Dispute Resolution
The legal system of the Kingdom of Saudi Arabia (“KSA”) is based on the uncodified principals of Islamic law (“Shari’ah”), derived mainly from the Holy Quran and the Sunnah (the witness sayings and actions of Prophet Muhammad PBUH), as well as the consensus of opinion of Muslim scholars (“Ijma”) on the principals involved on a specific matter.
The laws in KSA also include codified legislation, issued by way of royal orders, high orders, royal decrees, Council of Ministers resolutions, ministerial resolutions and circulars, all of which are subject to, and may not conflict with Shari’ah and KSA courts interpret legislation accordingly.
Shari’ah principles are often expressed in general terms, providing KSA courts with considerable discretion as to how to apply such principles. Moreover, there are different schools of Islamic jurisprudence and they construe certain of the precepts differently. The Hanbali school of Islamic jurisprudence is generally followed by the judges in KSA and within the Hanbali school there are majority and minority views on various issues, either of which may be applied in any particular case. In addition, we are aware of certain instances in which principles of other schools of Islamic jurisprudence have been applied by KSA courts where such application has been deemed by such adjudicatory bodies to be appropriate in the interests of fairness and justice with respect to the particular matter in question.
As a result, a KSA court has considerable discretion to apply the basic precepts to a particular set of circumstances. KSA courts generally regard themselves as competent, consistent with general Shari’ah principles, to determine each particular case before them as they consider is necessary to achieve an equitable result in all the circumstances of that case.
Historically, this broad judicial discretion has on occasion led to inconsistent and contradictory judgements being issued by KSA courts, particularly on issues where no applicable written legislation was available. Furthermore, even in instances where written legislation addressed the issue at hand, many judges did not treat the legislation as binding, choosing instead to utilise their broad discretion in interpreting Shari’ah principles. In an effort to manage this unpredictability, the Ministry of Justice has mandated that the judiciary shall not exercise its discretionary powers when the legislator has enacted applicable legislation.
KSA’s New Civil Transactions Law (the “CTL”) issued by Royal Decree on 18 June 2023 has come into effect as of 16 December 2023 and is considered a major milestone in the reform of the Saudi legal framework, as it codifies the previously uncodified law governing contract and tort in KSA and it is expected that the law will lead to greater transparency and increased predictability when it comes to judicial rulings.
The CTL is the third of four key judicial reform legislations in KSA announced in 2021, which include the Civil Status Law, the Law of Evidence, and the proposed Penal Code for Discretionary Sentences.
Litigation remains the main dispute resolution method for large commercial disputes in KSA. However, there is an increasing trend for parties to agree to resolve their disputes through arbitration or other alternative methods including mediation and conciliation.
Most types of commercial disputes come under the jurisdiction of the Commercial Courts, whose decisions can be appealed to the Court of Appeal, with further, limited rights of appeal to the Supreme Court. Banking disputes are adjudicated by the Committee for Banking Disputes, whose decisions can be appealed to the Appeal Committee for Banking Disputes and Violations. Securities disputes come under the jurisdiction of the Committee for the Resolution of Securities Disputes, whose decisions can be appealed to the Appeal Committee for the Resolution of Securities Disputes. Disputes involving contracts of insurance are heard by the Committee for the Settlement of Insurance Disputes and Violations, whose decisions can be appealed to the Appeal Committee for the Settlement of Insurance Disputes and Violations.
Almost all procedures before the KSA courts, including the commercial courts, now take place electronically through the Ministry of Justice’s electronic platform Najiz. This includes the exchange of memoranda between parties, submission of documents and reports, electronic pleading sessions, either through written pleading or pleading via video communication, as well as sentencing and receipt of judgments.
Increasingly, parties doing business in KSA are agreeing to arbitration as their method of choice for resolving any disputes. This is largely a result of the enactment of KSA’s new Arbitration Law in 2012, based on the 1985 UNCITRAL Model Law on International Commercial Arbitration (as amended in 2006), which significantly reformed the arbitration framework in KSA, bringing it in line with the best practices of international commercial arbitration.
Under the Arbitration Law, arbitration agreements must be in writing, otherwise they will be null and void. The arbitration agreement is considered written if it is included in a document issued and signed by the parties of the arbitration. Additionally, the referral in a contract to arbitration as the method of choice for resolving disputes is considered an arbitration agreement under the law. KSA courts are required to decline to hear a dispute if a defendant raises (as its first defense) arbitration as the contractually agreed to dispute resolution mechanism.
The Saudi Centre for Commercial Arbitration (SCCA) was established in 2014 and is the first institutional arbitration center in KSA. The SCCA administers arbitration and mediation procedures in civil and commercial disputes in both Arabic and English under either the SCCA Arbitration Rules or any other rules, which the parties agree to. The SCC Arbitration Rules are based on the UNCITRAL Arbitration Rules and are therefore familiar to international arbitration practitioners.
Foreign judgements and awards can be enforced in KSA and there are specific criteria that must be met when considering enforcement, reciprocity being the main criteria.
Reciprocity is typically established either by (a) both jurisdictions being party to a bilateral or multilateral agreement for the reciprocal enforcement of judgments or, (b) in the absence of such agreement, there is evidence that the foreign jurisdiction would recognize and enforce a Saudi judgment in the same manner as a domestic judgment.
Examples of relevant enforcement treaties with KSA include:
The Riyadh Arab Agreement for Judicial Cooperation (1983)
The Gulf Cooperation Council Convention for the Enforcement of Judgements, Delegations, and Judicial Notifications (1996)
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the New York Convention”).
Foreign judgements or awards must also meet the following conditions to be enforceable in KSA:
The judgment must be issued by a court with jurisdiction in accordance with the laws of international judicial jurisdiction stated in their laws. In addition, the subject matter of the judgment must not fall under the exclusive jurisdiction of the KSA courts.
The parties to the dispute must have been notified, duly represented in the proceedings, and allowed to defend themselves. If the judgment was handed down in absentia, proof that the respondent was notified of the proceedings is required.
The judgment must be final in accordance with the law of the jurisdiction in which the judgment is issued.
The judgment must not contradict another judgment or court order issued on the same subject in the KSA.
The judgment must not contradict Shari’ah or the public policy of the KSA.
The basic structure of the Saudi court system is as follows:
Ordinary Judiciary
Administrative Judiciary
Judicial Committees and Quasi-Judicial Committees
The Ordinary Judiciary consists of the following courts:
Courts of First InstanceCourts of First Instance deal with a variety of claims and are divided into five types, as follows:
General Courts are entrusted with all claims and final evidence that fall out of the jurisdiction of other courts, the Notary Public, or the Board of Grievances (Administrative Court).
Criminal Courts deal with all criminal cases, and all matters upon which the judgement on a criminal case before the same court depends.
Personal Status Courts deal with all family and personal status claims.
Commercial Courts deal with all principal and sequential commercial disputes.
Labour Courts will deal with labour disputes of all types and forms. (The Labour Courts have not started operating yet; at the time of writing, the Labor Committee is responsible for labour claims.)
Appeal CourtsIn each region of Saudi Arabia, there is one or more Appeal Court. The Appeal Courts review judgments and decisions issued by the Courts of First Instance appealed in their respective jurisdictions.
High CourtThere is only one High Court in Saudi Arabia. The High Court oversees the proper application of the provisions of Shari’ah, and the laws issued by the competent authorities that are not inconsistent with Shari’ah, in cases within the jurisdiction of the Ordinary Judiciary.
The Board of Grievances (Administrative Court) is an independent government body reporting directly to the King. It has jurisdiction in relation to disputes in which a governmental organisation is a party. As is the case with the Ordinary Judiciary, the Board of Grievances has three levels: First Instance Administrative Courts, Appellate Administrative Courts, and the High Administrative Court.
Quasi-Judicial Committees are specialised committees that have jurisdiction over particular types of disputes. Examples include the Banking Disputes Committee (which operates under the auspices of SAMA), the Committee for Resolution of Securities Disputes (which operates under the auspices of the CMA) and the Customs Committee for customs disputes (which operates under the auspices of the Ministry of Finance). Decisions of Judicial Committees are subject to challenge before upper appellate committee, however the decisions of Quasi-Judicial Committees is subject to challenge before the Board of Grievances.
