SAUDI ARABIA Trends and Developments Contributed by: Faisal Daudpota, Daudpota International (in alliance with Khalil Aljehani Law Firm)
The judgment obligated the owners to pay over SAR825,000 and confirmed the validity of the arrest. This decision reinforces the security of suppliers in Saudi ports, confirming that the vessel itself acts as the ultimate guarantor of its operational debts. The privileged debt status effectively pierced the opera - tional veil the owners attempted to construct. Tugboat dispute and the owner/operator divide: Case No 298 of 1439H – Madinah General Court (First Commercial Circuit) Context This case highlights the complexities arising when a vessel is chartered. A shipping agent provided ser - vices to a foreign tugboat docked in Yanbu. The agent sued both the operator (charterer) and the registered owner for unpaid fees of approximately SAR456,000. The agent obtained a precautionary arrest against the tugboat. Legal arguments The registered owner (Defendant 2) intervened, argu - ing a lack of privity. They presented the charter party agreement, which explicitly assigned responsibility for port fees and agency costs to the operator (Defend - ant 1). The owner argued the arrest of their asset for the charterer’s debt was “malicious” and demanded its release. Conversely, the plaintiff argued that under GCC Port Regulations and Article 154 of the Commer - cial Court Law (regarding privileged debts), the agent has a right to proceed against the ship regardless of the internal charter arrangements. Judicial reasoning and insight The court’s final judgment reveals a sophisticated dis - tinction between procedural security and substantive liability. • Arrest validity: The initial arrest was valid because the debt was a maritime debt attached to the ves - sel’s operation, justifying the detention to prevent the loss of rights. • Substantive liability: However, in the final judg - ment on the merits, the court dismissed the claim against the owner, ruling they lacked standing ( sifah ) regarding the debt because the contract for
services was with the operator. The court ordered the heirs of the operator to pay the debt. • Outcome: The arrest was ordered lifted after the judgment became final. Implications This case establishes a critical precedent: while a ship can be arrested to secure a claim involving a charterer (forcing the owner to intervene), the Saudi courts will ultimately respect the corporate and contractual sepa - ration between owner and charterer regarding pay - ment liability, unless a specific statutory lien overrides the contract. The owner’s asset is held hostage to the process, but the owner’s bank account is technically protected from the final judgment if the charterer is the sole debtor. “Eight-day rule” (Article 79) Article 79 of the Maritime Law imposes a strict dead - line: a creditor who obtains an arrest order must file the substantive lawsuit regarding the validity of the debt within eight days of serving the arrest minutes. Failure to strictly adhere to this timeline renders the arrest void ab initio. In Case No 4470343937, the plaintiff explicitly pleaded compliance with this rule, noting the timeline between the arrest order (Order 4430289064) and the filing of the substantive claim. The court’s validation of the claim underscores that this is a jurisdictional hard line. Unlike some jurisdictions where extensions might be granted, Saudi courts treat this window as absolute to prevent indefinite detention of assets without trial. Security and counter-security The form of security is a critical operational detail. • For arrest: Plaintiffs typically must post security (counter-security) to cover potential damages to the defendant. In Case 298/1439, the plain - tiff deposited a certified check for the full claim amount (SAR456,454). • For release: To lift an arrest, defendants must provide security. In Case 4470412950, a defendant attempted to lift an arrest by offering a real estate title deed. The Jeddah Commercial Court sum - marily rejected this, ruling that Article 81 implies liquid financial security (cash or bank guarantee).
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