Are there mechanisms in place to allow companies to complain about perceived malpractice in procurement, and are companies protected from discrimination when they use these mechanisms?
68a. Complaints mechanisms
Saudi Arabia score: 100/100
Companies have no opportunity to complain about perceived malpractice in procurement.
In the case of no formal mechanisms, informal communication channels are used by companies to complain about perceived malpractice in procurement.
Formal mechanisms are in place to allow companies to complain about perceived malpractice in procurement. This may include both a court process and an internal complaints mechanism.
In the past, companies could complain to the Board of Grievances (BOG), Saudi Arabia’s principal and highest administrative tribunal. The BOG had jurisdiction over contract-related disputes where a government entity or an independent public corporate entity is a party (1). In 2017, Saudi authorities established specialized commercial courts and related appeal centres throughout Saudi cities to produce a stronger legal framework for settling disputes (2). These courts are independent institutions directly under the Saudi Ministry of Justice (MoJ) rather than a branch of the BOG and began operating in September 2018 (3). According to the MoJ, the commercial courts issued more than 1,181 judgments in their second month of operation (4) No further details were released on the nature of these cases, and it is unclear whether any of them were related to procurement or other malpractice in defence contracts. However, the courts have taken over the functions of the BOG, which in the past handled disputes regarding defence contracts. Based on anecdotal evidence from the websites of law firms operating in Saudi Arabia, foreign defence contractors have in the past pursued complaints through the BOG, though there is no reference to corruption complaints, but rather to issues such as employment disputes and corporate governance practices (5), (6). According to our sources, complaints are usually solved informally and through personal relations. Defence procurement and purchases are confidential and do not go through civil courts or bodies such as the BOG. In addition to that, it is advised and known that personal and informal communications are much better to solve such malpractice, for fear of exclusion from future activities (7), (8).
Additionally, in May 2016, the Saudi government launched the Saudi Center for Commercial Arbitration (SCCA), a body tasked with administering arbitration procedures in civil and commercial disputes where parties agree to refer their disputes to SCCA arbitration. The SCCA’s decisions are enforceable under both domestic arbitration laws and international treaties such as the 1958 New York Convention (9).
1. “Board of Grievances law,” Embassy of Saudi Arabia in Washington DC, https://www.saudiembassy.net/board-grievances-law.
2. “Saudi Arabia sets up commercial courts to expedite investment,” Reuters, October 16, 2017, https://www.reuters.com/article/us-saudi-court/saudi-arabia-sets-up-commercial-courts-to-expedite-investment-idUSKBN1CL2DT.
3. “‘There Has Never Been a Better Time to Invest in Saudi Arabia,’ Says Ministry of Justice,” PR Newswire, August 6, 2018, https://www.prnewswire.com/news-releases/-there-has-never-been-a-better-time-to-invest-in-saudi-arabia-says-ministry-of-justice-842216592.html.
4. John Balouziyeh, “Judicial Reform in Saudi Arabia: Recent Developments in Arbitration and Commercial Litigation,” Kluwer Arbitration Blog, December 31, 2017, http://arbitrationblog.kluwerarbitration.com/2017/12/31/judicial-reform-saudi-arabia-recent-developments-arbitration-commercial-litigation/.
5. Law Office of Hassan Mahassni, http://www.mahassni.com.sa/prc_litigation.htm.
6. Law Firm of Mohammed Al-Ghamdi In Association with Norton Rose Fulbright US LLP, http://www.nortonrosefulbright.com/people/90185/mohammed-al-ghamdi%20[accessed%208%20April%202015.
7. Interview with Financial Officer (MoF), June 20-21, 2019.
8. Interview with Businessman/Supplier for the KSA army, June 22-24, 2019.
9 Saudi Center for Commercial Arbitration, https://www.sadr.org/ADRServices-arbitration-arbitration-rules?lang=en.
68b. Effectiveness and Accessibility
Saudi Arabia score: 0/100
The complaints mechanisms available to companies are costly and inefficient, and are thus rarely used.
The complaints mechanisms available to companies may be inefficient or expensive, but are occasionally used regardless.
The complaints mechanisms available to companies are efficient and reasonably priced, and are regularly used.
Sources report, that the complaint mechanism is not only costly in time and efforts, but it can lead to future exclusion, which means huge financial costs. Therefore, bidders and suppliers refer to informal mechanisms and informal relations with commanders and officials to solve such conflicts (1), (2). Historically, dispute resolution mechanisms in Saudi Arabia have been criticized as being plagued by uncertainty and inefficiency. Cases would typically take as long as two to three years, and sometimes even longer to finish. Furthermore, commercial courts under the BOG have traditionally asserted jurisdiction over contract disputes in Saudi Arabia, applying Saudi law regardless of whether the parties involved entered into arbitral or side agreements subject to foreign law (3). In some cases, the courts have refused to enforce arbitral awards on widely-interpreted public policy grounds.
Additionally, arbitration is prohibited in disputes involving Saudi government bodies and private contractors, unless approval is obtained by the king, or arbitration as provided for under a special provision of the law. This is a holdover from a landmark case during the 1960s in which an arbitral tribunal rendered an award against the Saudi Arabian government in favour of the Arabian American Oil Co (ARAMCO), which was then majority US-owned (4).
Recently, it appears the government has made efforts to encourage arbitration and streamline the dispute resolution process. This includes creating the above mentioned commercial courts for dispute resolution in October 2017, as well as the SCCA in May 2016. It remains to be seen whether these developments, particularly the establishment of the commercial courts, will lead to meaningful change and improvements in the dispute resolution process for companies operating in Saudi Arabia.
1. Interview with Financial Officer (MoF), June 20-21, 2019.
2. Interview with Businessman/Supplier for the KSA army, June 22-24, 2019.
3. John Balouziyeh, “Judicial Reform in Saudi Arabia: Recent Developments in Arbitration and Commercial Litigation,” Kluwer Arbitration Blog, December 31, 2017, http://arbitrationblog.kluwerarbitration.com/2017/12/31/judicial-reform-saudi-arabia-recent-developments-arbitration-commercial-litigation/?print=pdf.
4. “The Dispute Resolution Review – Edition 10: Saudi Arabia,” The Law Reviews, March 9, 2018, https://thelawreviews.co.uk/chapter/1166494/saudi-arabia.
Saudi Arabia score: 0/100
Companies believe that if they complain they will be unfairly disadvantaged or debarred from future procurements.
Companies rarely complain because they believe that they will be discriminated in future procurement cycles.
For genuine (non-malicious) complaints, companies believe that they will not be discriminated against in future procurements.
According to sources, companies and suppliers fear exclusions when using formal mechanisms, as there are no policies to protect them from arbitrary actions. Therefore, they rarely if ever complain and refer to informal relationships to solve conflicts (1). According to a Gulf affairs expert, “there are mechanisms in place but companies fear retaliation, so very rarely use them. For the most part, they will seek either official (embassies) or informal channels (networks) to resolve such issues” (2).
1. Interview with Businessman/Supplier for the KSA army, June 22-24, 2019. 2. Gulf affairs expert, email message to author, March 14, 2019.
Compare scores by country
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|Country||68a. Complaints mechanisms||68b. Effectiveness and Accessibility||68c. Retaliation|
|Albania||100 / 100||100 / 100||50 / 100|
|Algeria||100 / 100||50 / 100||0 / 100|
|Angola||100 / 100||0 / 100||50 / 100|
|Argentina||50 / 100||0 / 100||NEI|
|Armenia||100 / 100||100 / 100||50 / 100|
|Australia||100 / 100||100 / 100||75 / 100|
|Azerbaijan||100 / 100||0 / 100||0 / 100|
|Bahrain||0 / 100||NA||NA|
|Bangladesh||100 / 100||25 / 100||NEI|
|Belgium||100 / 100||75 / 100||100 / 100|
|Bosnia and Herzegovina||100 / 100||50 / 100||100 / 100|
|Botswana||100 / 100||50 / 100||NEI|
|Brazil||100 / 100||NEI||NEI|
|Burkina Faso||100 / 100||0 / 100||0 / 100|
|Cameroon||0 / 100||NA||NA|
|Canada||100 / 100||100 / 100||100 / 100|
|Chile||100 / 100||50 / 100||75 / 100|
|China||100 / 100||NEI||NEI|
|Colombia||50 / 100||50 / 100||NEI|
|Cote d'Ivoire||100 / 100||NEI||50 / 100|
|Denmark||100 / 100||100 / 100||100 / 100|
|Egypt||100 / 100||0 / 100||0 / 100|
|Estonia||100 / 100||75 / 100||100 / 100|
|Finland||100 / 100||75 / 100||100 / 100|
|France||100 / 100||75 / 100||50 / 100|
|Germany||100 / 100||100 / 100||75 / 100|
|Ghana||100 / 100||0 / 100||0 / 100|
|Greece||100 / 100||100 / 100||100 / 100|
|Hungary||25 / 100||50 / 100||50 / 100|
|India||100 / 100||50 / 100||75 / 100|
|Indonesia||100 / 100||100 / 100||100 / 100|
|Iran||50 / 100||0 / 100||0 / 100|
|Iraq||25 / 100||25 / 100||0 / 100|
|Israel||100 / 100||100 / 100||100 / 100|
|Italy||100 / 100||50 / 100||100 / 100|
|Japan||100 / 100||NEI||NEI|
|Jordan||0 / 100||NA||NA|
|Kenya||100 / 100||100 / 100||25 / 100|
|Kosovo||100 / 100||50 / 100||100 / 100|
|Kuwait||0 / 100||NA||NA|
|Latvia||100 / 100||100 / 100||100 / 100|
|Lebanon||100 / 100||NEI||NEI|
|Lithuania||100 / 100||100 / 100||100 / 100|
|Malaysia||100 / 100||50 / 100||50 / 100|
|Mali||100 / 100||100 / 100||50 / 100|
|Mexico||100 / 100||100 / 100||NEI|
|Montenegro||75 / 100||50 / 100||50 / 100|
|Morocco||50 / 100||NEI||0 / 100|
|Netherlands||100 / 100||100 / 100||50 / 100|
|New Zealand||100 / 100||100 / 100||100 / 100|
|Niger||100 / 100||100 / 100||NEI|
|Nigeria||50 / 100||0 / 100||0 / 100|
|North Macedonia||100 / 100||100 / 100||100 / 100|
|Norway||100 / 100||100 / 100||75 / 100|
|Oman||50 / 100||NA||NA|
|Palestine||100 / 100||0 / 100||0 / 100|
|Philippines||75 / 100||NEI||100 / 100|
|Poland||75 / 100||100 / 100||75 / 100|
|Portugal||100 / 100||50 / 100||50 / 100|
|Qatar||50 / 100||50 / 100||0 / 100|
|Russia||100 / 100||75 / 100||75 / 100|
|Saudi Arabia||100 / 100||0 / 100||0 / 100|
|Serbia||100 / 100||50 / 100||100 / 100|
|Singapore||100 / 100||100 / 100||100 / 100|
|South Africa||100 / 100||50 / 100||25 / 100|
|South Korea||100 / 100||50 / 100||50 / 100|
|South Sudan||100 / 100||NEI||NEI|
|Spain||100 / 100||100 / 100||50 / 100|
|Sudan||25 / 100||0 / 100||NEI|
|Sweden||100 / 100||100 / 100||100 / 100|
|Switzerland||50 / 100||100 / 100||100 / 100|
|Taiwan||100 / 100||75 / 100||75 / 100|
|Tanzania||100 / 100||50 / 100||NEI|
|Thailand||100 / 100||0 / 100||0 / 100|
|Tunisia||100 / 100||75 / 100||0 / 100|
|Turkey||100 / 100||50 / 100||0 / 100|
|Uganda||100 / 100||50 / 100||NEI|
|Ukraine||100 / 100||75 / 100||0 / 100|
|United Arab Emirates||0 / 100||NA||NA|
|United Kingdom||100 / 100||75 / 100||100 / 100|
|United States||100 / 100||100 / 100||NEI|
|Venezuela||100 / 100||0 / 100||0 / 100|
|Zimbabwe||100 / 100||50 / 100||50 / 100|