Saudi Arabia
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes, in the context of disputes considered by the commercial Courts, freezing orders are generally only available domestically. A party to a dispute (outside the territory of Saudi Arabia) can however file a summary application to impose a freezing order against a counterparty to preserve a disputed right that is being considered in another territory.
The respondent is prohibited from dealing with the assets referred to in the freezing order until a specified time (for example, a further hearing, judgment or payment) or further order of the Court.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
Yes, if applied for by the applicant (for example, a travel ban). At the point of enforcement, if the order does not specify which assets are subject to the freezing order, the Court might order the respondent to file a statement of its assets.
3. Briefly what is the relevant legal test?
(i) The applicant has a good arguable case in the substantive or prospective claim;
(ii) the respondent has identifiable assets;
(iii) there is a risk that unrepairable harm is going to be sustained if the order is not granted;
(iv) the underlying claim is urgent.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant makes an application to the Court setting out the basis on which the relevant test is met. The Court will decide whether to notify the respondent, and if deemed necessary, the Court will accordingly notify the respondent. An application for a freezing order can be made before the applicant issues the substantive claim, if so, the substantive claim must be issued within seven days from issuing the application for a freezing order. The Court considering the application will provide judgment, in most of the cases at the first hearing, and in all cases, within three days of the application being issued.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
Yes. The applicant may need to (only if ordered by the Court) provide a guarantee to compensate the respondent if the substantive claim is unsuccessful. The Court has discretionary power in this regard.
6. Can it be sought against third parties?
No.
7. What assets are covered by a freezing (or equivalent) order?
Generally speaking, any tangible or intangible assets.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
No.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
At any stage, including prior to commencing the claim or following judgment to assist with enforcement.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
No.
12. What happens after a freezing (or equivalent) order is granted?
The respondent has ten days from the date of service of the freezing order to appeal. At the appeal hearing, the freezing order will either be set aside or upheld until the substantive claim is decided. Once the freezing order becomes final (either there is no appeal within ten days or if the freezing order is upheld), the Court and the applicant will notify third parties (such as banks) of the freezing order when they might hold the respondent’s assets.
13. Who pays the costs of the application for a freezing (or equivalent) order?
Generally speaking, the losing party will be order to pay the judicial costs of the application.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
The following protections generally apply:
(i) a third party is not prevented from exercising any rights of set-off arising prior to its notification of the freezing order;
(ii) a third party does not need to enquire as to the application of any money withdrawn by the respondent if the withdrawal appears to be permitted by the freezing order;
(iii) a freezing order only affects third parties outside of the jurisdiction if the rules for recognizing and enforcing such freezing order in the other country are satisfied;
(iv) as regards assets outside of the jurisdiction, a freezing order does not prevent a third party from complying with (a) what it reasonably believes to be its obligations under the law of the country where the assets are located or any contract between itself and the respondent or (b) any orders of the Courts of the country where the assets are located; and
(v) applicants might be required to pay the reasonable costs of any third party which have been incurred as a result of the order.
15. What are the consequences of breach of a freezing (or equivalent) order?
The basic position is that the party who breached the freezing order might be ordered to pay damages to the applicant. The amount of damages will be equivalent to the value of the frozen asset subject to the breach. The sale of a frozen asset may be annulled by the Court on an application by the applicant. Finally, a receiver who breaches the freezing order might be sanctioned by the Court by imprisonment for a period not exceeding three years.
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
Possibly, if the third party (which would include banks) knowingly assisted the respondent in disposing of the frozen asset. In such circumstances, the applicant may have grounds to claim damages from such third party relying on Sharia principles.
17. Can a freezing (or equivalent) order be enforced abroad?
Yes, in principle, although subject to the laws of the relevant jurisdiction. However, this can only be sought with the permission of the Court and enforcement itself will be a matter of local law.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
Yes.
Contact
Mostafa Ihab Legal Director AlDhabaan & Partners in association with Eversheds Sutherland (International) LLP Riyadh, Saudi Arabia mostafaihab@aldhabaan-es.com www.aldhabaan-es.com
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