SAUDI ARABIA Law and Practice Contributed by: Faisal Daudpota, Daudpota International (in alliance with Khalil Aljehani Law Firm)
• Creditor liability: The party seeking the arrest is financially responsible for the vessel’s maintenance (including port fees and crew expenses) during detention and must usually provide an undertaking to cover these costs when applying. 5.11 Insolvency Laws Applied by Maritime Courts Saudi Arabia’s Bankruptcy Law (2018) establishes a framework analogous to US Chapter 11, prioritising corporate rescue over liquidation. • Automatic stay: Procedures like financial restruc - turing trigger a mandatory moratorium, prevent - ing creditors from taking legal action against the debtor or their assets to avoid piecemeal disman - tling of the company. • Prohibition on arrest: Consequently, maritime courts are generally prohibited from arresting or selling a vessel owned by a debtor once restructur - ing has commenced. • Creditor recourse: Instead of pursuing an inde - pendent in rem arrest, creditors – including those with maritime liens – must submit their claims to the bankruptcy trustee or the commercial court overseeing the insolvency. 5.12 Damages in the Event of Wrongful Arrest of a Vessel Saudi courts award damages for wrongful arrest if the detention is arbitrary, lacks legal justification or results from malicious prosecution, following the Sharia prin - ciple of “no harm” to restore the victim’s prior state. Grounds for Liability Liability arises from detaining someone without a war - rant (unless caught in flagrante delicto), violating pro - cedural time limits, or initiating malicious prosecution based on fabricated allegations. Additionally, a final acquittal establishing innocence or illegal detention regarding private debts can trigger liability. Types of Compensation These include: • material damages – covers financial losses like lost income and legal fees;
• moral damages – compensates for emotional dis - tress, defamation and damage to reputation; • daily compensation – courts often award a specific amount for each day of unjust imprisonment; and • judicial costs – the Court of Grievances may impose legal costs on the responsible party, whether a private entity or government authority. 6. Passenger Claims 6.1 Laws and Conventions Applicable to the Resolution of Passenger Claims Maritime passenger claims in Saudi Arabia are gov - erned by the Commercial Maritime Law (2019), along - side the LLMC Convention (1976/1996 Protocol) and Sharia Law where statutes are silent. • Time limits: Claims arising from passenger carriage contracts and marine insurance generally have a limitation period of two years. • Liability limits: Under the LLMC/1996 Protocol, a ship-owner’s liability for personal injury or death is capped at 175,000 SDR multiplied by the vessel’s passenger capacity. This limit is virtually unbreak - able – unless it is proven that the owner acted with personal intent or recklessness to cause the loss. • Legal status: Claims for passenger injury or death are officially classified as “maritime debts” under Article 75 of the Commercial Maritime Law. 7. Enforcement of Law and Jurisdiction and Arbitration Clauses 7.1 Enforcement of Law and Jurisdiction Clauses Stated in Bills of Lading Courts in Saudi Arabia generally recognise and enforce law and jurisdiction clauses stated in bills of lading, but this is subject to significant limitations based on public policy, Sharia principles and manda - tory local laws. With the modernisation of the Saudi legal system, courts are more likely to respect party autonomy and exclusive jurisdiction clauses (eg, in favour of London or other international courts) to ensure international
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