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Issue No: 8 - April, May June 2002
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As Saudi Arabia attracts more foreign investment, it is inevitable that business disputes will become more common. Understanding the country’s legal system is essential if one is to do business in the Kingdom. An overview of the interrelationships between the courts and various governmental committees existing in Saudi Arabia is the subject of this newsletter.
The overriding principle is that Shari’a, Islamic law based upon the Koran, is the basis of the Saudi judicial system. If a contract conflicts in any way with Shari’a, the offending provision is unenforceable. For example, Islamic law prohibits the imposition of interest on an overdue debt. A contract provision which provides that the borrower pay interest is, therefore, unenforceable. If the borrower is sued on the contract and raises the issue that he has been paying interest contrary to Shari’a, Saudi courts will probably require the creditor to reduce the balance by the amount of interest paid by the debtor.
Saudi courts apply Shari’a in all legal disputes brought before them. Certain rules and regulations have been promulgated to supplement Islamic law and deal with commercial activities such as governmental contracts, corporate matters, issues involving intellectual property (trademarks, patents and copyrights), and distributorship agreements. In light of the more complex issues involved in commercial matters, the courts have been less involved in deciding contract disputes than have specialized committees established by the government.
The most important of these specialized committees is the Board of Grievances, which was established in 1955 and reconstituted in 1982. The Board is a full-time quasi-judicial body that regularly meets in six three-judge panels throughout the country, and which governs all disputes between a private contractor and a governmental agency based upon a public works contract. It also deals with maritime and non-banking disputes, trademark disputes, and the enforcement of foreign judgments. As is the case with all other judicial and quasi-judicial bodies in the Kingdom, the Board is not bound by precedent.
Any claims arising out of administrative contracts must be brought before the Board within five years from the date on which the right arose or from the date of implementation of the Board Rules, if earlier. There does not need to be a formal decision from the relevant governmental agency in order to institute a claim before the Board of Grievances.
The Board holds all of its hearings in public unless the judicial panel specifically closes the hearing due to the sensitive nature of the issues involved. All Board decisions, which are made by majority vote, are announced in a public session of the panel. The unsuccessful party has the right to appeal to a separate appeal committee.
When a judgment becomes final, the successful party must deliver a copy of the judgment to the Civil Rights Directorate of the Police for service upon the judgment debtor. If the latter fails to satisfy the judgment, the Directorate has the power to imprison him or schedule a time for him to be examined as to the nature and location of his assets. Upon discovery of any assets, the judgment creditor can apply to the Shari’a court to have them sold in order to satisfy the judgment. If the debtor is a flight risk, the creditor can have the Directorate ask a court to prevent the judgment debtor from leaving Saudi Arabia.
Occasionally, it becomes necessary to seek to attach the debtor’s assets to satisfy a judgment. Generally speaking, this option is not very productive. Article 570 of the Commercial Court Regulation prohibits attachment of the debtor’s residence, furniture, clothing, professional or trade equipment, and funds needed to pay the salaries of his servants and employees. Further, more than one creditor can seek an attachment order at the same time, and the attachments are considered to rank equally.
One other specialized committee governing commercial disputes deserves special mention. The Saudi Arabian Monetary Agency (SAMA) Committee for Banking Disputes was created in 1987 to deal with disputes between banks and their customers which do not involve commercial paper. The committee seeks to conciliate disputes rather than impose judicial decisions. Experience has shown that settlement agreements forged by the SAMA committee are binding upon the parties. Disgruntled parties have met with failure in seeking to overturn these “compromises” in the courts or by royal petition.
The SAMA committee’s recommendations may include the attachment of assets, freezing of bank accounts and of governmental payments owed to defendants, and restrictions on the foreign travel of litigants.
It is essential that litigants be represented by a Saudi representative, preferably a lawyer well-versed in the country’s legal procedures. The litigant must have given a proper power of attorney to his representative. If the power of attorney is issued in the Kingdom, it must be notarized by a Saudi notary and be in Arabic. If a power of attorney is issued outside Saudi Arabia, it must be notarized in accordance with the procedures of the issuing country and consularized by the Saudi embassy in that country. The document must then be translated into Arabic and attested before the Saudi Ministries of Justice and Foreign Affairs. This is normally handled by one’s Saudi lawyer. |
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May 1, 2002 marked the beginning of Saudi Arabia’s new criminal procedure law. For the first time, Saudi lawyers may appear in court and present arguments in criminal cases. The 225-article law includes directives to be followed by justice and law enforcement authorities during all stages of a criminal suspect’s arrest, interrogation, trial and execution of verdicts.
The law now gives criminal suspects the right to hire lawyers during all stages of detention. Physical harm or torture to extract confessions from detainees are prohibited, and suspects must now be referred to an interrogator within 24 hours of arrest.
Criminal trials are open to the public, unless the judge decides otherwise in exceptional cases. The law also details how charges are to be brought and how testimony from the accused and witnesses are to be handled.
Final verdicts are issued by a two-tiered court system, but death and amputation verdicts must be approved by Supreme Judicial Council.
The new criminal procedure law is part of a plan to restructure court procedures and streamline the judicial process in the Kingdom. |
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In addition to revamping its system of Islamic justice, the Kingdom is considering opening the legal profession to women to deal with cases which relate exclusively to women. If approved by the Ministry of Justice, Saudi women could explain their cases to female legal advisers. The Ministry has already received applications from women who wish to open law firms in the country.
Such a move would create job opportunities for Saudi female graduates, particularly from the Colleges of Shariah. Even if approved, female lawyers would not be permitted to attend court. Instead, they would have to write out their arguments which would be presented on their behalf by male lawyers in open court. |
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The Shoura Council recently decided to set up a national committee to protect consumer rights. This follows the Jeddah Chamber of Commerce’s decision in April to establish the first center in the Kingdom to investigate consumer complaints about products offered by the private sector. When a complaint is made, the new center in Jeddah will acknowledge receipt of the complaint within three days.
Consumer complaints should be submitted to the center by telephone (6529255), fax (6529247), or e-mail (customerservice@jcci.org.sa). |
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Saudi Arabia continues its efforts in promoting information technology (IT). More than 500 local and international companies participated in the four-day IT conference in Riyadh in late April. The government has created a national body called the Electronic Commerce Standing Technical Committee to reflect the strong interest it has in e-commerce and e-government initiatives.
Conference participants point to a geometric growth in IT usage. Saudi Arabia is the largest computer market in the Middle East and has the largest number of Internet subscribers in the Arab world.
The country’s draft bill on e-commerce is now being reviewed at the highest level of government. The regulations will conform to Islamic law in all respects and will add protection and confidentiality to on-line financial transactions.
In addition to e-commerce, the Saudi government is seeking ways to incorporate new technology in delivering governmental services to its citizens. The plan includes creation of the infrastructure to support the systems necessary to meet the growing needs in the fields of e-commerce and e-government. The proposed infrastructure will consider the current trend away from traditional PC-based browsers to wireless, mobile devices. It is hoped that eventually all banking transactions will be completed electronically and that most government purchases could be accomplished securely over the Internet. Virtually all of the country’s ministries are involved in implementing this initiative, and the government has approached the private sector to support the project. |
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| Disclaimer |
| Material contained in this newsletter is for general information only and should not be interpreted as legal advice on any particular matter. Readers are advised to consult their legal advisor directly on any issues discussed herein. Transmission of this document does not create any attorney-client relationship. Although considerable care has been taken to ensure the accuracy of the material in Legal Update, the Law Firm of Dr. Khalid Alnowaiser is not responsible for any errors contained herein. |
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12/4/2009:Ministry steps up clampdown on copyright piracy 12/4/2009:Construction of New Office is near to completion 14/4/2009:JCCI preparing black list of car rental defaulters 7/4/2009:Justice Ministry warns ‘lawyers’ without permits
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