The Saudi Arabia judicial system has a long history and continues to see changes and adaptations to address the demands of the country and its citizens. One of the most recent judicial developments is the enactment of the Commercial Courts Law (CCL) by the government of the Kingdom of Saudi Arabia which came into full force and effect on June 8, 2020. The CCL is an effort to streamline and modernize Saudi Arabia’s court system and includes a number of measures that clarify the jurisdiction of Commercial Courts and provide additional efficiency and flexibility making Saudi Arabia a more attractive business market.
Read on to learn more about the CCL, its key features, and implications for foreign investors.
Jurisdiction of the Commercial Courts
The CCL defines and expands the jurisdiction of the Commercial Courts. Previously Commercial Courts existed in major urban centers in Saudi Arabia. The new law requires all general courts to develop judicial circuits to handle commercial disputes including assignment of specific judges with experience in commercial disputes. This mandate ensures that the Commercial Courts will have jurisdiction in every area of Saudi Arabia allowing for consistency in handling commercial matters across the country.
The Commercial Courts handle all disputes related to commercial matters, including the following:
• Disputes between merchants relating to the commercial business or a commercial contract;
• Lawsuits brought under a commercial contract against a trader where the value of the claims exceeds one hundred thousand riyals;
• Disputes between the partners of a Mudarabah (profit-sharing) agreement;
• Claims and violations of
o The Companies Law;
o The Bankruptcy Law;
o Intellectual property laws; and
o Other commercial laws
• Lawsuits and other requests related to appointment of a judicial receiver, trustee, liquidator, or expert; and
• Claims for damages arising from a lawsuit previously heard by the Commercial Courts.
For international disputes, the general rules of international jurisdiction under the CCL should apply. Generally, the Commercial Courts of Saudi Arabia will have jurisdiction in an international dispute if:
• The defendant in the matter is a Saudi Arabian citizen or company; or
• The dispute involves assets located in Saudi Arabia or a contractual obligation with fulfillment in Saudi Arabia
There are exceptions to this international jurisdiction, including if the parties contracted for disputes to be resolved through arbitration or in the courts of another jurisdiction. The ability to contractually agree to a jurisdiction outside of Saudi Arabia also allows parties to avoid the application of Saudi rules or other more stringent Saudi Arabian laws. However, there is no confirmed view whether two Saudi parties can agree to refer their dispute to a non-Saudi jurisdiction.
If there is a challenge to the jurisdiction of the Commercial Courts, it must be made at the first hearing and it should decide by the court within 20 days of the challenge. This change discourages frivolous jurisdiction challenges and reduces the ability of parties to delay proceedings indefinitely by challenging jurisdiction.
Expanded Private Sector Involvement
The CCL specifically authorized the Commercial Courts to use the services of private sector businesses to assist with the following court functions:
• Alternative dispute resolution (ADR), including mediation;
• Notification and service of claims and judgments;
• Registration of case filings;
• Management of court rooms and other court departments;
• Facilitating exchange of documents; and
• Providing expert opinions for the dispute
Private sector companies are more efficient at these administrative tasks. This change will result in increased efficiency for the Commercial Courts, expediting the administration of claims handled by the courts. Allowing outside expert opinions will also ensure quality expert advice is presented to the courts for complicated claims.
Alternative Dispute Resolution
In addition to allowing private sector involvement for ADR, the CCL places increased emphasis on using alternate methods for resolving any disputes. In addition to encouraging ADR, the law will make ADR mandatory in certain types of cases. The category of cases that will be subject to mandatory ADR have yet to be defined. The goal of increased ADR efforts is to avoid lengthy and expensive litigation for every commercial matter.
Notice, Filing, and Statute of Limitations
The CCL introduces a number of changes meant to streamline claims and ensure only claims with merit are brought before the court.
• Serving Notice: Additional addresses are authorized for service of notice, including electronic addresses used by the parties in court submissions and residential addresses unless another address is chosen. For foreigners, service can be made at any address used by the person in Saudi Arabia. Parties can also authorize their lawyers to accept service on their behalf.
• Filing: For certain cases, the claimant will be required to make a letter of demand for final payment or performance from the other party 15 days prior to filing the case. Additionally, certain cases can only be filed by licensed lawyers. These provisions encourage resolution of matters outside of court.
• Statute of Limitations: Claims that occurred more than five years after the date the entitlement rose are barred unless the defendant authorizes the claim or the claimant provides an excuse for the delay that is accepted by the court.
Introduction of Additional Flexibilities
In addition to the clarifications and efforts to streamline processes introduced by the CCL, it also gives the parties and courts additional flexibility in certain matters, including evidence rules and granting relief.
• Evidence Rules: The parties are authorized to agree either in their contracts or prior to litigation on specific evidence principles, including following evidence laws of another jurisdiction or international bodies as long as they do not contradict the general evidence rules in Saudi Arabia. The general rules of evidence have also been modified to allow for (a) acceptance of document copies when originals are not available; (b) submission of document requests to the other party (right of discovery); and (c) cross-examination of witnesses.
• Granting Relief: The CCL introduced a new procedure that provides additional flexibility in granting relief called a Performance Order. This Order allows the Commercial Court to issue a summary judgment without pursuing a full case hearing. Performance Orders are authorized in cases that involve a written contact with a quantifiable entitlement that is due immediately.
The CCL makes great strides in clarifying the role of the Commercial Courts and unifying their jurisdiction across Saudi Arabia. If you have a commercial conflict in Saudi Arabia, contact the attorneys at Hammad & Al-Mehdar Law Firm today.