| Submit your comments on this article |
| Arabia |
| Saudi group set to be sued in French courts |
| 2005-08-08 |
| A small building contractor is planning to take one of the world's largest petrochemicals companies to court in France, in a move that is likely to raise questions about the true extent of reform to Saudi Arabia's legal system. Thinet International, a small construction company originally spun out of Vinci construction group of France, will next month launch legal action against Saudi Arabia's Sabic. Thinet is suing for damages of $100m (€81m, £56m) in a dispute over the construction of the petrochemicals group's headquarters in Riyadh. Thinet has turned to the French legal system after its victory in the kingdom's relatively new commercial courts was overturned on appeal. Under the French Civil Code, any French citizen or company can appeal against an unfavourable foreign court ruling if it feels unfairly judged. Sabic, 70 per cent owned by the Saudi government, awarded the $120m contract to Thinet in 1998. However it withheld final payment, claiming delays meant the building was not completed on time, although it moved into the headquarters. Thinet took its case to the commercial section of the kingdom's grievance board, the Saudi equivalent of the arbitration and claims tribunal, as set out by the Sabic contract. The judges found in Thinet's favour and Sabic was ordered to pay about $35m. However this was overturned after Sabic appealed against the judgment. The judicial review panel ruled that Thinet's complaint should have been judged under civil and not commercial law. This means that Thinet's case in Saudi Arabia will now be tried according to Sharia law, which the French company argues will take far longer and is not equipped to deal adequately with contractual disputes. Sharia law does not recognise the payment of interest or penalties, for example. Thinet's experience is likely to exacerbate the concerns of foreign businesses operating in the kingdom. The World Bank estimates that commercial disputes in Saudi Arabia take 44 procedures and 360 days to resolve, at a cost totalling some 20 per cent of the contract value. US commercial disputes require fewer than 10 procedures and 250 days, costing an estimated 7.5 per cent of the contract value. Sabic said it would not comment on the dispute while it was before the courts. The group is the world's seventh largest petrochemicals company, operating in more than 100 countries. Its chairman is a member of the royal family, Prince Saud bin Thunayan al-Saud. Last year it generated operating income of SR23.6bn (£3.5bn, $6.3bn, €5bn) and sales of SR68.7bn. Thinet, which operates mainly in the Middle East, generated sales last year of nearly $100m and made a modest profit after several years of losses. The company attributes the losses to the dispute. |
| Posted by:leader of the pack |