The fundamental law of Saudi Arabia is sharia. The sharia is a collection of principles derived from different sources, but primarily the Quran and the Sunnah - the witnessed sayings and actions of Prophet Mohammed.
Sharia principles are often expressed in general terms, providing Saudi courts with considerable discretion as to how to apply those principles. Moreover, there are four schools of Islamic jurisprudence: Hanbali, Hanaﬁ, Shasai and Maliki. Each of them construes certain precepts differently.
The Hanbali school of Islamic jurisprudence is generally followed in Saudi Arabia. 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 Saudi courts, where that approach was deemed to be appropriate in the interest of justice and fairness.
Some consequences of the application of sharia include:
• the prohibition of interest (riba);
• the prohibition against uncertainty (gharar), which excludes options, futures, other derivatives, liquidated damages and economic loss;
• a power of attorney is generally revocable, even if the power of attorney document says it is irrevocable.
The secular authorities are allowed to supplement sharia and the Saudi government does so by issuing decrees, laws, regulations and policy positions that address particular social and economic issues.
The laws of the kingdom 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 government authorities.
Generally, projected laws (bills) are debated in the shoura, a parliament appointed by the king. They are then reviewed by the Council of Ministers, which is the king's cabinet. If approved, they generally come into effect from the date published in the Saudi Government Gazette, or as specified by the law itself, for example, 90 days after the publication of the law.
The laws are usually broad in nature. The relevant government authorities will typically be directed under the law to issue implementing regulations within 90 days of the issuing of the law. The regulations contain the details of the law and its implementation. The Arabic version of the law takes precedence over any English translation and not all laws have an official English translation.
Sharia courts (or general courts) have a general jurisdiction and preside over criminal, civil (including real estate) and family matters.
The courts have considerable discretion to apply basic sharia principles to a particular set of circumstances. Consistent with general sharia principles, these courts tend to regard themselves as competent to determine each case before them to achieve an equitable result in all the circumstances of that case.
A sharia 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 sharia principles. A well-known example is the prohibition of the charging of interest, as an unlawful gain.
In addition to cases presided over by a single judge, there is also an appellate court of three judges, which determines appeals from the individual judges. In turn, parties can appeal points of law (though not fact) from the appellate court to the High Court.
The appellate court is divided into a number of circuits that deal with certain types of cases. For example, there is a circuit for criminal cases and another for family cases.
The High Court is expected to issue judicial principles that the lower courts are obliged to follow.
This article is part of MEED magazine's Doing Business in Saudi Arabia Guide, for more information please visit MEED.com