Ø Overview on the reality of the legal profession in the Kingdom

Ø Dr. Khalid Alnowaiser addresses 2007 International Saudi Banking & Investment Forum.

Ø Terrorism victims and the private right

Ø The legal point of view on the capital market's suspension of the shares of some companies from circulation

Ø The doctrine of the contract as the law of the contracting parties

Ø Legal protection for the rights of women

 

Lawyer and Arbitrator Dr. Khalid Alnowaiser addressed the 2007 Saudi International Banking and Investment Forum held in Jeddah at the Hilton Hotel, on April 8 -10, 2007.  His speech, entitled "Governance in Financial Institutions", discussed the emerging framework of the new investment environment in which companies find themselves. The concept of "Governance" is concerned with controlling the operations and functions of companies, as well as the behavior of their employees while exercising their powers. This concept is fundamental to all companies in promoting corporate transparency in order to build confidence among shareholders and others with whom they do business.

 

Dr. Alnowaiser talked about what governance means in the area of financial establishments by focusing on three fundamental corporate functions:

 

§   The legal systems associated with the Governance of Financial Establishments.

 

§  The levels of regulatory supervision and control such Financial Establishments are subjected to by Governmental agencies.

 

§  The steps that must be followed to adhere to the rules of Governance upon Financial Establishments and the effects those steps have on the Kingdom's overall investment environment.

 

In discussing the legal systems connected to the Governance of Financial Establishments, Dr. Alnowaiser referred to the corporate governance regulations issued by the Capital Market Authority and subsequent regulations, including the Companies Act issued in 1965, as well as the Capital Market Act, the executive bylaws, the Saudi Arabian Monetary Agency, and other relevant entities.

 

As for the levels of supervision to which such Financial Establishments must adhere, these are represented in the Ministry of Commerce and Industry, the Capital Markets Authority, and Saudi Arabian Monetary Agency. He asserted that the success of the concept of Governance in Financial Establishments is not dependent upon the establishment of controlling rules only, but also to implementing them properly by the Financial Establishments.

 

At the end of the speech, Dr. Alnowaiser suggested several steps and procedures in order to further effective control of the Financial Establishments, including the following recommendations:

 

·         Consider Corporate Governance Regulations that are mandatory and binding upon the Financial Establishments, not just as guiding principles as outlined in the Article (1b) of the Corporate Governance Regulations.

 

·         In order to effectively protect investors and others having interests in the Financial Establishments, it is important that an assessment of the Financial Establishments by independent, state - accredited financial authorities be issued, which defines their performance and requires them to prepare a
detailed annual report outlining their future investments and projected
performance for the year, in order to keep investors aware and satisfied of their
correct and precise course of action.

 

·         Give more powers to the supervisory authority.

 

·         Establish an Institute for Governance, similar to those institutes
existing in other Arab countries.

It is should be noted that the Saudi International Banking & Investment Forum was attended by a number of Princes, senior state employees, bankers, financial consultants, academicians, businessmen, and lawyers.

 

 

 

   The mission of the legal profession is certitude and justice. It is a free and independent profession, sharing with the judiciary the implementation of justice and promoting the dominance of law. It is also a profession of honor and dignity, drawing its existence from the noblest and most honorable goals. It is often said that justice cannot fly without two wings: the legal profession and the judicial system.

 

For centuries, the legal profession imbued power that was unshakable. The system of justice relied upon this foundation of power. The profession has been integrally involved in defending the claims of individuals and nations in seeking to uphold their rights and those of humanity in general.

 

The legal profession, like other professions, benefits from any improvement in the economic situation of the state. Individuals, communities and governments increasingly rely today on the law in organizing economic, social and political interests. As the role of law increases, so does the role of the judiciary and law enforcement. Based upon this perception, it is indisputable that the tremendous economic growth in the Kingdom will generate more commercial and civil lawsuits before the courts and specialized committees. As this happens, the legal profession will be more visible in a positive light. It is expected that large public companies will rely upon highly capable lawyers to assist them. The establishment of economic cities based upon commercial activities will require the services of more attorneys and motivate those persons in seeking to engage in the practice of law. This will cause the following positive developments in the Kingdom:

 

 

There has already been considerable growth in the number of practicing lawyers, particularly after the approval of the legal profession law and its regulations in 1422 h. The number of practicing lawyers registered in the list of lawyers prepared by the Ministry of Justice totals more than one thousand lawyers, but this number is still very low in comparison with other countries similar in size to the Kingdom of Saudi Arabia. Realistically, this number should be doubled when one considers the number of commercial development projects now happening in the Kingdom. Also, it is low when compared with the number of practicing lawyers in the world as general and in the Arab world in particular. This is due to two causes: (1) many of the Saudi universities have no law schools; and (2) the current viewpoint of the community on the legal profession in general.

 

 By examining the general reality of the legal profession in the Kingdom, we find it faces a set of challenges that must be solved to enable the profession to meet its mission in defending the rights of Saudi citizens. The most significant of these challenges is to stop limiting profession practice to those lawyers licensed by the Ministry of Justice. The nonexistence of a body overseeing and organizing attorneys’ affairs and protecting their rights also contributes to the present situation. The two most important solutions are:

 

 The independence of the legal profession is the main pillar of its existence and legitimacy in performing its role, because a lawyer who is assigned to protect the rights of people must have high professional and moral ethics subject to no one’s influence or interference.

 

 This independence emerges from the existence of an independent law organizing it and insuring its freedom from improper influence. Thus, there is an urgent need for a body for lawyers like other professionals existing in other countries to organize the profession’s affairs, defend the interests of lawyers, maintain legal and judicial efficiency, protect the freedom of lawyers in performing their work, and promote legal training to serve justice.

 

Training the legal profession is very important in qualifying the lawyer to practice law and keep up-to-date on legal developments after passing the initial training requirements, so that the lawyer will understand the principles of pleading and the rules governing legal work, specialized legal issues, the difference between theoretical information and the practical, development in legal research tools, and the rules of professional ethics.

 

It should be noted that in 1996^A.D, the Arab Federation of Lawyers drafted a proposal for an Arab Institute for the development of the legal profession and to support the independence of the judiciary, justice, and the protection of human rights, but the draft of the basic law for the Institute has still not been approved and implemented.

 

The following should be complied with:

 

 

 

  The legal profession must improve its method of providing services by utilizing information technology to enable lawyers to communicate more easily with others and to acquire relevant legal information.

 

    The challenge we face is that competition in the legal services is global in nature. To be competitive, we have to develop and improve the way we conduct our legal practices to provide an internationally high quality service. The WTO agreement allows the foreign lawyer to provide some legal services in other countries. This will lead to the rise of foreign or multinational law firms who will engage the services of Saudi attorneys to provide legal services in the Kingdom.

 

 

 

Terrorism has affected many countries and communities regardless of its underlying cause. It has disturbed national security and threatened international peace and has become random in its effects, causing physical, financial and emotional damage to its victims.

 

 Currently, the world faces two types of terrorism: government-supported and sanctioned terrorism, and homegrown terrorism perpetrated by extremist groups and organizations. In both cases, the victims are innocent civilians losing their lives or becoming permanently handicapped.  

 

Although terrorism is not new, it has increased in many regions of the world, especially in the Middle East. Even the Kingdom of Saudi Arabia has not escaped its effects. Bombings in the Kingdom clearly demonstrate the goal of extremists in spreading fear and horror among ordinary citizens. Many of the developed and growing countries have made use of the Kingdom's experience in rooting out terrorist groups. Indeed, the Gulf Cooperation Countries have intensified their efforts to counteract this terrorism phenomenon.

 

The problems and results from terrorism are numerous. Foremost is the issue of the private right to indemnify those prejudiced in their lives, bodies, properties and feelings. Who is responsible for indemnifying the victims? Who is responsible for compensating the damage caused to their property? How can the rights of heirs who have lost their relatives in terrorism accidents be preserved? Knowing that insurance companies cannot insure against terrorist acts and realizing that the terrorist may be anonymous or known but protected by others requires a solution. 

 

Rules must be established to solve these problems arising from terrorist acts through effective and binding international efforts. It is the right of every affected victim to receive reasonable indemnity for his or her physical and emotional damages. And those who commit these senseless acts of violence need to be arrested and punished, including those who abet, harbor or promote such terrorism contrary to national and international laws.

 

The legality of indemnifying for emotional distress is not absolute, but conditioned upon general legal rules and principles conforming to the prevailing laws. The claim for damages based upon emotional distress must be definite and personal to the claimer. 

 

Awarding monetary damages to those relatives of terrorism victims may be most clear when the terrorism is proved beyond doubt to be backed by states or by parties who can be held responsible for the terrorist’s crimes. The best example of this is the historical legal precedent represented in the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, where the private right was obvious and represented in indemnifying the relatives of the victims and the public right was vindicated by sentencing certain individuals before the International Court of Justice to life imprisonment.

    

For terrorism sponsored by some organizations or groups, claiming the private right may not be practical due to the very real difficulty of reaching the planner and financing party of the terrorism act. The best example of this is the attacks of September 11, 2001 on Washington and New York.

 

Therefore, we believe that it is necessary to establish rules for indemnifying the victims of terrorism when the terrorist dies during the event. There are many proposals on this, the most important being:

 

1.      Enactment of a special law identifying the method and mechanism of indemnifying the injured.

2.      Establishment of a fund for immediately indemnifying the injured for the resulting damages.

3.      Publication of the ruling issued in favor of the injured and rehabilitating him as appropriate.

4.      Proscribing any limit on the damages the families of victims can receive, including all physical and psychological damages.  

 

We are living in a world today dealing selectively in enforcing and respecting the dominance of the law to counter terrorism. A world in which those of power and dominance can always avoid punishment and those who have powerful friends can avoid the consequences of their evil actions. The best example of this is the Israeli government’s crimes against the Palestinians, where the law and the international community remain incapable or unwilling to condemn them. Apart from silence and ignorance, these crimes of terrorism continue with many being arrested and thrown into prisons without trial, such as the infamous Guantanimo prison that is generally considered a disgrace in the face of international human rights.

 

 

The recent actions taken by the Capital Market Authority against some companies that have violated the market behaviors regulation and caused damage to the public interest is a highly important step towards organizing and developing the capital market and promoting greater credibility and reliability in the market operation mechanism.

 

These resolutions to suspend the shares of some companies are a clear warning to all companies deviating from optimum management designed to achieve the best balance and protection between the rights of the company managers, its shareholders, and other interested parties. The action taken by the Capital Market Authority complies with the law, regulations and interests of shareholders. Further, the Capital Market Authority intends to disclose all relevant facts to seek transparency and require stock companies to disclose any losses. Concealing such facts in the past pushed the Capital Market Authority to act in seeking disclosure of such losses, their size, and any manipulation inside those companies concealing the true nature of the profits or losses.

 

   Complying with full disclosure and transparency has become an important and necessary issue for all investors, many of whom have suspected the truth of those companies. The random speculations and momentum profits reported by the companies unfortunately caused some investors to overlook the actual operating losses of such companies. The huge financial stakes, when discovered, totally exposed the fact that these companies had been unable to deal with new market conditions. Those companies with low assets and losses equal to nearly 75% of their capital were seeking to achieve growth in their share prices due to false rumors and clear manipulation of the market, thus misleading investors.

 

For all these reasons and in order to protect the rights of the shareholders, the Capital Market Law devoted one complete chapter for the disclosure of business data, followed with detailed executive regulations for disclosure beginning when a company is incorporated and continuing so that the true performance of the company is revealed to preserve the rights of its shareholders and other parties of interest.

 

   In addition to the Capital Market Law and its executive regulations, there are other commercial laws containing provisions entitling other parties and persons to stop losses in the companies. For example, Article 148 of the company law requires that any interested party can seek to dissolve the company if its losses reach 75% of its capital and its board of directors has neglected to call for a special stockholders’ meeting to discuss whether the company should continue or be dissolved.

 

It is also worth mentioning that Articles 55 of the Capital Market Law and 10 of the market behavior regulation entitle an investor to legally claim indemnity for the damages he suffers as a result of his reliance upon false material information disseminated by the company. Corporate statement are deemed material if the investor offers evidence before the financial instruments disputes settlement committee that he was unaware of the true facts when he purchased his shares. Every person whose name is listed in the issuance publication and those persons identified in Paragraph B of Article 55, which include the party issuing the instrument and its senior officers, board of directors, covering contractors, and the company accountant are jointly and severally responsible for the losses sustained by the affected shareholder.

 

Article 59 of the Capital Market Law states that if any person violates the provisions of the law or its executive regulations, then the Capital Market Authority may sue such person before the financial instruments disputes settlement committee seeking suitable punishment, including indemnifying all prejudiced persons due to the violation committed and imposing fines.

 

It must be noted that the information technology at the circulation site must be improved to develop an effective mechanism to provide a degree of legal knowledge for the shareholders so they can be aware of their rights and liabilities and understand all of the applicable laws.             

 

 

 

The growth of the Movement of Enlightenment, Awareness and Education, as well as the growing contribution of women in public life, is direct related to the growth of wider opportunities for amending the rules and regulations relevant to the female gender to enable women to possess and exercise all of their rights. It is indisputable that women have brilliantly and effectively proved themselves as valuable contributors to Saudi public life. This reality has demonstrated a significant shift in how women are engaged and employed in both private and public sectors in the Kingdom. Now, women are taking senior prominent corporate positions in leading family companies, some government departments, the membership of the Jeddah Chamber of Commerce, and the area of investment and the capital markets, as well as fulfilling their historic role socially.

 

The Kingdom's competent authorities have enacted numerous acts securing numerous rights for women provided for in the Kingdom's government and articles of association issued in 1412^H. Article 8 states, "The system and rule of Government in the Kingdom shall stand on and be based upon, justice, consultation and equality according to the Islamic Law and Sharia". This provision clearly states the principle of equality among all the citizens of the Kingdom, making no distinction between men and women.

 

Some rights for women are secured by the Regulations of Trade, Economy and Investment which gives women the right to be engaged in the business market by owning their own stores and commercial institutions, or participate as partners in the commercial companies. This trend provides more opportunities for Legal, Financial and Advertising Workshops and Conferences to increase women’s awareness and understanding of many newly emerging trends in business. These workshops seek to push women to get involved in the domains of Financial and Trade Business and enter the business market, without fear or hesitation, particularly after the accession of the Kingdom to the World Trade Organization. Just as men, women too need specialized teams of Legal, Economic and Financial Consultants to assist them in setting up and running businesses. These consultants can help women become more familiar with their legal rights, such as their right to attend meetings, vote on the decisions made at ordinary or extraordinary company meetings, in their capacities as merchants, or as mandators using the services of accountants and financial experts to furnish them with accurate and precise information concerning the financial position of the establishments they own or may own in the future.

 

The Saudi Labor Law issued in 1426^H secured the right of work for all women. This right is clearly stated in Articles No. 149 – 160 in Chapter 9, which discusses women engagement and employment. These provisions have granted many work rights to women in the Kingdom and require female employment in all areas which correspond to their nature, but ban employing them in hazardous jobs. Likewise, the law gives women access to health care, especially during pregnancy and a paid maternity leave upon delivery.

 

With the growing economy and commercial development in the Kingdom, the educational regulations and systems now grant women the right to enroll to study certain specialties and practice them in public life. Formerly, some occupations, such as legal advocacy and the media, were limited to men only. Now they stand open for women. Women now may work as Radio Announcers, Debaters, Correspondents, Researchers, and Legal Consultants. These positions will enable Saudi business- women to participate in commercial causes and use female consultants to assist them in their endeavors.

 

The international community has agreed on promoting certain woman – related rights, which correspond to some contemporary developments, under the Local and International Rules and Regulations. The General Assembly of the United Nations has been the leading body to express serious concern in respect of these rights. Accordingly, it has issued many declarations calling for the protection of the rights of women and the elimination of all forms of discrimination, including violence against them.

 

The issuance of the International Human Rights Declaration on the 10^th of December 1948^A.D acknowledges the principle of equality, equity and non-discrimination among people by reason of color, race or sex. Agreement on the elimination of all forms of discrimination against women in 1979^A.D which the Kingdom joined in December 2000^A.D,  – other than those matter which contradict with the provisions of the “Sharia" – contains provisions which prohibit all forms of discrimination against women and promote reforms to protect female rights in the world so women can make their own decisions.

 

There are a number of recommendations in this respect, the most important of which are:

 

1.      Activation of the provisions of the Saudi Labor Law protecting the rights of working women. This requires the existence of effective and ongoing supervision of the Labor Office. All original female employment contracts must be deposited with the Legal Department of the Ministry of Labor so it may verify to what extent the provisions of such contracts conform with the Labor Law. This will ensure that the contents of such contracts do not become fail to guarantee the legal protection determined by the provisions governing the employment of women.

2.      Amending the regulations and instructions related to the engagement of women in high administrative leadership posts and grant women occupying such high offices wider decision-making powers and authority.

3.      Alteration of some of the still existing national Laws holding back opportunities for women and seek to have them conform with the provisions of the articles of association of the International and Regional Agreements.

4.      Enacting new legislation to enable women to fully realize their legal rights and pave the way for them to participate effectively in public life, such as practicing the legal profession like their peers in other countries, and engaging in business activities independently without the assistance of an attorney.

5.      Mandating an unbiased legal environment – observant of gender differences – to bridge the gaps which preclude the rights of women.

6.      Setting up courts specialized in family affairs to foster the application of laws that will protect the rights of women and limit masculine abuse and tyranny, but protecting legitimate powers reserved to men by guardianship and curatorship under the fair provisions of the Islamic Law.

7.      Establishing a supreme council for family affairs, to examine and promote those rights valuable to women such as the constitution of National Women Societies.

 

The calls made to protect the rights of women and activating their role in public life require a comprehensive review of Saudi statutes to ensure that they are in harmony with the goal to eliminate all forms of discrimination against women. Pursuit of this goal will enable Saudi society to breathe freely with the joint cooperation and solidarity of all its citizens for a more promising future.

 

One of the most important principles of the law is the rule which states, "The contract is the law of the contracting parties." This legal doctrine has become deep-rooted and well – established in the civil law of many different countries throughout the world. A contract, as between the contracting parties, is essentially the law, or to be more specific, it is a law exclusively theirs as if it were the origin of an agreement between them. Islam preaches that Muslims are bound by their condition, except a condition which legalizes what is banned religiously or disentitles what is legalized.

 

The maxim: "The contract is the law of the contracting parties” requires that the individual shall not disengage himself from an obligation deemed mandatory pursuant to a contract of which he is a party.

 

This doctrine is based upon three principles: philosophical, moral and economic. First, it stands on willpower, meaning that the individual shall not abide except by what he wanted and if he wants to commit himself, nothing can stop him from doing so.

 

Second, it stands on honoring and respecting one’s pledges and promises. The moral basis rests on the obligation that the transaction must be constant and deep-rooted, because if the contract cannot bind the contracting party, then people will avoid making contracts. Anxiety and uncertainty will follow and confidence and trust will vanish among individuals. Legal centers then become confused and chaotic. Thus, a contract must have a binding obligatory force and power making it legally invulnerable to be breached, violated, or amended by one contracting party.

           

Whereas the contract is the rule and law of the contracting parties, the law itself wants this as well, so that the contract becomes a sort of special law as to those who have made it of their own volition. So, in this situation, where international pacts and treaties have become equal and matching, the two contracting parties thus surrender and submit to what they have enacted and agreed to.

 

Similarly, a judge himself must consider and protect these agreements in the same way he cares for and protects the legal wording. In other words, if a dispute is submitted to him, the judge must apply that special law which is ordained and enacted by the two contracting parties between them, for which the common law has imposed and ordained that character and that obligation. The following considerations apply:

 

 

 

 

1.      The law may cancel any other law as the case may be, but agreements cannot contradict one another and be binding upon the parties. This is because although the contract is a special relationship between two specific persons, it may affect the interests of others, as well as the interests of the group. Yet, the legislator may interfere and impose control and supervision over contracts by enacting injunctive rules banning or canceling temporarily some conditions, or imposing others. Such monitoring and its interference upon contracts may be unavoidable, particularly when equality is lacking between the two contracting parties and where the weaker party is threatened by being crushed by the stronger and more powerful party. In such an instance, the law, through injunctions with the intention of protecting the weak partner, often interferes to restrain the parties’ willpower.

 

2.      There are some contracts that the law does not allow to be voided even with the consent of the two parties, such as marriage contracts among Christians. Judicial intervention and decree is required to break the bonds of matrimony. Other contracts can be voided unilaterally, such as the right one party is entitled to in an individual unspecified employment contract (see Article 74/3 of the Saudi Labor Law). In these instances, contract cancellation may occur according to the manner in which it was ordained and enacted.

 

3.      The interpretation of a legal text or wording may need reworking to be more flexible and adaptable, according to certain social and practical necessities. For example, the text used by the contracting parties, which they expressly abide by in letter and spirit, may be contrary to the public law imposed for that character. Thus, the law will rewrite the contract to eliminate the ambiguity so the parties remain bound thereto. Failure to resolve the problem of contract interpretation may permit the parties to cancel their agreement.

 

It is without doubt that the contract is the law and rule of the contracting parties, as long as it is made within the limits and bounds sanctioned by law so that it does not violate the public law, order, or morals.

 

If what the two contracting parties had agreed upon violates a legal doctrine which is not considered by the public law, the content of such a contract shall predominate the violating legal doctrine and rule. This occurs if the contract is in violation of societal customs and traditions, since it is up to the individuals to agree on the kind of relationship between them, contrary to the dictates and rules established by the law in this respect, which are irrelevant to the public law, or morals. Based on this, a judge cannot reject the implementation of the contract as it is, under the pretext that its content disagrees and contradicts with justice if it supercedes the will of the contracting parties.

 

Justice also should seek to uphold the contract if it is not contrary to the law. This identically corresponds to the case of justice in law; accordingly, it shall be improper that the judge refrain from applying one of the provisions of the contract, claiming that it contradicts with justice. However, this does not mean that the judge may disregard the doctrines of justice at all, but he has to uphold the agreement of the parties if he can.

 

If a disputed contract is submitted to a magistrate which contains a provision banning any amendment thereto, this is binding upon the contracting parties, because once the contract is made and they have agreed to it, the contract becomes the law which they wanted. Neither of them shall retreat from his rights and responsibilities under the contract, since they freely determined and defined their obligations thereunder. Despite this, laws nowadays often interfere with such freedom by giving the judge the power to reconsider the contractual obligation, if an unexpected circumstantial emergency occurred during the execution of the contract, as well as granting him the power to amend or even cancel wrongful conditions in contracts.

 

The judge is also vested with the power to reform some contracts injunctively, rendering them closer to the law than to a contract, such as in employment insurance contracts.