Subrogation action in the Kingdom

From our observation, the Cooperative Insurance Companies Control Law issued by Royal Decree no. m/32, 2 Jumada II 1424 Hijri corresponding to 31 July 2003 has resulted in some uncertainty among insurers because the instrument provided the Governor of Saudi Central Bank the authority to form Committees, commonly known as “Insurance Disputes Committees”, to resolve insurance-related disputes.

The existence of such powers to form said Insurance Disputes Committees had consequently created uncertainty concerning the status of courts and arbitration panels and if they remain the or a competent and appropriate forum to resolve disputes or do the Insurance Dispute Committees now have exclusive jurisdiction over insurance-related disputes.

In a recent case, Recovery Advisers had succeeded in obtaining an order from a domestic court of the Kingdom to compel a local debtor to pay an ECA the full amounts owing that arose from the underlying trade transactions which the ECA had underwritten (“the Order”).

In this instance, we had acted for a foreign ECA against a debtor incorporated in Saudi Arabia and secured an order to recover not only the indemnified amount, but the full quantum of the underlying trade transactions.

In our view, securing of the Order means that Royal Decree no. m/32 notwithstanding, local courts remain a forum foreign ECAs may seek recourse and enforce their rights as a subrogee. Moreover, this being a first ECA claim under the new commercial court rules that came into effect in 2020, we saw that the lead-time from lodgment of claim to securing of the Order was around 2 months until the first instance judgement was rendered.

This also means that judicial recovery in the Kingdom remains — or perhaps has become more viable — an avenue for creditors to enforce their rights, particularly given the enhanced time-effectiveness.

Support from Recovery Advisers in Saudi Arabia

Recovery Advisers has extensive experience in the Kingdom of Saudi Arabia, enabling the company to effectively and promptly support ECAs, exporters and financial institutions with exposure in the Kingdom.

The Saudi office, which provides services in claims and recovery management, aged receivables management, and international commercial dispute resolution, is led by Mr. Abdullah Alghusn who has more than 8 years of experience in practice.

Contact us to discuss how we can support your business in Saudi Arabia, and worldwide.