The Kingdom of Saudi Arabia is an Islamic state whose legal system is based on Sharia law derived from two primary sources: the Koran and the Sunnah. The Qur’an is the holy book of Islam, while the Sunnah is the teachings of the Prophet Muhammad. Thus, unlike common law countries, where the law derives from legislation or judicial precedents, the source of Islamic law comes from the opinions of religious scholars infamous books such as fiqh.
In Islamic law, punishment for illegal actions takes place both in this world and in the hereafter. While in traditional legal systems, punishment for breaking the law occurs only in this world. It illustrates the problem for Saudi consumers when dealing with overseas suppliers, as there is a conflict between contractual legal clauses and obligations under the two systems. Moreover, the foreign seller is not always aware of Islamic legal, contractual obligations, and principles. They suggest that Islamic legal commitments are appropriate for the purpose of selling to the offline world in Saudi Arabia since both supplier and consumer are subject to jurisdiction. The same legislation passed in Saudi Arabia concerning commercial organizations with property in the territory applies to online commerce. In accordance with the bill of the KSA, the website replaces the domicile.
Jurisdiction for Online Sellers Under KSA Law
At the same time, the online marketplace is open to everyone, regardless of the location of both the seller and the buyer. The difference is that Saudi Arabia’s Electronic Commerce Law states that this particular law applies to domestic and international suppliers. It is valid without mention of legal inconsistency with the seller’s international local law enforcement agencies. Saudi Arabia does not have comprehensive consumer protection legislation, but there are many laws and regulations that prohibit fraud and deceptive trading behavior, such as the Anti-Commercial Fraud Act.
When entering international commercial contracts, the most crucial issue that the parties must carefully consider is the choice of applicable law. Which settlement will be used and applied to interpret the contract and to determine the rights and obligations arising from it. In international arbitration, the parties usually choose the domicile of one of the parties as to the applicable law in their contract.
For example, in the case when one party to the contract was an American company and the other party was an Egyptian, Egyptian law was selected as the applicable law. However, the selection of Saudi law as the applicable law in the contract raises various problems. They can arise in international arbitration cases or even in municipal courts, along with possible decisions, under the new Saudi arbitration regime. Foreign investors, who are usually not very familiar with the laws and regulations of Muslim countries such as Saudi Arabia, should be aware of these decisions before entering into such an agreement.
First, in this case, when the business has a bilateral partner, one of which is subject to the laws of the Kingdom, Article 25 of the Law of the Kingdom of Saudi Arabia applies. In addition, if the property of an ordinary business is located on the state’s territory, both the citizen of Saudi Arabia and his foreign partner fall under the influence of the KSA. Article 25 states that the Courts of the Kingdom have jurisdiction over cases brought against non-Saudis who have a standard or specific residence in the Kingdom. The exception is in rem cases, the property of which is located outside the Kingdom.
Foreign citizens can have a business in Saudi Arabia but registered outside the state. It means that a non-Saudi has an Internet business, the production, and sale of products which is directed, among other things, to the Saudis. In this case, according to the laws of the Kingdom, a foreign organization with real estate outside the Kingdom falls under the jurisdiction of the state. It includes litigation that concerns property in the Kingdom or an obligation, that is, deemed to have arisen or enforceable in the Kingdom. If the lawsuit is related to the declaration of bankruptcy in the Kingdom, then foreigners fall under the jurisdiction of the country. The same goes for when the lawsuit is filed against more than one person, and one has a residence in the Kingdom.
The KSA E-Commerce Law
The Saudi Arabian Ministry of Commerce has proposed a new legal project to regulate e-commerce. The goal of this project is to protect the consumer by setting requirements that sellers must fulfill. It also includes the provision that the merchant must display their online business’s name, location, contact information, and commercial registration number. Furthermore, terms and conditions must be clear, prices must be accurate, and product information must be provided.
In 2019, the Department of Commerce published an e-commerce law, and then in 2020, an executive order was implemented that governs contracts between domestic or international suppliers and buyers. In addition, this electronic business law covers many aspects of electronic agreements. It includes the provision of the seller’s personal information, the required characteristics of goods and services, delivery information, warranty if any, and the terms of the contract. Moreover, the regulation of surrounding electronic advertisements, including prohibiting deception and false information. The consequences of not complying with this law include receiving a warning, a fine of one million Saudi Riyals, and a ban on practitioners from trading online, temporarily or permanently blocking the online provider.
EU Justice for Online Business
The rules for doing business abroad are different and also depend on cultural differences – other legal systems. It depends on the provisions of the private international law (IPR), which legal system is applicable. Intellectual property rights are a conflict of laws that provide information about specific contact persons, which the legal system applies to a particular case. The European Union is one of the largest economic zones in the world, and this also applies to e-commerce. While the 28 EU countries are showing very different trends, they are all united by the fact that online commerce is a growth engine and a billion-dollar market. What is striking is the growing relevance of cross-border trade. Borders are gradually breaking down, especially in the EU, at least in e-commerce, but at the same time, each country still regulates the sale and purchases according to its laws.
Many online stores believe that they can apply, for example, German law when selling goods in an EU country since Germany is a member of the European Union. However, one should be aware that, in principle, the law of the country where the trade takes place applies. In simple terms, it means that not everything is so simple. Entrepreneurs are under the jurisdiction of the state in which they trade. Brussels has standardized online trading rules in the EU through a series of directives. However, there are specific national regulations, for example, for France, Belgium, and the United Kingdom, which must be followed. The legal situation is still different in Switzerland, which is not an EU country and has its legal regulations.
Following the provisions of the EUTMR, if the defendant does not reside in the EU, then claims can be brought to the courts of the EU Member State in which the plaintiff resides. There are also special instructions in the absence of a permanent place of residence or establishment in the EU for both the plaintiff and the defendant. The proceedings may be referred to the courts of the Member State where the European Union Intellectual Property Office is located. Thus, the process of litigation will depend on the country in which the claim was filed.
Features of the International Jurisdiction of the EU Online Sales in the Example of France
France has traditionally been a country that severely restricts the freedom to contract traders when it comes to consumer protection. It is imperative here that the product description on the retailer’s online store is considered a binding contract offer; it has practical implications. For example, a retailer is fundamentally bound by an erroneously incorrect price quote. The mandatory information that an online store must publish in its online store is agreed upon across all EU countries4. But France goes even further and obliges online retailers to inform consumers of the warranty rules in their terms and conditions; otherwise, they could be fined. The law prices are much stricter than in Germany: there are strict rules for discounts on sales. Violation can be punished by the antitrust authority in the form of a hefty fine.
In particular, in France, the use of the French language is mandatory, which is essential even for designing an online store. In some cases, a violation can be punished with a fine or prosecution. In addition, the consumer can refer to the fact that he did not understand the information, for example, about the right of withdrawal, which is not written in French, which could be legally liable to the service providers.
One of the most effective means of combating international crime is the principle of universal jurisdiction. According to the laws of the Kingdom of Saudi Arabia, non-Saudis fall under international jurisdiction in the territory of the state of Saudi Arabia in the following cases. Entrepreneurs own property or reside in the form at the time of the initiation of the lawsuit. The Kingdom’s courts also have jurisdiction over claims against non-Saudi Arabian citizens whose primary or designated residence is outside the Kingdom. It happens if the litigation concerns property located in Saudi Arabia.
Kingdom-based businesses also apply to online merchants. It follows that websites are replacing domicile under the laws of the KSA. Thus, when speaking of international jurisdiction, online entrepreneurship is equated with a local business. That is why all of the above obligations and laws must be fulfilled by foreign entrepreneurs, both with an existing business directly on the territory of the Kingdom and online. In general, the laws related to international violations have their characteristics depending on the state where the violation occurred. Even within the EU, the acts differ, so it is essential to consider where the claim was filed.
Abdulrahman, Aloufi. 2020. “The Need to Enhance Online Consumer Protection in KSA.” International Journal of Law and Political Sciences, 14(11). Web.
Altawyan, Ahmed A. 2018. International Commercial Arbitration in Saudi Arabia. Indianapolis: Council on International Law and Politics.
Law of Civil Procedure. Translation of Saudi Laws. 2017. Riyadh: Official Translation Department.
Rosati, Eleonora. 2016. “International Jurisdiction in Online EU Trade Mark Infringement Cases: Where Is the Place of Infringement Located?” European Intellectual Property Review, Forthcoming. Web.