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International Litigation - Saudi Arabia

International Litigation - Saudi Arabia

Published May 2023

Author

Kareem Alsadi

Firm: The Law Firm of Salah Al-Hejailan LLC (in association with Freshfields Bruckhaus Deringer)
Country: Saudi Arabia

Practice Area: Litigation

  • Loft No. 6, Alturki Business Park, South Doha District
    P.O. Box 405
    Al-Khobar 31952
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Guide Content

Please note that the answers provided below will be restricted solely to LFSH’s dispute resolution practice and will not provide information on LFSH’s non-contentious practice areas.

LFSH deals with all areas of dispute resolution within and outside of the Kingdom of Saudi Arabia (KSA). Within the KSA, LFSH deals with disputes between companies and disputes between companies and the government. In relation to corporate disputes, LFSH most commonly advises on debt recovery, EPC and construction disputes, agency and distribution disputes, shareholder disputes, maritime and naval disputes, employment disputes and banking & finance disputes.

For administrative disputes (i.e. disputes between governmental bodies and companies), LFSH regularly advises on anti-concealment claims, anti-competition claims, tax cases and custom cases. 

LFSH also handles other types of dispute resolutions and work related to litigation such as arbitration, settlement negotiations, enforcement of foreign judgements in the KSA and the provision of expert reports for non-KSA litigation involving KSA law.

LFSH distinguishes itself by: having offices in Riyadh, Jeddah and Khobar; its significant number of fee earners, who have many years of experience in dispute resolution; its ability to work closely with foreign clients; and its understanding of how the Saudi legal system works. LFSH is also known for its ability to respond quickly to clients when unexpected circumstances arise or when urgent legal advice is required.

LFSH is currently working on a number of cases. Those which currently come to mind are in the field of debt recovery, shareholder disputes, anti-competition disputes, asset recovery and disputes with the customs authorities over customs tariffs. 

A recent case study involves a dispute between a world-renowned international port operator (the Client) and the King Abdulaziz Port Authority (the Authority) in Dammam. In this case, a port operation contract (the Contract) in accordance with which the Client had been operating the King Abdulaziz Port had expired, and a dispute arose between the Client and the Authority regarding ownership and the return of equipment used in the operation of the port during the lifetime of the Contract. LFSH successfully represented the Client at the First Instance Administrative Court and subsequently at the Court of Appeal. LFSH obtained judgement in favour of the Client, which ordered the return of equipment worth approximately One Billion Saudi Riyals.

Currently, our most active areas of practice are anti-competition claims and tax and custom cases. From a business-to-business perspective, LFSH is currently acting on a number of debt recovery disputes and shareholder disputes.

Debt recovery will always be a common practice area in the KSA. Shareholder disputes are also common.

The main criteria to consider in litigation are (a) time expenditure, and (b) costs. Additionally, the value of the claim must be considered when weighing up whether there is actual value in issuing and pursuing litigation in the KSA. This is primarily because, unlike many other jurisdictions, the charging of interest is prohibited in the KSA, and therefore a successful judgement will only award direct damages suffered by the plaintiff as well as (possibly) its legal costs.

There are several challenges in litigation at this level:

• The difference in how court systems operate in the KSA as opposed to other jurisdictions can be difficult for foreign clients or even lawyers to understand; 
• The prohibition in applying or charging interest is also an important factor that can significantly affect the value of cross-border claims, especially when it comes to enforcement of these judgements in the KSA; 
• Translation of documents from English to Arabic (as all documents must be translated into Arabic in order to be lodged as evidence with a Saudi court) and ensuring an accurate translation is an important practical challenge that should not be underestimated;
• The lack of a formal system of precedents means that there is always uncertainty as to how claims will be decided in the KSA;
• Finally, KSA law often does not cover all aspects of a dispute, and there can be significant unclear or grey areas, especially when compared to other jurisdictions. Lawyers acting in such cases must have an ability to interpret laws and judge how they may be viewed by Saudi courts. Non-Saudi lawyers may not be familiar with how the KSA courts actually apply KSA law.

This area of law is very much in its infancy in the KSA. We are not aware of any significant cases.

COVID-19 obviously had a negative impact on the economy of the KSA, which often results in an increase of litigation. However, a major beneficial effect has been to move all government function, including but limited to the court system and court hearings, to electronic and virtual formats. While the system had some teething issues when first implemented, it has helped streamline and make more effective the manner in which hearings are carried out, as well as the issuance and lodging of pleadings by parties involved in litigation.

To a certain extent, it has value. However, it is likely that this is more important for non-contentious legal work as opposed to litigation or dispute resolution work.

The most important developments are those explained in the answer to question 7.

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