Welcome to the Saudi Arabia focus edition of Law Update.
One of the key markets in the Middle East and North Africa (MENA) that continues to lead from the front is the Kingdom of Saudi Arabia (KSA). As the largest country in the Middle East and the 18th largest economy in the world, the progress KSA continues to make is underpinned by its Vision 2030 that envisions developing the country as an investment powerhouse and hub that ultimately connects Asia, Europe, and Africa. Given Saudi Arabia’s significance to the regional economy, our team of experts have prepared a range of pertinent articles that provide insights into new laws, regulations, and the legal landscape in the Kingdom.
This edition will provide you with an up-to-date guide on matters such as; the framework issued by the Saudi Central Bank on IT governance, the anti-corruption landscape under Vision 2030; we also provide practical tips for dispute avoidance. This is only a snapshot; there are many more articles within the KSA focus section for you to read, which we hope you will find valuable and enjoyable.Read the edition
December 2014 – January 2015
Background to the Case
The Claimant (a bank) provided a real estate mortgage to the Defendant for an amount of QAR 7 million (USD 2,000,000) with an interest rate of 8.25% per annum, in addition to other benefits which amounted to QAR 1 million (USD 280,000) in debits against the Defendant’s account with the bank.
In 2010, the Claimant filed a civil case with the Court of First Instance in Qatar, seeking payment on the arrears of the principal amount in addition to the interest of 8.25%.
The Case at First Instance
In 2011 the Court of First Instance issued a judgment for the Claimant and awarded the Claimant the full amount of the principal amount but refused to grant him any interest.
Ruling of the Court of Appeal
The Claimant brought appealed the decision of the Court of First Instance to the Court of Appeal. In a judgment delivered in 2011, the Court of Appeal upheld the finding of the Court of First Instance but additionally awarded further compensation amounting to QAR 100,000 (USD 28,000) as damages for the delay caused by the borrower’s nonpayment.
Judgment of the Court of Cassation
In 2012 the Claimant lodged an appeal with the Court of Cassation, seeking to overturn the judgment for the damages of QAR 100,000 and asserting that the court erred in the calculation method used to reach this figure. The appeal was argued on three grounds:
The Court of Cassation’s Decision
The Court of Cassation rejected all three grounds of the Claimant’s appeal and reasoned as follows:
In light of the foregoing, the Court of Cassation upheld the judgment of the Court of Appeal and rejected the bank’s appeal with respect to challenging the measure of damages valued at QAR 100,000.
This judgment has significant implications for day-to-day transactional banking activities conducted in Qatar. In considering this case the Court appears to have overlooked the substance of the terms agreed between the parties regarding the interest rate. It is not clear from this ruling why the court refused to apply the interest rate agreed upon between the parties. In addition, the judgment does not explain why the liability of the borrower was based on the principles of tortious rather than contractual liability. As the said ruling contradicts previous judgments issued by the Court of Cassation confirming the enforceability of the interest rate stipulated in the loan contract, we hope that the Court of Cassation issues a new judgment clarifying these matters.