Saudi Arabia’s legal System continues to modernise: the new Commercial Courts Law
James Cameron explains what you need to know about the new Commercial Courts Law enacted within the Kingdom of Saudi Arabia.
For a number of years now there has been a continuing trend of progressive modernisation of the legal system in the Kingdom of Saudi Arabia1. In 2012, the Kingdom conducted an overhaul of its arbitration law, and in 2016 established the Saudi Centre for Commercial Arbitration. This year, we have seen a similar overhaul of the Kingdom’s Commercial Court system.
The new regime represents a big step forward, and implements a number of new initiatives such as mandatory pre-action protocols, e-filing procedures, procedures for expedited performance orders and limitation periods in an effort to streamline and revitalise the Commercial Courts and relieve the burden of unmeritorious claims and tactical litigants.
The new Commercial Courts Law (the “CCL”) was enacted under Royal Decree No. M/93 dated 15/08/1441H (8 April 2020) and came into effect on 16 June 2020. The CCL governs the procedures of the Commercial Courts and applies to all disputes that fall within their jurisdiction.
The Commercial Courts’ jurisdiction is broad, and includes disputes between traders arising out of matters related to their business, suits under commercial contracts where the claim exceeds SAR 1,000 (US$266), disputes between partners of a Mudarabah agreement2 and claims/violations arising under the Companies Law, Bankruptcy Law, Intellectual Property Laws and other commercial laws.
The key features of the CCL are as follows:
- Limitation period introduced for commercial claims: the CCL has introduced a limitation period of five years in relation to commercial claims.
A party will therefore lose its right to bring a claim if it has not done so within five years from the date on which the cause of action arose (although there are exceptions, for example where the defendant acknowledges the cause of action or the plaintiff has some acceptable excuse for having not brought its claim within the limitation period).
- Mandatory alternative dispute resolution: the CCL encourages the parties to explore alternatives such as reconciliation and mediation before resorting to the Commercial Courts, and in some instances makes mediation a prerequisite to being able to bring an action.
- Electronic filing and procedure: the CCL has introduced e-filing procedures and made allowance for certain other procedural matters to be dealt with electronically.
- Recognised addresses for service: the CCL identifies various categories of address that will be considered valid for the purpose of effecting service, including email addresses used in a party’s submissions to the court, residential addresses of natural/legal persons, and in the case of foreigners, any address used by that person in the Kingdom.
Parties’ lawyers may also be authorised to accept service on behalf of their clients.
- Private sector can be engaged to assist with administration: the CCL allows the Commercial Courts to utilise public sector services in the administration of its work, including by way of mediation/reconciliation, notifying claims, delivery of judgments, managing hearings and the provision of expert evidence.
- More case-management powers: Commercial Court Judges now have a wider range of powers to manage cases in a more efficient manner, including imposing sanctions on litigants who fail to meet court deadlines.
- Time limit for jurisdictional challenges: any objection to the jurisdiction of the Commercial Courts must be decided within 20 days of the date of the challenge, which is targeted squarely at reducing the impact of tactical jurisdictional challenges.
- Urgent relief may be granted: a party seeking an urgent injunction or similar must have its application determined within three business days of the application being filed with the Commercial Court.
This may be of particular interest to contractors operating in the Kingdom, where urgent injunctive relief is often necessary to protect a party’s rights.
- Parties can choose applicable rules of evidence: the CCL allows parties to agree specific evidential rules that will then be applied to their disputes.
This may be a precursor to the Kingdom implementing its own detailed suite of evidential rules, but in the meantime, parties may agree that the evidential rules of, for example, a foreign country or the International Bar Association will apply to their dispute.
- Judgments on small claims cannot be appealed: where a judgment is for an amount less than SAR 50,000 (US$13,330) it cannot be appealed. Judgments exceeding SAR 50,000 can be appealed within 30 days.
- Payment orders can be obtained quickly: where a party has obtained a judgment in its favour, it can now apply to the Commercial Court for a payment order, which must be determined within 10 days from the date of submission. A payment order can then be enforced against the judgment debtor.
The Kingdom’s “Vision 2030” is an ambitious plan to reduce Saudi Arabia’s reliance on the oil industry and cement the Kingdom’s place as an economic powerhouse and important hub in the GCC region. Reforming the Commercial Courts is seen as a key part of that vision, and will surely be welcomed as a big step forward in modernising the legal system and providing more efficient access to the courts for commercial parties.
We expect that international contractors will still prefer to include arbitration clauses in their agreements, but for local contractors these reforms could allow parties to seek resolution of claims in a more timely fashion and provide a more effective means of enforcing judgments.