its decision on the dispute.

Diplomatic relations

The BITs with Germany, Italy, Belarus, BLEU, India, Japan, Austria, Korea, Sweden, and the OIC Agreement clarify that the BIT applies independent of whether diplomatic relations exist between the Contracting Parties.

Award to be final and binding

The majority (Indonesia, Malaysia, Switzerland, France, Belarus, Spain, China, BLEU, Ukraine, Korea, Sweden, Czech, Azerbaijan, Turkey, India, Austria, Singapore, Belarus, Germany and Sweden) of Saudi BITs clearly set out that, where the dispute is filed for arbitration, the award shall be binding and shall not be subject to any appeal or remedy other than those provided for in the said Convention. Furthermore, the award is to be enforced in accordance with domestic law, and in case of the BIT with Sweden, with international agreements.

Applicable law

Most of the investment treaties with Saudi Arabia do not specify an applicable law. However, the BIT with Czech Republic directs the arbitral tribunal to have regard to the provisions of the BIT and other relevant agreements between the parties, the law in force of the Contracting Party concerned, provisions of special agreement relating to the investment, as well as general principles of international law. The BIT with Japan states that the arbitral tribunal shall decide the dispute in accordance with the BIT and ‘applicable rules of international law’.

The Unified Agreement elaborates that a compensation decision must be made in accordance with, in order of preference, ‘principles on which it is based and the aims which inspired it’, ‘rules and principles common to the respective legislation of the State members of the League of Arab States’ and ‘the principles recognized in international law’.

No requirement to exhaust local remedies

The BITs with Czech Republic, France, BLEU, India, Austria, and Sweden explicitly provide that if international arbitration is chosen as a dispute resolution mechanism, the exhaustion of local remedies is not required.

No immunity and no defence of counterclaim or right of set off based on payment under insurance

The BITs with Spain, BLEU, Austria, Belarus and Sweden stipulate that the fact that an investor of the other Contracting Party has received compensation covering the whole or part of the losses will not be a defense to the arbitral proceedings.

The BITs with Belarus and Japan further includes a waiver of diplomatic protection in respect of investments under the Agreement.

ICSID or ad hoc arbitration

All Saudi investment treaties provide a right to recourse to the local courts and most Saudi investment treaties provide a right of recourse to ICSID. A few provide for ad hoc arbitration and ICSID conciliation.

The BITs with Indonesia, Malaysia, Germany, Switzerland, France, Italy, Azerbaijan, Spain, China, BLEU, China and Korea only provide arbitration under the ICSID Convention. The BITs with India and Ukraine provide for ICSID arbitration or under the UNCITRAL Rules, whereby the Indian BIT goes on to stipulate procedure, appointment authority and time frame for arbitration under the UNCITRAL Rules. The BIT with Turkey provides for recourse to ICSID or ad hoc arbitration, explicitly referring to the reservations entered by Saudi Arabia and Turkey as regards ICSID jurisdiction. The BIT with Taiwan only offers recourse to ad hoc arbitration ‘on such terms and conditions as the parties may agree’. The BITs with Czech Republic, Belarus, Sweden and Austria provide for recourse to ICSID arbitration, ad hoc arbitration under the UNCITRAL Rules, or any other form of settlement agreed by the parties. Both the BIT with Japan and with Singapore provide for ICSID arbitration and conciliation. The Japan BIT refers to recourse under the additional facility, arbitration under the UNCITRAL Rules or ‘any arbitration in accordance with other rules’. The Japan BIT includes an elaborate procedure for ICSID arbitration and arbitration under the UNCITRAL Rules, specifying the ability of the tribunal to order interim measures, including powers to order the preservation of evidence, and specifications as to what remedies are available.

Significantly, the BIT with China limits recourse to ICSID to ‘resolve a dispute over the amount of damages paid after a nationalisation or expropriation’

No unilateral recourse to arbitration

The dispute resolution procedure in the OIC Agreement is somewhat unclear as to whether an investor has an unilateral right to resort to arbitration. Since there has only been one known case publicly under the OIC agreement, the matter has yet to be resolved. The Agreement specifies that ‘until an Organ for settlement of disputes arising under the Agreement is established, disputes that may arise shall be entitled through conciliation or arbitration’. It further clarifies that the parties may agree on conciliation. Only ‘if the two parties to the dispute do not reach an agreement as a result of their resort to conciliation, or if the conciliation is unable to issue his report within the prescribed period, or if the two parties do not accept the solution proposed therein, then each party has the right to resort to the Arbitration Tribunal for a final decision on the dispute’.

Although the Unified Agreement grants the investor recourse to the Arab Investment Court without consent from the State party, the same does not hold true for arbitration. Agreement to arbitrate is consensual only.

Limitation period

The Saudi investment treaties generally do not incorporate limitation periods but for the BIT with Japan, which sets a limitation period of 5 years from the date the investor acquires knowledge of the damage/loss.

BIT amendments

The majority of BITs envisage later amendments to be made by mutual consent, but only BITs with Indonesia, Malaysia and Turkey state that such amendments are without prejudice to the rights and obligations arising from the agreement prior to the amendment.

Subrogation

The majority of Saudi investment treaties (Indonesia, Czech Republic, Malaysia, Germany, Switzerland, France, Italy, Azerbaijan, Belarus, Turkey, Spain, China, Taiwan, BLEU, India, Japan, Ukraine, Austria, Singapore, Korea, Sweden, OIC Agreement and Unified Agreement) contain provisions on subrogation allowing Contracting Parties or designated agencies, having made payments to an investor under a guarantee, to fully stand in the shoes of the investor.

No prejudice to measures necessary for maintenance of public order

The India BIT limits the ambit of the BIT suggesting that it does not preclude the application by either Contracting Party of measures necessary for maintenance of public order, or the protection of its own essential security interests in circumstances of extreme emergency in accordance with its laws normally and reasonably applied on a non-discriminatory basis.

The Japan BIT limits its ambit as regards ‘measures relating to financial services for prudential reasons…to ensure the integrity and stability of the financial system’. The BIT also requires Contracting Parties to recognise that it is inappropriate to encourage investment by investors of the other Contracting Party by relaxing environmental measures’.

Award to be rendered within 6 months

The Unified Agreement requires an award to be rendered within 6 months from the date on which the arbitral tribunal first convenes, which given the complexity of disputes nowadays, is quite ambitious.

Resort to Arab Investment Court for enforcement

The Unified Agreement provides that where the State fails to implement an arbitral award under the Agreement within three months, the matter may be referred to the Arab Investment Court for enforcement.

11. What is the status of this country’s investment treaties?

Saudi Arabia

Consistent with investment treaty practice, 22 of the reviewed investment treaties of Saudi Arabia can be unilaterally terminated by a Contracting Party at any time after the end of the initial term of the treaty, which is 10 years for 20 of the BITs and 5 years for the Philippines BIT and the OIC Agreements by giving six months or one year’s written notice of the termination. Saudi BITs incorporate a ‘survival clause’, which extends a treaty’s application in relation to existing investments for a further period of 10- 20 years from the date of termination (Indonesia, Italy, BLEU, Germany, France, Belarus, Azerbaijan, India, Austria, Korea, Sweden, Singapore: 20 years; Czech Republic, Switzerland: 15 years; Malaysia, Turkey, Spain, China, Taiwan, Japan, Ukraine: 10 years). In the case of the treaty with the Philippines, the provisions continue to be in force for liabilities not completed, and settlement for financial dues. Likewise, the OIC Agreement specifies that withdrawal by a Contracting Party from the Agreement shall not affect the rights and obligations arising under the Agreement in the host state towards the investor, which have accrued before the receipt of the notice of withdrawal.

Practicalities of commencing an investment treaty claim against this country

12. To which governmental entity should notice of a dispute against this country under an investment treaty be sent? Is there a particular person or office to whom a dispute notice against this country should be addressed?

Saudi Arabia

 

Government entity to which claim notices are sent

Saudi Arabia has not publicly confirmed the relevant entity.

13. Which government department or departments manage investment treaty arbitrations on behalf of this country?

Saudi Arabia

Government department which manages investment treaty arbitrations

In the only known investment treaty arbitration case against Saudi Arabia, Ed. Züblin AG v. Kingdom of Saudi Arabia (ICSID Case No. ARB/03/1)26 , the Ministry of Finance and National Economy, Riyadh, Saudi Arabia managed the proceedings on behalf of the government of Saudi Arabia.

14. Are internal or external counsel used, or expected to be used, by the state in investment treaty arbitrations? If external counsel are used, does the state normally go through a formal public procurement process when hiring them?

Saudi Arabia

Internal/external counsel

Since all claims against Saudi Arabia were settled at very early stages, it is unknown whether Saudi Arabia relies on external counsel for representation. It is however expected that Saudi Arabia would do so.

Practicalities of enforcing an investment treaty claim against this country

15. Has the country signed and ratified the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965)? Please identify any legislation implementing the Washington Convention.

Saudi Arabia

Washington Convention implementing legislation

Council of Ministers Resolution No. 372, 15/3/1394H.

Royal Decree No. M/8, 22/3/1394H.

The ICSID Convention entered into force in Saudi Arabia on 7 June 1980 pursuant to Royal Decree No. M/8, dated 22/3/1394H.

According to a reservation entered on 8 May 1980, Saudi Arabia reserves the right to refuse submission of all questions pertaining to oil and pertaining to acts of national sovereignty to the International Centre for the Settlement of Investment Disputes whether by way of conciliation or arbitration.27 Heavily relying on foreign investment in the field, this may exclude a large set of potential claims. However, ratifying the ICSID Convention may be seen as a major shift in Saudi Arabia’s previously hostile stance towards arbitration. Following its disappointment with the infamous Saudi Arabia v Aramco Arbitration award rendered in 1958, the government prohibited in 1963 state entities from entering arbitration agreements without prior authorisation.

16. Has the country signed and ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the New York Convention)? Please identify any legislation implementing the New York Convention.

Saudi Arabia

New York Convention implementing legislation

Royal Decree No. M/11 dated 16/7/1414H (29 December 1993)

Saudi Arabia acceded to the New York Convention on 19 April 1994 pursuant to Royal Decree No. M/11 dated 16/7/1414H (29 December 1993) which entered into force on 18 July 1994.28

Saudi Arabia applies the Convention only to recognition and enforcement of awards made in the territory of another contracting State, on the basis of reciprocity. Saudi Arabia originally designated the Diwan al-Mazalim (Court of Grievances) for the purposes of recognizing and enforcing awards rendered pursuant to the New York Convention.29

Previously, to enforce a Convention award, the following procedure had to be followed:

(1) present the award to the Diwan al-Mazalim in accordance with rules of administrative procedure, who verifies the exhibits of the request for enforcement;

(2) the Diwan al-Mazalim then hears the representatives of the parties and decides on enforcement having regard to:

(a) reciprocity, and

(b) compliance with the Shariah as interpreted in Saudi Arabia.30

However, complementing the issuance of the New Arbitration Law in 2012, Saudi Arabia also passed a new Enforcement Law (Royal Decree No. M/53 of 13/8/1433H corresponding to 3 July 2012), which applies to both domestic and international arbitration awards. It stipulates specific procedures applicable to recognition and enforcement designed to guarantee that the dispute is not rehearsed de novo and that enforcement proceedings are sped up. Thus, enforcement matters must now generally be presented to an enforcement judge of the Enforcement Circuit avoiding the lengthy procedure before the Board of Grievances.

To get the award enforced the party seeking enforcement must show:

(1) Saudi courts do not have jurisdiction over the dispute,

(2) the award complies with due process requirements,

(3) the award is in final,

(4) the award does not contradict a decision of a Saudi court, and

(5) the award does not breach Saudi public policy.

Notably, the legislation explicitly requires the refusal of enforcement of a foreign award from jurisdictions that would not enforce Saudi judgments or awards. This requirement of reciprocity remains in keeping with Saudi Arabia’s reservations under the New York Convention.

As a consequence, both under the old but also the new system an award of interest may be seen as an infringement of Shariah and public policy and accordingly unenforceable in Saudi Arabia under New York Convention procedures.

17. Does the country have legislation governing non-ICSID investment arbitrations seated within its territory?

Saudi Arabia

Legislation governing non-ICSID arbitrations:

Decree of the Council of Ministers No. (156), dated 17/05/1433H (9/4/2012AD)31

Royal Decree No M/34, dated 24/5/1433H (16/4/2012 AD) concerning the approval of the Law of Arbitration.

The Saudi Arbitration Law (the Arbitration Law) issued on 16/4/2012 came into force on 8 July 2012, replacing the previous arbitration law (Royal Decree No. M/46 dated 25 April 1983, and Executive Regulation implemented on 22 June 1987). 32 The Arbitration Law incorporates principles more in line with the UNCITRAL Model Law but retains the requirement that the arbitral process is in accordance with the Shariah as interpreted in Saudi Arabia. The modernisation of the arbitration law is in keeping with Saudi Arabia’s warming to arbitration in recent years.

18. Does the state have a history of voluntary compliance with adverse investment treaty awards; or have additional proceedings been necessary to enforce these against the state?

Saudi Arabia

Compliance with adverse awards

No publicly available award has been rendered against Saudi Arabia under its investment treaties. A claim brought by Ed. Züblin AG against Saudi Arabia under the Saudi Arabia - Germany BIT in relation to the construction of university facilities registered on January 28, 2003 was quickly settled and discontinued on July 22, 2003.33

19. Describe the national government’s attitude towards investment treaty arbitration

Saudi Arabia

Attitude of government towards investment treaty arbitration

To the knowledge of the author, Saudi Arabia has not publicly voiced any specific policy as regards investment treaty arbitration.

However, it is well known that Saudi Arabia’s original positive stance towards arbitration, in keeping with the Islamic law position which is supportive of arbitration, turned hostile after the rendering of the infamous award in Saudi Arabia v Aramco (Award of 23 August 1958 (1963) 27 ILR 117), which disappointed the Saudi government. As a consequence in 1963, Saudi Arabia issued Royal Decree No. 58 that prohibited all state entities from entering into arbitration agreements without prior authorisation.

With Saudi Arabia having turned into a capital exporting nation, the government’s position as regards arbitration has been gradually changing. The signing of the New York and ICSID Conventions, the signing of 21 BITs that include investor-dispute settlement clauses and the modernisation of the arbitration law is proof of such change. The expropriations in Egypt which followed the so-called Arab Spring in 2011 badly impacted Saudi investments and the absence of an investor-dispute resolution clause in the Egypt-Saudi BIT was heavily criticised by affected Saudi investors.

20. To what extent have local courts been supportive and respectful of investment treaty arbitration, including the enforcement of awards?

Saudi Arabia

Attitude of local courts towards investment treaty arbitration

There have not been any known arbitration awards involving the government of Saudi Arabia, but for the Saudi Aramco Arbitration in 1958. Accordingly, knowledge of court attitude towards investment treaty arbitration and the enforcement of awards is limited.

However, one may assess the courts’ general attitude against arbitration from its track record of enforcing foreign awards. There remain significant obstacles to enforcing foreign arbitral awards in Saudi Arabia. Over the years, despite Saudi Arabia’s accession to the New York Convention, enforcement has been difficult. The now superseded enforcement procedure before the Board of Grievances meant that the entity tasked with the enforcement of foreign awards revisited and re-litigated the merits of the case and often refused enforcement of the award 35 . The review process was lengthy, often lasting two years or more. It is hoped that the new procedure before an enforcement judge will prove to be more efficient and speedy. Previously, enforcement was refused for failure to comply with the public policy, i.e. the Shariah and this is likely continue being the case.

It is unclear whether the party seeking to enforce an ICSID award would now also go the Enforcement Circuit route, instead of the Board of Grievances. The new Enforcement Law specifically leaves contrary provisions under international treaties untouched (Article 94) and the designation of the Board of Grievances as the enforcement institution under the ICSID Convention has not been officially updated or amended elsewhere 36 .

As opposed to the New York Convention, which allows enforcement to be refused on the basis of several grounds listed in Article V, including for public policy reasons, the ICSID Convention does not include similar avenues for refusal to enforce an award. An award of a Tribunal is binding on all parties to the proceeding and each party must comply with it pursuant to its terms (Article 53(1) of the ICSID Convention). Nonetheless, based on the wording of Article 54(1) requiring Contracting States to enforce an ICSID award ‘as if it were a final judgment of a court in that State’, allows the state to use administrative procedures to try and stop enforcement.

Since no award has thus far been rendered against Saudi Arabia, it is unknown whether enforcement would meet similar hurdles that are encountered in enforcing foreign commercial awards.

National legislation protecting inward investments

21. Is there any national legislation that protects inward foreign investment enacted in this country? Describe the content.

Saudi Arabia

National legislation

Substantive protections

Procedural rights

FET

Expropriation

Other

Local courts

Arbitration

The Foreign Investment Law, Royal Decree No. M/1 dated 5/1/1421H (10 April 2000) plus Rules of Implementation published on 7/6/1423H (16 August 2002)37

Not explicitly

Yes

National treatment in all respects

Yes

Yes

National legislation protecting outgoing foreign investment

22. Does the country have an investment guarantee scheme or offer political risk insurance that protects local investors when investing abroad? If so, what are the qualifying criteria, substantive protections provided and the means by which an investor can invoke the protections?

Saudi Arabia

Relevant guarantee scheme

Qualifying criteria, substantive protections provided and practical considerations

Multilateral Investment

Guarantee Agency

Saudi Arabia ratified the Convention establishing the Multilateral Investment Guarantee Agency (MIGA) on 12 April 1988. Under the Convention, Saudi nationals and corporates are eligible to acquire, for the payment of a premium, political risk insurance from MIGA in respect of investments made in certain developing states provided that certain conditions are met. To be eligible for assistance, the investment must be medium to long term in nature, support the host country’s development goals, comply with MIGA’s Policy on Social and Environmental Sustainability and anti-corruption and fraud standards, and also be financially viable.

The Arab Investment and Export Credit Guarantee Corporation

On 20 April 1977, Saudi Arabia joined and ratified the Convention establishing the Arab Investment & Export Credit Guarantee Corporation ‘Dhaman’, which had been established in April 1974 as a multilateral investment guarantee provider based in Kuwait.

Its objective is promoting the flow of investments into the Arab countries and to enhance the Arab international trade. ‘Dhaman’ provides insurance against non-commercial risks for Arab and non-Arab investments in the Arab countries, as well as insurance against both commercial and non-commercial risks for Arab export credits.

Islamic Cooperation for Insurance of Investments and Export Credits (ICIEC)

Saudi Arabia is a member state of Islamic Cooperation for Insurance of Investments and Export Credits (ICIEC), which was established on 1 August 1994 as an international institution with full juridical personality on the back of the OIC Agreement.

Its objective is to encourage exports from Member Countries and to facilitate the flow of Foreign Direct Investment to Member Countries by providing and encouraging the use of Shariah compatible Export Credit and Investment Insurance as Credit and Country Risk mitigation instruments. In line with this, ICIEC provides investment and export credit insurance for Islamic countries operating in full compliance with Islamic Finance principles.

Awards

23. Please provide a list of any available arbitration awards or cases initiated involving this country’s investment treaties.

Saudi Arabia

Awards

No publicly known award has been rendered involving Saudi Arabia’s BITs, however an interim award on jurisdiction has been rendered under the OIC treaty, to which Saudi Arabia is a signatory, against Indonesia: Hesham T. M. Al Warraq v. Republic of Indonesia , UNCITRAL, Award on Respondent’s Preliminary Objections to Jurisdiction and Admissibility of the Claims dated 21/6/2012.38

Pending proceedings

There are several proceedings currently pending relying on the OIC Treaty and which were brought by Saudi investors.

Reading List

24. Please provide a list of any articles or books that discuss this country’s investment treaties.

Saudi Arabia

Abdul Hamid El Ahdab and Jalal El Ahdab, ‘Arbitration in Saudi Arabia’, Arbitration with the Arab Countries (Kluwer Law International 2011), pp. 593-671.

Mohammed Al-Ghamdi, John Lonsberg, Jonathan Sutcliffe and Sam Eversman, Chapter 44 - Saudi Arabia in Richard Clark (ed), The Dispute Resolution Review (2012) available at www.nortonrosefulbright.com/files/us/images/publications/20120401SaudiArabia.pdf

Faisal Alkahtani, Legal Protections of Foreign Direct Investment in Saudi Arabia (D.Phil. Thesis) available at https://theses.ncl.ac.uk/dspace/bitstream/10443/2254/1/BL%20Alkhatani.pdf

Henry Clarke, Introduction to ICSID arbitration and the prospects of investment treaty arbitration in relation to the Kingdom of Saudi Arabia available at https://www.academia.edu/6066048/An_introduction_to_ICSID_arbitration_and_the_prospectives_of_investment_arbitration_in_

relation_to_the_Kingdom_of_Saudi_Arabia

Jean-Benoît Zegers, National Report for Saudi Arabia (2013) in Jan Paulson and Lise Bosman (eds), ICCA International Handbook on Commercial Arbitration .

Notes

1 In all BITs that include an MFN standard it does not apply to benefits of membership of customs union, economic union, free trade areas and tax matters.

2 Azerbaijan ratified the treaty and was implemented as law No. 911-IIQ on 10 May 2005, however it appears that Saudi Arabia has not yet ratified it. The BIT was signed on 9 March 2005.

3 China BIT: Arbitration is restricted to the resolution of disputes over the amount of damages in the case of nationalization or expropriation.

4 The Egypt BIT does not include a FET standard as such, but specifies that investments and capital are to be accorded all the basic guarantees, particularly related to expropriation. It may be argued that such basic guarantees include the FET standard, national treatment and protection and security.

5 Ibid.

6 The Egypt BIT only grants national treatment.

7 The India BIT excludes regulatory actions for the public benefit (health, safety and environment) from the ambit of the provision.

8 The Japan BIT equates the FET standard to the international law standard.

9 The Japan BIT equates the security and protection standard to the international law standard.

10 The Malaysia BIT states that ‘Investments…shall at all times be accorded equitable treatment...’. Fair is omitted from the definition.

11 The Philippines BIT does not explicitly address expropriation. It however calls on the contracting parties to ‘guarantee fair and urgent compensation in case of injury’.

12 The Philippines BIT requires the Contracting Parties to ‘protect the capital and investments of their respective countries and nationals, including the liberty to repatriate their capital and profits’.

13 In the Philippines BIT MFN treatment is restricted to ‘the confines of the international trading system’.

14 The FET standard does not apply to disputes that arose before the BIT entered into force.

15 The Sweden BIT mentions only ‘protection’, not security.

16 The Taiwan BIT mentions only ‘protection’, not security.

17 The Taiwan BIT provides for ad hoc arbitration only ‘on such terms and conditions as the parties may agree’.

18 The BIT was not accessible to the author.

19 MFN treatment does not apply to benefits of membership of customs union, economic union, free trade areas and tax matters or rights and privileges given pursuant to international agreements, law and those given in relation to a specific project.

20 The OIC Agreement provides for arbitration following conciliation ‘until an Organ for the settlement of disputes arising under the Agreement is established’. Some scholars and practitioners have suggested that the International Islamic Court of Justice established on paper is the relevant organ. Others have opposed such view. It is unclear whether arbitration is possible without the parties having previously agreed to conciliation, ie, whether an investor can require arbitration unilaterally.

21 The Unified Agreement was amended in January 2013 at the Arab Summit for Economic and Social Development. Saudi Arabia ratified the amendments by Royal Decree No. 48/M dated 14/7/1435 H (13 May 2014).

22 The original Unified Agreement does not include the FET standard, however the Amended Agreement does.

23 The Agreement suggests that ‘The capital of the Arab investor shall, without discrimination, be treated in the same manner as capital owned by the citizen of that State…’. Further, ‘the Arab investor shall…be entitled to opt for any other manner of treatment which is laid down in general provisions in force in the State…or an international agreement and which is applicable to a non-Arab investment in a similar field.’

24 The Unified Agreement allows for investor state disputes to be brought before the Arab Investment Court. The Unified Agreement does not provide for a unilateral right to submit the dispute to arbitration: The parties ‘may agree to resort to arbitration’. A viable option for dispute resolution is however the submission to the Arab Investment Court, which currently has no less than seven cases pending under the Unified Agreement.

25 The Agreement guarantees citizens of the GCC national treatment as regards (1) freedom of movement, work and residence, (2) right of ownership, inheritance and bequest, (3) freedom of exercising economic activity, (4) free movement of capital.

26 See https://icsid.worldbank.org/apps/ICSIDWEB/cases/Pages/casedetail.aspx?CaseNo=ARB/03/1&tab=PRO

27 See https://icsid.worldbank.org/apps/ICSIDWEB/about/Pages/MembershipStateDetails.aspx?state=ST117

28 See https://treaties.un.org/pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXII-1&chapter=22&lang=en

29 See Article 8, Royal Decree No. M/51, 17/7/1402H (11 May 1982); Article 13 of Royal Decree No. M/78, dated 19/9/1428 H

30 Arbitration in Saudi Arabia in Abdul Hamid El Ahdab and Jalal El Ahdab, Arbitration with Arab Countries, para. SA-163.

31 See https://icsid.worldbank.org/apps/ICSIDWEB/about/Pages/MembershipStateDetails.aspx?state=ST117

32 See www.mci.gov.sa/en/LawsRegulations/SystemsAndRegulations/AbitrationSystem/Pages/default.aspx

33 See https://icsid.worldbank.org/apps/ICSIDWEB/cases/Pages/casedetail.aspx?CaseNo=ARB/03/1&tab=PRO

34 Article 8(1)(g), Royal Decree No. M/51, dated 17/7/1402 H (11 May 1982), Article 13(g) of Royal Decree No. M/78, dated 19/9/1428 H (1 October 2007).

35 See Arbitration in Saudi Arabia in Abdul Hamid El Ahdab and Jalal El Ahdab, Arbitration with Arab Countries, para. SA-371.

36 See for example at https://icsid.worldbank.org/apps/ICSIDWEB/about/Pages/MembershipStateDetails.aspx?state=ST117

37 See www.mci.gov.sa/en/LawsRegulations/SystemsAndRegulations/ForeignInvestmentSystem/Pages/default.aspx

38 See www.italaw.com/sites/default/files/case-documents/italaw3174_0.pdf

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