Navigating the Committee for Resolution of Securities Disputes (CRSD) in Saudi
Emad SalamehPartner, Head of Office – Riyadh
Mohammed NegmSenior Counsel,Dispute Resolution
Farhan Al-MarriTrainee Lawyer,Dispute Resolution
In 2022, the Saudi Stock Market attracted the attention of both domestic and international investors through a series of ground-breaking IPOs. In line with Vision 2030, Saudi Arabia will position its stock market among the top exchanges globally, alongside the New York Stock Exchange and Shanghai Stock Exchange. The landmark public offering of Saudi Aramco in 2020 on Tadawul demonstrated the financial strength and ambition of the Saudi Main Market.
To safeguard the stock market from unethical practices, misconduct, and mismanagement, Saudi Arabia has established the Committee for Resolution of Securities Disputes (CRSD) and its appellate Committee.
To safeguard the market participants from unethical practice, misconduct, and mismanagement, Saudi Arabia has established the Committee for Resolution of Securities Disputes (“CRSD”) and its appellate Committee. The complexity and volume of disputes has driven this innovation in disputes resolution for the market. The committees are tasked with hearing and resolving these disputes in a fair and impartial manner. A unified General Secretariat referred to as the General Secretariat of Committees for Resolution of Securities Disputes will be the administrative body for both committees.Given the crucial role these committees will play in resolving market disputes, this article provides an overview of their operation, the extent of their jurisdiction, and the process of filing a case with the CRSD.
The CRSD consists of two main committees, the Preliminary Committee, and the Appeal Committee, each of which governs a particular stage of dispute resolution.
The Preliminary Committee was introduced under Article 30 of the Capital Market Law issued in 2003 through royal decree No. M/30 dated 1424/6/2 corresponding to 31/07/2003 (the “Law”) which provides that:
the Preliminary Committee might be formed
in more than one circuit,
each circuit will consist of three members,
one of whom is the chair, and
all the members shall be appointed through a Royal Order (which is the highest statutory instrument and is used to appoint judges).
The Appeal Committee was also introduced through Article 30 of the Law, where the Appeal Committee also might be formed in more than one circuit, consisting of three members, one of which is the chair, and all members are also appointed through a Royal Order. What distinguishes the CRSD from other judicial bodies is the scope for quicker expert dispute determination as the members of both committees will have relevant commercial legal backgrounds, such as law firms, and academic experience.
Both committees’ powers focus on protecting participants in the Saudi Stock markets, as both committees have clear and explicit jurisdiction to investigate violations of the Law and the regulations issued by the Capital Market Authority (the “CMA”) and other relevant laws and regulations.
Furthermore, the CRSD has jurisdiction to govern, hear, and resolve all cases raised from the Stock Market, where they protect individuals and financial institutions from any misconduct that might be committed.
The CMA issued the Resolution of Securities Disputes Proceedings Regulation; this regulation is the main guideline for any representation before the CRSD. The common procedure before both committees are written submissions rather than oral pleading. However, in some cases, the relevant committee might direct an oral trial and notify both litigants to appear and present their judicial memoranda and plead before them.
Before filing any lawsuits before the committees, a complaint must be filed with the CMA. The CMA will verify the validity of the complaint, contact the defendant to clarify the dispute, and sometimes tries to solve the issue amicably. If the CMA achieves a resolution or a period of 90 days has elapsed, only then can a claimant proceed with their claim and submit it to the CRSD.
One of the critical factors that are presented in any judicial memoranda is evidence, where the Sharia Principle "burden of proof is on the one who claimed, and the oath on the one who denied" applies before both committees. Both committees enjoy the freedom of evidence, reflected in Article 26 of the Resolution of Securities Disputes Proceedings Regulation which provides: “Evidence before the Committee may be admissible in all forms including electronic or computer data, telephone recordings, fax messages, and electronic mail.”
In light of the above, both committees recognize all forms of evidence, and both committees, with their sole discretion, can either consider the presented evidence or not.
The Law sets a limitation for civil claims. Such claims include those related to false statements in a prospectus regarding significant matters or the omission of important information and intentional manipulation of security prices. Such claims will not be considered unless a complaint is filed with the CMA within one year of the claimant becoming aware of the violation. Additionally, the Committee cannot hear such a claim after five years have passed from the date of the violation unless the defendant accepts responsibility, or the plaintiff provides acceptable justification to the Committee. The CMA and CRSD effectively protect the Saudi stock markets from violations and misconduct. All litigants before the CRSD have an equal opportunity to prove their claims and defend their positions.
For further information, please contact Emad Salameh, Mohammed Negm or Farhan Al-Marri.
Published in March 2023.