This country-specific Q&A provides an overview of Litigation in Saudi Arabia.
It will cover methods of resolving disputes, details of the process and the proceedings, the court and their jurisdiction, costs and appeals and opinions on future developments.
This Q&A is part of the global guide to Litigation. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/litigation-dispute-resolution/
What are the main methods of resolving commercial disputes?
The main method of resolving commercial disputes in Saudi Arabia is litigation before the Commercial Court, which became operational in October 2017 as successor to the Commercial Circuits of the Board of Grievances. The judges and judges and support staff of the Commercial Circuits of the Board of Grievances were transferred to the Commercial Court, thus ensuring continuity in the decision-making, but there now are considerably more commercial circuits and judges than before.
Certain types of commercial disputes must be submitted to specialized statutory tribunals, as follows:
- Disputes between banks and their customers are adjudicated by the Committee for Banking Disputes.
- The Committee for the Resolution of Securities Disputes has jurisdiction in disputes arising in connection with the Capital Market Regulation and related legislation.
- The Committee for the Determination of Financing Violations and Disputes has jurisdiction in disputes concerning real estate financings and other form of financing regulated under the Regulation for the Supervision of Finance Companies.
- The Committee for the Adjudication of Insurance Disputes and Violations has jurisdiction in disputes arising under contracts of insurance and claims to which insurers are subrogated.
- Complaints in respect of copyright infringements come under the jurisdiction of the Committee for the Adjudication of Copyright Disputes and Infringements of the Ministry of Culture and Information.
- Patent cases come under the jurisdiction of the Patents Committee of King Abdulaziz City for Science and Technology.
Until 2012, there was an automatic right to appeal from arbitration awards to the Board of Grievances, which made arbitration an unattractive option to resolve disputes. The enactment of the Arbitration Regulation of 2012, which is based on the UNCITRAL model, coupled with the establishment of the Saudi Center for Commercial Arbitration, is expected to make arbitration more popular in Saudi Arabia.
What are the main procedural rules governing commercial litigation?
The procedures of the Commercial Court are governed by the Civil Procedure Rules of the Shari’a Courts of 2013. Each of the specialized statutory tribunals has its own procedural rules, and where an issue is not covered by these rules the Civil Procedure Rules of the Shari’a Courts apply. Arbitration procedures are governed by the Arbitration Regulation of 2012.
What is the structure and organisation of local courts dealing with commercial claims? What is the final court of appeal?
The Commercial Court is divided into circuits. Appeals from first instance tribunals of the Commercial Court go to the Court of Appeal. The Supreme Court is the final court of appeal, but its involvement in commercial disputes is limited.
The specialized tribunals each have their own appeals tribunals.
How long does it typically take from commencing proceedings to get to trial?
Proceedings before all Saudi Arabian courts and judicial tribunals, including the Commercial Court, are broadly similar to proceedings in Civil Law jurisdictions. Litigation takes place in a series of short hearings, which last between 15 minutes to 1 ½ hours. There are no pre-trial procedures as such, and there is no discovery of documents. Once the action is formally instituted, the parties are summoned to a hearing, usually within a few weeks of the filing of the complaint.
Are hearings held in public and are documents filed at court available to the public? Are there any exceptions?
Hearings before the Commercial Court are held in open court, but proceed mainly on documents. Documents filed in court are not available to the public. When judgments are published, the parties’ names are not reported. Proceedings before specialized tribunals are in camera.
What, if any, are the relevant limitation periods?
Time bars are recognised under Saudi Arabian statute law, but only as procedural devices, and not as substantive time bars. Moreover, these time bars are specific rather than general. Examples include the following:
- Banking disputes cannot be instituted after five years “from the date of entitlement to the amount the subject matter of the claim or from the date of knowledge of the event the subject matter of the dispute”, unless the claimant has an excuse, which may be accepted in the discretion of the Banking Disputes Committee.
- Actions on insurance claims may not be heard after the expiration of five years “from the date of entitlement to the amounts the subject matter of the claim”, unless there is an excuse acceptable to the Committees.
- Claims arising in connection with contracts for the carriage of goods by sea become time barred after 365 days from arrival of the goods or deemed arrival if they are lost.
- Land transport claims are time barred after three months if the loss or damage occurred in Saudi Arabia, or after one year if the loss or damage occurred outside of Saudi Arabia.
- Actions on bills of exchange or promissory notes against the issuer must be commenced within three (Hejra) years of the date of maturity.
What, if any, are the pre-action conduct requirements in your jurisdiction and what, if any, are the consequences of non-compliance?
There are no pre-action requirements under Saudi Arabian procedural law.
How are commercial proceedings commenced? Is service necessary and, if so, is this done by the court (or its agent) or by the parties?
Actions are commenced by filling a claim with the Commercial Court or the appropriate specialized tribunal. The Commercial Court and most of the tribunals require claims to be filed online.
The normal method of service is through the court, but the claimant’s attorney may apply to carry out service in order to speed up the process. Service by electronic means and registered mail has been approved and may be implemented in the near future.
How does the court determine whether it has jurisdiction over a claim?
Geographic jurisdiction is determined by the defendant’s place of residence. In most instances, jurisdiction by subject matter is self-evident, such as in banking disputes. If a claim has been rejected by two tribunals for lack of jurisdiction, a special tribunal of the Ministry of Justice determines which tribunal must hear the case.
Challenges to a court’s or tribunal’s jurisdiction on the basis of an agreement to submit disputes to the courts of another jurisdiction or to arbitration must be lodged before filing defences or other motions. Once a defence or motion is filed, the defendant is deemed to have accepted the tribunal’s jurisdiction.
How does the court determine what law will apply to the claims?
The concept of private international law, or conflict of laws, has only limited application before Saudi Arabian courts. Whenever a Saudi Arabian court or judicial tribunal is properly seized of a dispute, the case will be decided only in accordance with Saudi Arabian law, even if a contract is expressed to be governed by the laws of a country other than the Kingdom of Saudi Arabia. On the other hand, the Saudi Arabian courts give effect to agreements to submit disputes to the courts of, or arbitration in, another jurisdiction.
In what circumstances, if any, can claims be disposed of without a full trial?
There is no summary procedure under Saudi Arabian law.
What, if any, are the main types of interim remedies available?
A claimant can apply for the pre-judgment attachment of movable assets belonging to a defendant who does not have sufficient assets in the jurisdiction to satisfy a judgment. This procedure is ordinarily invoked to arrest ships or aircraft. Other forms of interim remedies, for example for the possession of real estate, are available.
After a claim has been commenced, what written documents must (or can) the parties submit and what is the usual timetable?
The claimant must support documentary evidence to support his claim, and the defendant may submit documentary evidence to rebut the claim. Electronic evidence is recognized. New evidence may be introduced at any stage of the proceedings.
What, if any, are the rules for disclosure of documents? Are there any exceptions (e.g. on grounds of privilege, confidentiality or public interest)?
There is no disclosure of documents in Saudi Arabian proceedings. Judges have the discretion to order the production of government records or documents in the possession of third parties.
How is witness evidence dealt with in commercial litigation (and, in particular, do witnesses give oral and/or written evidence and what, if any, are the rules on cross-examination)? Are depositions permitted?
Oral evidence is rare in Saudi Arabian commercial cases, due to the Islamic Law rule that the statements of a party to the proceedings have no evidential value. This rule extends to the servants or agents of a party to legal proceedings, so that only independent parties qualify as witnesses.
One important, and unusual, feature of Saudi Arabian law of evidence concerns the taking on an oath. If the claimant has failed to prove his case conclusively either through witnesses or documentary evidence, he may challenge the defendant to deny his liability on oath. If the defendant accepts the challenge and denies the claim on oath, the case is closed with very limited means of appeal. However, because of the extreme religious significance attached to demanding and taking an oath, the right to challenge a defendant on this basis is not frequently invoked.
Is expert evidence permitted and how is it dealt with? Is the expert appointed by the court or the parties and what duties do they owe?
Where technical or complex financial issues are raised, it is common for judges to appoint an expert or experts as advisors to the tribunal. It is within the tribunal's discretion whom it appoints as an expert, and to accept or disregard all or part of the expert's findings, but, ordinarily, the determination of technical or complex financial issues falls to the expert. The normal procedure is for the court to ask the parties to each put forward three experts, and if one appears on both parties’ lists, that expert is chosen. If the parties cannot agree on the choice of expert, the court will select the expert from a list of approved experts.
Can final and interim decisions be appealed? If so, to which court(s) and within what timescale?
When courts or tribunals render a judgment or make an order, the parties are asked whether they agree with the decision. The party who objects may file an application for review with the competent appeal tribunal within 30 days from receipt of the written judgment. At this stage, the appeals tribunal reviews the case file and judgment without the parties’ presence. If the appeals tribunal considers the objection unjustified, the judgment is stamped final and enforceable and returned to the court at first instance.
If the appeals tribunal considers the objection justified, it issues specific directions, for example that the first instance tribunal must ascertain additional facts, or that it must reconsider the facts in light of a ruling on procedure or evidence made by the appeal tribunal. It is not unusual for additional hearings to take place, at which the parties are asked to make further submissions. Once the tribunal at first instance is satisfied that it has carried out the appeal tribunal’s directions, it issues a new judgment. It is then open for the losing party to raise further objections.
If the appeal tribunal forms the opinion that the tribunal at first instance is not able or willing to carry out its directions, it can issue its own judgment. There is no specific rule when this point is reached, although most commonly this is after the second judgment is issued. Once the appeal tribunal decides to take over the case, it must invite argument from both parties before issuing its judgment. Decisions of the appeal tribunal are final.
What are the rules governing enforcement of foreign judgments?
The enforcement of foreign judgments in Saudi Arabia is governed by the Enforcement Regulation of 2012, Article 11 of which makes enforcement of foreign judgments conditional on reciprocity. The only international treaties on the reciprocal enforcement of judgments to which Saudi Arabia is a party are the Arab League Treaty on the Enforcement of Judgments of 1983, and the Arab Gulf Cooperation Council Convention on the Enforcement of Judgments of 1995.
Applications for the enforcement of foreign judgments must be lodged with an enforcement judge, and must satisfy the following requirements:
- The judgment must be final and unappealable;
- There must not have been any action pending before a Saudi Arabian court in respect of the same issues;
- The defendant was summoned to attend, was properly represented and was put in a position to defend himself; and
- The judgment does not conflict with Islamic Law.
Can the costs of litigation (e.g. court costs, as well as the parties’ costs of instructing lawyers, experts and other professionals) be recovered from the other side?
Saudi Arabian judges have a discretion to award costs to a successful litigant. In the past this discretion was not exercised frequently, and if costs were awarded, the sums tended to be well below what commercial lawyers charge in Saudi Arabia. However, we have seen increasing willingness on the part of Saudi Arabian judges to award costs, sometimes for substantial sums.
What, if any, are the collective redress (e.g. class action) mechanisms?
Until recently, class actions were not recognized in Saudi Arabia. A change was recently introduced by the Committee for the Resolution of Securities Disputes, which now permits class actions before it.
What, if any, are the mechanisms for joining third parties to ongoing proceedings and/or consolidating two sets of proceedings?
It is possible to implead defendants, or for parties with an interest to ask to be joined to the proceedings, but both procedures are rare in practice. As a general rule, commercial cases tend to be between one claimant and one defendant. Consolidation of proceedings is generally not possible.
Are third parties allowed to fund litigation? If so, are there any restrictions on this and can third party funders be made liable for the costs incurred by the other side?
There are no rules against third party funding.
What, in your opinion, is the main advantage and the main disadvantage of litigating international commercial disputes?
A major disadvantage for claimants is that the judges of the Commercial Court do not award damages for loss of anticipated profit or business interruption, although this may be an advantage for defendants. On the plus side is the judges’ impartiality, with no preference for local parties over non-Saudis.
What, in your opinion, is the most likely growth area for disputes for the next five years?
We anticipate that new bankruptcy legislation, coupled with a current downturn in business, may result in increased bankruptcy proceedings over the next five years. Also, the emergence of a market in real estate mortgages is likely to result in increased real estate litigation over time.
What, in your opinion, will be the impact of technology on commercial litigation in the next five years?
Saudi Arabian courts and tribunals have enthusiastically adopted information technology. Most now require claims to be filed online, and some tribunals require submissions to be provided in electronic format. As a next step, service by electronic means will be implemented. This trend is likely to increase.