Saudi Arabia: Legal Environment

In this page: Business Contract | Intellectual Property | Legal Framework of Business | International Dispute Resolution

Business Contract

General Observation: You must state precisely the obligations of the vendor and the methods of quality control. Contracts have to be made using a local lawyer and fiscal matters have to be dealt via a local accountant. Agreements which have been signed out of the country are not recognised.
Law Applicable to the Contract: Saudi Arabia is not a signatory to the Vienna Convention on International Contracts. Saudi Arabian contract law is formed principally, from the prescriptions and provisions of Islamic law, Sharia. Even when the relevant contract contains a foreign choice of law provision and provides for a foreign forum to have jurisdiction, Saudi courts tend to apply Saudi law.
Advisable Incoterms: CIF or FOB.
Language of Domestic Contract: Generally Arabic, but English is used in cases involving foreign parties.
Other Laws Which Can Be Used in Domestic Contracts: Neither foreign judgment nor any contractual provision contrary to Islamic principles may be enforced in Saudi Arabia.

Intellectual Property

National Organisations: Industrial Property Office (Patents): Saudi Patent Office.

Industrial Property Office (Marks): Ministry of Commerce and Industry (Trade Mark Section)

Copyright Office: Saudi Authority for Intellectual Proprety
Regional Organisations: Arab Society for Intellectual Property (ASIP)

Arab Intellectual Property Mediation and Arbitration Society (AIPMAS)
International Membership: Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)

National Regulation and International Agreements

Type of property and law	Validity	International Agreements Signed
Patent Industrial Property Law -2004	15 years, can be extended for further 5 years.	Patent Cooperation Treaty (PCT)
Trademark The Law Of Trademarks (Royal Decree No. M/21, 7 August 2002)	Approximately nine years and eight months (ten Hegira years)
Design Industrial Property Law -2004	10 years
Copyright Copyright Law (Royal Decree No. M/11, 30 Aug 2003)	Between 25 and 50 years	Berne convention For the Protection of Literary and Artistic Works
Industrial Models Industrial Property Law -2004	10 years

Legal Framework of Business

Equity of Judgments

Equal Treatment of Nationals and Foreigners: There have been allegations that foreign nationals do not always enjoy a fully impartial trial in Saudi Arabia. Corruption may exist: foreign companies have reported paying bribes to middlemen and government officials to secure business deals.
The Language of Justice: Arabic
Recourse to an Interpreter: Having an interpreter is possible. In case of migrant workers, generally the respective consular officials arrange the translation and interpretation.
Legal Similarities: The main source of the law is Sharia (the Islamic law), and the Quran is the constitution of the country. However the Basic Law that articulates the Government's rights and responsibilities was promulgated by royal decree in 1992. Moreover several secular codes have been introduced, and commercial disputes are handled by special committees. Saudi Arabia is not a member to the ICJ jurisdiction.

The Different Legal Codes

Constitutional Law	Law of Regions, Law of the Council of Ministers, Law of the Judiciary, Shura Council Law, The Basic Law
Administrative/Public Law	Law of Provinces
Criminal Law	Law of Combating Money Laundering
Commercial Law	Foreign Investment Act
Company Law	Government Tenders and Procurement Law, Cooperative Insurance Companies Control Law
Tax law	Income Tax Law
Labour Law	Labour Law
Intellectual Property Law	Law of Patents, Layout Designs of Integrated Circuits, Plant Varieties, and Industrial Designs
Shura Council Law	Shura Council Law
Banking Law	Capital Market Law

Checking National Laws Online: The World Law Guide
Other Useful Resources: Emory Law
Constitution of Saudi Arabia
Country Guides: Library of Congress

The Jurisdictions

Sharia Courts

Supreme Judicial Council: Supervises courts; provides opinion on special cases; and reviews death, amputation, or stoning sentences.

Appellate Court: Has three panels which look into criminal, personal and general cases.

Special Tribunals

Settles disputes in specific areas, such as commercial or labour law. These specialised tribunals are part of various ministries outside the Ministry of Justice.

Board of Grievances

This does not come under the Ministry of Justice but is directly responsible to the King. The Board of Grievances is composed of the Administrative Division, Commercial Division and Penal Division. These include Audit Panels that act as courts of appeal. Complaints are filed with the chairman of the Grievance Board, who then selects a panel of experts to hear the case.

Court Officials

Practicing lawyers

The practicing lawyers need to be Saudi nationals licensed by the Ministry of Justice to plead cases in the local courts. However, lawyers practicing at the commissions for settlement of disputes are licensed by the Ministry of Commerce and Industry.

Judges

Judges have discretion to issue rulings according to their own interpretation of Islamic Sharia law.

Chief Justice

The Minister of Justice, appointed by the King from among the country's most senior Ulama, is the de facto Chief Justice.

The Chief Justice and a panel of several qazis preside over all cases.

The King

The King is at the pinnacle of the judicial system, functioning as a final court of appeal and as a source of pardon.

International Dispute Resolution

Arbitration: Arbitration of disputes is becoming common in Saudi Arabia. However, in certain cases, dispute settlement in Saudi Arabia can be time-consuming and uncertain. Even after a decision is reached in a dispute, effective enforcement of the judgment can still take years. Thus it is suggested that a foreign company investing in Saudi Arabia include in contracts a foreign arbitration clause.
Arbitration Law: The Royal Decree called “Arbitration Regulations” (Royal Decree No. M/46 dated 1983) states the Arbitration Tribunal must consist of an odd number of arbitrators, with the chairman being an expert in Sharia or in the Kingdom's commercial rules and regulations. Any judgment contrary to Islamic principles, such as the payment of interest, will not be enforced.
Conformity to International Commercial Arbitration Rules: Party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Appointment of Arbitrators: The arbitrating parties have the freedom to choose their own arbitrators.
Arbitration Procedure: The arbitrating parties first need to approach the Committee for Conciliation of Commercial Agency Disputes, a body that deals with conflicts between foreign companies and their Saudi agents. If the committee fails to resolve the dispute, the case is then referred to the courts. The committee can still make recommendations to the courts and to the Ministry of Commerce. It is important to note that the committee's recommendations are not binding and only the courts can determine legal aspects of such disputes.
Permanent Arbitration Bodies: Saudi International Arbitration Commission (SIAC) (Sectors Covered: Established in 2005, SIAC is first formal arbitration program for the business community. The SIAC falls under the Saudi chapter of the International Chambers of Commerce, and has adopted the same arbitration system employed by the International Court of Arbitration.)

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