The Approach of the Saudi Legal System to the Applicable Law of Cross-border Contracts

Abstract

This dissertation examines the issue of how the Saudi legal system deals with the applicable law of international contracts. In addition, it compares the approach of the Saudi legal system with the EU as well as with The Hague Principles on Choice of Law in International Commercial Contracts. Eventually, it concludes that The Saudi legal system absolutely disavows the principle of party autonomy, not only because it lacks choice-of-law rules, but also because it has rules that prohibit any foreign law from being applied. This means if contractual parties have chosen a specific law other than Saudi law whether expressly or impliedly, this choice will not be honoured by Saudi courts. Likewise, the determination of the governing law in the absence of choice is inadequate in Saudi Arabia because no rules define which law is applicable to a contract that lacks a governing law. Instead of having rules that determine which law is the applicable law in the absence of a choice of law, the Saudi legal system only has rules to determine the applicability of its own law to the contract in question. Thus, if such a case falls under Saudi jurisdiction, Saudi law will be instantly applied; otherwise, the case will be dismissed. Based on the foregoing, it is submitted that to create an attractive legal environment for international business in Saudi Arabia, the Saudi legal system must be reformed in this regard by adopting an advanced framework such as The Hague Principles or the Rome I Regulation, which represent the pinnacle of current international standards.