CRITICISMS

Despite economic development and the liberalisation of the market, the Saudi government has not revised the relevant law to take into account new trends. Therefore, current legislation fails to provide sanctions for some forms of activities that elsewhere would be punishable as crimes as these activities (whether they are difficult to detect or not) are not identified within the relevant legislation.

The absence of comprehensive guidelines and robust legal provisions, along with outdated private commercial legislation, has been identified as the primary reason for the Saudi government’s failure to effectively regulate the activities of corporations in the KSA. In fact, the Kingdom’s main corporate law, the Commercial Court Law 1931 (CCL’31),^[698] which was made by the Royal Decree No. M/6, is considered outdated as it was promulgated in the mid-1960s. While this particular legislation has been amended a number of times, it continues to have shortcomings, in particular in regard to measures to regulate company activities.^[699] Not only is the Commercial Court Law outdated and inefficient, the rest of the regulatory instruments merely provide basic guidelines without having any legal or mandatory requirements. Notable in this respect are the Corporate Governance Regulations 2006 (CGR’06) introduced by the Kingdom’s Capital Market Authority (CMA) in 2006.^[700] It could be argued that even though the KSA is a leader of the GCC^[701] and OPEC,^[702] and a member of the WTO, its rules and regulations dealing with companies are outdated, and many restrictions inhibiting commercial activities still apply to the Saudi economy.^[703] These have arguably contributed to the failure to effectively enforce the law. Considering the importance of legal certainty about subjects’ rights and obligations together with their effective enforcement, the current CL’15 undermines the effectiveness of the domestic legal framework.

Hand by hand with ambiguous or obsolete laws there comes a possibility of the existence of legal lacunae, or misinterpretation or circumvention of laws. With regard to corporate crimes it is then very difficult to maintain a high standard of compliance with legal provisions. Application of unamended outdated rules on new forms of crimes that have accompanied new technologies can never cover all the aspects of malicious acts and identify the persons responsible. Problems with interpretation and application of the respective laws by judges con­sequently cause difficulties with enforcement. Therefore, it can be seen that the current version of the CL’15 has been ineffective in dealing with increasing corporate crime.

The basic regulatory frame of the penal law of corporations is contained in sections 211 to 214 of CL’15. According to the writer’s view, the main drawbacks of its legal provisions are weak correlation with the needs of today’s society, inadequate theoretical and legal judicial process, the lack of clear identification of the persons that can be held liable, ineffective sanctions and a lack of public confidence in the legislation.

Outdated Character and Weak Correlation with the Needs of Today’s Society

The CCL’31 was enacted in 1931 with a view to boosting a healthy competitive environment in the KSA market. However, the formation, management and supervision of today’s companies differ from those of 1931. According to this writer’s view, the current penalties, which in the CL’15 cannot deter the new corporate crimes, and the law does not provide for any supplementary penalties, such as publication of the crime committed and its penalty, as well as deprivation of the ability to conduct commercial/business activities. Moreover, the CCL’31 was issued in 1931. Both the CCL’31 and the CL’15 are no longer able to deter corporate crimes and should be replaced by effective new legislation under one law, which should be named Commercial Law.

Lack of Sufficient Theoretical and Legal Process and Lack of Trust

The commercial courts in the KSA still lack public confidence. In the writer’s view, one of the reasons for this lack of confidence is that the judges and lawyers are not properly qualified for the tasks in hand. In addition, there are a lot of delays with regards to the issuing of the decisions. Such delays can be measured either by the average length of the trial, or by the percentage of the lawsuits concluded in one year out of the total number of lawsuits. Moreover, the laws related to corpor­ations are outdated; and there are no professional judges for, nor a body of specialised practitioners in, company disputes; nor specialised com­mercial courts.

Individual Liability

The CL’15 does not provide for a clear explanation for persons who are held criminally liable for the crime of offering company shares for subscription, under the scope of the application of section 211 of the CL’15. This, the writer considers, is another flaw in the CL’15.

Ineffective Sanctions

The study has revealed the weakness of the CL’15 in terms of the penalties for crimes related to formation of company capital during the phase of its incorporation as compared to those sanctions provided under company laws of some members of the Gulf Cooperation Council (GCC). Sanctions in other member countries include imprisonment and fines. In comparison, however, the KSA fines are very low. The CL’15 imposes a fine on the company based on section 217; it may be imposed on an individual if he or she committed a crime under section 211 of the CL’15. However, some opponents of the imposition of substantial fines may argue that the effects may be disproportionate. There have been cases where the Court itself has reduced the fine, in order not to have negative consequences on the corporation.^[704] Those arguing against heavy fines may also point out that such fines will further adversely affect the innocent, that is, excessive fines can have perverse effects that may have to be borne by innocent shareholders, creditors, employees or consumers. However, penalties in terms of both imprisonment and fine are very low in the KSA compared to the ones imposed by the legislation of other countries.

IV.