What Is the Jurisdiction of Commercial Courts?

Translation of the attached article:

Commercial courts are considered among the most important courts in Saudi Arabia. They are the courts competent to hear disputes that arise between merchants and companies, as well as matters related to commercial cases.

Their jurisdiction is no longer limited to traditional disputes between merchants only. Rather, they now have jurisdiction over a wide range of cases related to economic regulations and commercial activities.

In this article, we will explain the jurisdiction of commercial courts, the cases that fall within their jurisdiction, and the cases that do not.

Jurisdiction of Commercial Courts in Saudi Arabia: Concept and Legal Basis

The Commercial Court Law was issued with the approval of the Council of Ministers after extensive study, to serve as an independent legal framework regulating commercial judiciary in the Kingdom, based on the Law of the Judiciary and the Law of Civil Procedure, and with the aim of establishing a specialized judicial system that resolves commercial disputes efficiently and promptly.

The law provides for the establishment of independent commercial courts. Where such courts are not available in certain regions, commercial circuits are established within general courts, provided that appeals are heard before the nearest commercial court.

Subject-Matter Jurisdiction of Commercial Courts: Which Cases Fall Within It?

Commercial courts are first-instance courts competent to decide commercial cases. The jurisdiction of commercial courts includes several types of jurisdiction, including subject-matter jurisdiction, which means distributing work among commercial courts within the same judicial authority based on factors such as the type of claim or the nature of the dispute. This jurisdiction includes:

• Disputes arising between merchants due to their original or ancillary commercial activities.
• Claims filed against a merchant in disputes related to commercial contracts, where the value of the original claim exceeds one hundred thousand Saudi riyals, and the Council may increase this amount when necessary.
• Disputes between partners in a mudarabah company.
• Claims and violations arising from the application of the Companies Law.
• Claims and violations arising from the application of the Bankruptcy Law.
• Claims and violations arising from the application of intellectual property laws.
• Claims and violations arising from the application of other commercial laws.
• Claims and applications related to a judicial custodian, trustee, liquidator, appointed expert, and similar persons, whenever the dispute relates to a claim that falls within the court’s jurisdiction.
• Compensation claims for damages arising from a claim previously heard by the court.

Territorial Jurisdiction of Commercial Courts: Where Is a Commercial Claim Filed?

The territorial jurisdiction of commercial courts belongs to the court within whose jurisdiction the defendant’s place of residence is located, unless there is a written agreement between the parties stating otherwise, and unless a special legal provision applies.

However, if the defendant has no place of residence in the Kingdom of Saudi Arabia, jurisdiction belongs to the court within whose jurisdiction the plaintiff’s place of residence is located. A claim may also be filed before the court where the contract was concluded or performed.

In claims involving companies, territorial jurisdiction belongs to the court within whose jurisdiction the company’s main headquarters is located, regardless of whether the claim is filed against the company, filed by the company against one of its partners, filed by one partner against another, or filed against the company’s manager or board members.

A legal claim may also be filed before the court within whose jurisdiction one of the company’s branches is located, with respect to disputes arising from contracting with that branch.

What Is the Difference Between the Commercial Court and the General Court in Saudi Arabia?

Commercial courts are courts that have jurisdiction over commercial cases. They are first-instance courts spread across the Kingdom of Saudi Arabia and consist of several circuits, each composed of one or more judges as determined by the Supreme Judicial Council, and each is specialized in a set of jurisdictions.

General courts are also spread throughout all regions of the Kingdom of Saudi Arabia and consist of several circuits, including enforcement circuits and final proof circuits. They may be composed of one judge or three judges, as determined by the Supreme Judicial Council.

As for their jurisdiction, general courts hear all claims, final proof matters, and any matters of a similar nature that do not fall within the jurisdiction of any other court, as well as matters not falling under the Board of Grievances, notarial offices, and other authorities.

Pure Commercial Cases Heard by the Court: Companies, Bankruptcy, Contracts, and Compensation

Commercial courts have jurisdiction over several types of cases, most notably:

• Disputes between merchants due to their commercial activities.
• Company cases of all types.
• Disputes related to commercial contracts.
• Bankruptcy and financial restructuring claims.
• Banking and financing disputes.
• Commercial paper cases, such as checks and bills of exchange.
• Cases related to trademarks and commercially used patents.
• Contract and compensation cases.

Cases That Do Not Fall Within the Jurisdiction of the Commercial Court and When They Are Referred to Another Authority

There are certain exceptions that do not fall within the jurisdiction of commercial courts, including:

• Commercial courts do not have jurisdiction over real estate claims, even if both parties are merchants and the claim arises from commercial activities, whether original or ancillary. Such cases fall within the jurisdiction of the general court, as do claims related to traffic accidents.
• Violations related to commercial regulations do not fall within the jurisdiction of commercial courts; currently, the general court also has jurisdiction over them.
• If a company’s activity is not commercial and the company has not acquired commercial status, claims related to it fall within the jurisdiction of general courts.
• If the claim is filed against a defendant who is not resident in the Kingdom, jurisdiction belongs to the court located in the place where the plaintiff resides.
• Any claim filed against government entities must be filed at the main headquarters of the competent court.
• As for claims related to public and private companies, institutions, and associations, the claim is filed at the administrative center of the court within whose jurisdiction it falls, whether the claim is filed against the company or institution, filed by the company against one of its members, or filed by a partner or any other person in the company.

How Does the Judge Resolve Conflicts in Determining Jurisdiction Between the Commercial Court and Other Courts?

Conflicts in determining jurisdiction between the commercial court and other courts in Saudi Arabia are resolved by referring to the nature of the dispute and the parties involved, in accordance with the applicable judicial regulations.

The judge primarily relies on the legal characterization of the claim, meaning determining its correct legal description: whether it is a commercial, civil, or labor claim. This is based on the subject matter of the dispute. If it becomes clear that the dispute arises from a commercial activity or is between merchants in connection with their commercial activity, jurisdiction belongs to the commercial court. However, if the dispute is civil or related to a non-commercial relationship, it is referred to the other competent court.

The judge also considers the capacity of the parties. The existence of two merchants does not necessarily mean that the dispute is commercial; it must be connected to their commercial activity. Likewise, when a company is a party to the dispute, the nature of the relationship forming the basis of the claim is examined to determine the competent authority.

Common Mistakes When Filing a Claim Before the Commercial Court Due to Misunderstanding Jurisdiction

Correctly determining judicial jurisdiction is one of the most important steps when filing a claim. However, many mistakes occur because of misunderstanding the nature of jurisdiction, which may lead to the claim being dismissed on procedural grounds, referred to another court, and delayed. The most prominent of these mistakes include:

• Filing a commercial claim before a non-competent authority, such as filing a civil or labor-related claim before the commercial court without verifying the true nature of the dispute.
• Relying only on the parties’ capacity, such as assuming that the presence of a company or merchant in the dispute automatically means commercial court jurisdiction, without considering whether the dispute is actually connected to commercial activity.
• Incorrect legal characterization of the claim, which is one of the most common mistakes, where the dispute is described inaccurately, leading it to be directed to a non-competent judicial authority.
• Ignoring the nature of the contractual relationship, such as filing a service or employment contract claim as a commercial claim, although it is governed by another legal system.
• Failing to pay attention to the existence of a jurisdiction or arbitration clause, where the contract may specify a certain authority or arbitration to resolve the dispute, yet the parties resort directly to the commercial court.
• Confusing commercial activities with civil activities, especially in mixed activities, which leads to filing the claim before the wrong authority.
• Ignoring territorial jurisdiction, such as filing the claim in a city that lacks territorial jurisdiction, which results in referral and procedural delay.

What Is the Best Law Firm Specialized in Commercial Cases?

Nawaf bin Awad Al-Harbi Law Firm is considered one of the leading firms specialized in company cases, thanks to its team of lawyers specialized in these matters and fully familiar with commercial courts of all types and jurisdictions.

The firm’s team represents merchants and companies before commercial courts at all levels of litigation, while preparing and submitting legal memoranda in accordance with the requirements of the Executive Regulations of the Commercial Courts Law. They also draft commercial contracts in a legally sound manner that ensures compliance with the provisions of the new Commercial Courts Law.

If you are looking for the best law firm specialized in commercial cases in Saudi Arabia, contact us now.

Conclusion

Understanding the jurisdiction of commercial courts is an essential element that directly affects the progress and outcome of a claim. Handling commercial claims requires strong awareness of the nature of the applicable regulations, and knowing the court’s jurisdiction saves you a great deal of time and effort.

Frequently Asked Questions

What are commercial courts?

The commercial court is one of the branches of first-instance courts in Saudi Arabia. It exists across all governorates and regions of the Kingdom and has jurisdiction over original and ancillary commercial cases.

What is the limitation period under the Commercial Courts Law?

The limitation period under the Commercial Courts Law means the period after which the right to file a claim or demand a commercial right lapses. Its purpose is to stabilize transactions and prevent delayed disputes. The limitation period varies depending on the nature of the claim and the type of commercial relationship between the parties.

Does the commercial court have jurisdiction over company cases only?

No. Its jurisdiction includes all disputes arising from commercial activities between merchants and companies, as explained in this article, provided that these cases actually fall within its subject-matter jurisdiction.