Saudi Basic Industries Corporation (SABIC) was a Saudi Arabian corporation owned by the Saudi government. In the 1970s, it entered into joint ventures with Mobil and Exxon, under contracts governed by Saudi law. The agreements forbade the participants from charging a “mark-up” on any products purchased for the joint venture, but SABIC violated this provision for two decades.

ExxonMobil and SABIC sued each other in federal court in Delaware for breach of contract and tort. Because the Delaware court was required to apply Saudi law, the judge brought in notable experts in shari’a law for instruction.

The jury found SABIC liable for Saudi tort of usurpation (ghasb) and awarded ExxonMobil $416 million. SABIC appealed to the Delaware Supreme Court for a new trial, arguing that that the trial court’s application of Saudi law was flawed.

Issue: Did the U.S. court err in its application of shari’a law?

Excerpts from Justice Jacobs’s Decision:In Saudi Arabia, Islamic law (shari’a), which is a fundamentally religious law based on both the Q’uran and the model behavior of the Prophet Muhammed, is the law of the land. Although early Islamic law scholars eventually coalesced into various guilds or schools, only four of those guilds have survived in modern times: theHanbali, the Hanafi, the Shafi’i and the Maliki. In Saudi Arabia, the judges are instructed to rule exclusively in accordance with the teachings of the Hanbali guild. 

The Saudi law system differs in critically important respects from the system of legal thought employed by the common law countries, including the United States. Perhaps most significant is that Islamic law does not embrace the common-law system of binding precedent and stare decisis. Indeed, in Saudi Arabia, judicial decisions are not in themselves a source of law, and with minor exceptions, court decisions in Saudi Arabia are not published or even open to public inspection. The trial judge was keenly mindful of this distinctive characteristic of Saudi law.

Exxon and Mobil entered into separate contracts with SABIC, but by the time of this lawsuit had merged to form one company named ExxonMobil.

Instead of relying upon statutes or decisional precedent to discern the law applicable to a particular case, judges in Saudi Arabia must “first and lastnavigate within the boundaries” of the Hanbali school’s authoritative works, which are the scholarly treatises. Using these writings as guides, Saudi judges identify a spectrum of possibilities on any given question, rather than a single ‘correct’ answer.

Thus, in this highly different legal environment, the predominate factor in determining the Saudi law on a given issue is the study and analysis, or ijtihad, that a judge brings to bear in each particular case. To state it in different terms, the critical inquiry is whether the proper analytical procedures are followed in reaching the results.

The judge made exceptional efforts to ensure that she was fully informed of the Hanbali teachings. Before trial, the parties presented [her] with seven reports from four Saudi law experts. [She also] retained an independent expert, who conduct[ed] additional research in Saudi Arabia. After reviewing a total of nine reports and more than 1,000 pages of testimony, the judge then held a day-long pretrial hearing, to [hear] live testimony from [the experts]. Only after this extensive process did the trial court undertake to determine the disputed elements of ghasb.  

It is remarkable that SABIC, having [purposefully] selected this forum instead of a Saudi Court, knowing the United States legal system is dramatically different than the Saudi legal system, comes forward after a verdict against it to claim that no American judge is qualified to interpret and apply Saudi law. This is particularly incredible in light of SABIC’s vehement argument that this case should be tried by a U.S. judge.

For the foregoing reasons, the judgment of the Superior Court awarding damages to ExxonMobil is affirmed.

Questions:

1. What is the predominate factor in determining the Saudi law on a given issue?

2. Which four guilds in Saudi Arabia have survived into modern times?

3. Which of these guilds are judges in Saudi Arabia instructed to rule exclusively in accordance with?