Saudi Arbitration Law: Are Electronic Links in Purchase Orders Enough to Bind You to Arbitration?
This question has become increasingly relevant in today’s business environment, particularly as companies rely more heavily on purchase orders and standardized contracting tools. Under the Saudi Arbitration Law, the existence of an arbitration agreement can have decisive consequences, including depriving courts of jurisdiction altogether. This issue came sharply into focus following a recent ruling by the Commercial Court in Dammam involving a dispute exceeding SAR 2.9 million. While one party sought to litigate its claim before the court, the other invoked an arbitration clause incorporated through an electronic link. The dispute was not about performance or delivery, but rather whether a supplier could be bound to arbitration without signing a traditional contract. As a result, the case raised fundamental questions about consent, electronic contracting, and commercial risk.
In its defense, the respondent relied on the wording of its purchase orders, which expressly referred to general terms and conditions available through an electronic link. The purchase order stated that acceptance or commencement of performance by the supplier constituted full acceptance of those terms. Notably, the referenced terms included a clear arbitration clause providing that disputes would be resolved through arbitration rather than litigation. Such arrangements are increasingly common in commercial practice, where complex relationships are governed by concise documents incorporating detailed terms by reference. Relying on the Saudi Arbitration Law, the respondent argued that once the arbitration agreement existed and was invoked at the earliest stage, the Commercial Court was required to decline jurisdiction.
By contrast, the claimant challenged the binding nature of the arbitration clause itself. It argued that the terms and conditions were never physically delivered, nor electronically signed, and therefore lacked binding force. Moreover, the claimant emphasized that the relationship arose between two Saudi companies operating within the Kingdom, which in its view required the application of Saudi law and conferred jurisdiction on the Saudi courts. This position reflects a broader concern among suppliers and contractors about being bound by standard terms that were not individually negotiated. It also highlights a recurring risk in commercial transactions: silent acceptance, where consent is inferred from conduct rather than explicit agreement.
The court ultimately provided a practical answer to the question posed by this case. It held that an electronic link may indeed be sufficient to bind a party to arbitration where clear indicators of acceptance exist. The court found that the supplier’s failure to object to the purchase order, its acknowledgment of the reference to the terms, and its commencement of performance without reservation constituted implicit acceptance of all incorporated terms, including the arbitration clause. Importantly, the court reaffirmed that commercial contracts must be interpreted in light of the parties’ conduct. For businesses, the message is clear: under the Saudi Arbitration Law, electronic links are not a minor detail, and failure to scrutinize them may result in disputes being decided by an arbitral tribunal, potentially before a Saudi arbitrator, rather than a court.
About the Author | Mohammed Almuzayen
Mohammed Almuzayen is the Chief Executive Officer of Mohammed Almuzayen Law Firm. He is a principal member of the Saudi Bar Association and a Member of the Chartered Institute of Arbitrators (MCI). He has over fifteen years of professional legal experience, and the firm specializes in arbitration related to construction and contracting disputes, construction claims, government contracts, and franchise agreements, in addition to providing corporate legal advisory services. Mohammed Almuzayen holds a Bachelor of Laws (LL.B.) from King Saud University (2009). He has been appointed as a lawyer and arbitrator in numerous cases, with arbitral awards submitted to the Commercial Court in Riyadh.
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Further Reading
For a deeper understanding of arbitration practice and strategy in Saudi Arabia, you may also review the following articles:
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SCCA Online Arbitration: Appointment and Challenge of the Arbitrator (ODR Appendix – Article 5)
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Arbitration Clause Drafting and Its Impact on Amicable Settlement in Saudi Construction Contracts
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Arbitration Fees Policy at Mohammed Almuzayen Law Firm & Arbitration
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ICC Court of Arbitration: Its Institutional Role and the Enforceability of Awards in Saudi Arabia
Summary
Written by Mohammed Almuzayen, a commercial arbitration expert with 15 years of legal experience, this article explains how the Saudi Arbitration Law treats arbitration clauses incorporated through electronic links in purchase orders. Based on a recent Commercial Court ruling, it clarifies when electronic terms may become binding through implied acceptance and performance—potentially depriving courts of jurisdiction and shifting disputes to arbitration. The article highlights practical risks for businesses, suppliers, and contractors, and offers guidance on reviewing and drafting arbitration clauses, including considerations for appointing a Saudi arbitrator in commercial disputes in Saudi Arabia.
