This country-specific Q&A provides an overview of Litigation laws and regulations applicable in Saudi Arabia.
What are the main methods of resolving commercial disputes?
The main method of resolving commercial disputes in Saudi Arabia is litigation. Arbitration is also becoming increasingly popular as a result of the Arbitration Regulation of 2012, which is based on the UNCITRAL model. Article 6 of the recently enacted Commercial Courts Regulation of 2020 gives two merchants who are parties to a commercial transaction the option to agree on specific procedures for dispute resolution. This opens the door, for example, for binding expert determination, which previously was not an enforceable means of dispute resolution under Saudi Arabian law.
What are the main procedural rules governing commercial litigation?
The main procedural rules governing commercial litigation are set out in the Commercial Courts Regulation of 2020. Statutory tribunals have their own procedural rules. Issues which are not addressed in the Commercial Courts Regulation or the procedural rules of a statutory tribunal are governed by the Civil Procedure Rules of the General Courts of 2013. Arbitrations 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?
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. Intellectual property disputes come under the jurisdiction of different tribunals depending on the type of intellectual property right that is being enforced.
How long does it typically take from commencing proceedings to get to trial?
Saudi Arabian legal proceedings take place in a series of short hearings spread over one to two years to reach a final judgment, but may take longer.
Are hearings held in public and are documents filed at court available to the public? Are there any exceptions?
Most procedures before the Commercial Court take place online. Physical hearings are open to the public. Under the Commercial Courts Regulation of 2020, public access to the particulars of a commercial case and the documents filed in it is possible upon payment of a fee. This is a new development, since previously all details of disputes were kept confidential. A party with an interest may apply for an order that proceedings or parts thereof are kept confidential. This new development will make without prejudice communications more important than previously.
What, if any, are the relevant limitation periods?
Claims before the Commercial Courts, in banking disputes and in insurance disputes become time barred after five years from the date on which the right of action accrued, although the claimant may get an extension if they have a valid excuse. Special time bars apply in securities disputes and shipping cases. Time periods are calculated with reference to Hejra years, which are shorter than Gregorian calendar years. In principle, all time bars under Saudi Arabian law are procedural and not substantive.
What, if any, are the pre-action conduct requirements in your jurisdiction and what, if any, are the consequences of non-compliance?
In most commercial cases, the claimant must give at least 15 days’ notice before action, details of which must be supplied with the statement of claim. A party who has failed to give the notice before action cannot file the statement of claim. There are no pre-action requirements for proceedings before the statutory tribunals.
How are commercial proceedings commenced? Is service necessary and, if so, is this done by the court (or its agent) or by the parties?
Proceedings before the Commercial Courts are commenced by filing a statement of claim electronically. The statement of claim must set out particulars of the parties and their representatives, their capacities, an exhaustive statement of the applications, and a statement of all documents relied on in the action.
How does the court determine whether it has jurisdiction over a claim?
Article 16 of the Commercial Courts Regulation sets out details of the disputes under the Commercial Courts’ jurisdiction. Likewise, the regulations governing the Committee for Banking Disputes, the Committee for the Resolution of Securities Disputes, and the Committee for the Settlement of Insurance Disputes and Violations set out each tribunal’s jurisdiction. When two courts or tribunals have declined jurisdiction in a case, the claimant can apply to the Committee for the Determination of Jurisdictional Disputes at the Supreme Council of the Judiciary, who will determine which court or tribunal must hear the case, and whose decisions cannot be appealed. Agreements to submit disputes to the courts of another jurisdiction, or to arbitration, are given effect by Saudi Arabian courts but a challenge to jurisdiction must be made before filing a defence or other motions, failing which the defendant is deemed to have submitted to the court.
How does the court determine what law will apply to the claims?
Saudi Arabian courts apply only Saudi Arabian law, namely Islamic Law as interpreted in Saudi Arabia, and Saudi Arabian legislation. Although it is permissible for private sector parties to agree to have contracts governed by a law other than Saudi Arabian law, whenever a Saudi Arabian court or 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 Saudi Arabia. On the other hand, arbitrations in Saudi Arabia may be conducted under a law other than Saudi Arabian law, if chosen by the parties.
In what circumstances, if any, can claims be disposed of without a full trial?
The concept of summary judgment does not exist under Saudi Arabian law. Claimants can apply for certain applications to be dealt with on an expedited basis, but these must be combined with full proceedings.
What, if any, are the main types of interim remedies available?
Expedited applications can be made in connection with a survey for proof of status; prohibition of travel; stay of new works; judicial custodianship; preservatory attachment; obtaining a product sample; preservation of specific documents; prohibition on disposal or permitting the same; and applications having the status of urgency in commercial regulations.
After a claim has been commenced, what written documents must (or can) the parties submit and what is the usual timetable?
The parties must submit copies of the documents on which they wish to rely in the proceedings. There is no automatic disclosure of documents, and each party must proceed on the basis of the documents in its possession, unless an application for specific disclosure succeeds.
What, if any, are the rules for disclosure of documents? Are there any exceptions (e.g. on grounds of privilege, confidentiality or public interest)?
A party may request the other party to disclose documents that are connected with the claim. Such documents must be must be particularised by specific identity or by type; they must have a connection with the commercial transaction, or result in a fact therein being brought to light; and they must not be of a confidential character. A plea of confidentiality must be supported by reasons why the documents are confidential. Failure to disclose documents as ordered by the court may be treated as circumstantial evidence by the court.
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?
Under Saudi Arabian law, the evidence of the parties or their employees or agents has little probative force. Witnesses must be independent and have no interest in the outcome of the case. This limits the extent to which witness evidence is used in commercial proceedings in Saudi Arabian proceedings. When witness evidence is introduced, the court must have regard to their probity, behaviour and conduct, and the witness must disclose their relationship with the parties. Witnesses may be cross-examined.
An important feature of Saudi Arabian legal proceedings is the taking of an oath. If the claimant has failed to prove his case either through witnesses or documentary evidence, he may challenge the defendant to deny his liability on oath, which may also be ordered by the judge. Likewise, the defendant may in circumstances require the claimant to take the oath. If the party so challenged accepts and denies or affirms the claim on oath, the case is closed without further means of appeal. In the case of a body corporate, the denial of the claim on oath falls to the company’s chairman or chief executive. It is a prerequisite for the taking of an oath that the evidence is not conclusive. When the judge has formed the view that the facts of the case are proven, he must reject the application for a party to take the oath.
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?
The evidence of court-appointed experts is an important feature of Saudi Arabian legal proceedings. In most cases involving technical or financial issues, or trade custom, the court will appoint an expert. Under the Commercial Courts Regulation of 2020, a party may also apply to admit evidence of an expert of its choice, which application must be based on reasons. More commonly, an expert is appointed by the court either on the application of one or both parties, or on its own determination that the assistance of an expert is needed.
Usually, the court asks both parties to each nominate three candidates, and if one name is on both parties’ lists, that expert is chosen. If there is no agreement on an expert, the court will choose the expert from lists kept by the court. The expert’s findings may be questioned by the parties or by the court, and it is not uncommon for the process to go through several stages, with revisions to the expert’s draft report. The court is free to disregard all or part of the expert’s findings, but this is unusual.
Can final and interim decisions be appealed? If so, to which court(s) and within what timescale?
All first-instance judgments and interim decisions of Saudi Arabian courts and tribunals, other than small claim with a value below US$ 13,350, can be appealed. The appellate courts and tribunals are listed in 3, above. The rules of all courts and tribunals require the application for an appeal from a judgment to be filed within 30 days from receipt of the written judgment. Appeals against expedited judgments or orders must be filed within 10 days from receipt of the judgment or order. Appeals are very common, and in most cases the appellate tribunal reviews the appeal application, the judgment and case file without further argument from the parties, and issues a decision making the judgment final and enforceable. Where the appellate tribunal considers that the application has merit, it may refer the case back to the court or tribunal of first instance, with a request to adduce additional evidence or reconsider the facts in light of directions given by the appellate tribunal. In such situations, the court or tribunal of first instance usually invites further argument from the parties and issues a new judgment. We have been involved in several proceedings where the process was repeated three times before a final and enforceable judgment was issued. The appellate tribunal can also take over the handling of the case and make its own ruling. A final and enforceable judgment of the Court of Appeal can be appealed to the Supreme Court, on the basis of errors of law, mischaracterisation or mis-description of facts, lack of jurisdiction and res judicata. An appeal to the Supreme Court does not result in a stay of enforcement. Lastly, it is possible to object to a final and enforceable judgment by way of review on the basis of narrow grounds such as fraud or forgery, lack of representation, and the like.
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 and conventions 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. Since 1992, the Saudi Arabian courts have ruled that the only judgments which are enforceable in Saudi Arabia on the basis of reciprocity are judgments of countries who (a) are party to a treaty or convention for the reciprocal enforcement of judgments to which Saudi Arabia is also a party, or (b) whose authorities would give executive force to judgments of the courts of Saudi Arabia without the requirement of instituting an action on the judgment. Specific cases dismissed applications to enforce judgments issued in the United Kingdom and the USA, most recently in 2018.
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?
There are at present no court costs in Saudi Arabia, although it has recently been suggested that the issue is under consideration. Courts and tribunals can award costs to a successful litigant, in their discretion. Factors which may be taken into consideration include the amount of the award and whether the defendant has delayed the proceedings unnecessarily.
What, if any, are the collective redress (e.g. class action) mechanisms?
Class action were first introduced in 2017 before the Committee for the Resolution of Securities Disputes. The Commercial Courts Regulation of 2020 has introduced class actions in commercial disputes. A class action before the Commercial Court requires not less than ten claimants with the same claim and cause, and against the same defendant. The claimants must be represented by the same advocate and the claims must be consolidated into a single statement of claim. It is possible to consolidate claims with an ongoing class action. Before a class action proceeds to trial, a settlement offer must be made to, and considered by, the claimants.
What, if any, are the mechanisms for joining third parties to ongoing proceedings and/or consolidating two sets of proceedings?
Other than in class actions, there are no mechanisms to join parties to ongoing proceedings or to consolidate two sets of proceedings.
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 prohibiting third party funding of litigation. There is no requirement to disclose who funds litigation. Third party funders cannot be made liable for the costs incurred by a party.
What, in your opinion, is the main advantage and the main disadvantage of litigating international commercial disputes?
At present, the absence of court fees is a major advantage of litigating international commercial disputes in Saudi Arabia. Until recently, courts rarely awarded costs to a successful litigant, which could be an advantage to claimants who were unsure of success. However, this is changing, and one of our clients was recently awarded US$ 1.35 million legal costs. From a claimant’s perspective, a major disadvantage of litigating in Saudi Arabia is that the courts have ruled consistently over the years that one cannot recover damages for loss of anticipated profit, loss of business opportunity or loss of reputation. In essence, only damages for direct and actual losses are recoverable under Saudi Arabian law. This is a disincentive to claimants, but an advantage for defendants.
What, in your opinion, is the most likely growth area for disputes for the next five years?
Without doubt, insolvencies are the main growth area in dispute resolution in Saudi Arabia. The Bankruptcies Regulation of 2018 has introduced sophisticated legislation into an area that previously was largely unregulated. Since the beginning on 2019, many proceedings for protective settlement, financial reorganisation and liquidation have been made, several involving multi-billion-dollar insolvencies.
What, in your opinion, will be the impact of technology on commercial litigation in the next five years?
For the past five years, court proceedings (and government services generally) have gradually been moved to digital platforms. This ongoing evolutionary process was turbo-charged as a result of the COVID-19 crisis in 2020, when all initial court proceedings and interim applications were moved online in a matter of weeks. When court services resumed after the end of the initial lockdown, most hearings were moved to digital platforms. Although there are teething problems, the process works by-and-large. We anticipate that in the coming years few procedures will require physical attendance.
How have the courts in your jurisdiction dealt with the COVID-19 pandemic and have you seen particular types of disputes arise as a result of the pandemic?
As explained in 3, above, the COVID-19 crisis has speeded up the already ongoing transition to digital litigation services. Therefore, the courts and authorities did not have to start from scratch, and the move to digital hearings has worked well, so far. We have seen problems arise in the transport sector.
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