Recent Saudi Court Judgments: Governing Law and Choice-of-Law Principles

8 min 22 sec December 3, 2025 (Edited)

Saudi Arabia’s court system has undergone significant modernisation over the past few years. The Commercial Courts Law, reforms to evidentiary rules, and the 2023 Civil Transactions Law have all impacted the way commercial disputes — both domestic and cross‑border — are handled.

For international businesses, the most important practical developments are in how Saudi courts coordinate with foreign proceedings, how they view contractual choices of forum and governing law, and how they police public policy limits.

Recent Saudi judgments illustrate a more structured approach to jurisdictional conflicts and settlement enforcement, while confirming that Saudi courts will apply Saudi law in litigation and will not adjudicate disputes by applying foreign substantive law. These developments have made outcomes more predictable for investors and clarified the boundaries between Saudi court litigation and arbitration or foreign court proceedings.

This article will consider recent Saudi court judgments, clarify how Saudi courts approach jurisdiction and concurrent foreign proceedings, and discuss the impact of party autonomy on forum and governing law.

Recent Judgments on Cross-Border and Domestic Disputes

Saudi courts have issued several important judgments that illustrate how they manage cross-border parallel proceedings, forum selection, and domestic commercial controversies.

In a recent court judgment (Decision No. 324 of 1433H, Board of Grievances), a dispute arose from a share sale transaction connected to the UAE. Proceedings had already been filed before the Dubai Courts concerning the same transaction and parties (or closely related parties). The respondent argued lis pendens/parallel proceedings, and contested the Saudi court’s jurisdiction in light of a dispute resolution clause. The Saudi court, as a preliminary issue prior to considering the substantive aspects of the dispute, examined whether to proceed in parallel or defer in light of the foreign case and an agreement on forum.

The court judgment is significant for a number of reasons. First, it recognises party autonomy in selecting a competent foreign forum, provided that the clause does not contravene Saudi public policy or mandatory rules. The court read the parties’ agreement — including a clause referring disputes to courts in either of the two countries — as a valid jurisdictional undertaking, consistent with international jurisdiction norms recognised in the Kingdom, where not in conflict with the general law or public order.

Second, the court applied lis pendens in an international setting, reasoning that where the same parties and substantially the same subject matter are already the object of pending proceedings abroad before a competent court identified or accepted by the parties, Saudi courts may stay or decline to proceed to avoid duplicative litigation and inconsistent outcomes.

In reaching that conclusion, the court relied on the principle that adjudication should avoid parallel judgments in the same dispute and should honour the contractually chosen forum in cross‑border commerce, when compatible with Saudi law. It thus emphasised that the contract is the law of the parties (to the extent that it does not contradict mandatory law or public policy matters) and that the current procedural rules of Saudi law have sufficient mechanisms that seek to mitigate conflict of decision. This is a matter that, if not adequately and commensurately addressed, would fracture any justice system.

Third, the judgment distinguishes between challenges that must be raised as preliminary pleas and merits defences. Jurisdictional objections and lis pendens are treated as threshold issues that must be resolved before addressing the merits. This reflects the rules that pleas related to competence and lis pendens are to be addressed at the outset so that the court does not decide a matter beyond or alongside a competent foreign forum.

Fourth, while the respondent had argued that contractual provisions for fixed annual “interest” would render the agreement void under Sharia, the appellate court treated that substantive invalidity contention as separable from the jurisdictional question, emphasising that the existence of potentially void terms does not itself negate a duly agreed forum clause or the effect of foreign parallel proceedings; those merit issues are addressed by the court with proper jurisdiction. In summary, Judgment No. 324/1433H (Appeal No. 324/1433H) establishes that Saudi courts will respect cross‑border forum arrangements and pending foreign litigation, applying international lis pendens and party‑autonomy principles subject to Saudi public policy.

In a later Supreme Court Judgment (Decision No. 431413 dated 05/03/1443H), the Supreme Court held that parties cannot agree to a foreign court’s jurisdiction where Saudi courts have jurisdiction under Saudi law, such as in lawsuits against a Saudi‑resident defendant. Choice‑of‑forum clauses selecting foreign courts may not be enforced if they divest Saudi courts of jurisdiction they hold under local law. Parties should calibrate forum clauses with this constraint in mind and consider arbitration where neutrality is essential.

In Commercial Court Judgment No. 4530083991 of 1444H, the court addressed a corporate dispute that overlapped with pending proceedings. The court enforced procedural bars derived from the law of pleadings, including lis pendens and the rule that certain defences must be raised at the earliest stage, and emphasised the inadmissibility of duplicative claims once a related case is already before a competent court.

Separately, commercial judgments concerning territorial jurisdiction and litigation costs (for example, a Jeddah Commercial Court case regarding supply obligations and another appeal on recovery of attorney’s fees) show how courts are applying the Commercial Courts Law and its Implementing Regulations to determine place-of-suit, allocate costs prudently, and sanction non-compliance with procedural timelines.

This judgment illustrates the Commercial Courts’ firm case‑management posture: duplicative suits are curtailed; settlements are to be honoured; and defences must be timely. For businesses, it reinforces the importance of consolidating disputes and sequencing claims carefully to avoid preclusion.

Do Saudi Courts Respect Parties’ Choice of Governing Law?

In light of the foregoing judgments, it is essential to ask whether Saudi courts would respect parties’ choice of governing law. When a dispute is litigated before the Saudi courts, they apply Saudi law. Saudi courts do not apply foreign substantive law, even if the parties have elected it in their contract, because the Law of Civil Procedure directs courts to apply Sharia as derived from the Quran (the Muslim Holy Book) and the Sunnah (being the teaching of the Prophet Muhammad), together with other Saudi legislation consistent with Sharia. This position reflects the fundamental role of Sharia and Saudi public policy in the Kingdom’s judicial system and is consistently confirmed in authoritative guidance on cross-border litigation.

This does not mean party autonomy is irrelevant to governing law in all settings. In arbitration — particularly international arbitration seated outside the Kingdom — tribunals generally may apply the law chosen by the parties, and Saudi Arabia’s adherence to international instruments on the recognition and enforcement of arbitral awards supports that framework.

For arbitrations seated in Saudi Arabia, Article 37 (4) of the SCCA Arbitration Rules, provides that “[t]he law applicable to the arbitration agreement shall be the law applicable at the place of arbitration, unless the parties have agreed in writing on the application of other laws or rules of law”. The SCCA Arbitration Procedures Guide also provides that: “All awards rendered shall…. apply the substantive law that parties agreed upon.”

Accordingly, subject to Saudi public policy, the parties’ agreement on governing law prevails over the default positions in the Arbitration Law and the SCCA Arbitration Rules.

Mandatory National Rules that Modify or Restrict Chosen Law

Because Saudi courts will apply Saudi law, mandatory rules embedded in Saudi legislation and Sharia-based public policy are determinative in court proceedings, regardless of any foreign governing law clause. These include, among others, the prohibition of interest (riba) and certain uncertainty (gharar), the Commercial Courts Law provisions governing commercial disputes, the Evidentiary Law governing proof, and the Civil Transactions Law, which codify core private law principles consistent with Sharia.

Contract terms that contravene Saudi public policy will not be enforced by Saudi courts, and any monetary remedies will be confined to compensatory damages; punitive damages and interest are not available.

Applicable Law in the Absence of an Agreement or for Non-Contractual Claims

As can be seen in the above cases and in the absence of a choice-of-law clause, Saudi courts apply Saudi law. The same rule applies to non-contractual claims brought before Saudi courts. There is no separate conflict-of-laws mechanism in ordinary Saudi court litigation that would point to a foreign law for torts or unjust enrichment. Instead, Saudi law governs across the board whenever the dispute is adjudicated in the Kingdom’s courts.

Conclusion

Saudi appellate courts will, in appropriate circumstances, acknowledge foreign proceedings and valid jurisdiction clauses to avoid conflicting judgments, illustrating a practical alignment with international procedural comity. However, the Supreme Court has made clear that party autonomy cannot divest Saudi courts of jurisdiction where Saudi law grants it, such as when the defendant resides in the Kingdom.

In matters placed before Saudi courts, the governing law is Saudi law regardless of the parties’ contractual choice. Mandatory Saudi rules and Sharia-based public policy override inconsistent contractual terms, including any provisions involving interest.

In the absence of a governing law clause, and for non-contractual claims, Saudi law applies in Saudi courts. Domestically, commercial courts are applying robust procedural tools — including lis pendens, venue rules, and strict timelines — to streamline cases and control duplicative litigation, reflecting a modernised litigation environment.

The Saudi court decisions discussed in this article demonstrate a coherent approach to both cross-border and domestic disputes. On the one hand, Saudi courts have the procedural flexibility to recognise foreign proceedings anchored in a valid forum-selection clause, thereby reducing the risk of inconsistent judgments. On the other hand, they preserve core jurisdictional prerogatives where Saudi law so provides and uniformly apply Saudi substantive law in Saudi courts.

For contracting parties, the practical implications are clear. If a dispute will be litigated in Saudi courts, expect Saudi law to govern, Saudi public policy to prevail over inconsistent contract terms, and procedural rules to be enforced with rigour. If party choice of law is critical, arbitration may offer a more reliable vehicle for honouring that choice. In Saudi court litigation, Saudi law and procedure will supply the framework from start to finish.