Sharia Business Law


Commercial and business deals in Saudi Arabia are regulated by Shari’a or Islamic law. There are quite a few similarities between it and western law. For example:

* All people are equal before the law
* A person is innocent until proven guilty
* The burden of proof is on the plaintiff
* Written contracts have a sanctity and legitimacy of their own

Like the western system, the Saudi system has appeal procedures. Claims must be proven and substantiated by two male witnesses, preferably Muslim, or one male witness and two females, or one male and the oath of the claimant.

In vicious or serious crimes, four male witnesses are required. Character witnesses may also be required to verify reputations.

Hearsay is normally not acceptable as evidence and evidence under oath is accepted in case written evidence is not available.

One big difference between Shari’a law and western law is the idea of reference to a precedent. A ruling issued by a judge is not binding on other judges or on him in later cases.

Islam forbids interest to be paid on moneys, but allows management fees and services. Normally, awards for damages are in line with practicality and not as inflated as is often the case in the west.

In other words, damages to property will be actual sums relating to repair and replacement of the property. Damages for accidental death are a sum of approximately US$35,000. The loss of the opportunity cost of money is not compensated under Shari’a.

In normal court proceedings, attorneys and formal written documents are not required. A defendant being tried for a criminal case cannot delegate his defence to an attorney.

The judge seeks the truth from all concerned parties. In general, judges will encourage compromise to settle disputes, but when this fails, a judgement is made.

When a judge imposes sentence, it is carried out by an official government representative.

Aside from various administrative bodies and tribunals set up within ministries or government agencies, there is a court system in the Kingdom composed of four levels. The first is the General Court. It has one or more judges and handles cases of personal, civil, family or criminal nature.

Next is the Limited Court which has one judge and which handle smaller cases involving civil or criminal matters. The next level contains the two appeal courts with the highest, the Court of Appeals having five or more judges. This court does not have jurisdiction over administrative tribunals or disputes between lower Shari’a courts and another tribunal.

The fourth Shari’a court is known as the Supreme Judicial Council and is concerned with matters referred to it by the King. It also considers appeals from other courts and reviews cases involving death or mutilation which have been pronounced by lower courts.

There is also a government Grievance Board which includes both secular and Shari’a-trained lawyers. It is not a Shari’a court; its authority comes from the King’s power to administer justice and redress grievances by individuals who allege wrong-doing by the government.

This board has jurisdiction over any complaint brought to its attention, especially those made against government agencies and their administrative regulations.

Arabic and English in business
Although English is widely used in the Kingdom, companies must conduct all their business with the government in Arabic.

Tender announcements for projects specify the language of the bid. Most major contracts use English. Documents establishing joint-venture or agency representation must be in Arabic in order to be legally binding.

In case of dispute, the Arabic text will be the basis of any decision made in settlement.

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