The fundamental law of KSA is the Shari’ah. The Shari’ah is a collection of principles derive from different sources, but principally the Holy Qur’an and the Sunnah (the witnessed sayings and actions of the Prophet Muhammad).
Shari’ah principles are often expressed in general terms, providing KSA courts with considerable discretion as to how to apply those principles. Moreover, there are four different schools of Islamic jurisprudence Hunbali, Hanafi, Shafey and Maliki, and they construe certain of the precepts differently.
The Hunbali school of Islamic jurisprudence is generally followed in KSA. However, within that school, there are majority and minority views on various issues, either of which may be applied in any particular case. There have, also, been instances where the principles of other schools of Islamic jurisprudence have been applied by KSA courts where that approach was deemed to be appropriate in the interests of justice and fairness.
Some practical consequences of the application of Shari’ah include:
· The prohibition of interest(ribah)
· The prohibition against uncertainty (Gharar) which excludes options, futures, other derivatives, liquidated damages and economic loss.
· The inability to provide a waiver in respect of future rights.
· Powers of attorney are always revocable verbally, regardless of language to the contrary in the instrument.
· There is no recognition of “self help” remedies and it is not possible to obtain effective security over future assets.
The laws of KSA governing business dealings include numerous regulatory instruments, the most common of which are Royal orders, high orders, Royal decrees, laws, regulations, Council of Ministers’ resolutions, ministerial resolutions and circulars by the government authorities.
Shari’ah courts as called (general courts) have a general jurisdiction and preside over criminal, civil and family matters.
The courts have considerable discretion to apply the basic Shari’ah principles to a particular set of circumstances. Consistent with general Shar’ah principles, these courts generally regard themselves as competent to determine each case before them in a manner which they consider is necessary to achieve an equitable result in all the circumstances of that case.
A Shari’ah court has the discretion to deny or modify the enforcement of contractual or other obligations in strict accordance with their terms if in the court’s opinion strict enforcement would be inequitable under Shari’ah principles. A well known example is the prohibition (haram) on the charging of interest (Ribah), as an unlawful gain.
in addition to cases presided over by a single judge, there is also an appellate court to the Supreme Judicial Council.
In turn, parties can appeal points of law (not fact) from the appellate court to the supreme judicial council.
The supreme judicial council has established two committees, one dealing with capital punishments and issues referred by the King or the Ministry of Justice and the other dealing with the review of appellate court judgments that represent a change from established rulings.
Board of Grievances:
The board of grievances(“BOG”) has the principal jurisdiction over all disputes where the Government is a party, and commercial disputes involving private sector parties. if the BOG decides that a dispute falls outside its jurisdiction, it will refer that dispute to a Shari’ah court.
The most relevant authorities for business are the Saudi Arabian Monetary Agency (“SAMA”), the Capital Market Authority(“CMA”), the Saudi Arabian General Investment Authority (“SAGIA”), the Ministry of Commerce & Industry (“MOCI”) and the Department of Zakat and Income Tax (“DZIT”)
In addition to the Shari’ah courts, there are a number of committees with quasi-judicial powers for resolving disputes. these committees include the :
· Negotiable Instruments Office of MOCI (bills of exchange and promissory notes disputes).
· The SAMA banking Disputes Committee(disputes involving commercial fraud and banking disputes).
· The CMA committee for the resolution of securities disputes (stock market disputes).
· The SAGIA investment disputes settlement committee (disputes as to investments under the foreign investments act involving a foreign investor and a KSA partner).