THE UNIVERSITY of HULL Under the Shadow of Sharia Law: The
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THE UNIVERSITY OF HULL Under the Shadow of Sharia Law: the Implementation of Government Procurement Agreement (GPA) Provisions by Saudi Arabian Government Tenders and Procurement Law being a Thesis submitted for the Degree of Doctor of Philosophy in the University of Hull By Abdulla Ali Alzaben, LL.B (MSU, Riyadh), LL.M (UCLAN, UK) (May, 2016) I Acknowledgments I would like to express my sincere gratitude to my supervisor Dr. Mike Varney, for his help, encouragement, ideas, kindness, and guidance. Without his support this thesis would not be completed. Also I would like to thank my second supervisor Professor Chris Bovis, for his help and kindness. Special thanks to my parents, for their support and patience. I know how hard it is to be away to study a PhD. My deep gratitude goes to my wife, Norah, and my children, Suhail and Balqees, for their support, patience and kindness. Also I would like to thank my friends, colleagues, and admins of the law school at the University of Hull for their help and encouragement. II Abstract This research is a scientific study about the approach of sharia law to the implementation of the requirements of the World Trade Organization’s (WTO) Agreement on Government Procurement (GPA) in government tenders and procurement law in Saudi Arabia. Saudi Arabia has reformed its legal system in order to be part of the WTO. Furthermore, Saudi Arabia has adopted measures to liberalize its procurement market, as it modified the procurement law in 2006. However, Saudi Arabia is not party to the GPA. The protective measures and lack of transparency are the main characteristics of the procurement law which contradict the main principles of the GPA which are transparency and non-discrimination. The impact of joining the WTO for Saudi Arabia was fruitful, as the quality of goods and services has been improved, and also the settlement of trade disputes has become professional. Therefore, as Saudi Arabia suffers from the low quality of products and services in some sectors, and stalled projects have become a relatively common feature, the main aim of this research is to bridge the gap between the GPA and procurement law. The chapters of this research will discuss the legitimacy of the GPA in the eyes of sharia law, which is the main source for all Saudi laws. The main contradiction between the GPA and procurement law will be reconciled according to the public interest methods which are approved by sharia law. The research considers some cases from the Board of Grievances [the administrative court] as well as some of the Council of Ministers’ decisions in Saudi Arabia. They show that there is an urgent need to reform the procurement law provisions, in particular provisions related to transparency and non-discrimination. In addition, these provisions might be the main reasons for the delay in joining the GPA by Saudi Arabia. III Table of contents: Acknowledgments…………………………….……………………………………. II Abstract………………………….…………………………………………………. III List of Abbreviations………………………….……………………………………. IX Chapter One: Introduction to the Research 1.1 Overview …………………………………………………………. 1 1.2 Aims and Objectives of the Study ……………………...………… 2 1.3 The Significance and Importance of this Study ………...………… 3 1.4 Research Questions …………………………………….…………. 7 1.5 Methodology ……………………………………………………… 7 1.5.1 Discovering and Analysing the Legal Texts ……………………… 8 1.5.2 The Compatibility Approach……………………………………… 9 1.5.3 The Reconciliatory Approach……………………………………... 11 1.5.4 The Sources and Data ………………………………….…………. 11 1.6 Organization of the Thesis.………………………………………... 12 Summary…………………………………………………………… 14 Chapter Two: The Requirements of the Government Procurement Agreement 2.1 Introduction ……………………………………………………… 15 2.2 The Background of the GPA……………………………………... 15 2.2.1 The Tokyo Round Agreement…………………………………… 17 2.2.2 Transparency in the Tokyo Code……………………………..….. 19 2.2.3 The Status of GPA as Plurilateral Agreement………….……… 20 2.3 The New Form of the GPA after Uruguay Round……………….. 20 2.4 The Aims of the GPA……………………………………………. 21 2.4.1 The Accession Process of the GPA……………………………… 24 2.5 The Main Key Features of GPA…………………………………. 26 2.5.1 Scope and Coverage……………………………………………… 26 2.5.2 The GPA Coverage Negotiation…………………………………. 29 2.5.3 Special and Differential Treatment for Developing Countries… 30 2.5.4 The Developing Countries Provision in the Revised Text of the GPA………………………………………………………………. 32 2.5.5 The Benefits and Costs of the GPA for Developing Countries….. 35 2.5.6 The Cost of Joining the GPA……………………………………. 38 2.5.7 Tendering Procedures……………………………………………. 38 2.6 Challenge Procedures……………………………………………. 41 2.6.1 Forum for Review……………………………………………….. 44 IV 2.6.2 Available Remedies under the GPA…………………………….. 48 Summary………………………………………………………… 50 Chapter Three: The Sharia Law Approach to the Government Procurement Agreement (GPA) 3.1 Introduction……………………………………………………… 53 3.1.1 The Sharia Law (An overview) ………………………………… 54 3.1.2 The Holy Quran……………………………..…………………... 55 3.1.3 The Prophetic Traditions (Hadith) ……………………………… 55 3.1.4 Consensus…………………………………...…………………… 56 3.1.5 Analogy……………………………………...………………….. 57 3.2 Sharia Law and International Agreements…..…………………… 58 3.2.1 Preamble…………………………………….…………………… 58 3.2.2 The Provisions of Personal Reasoning Ijtihad ………………….. 60 3.2.3 The Method of Personal Reasoning Ijtihad ……………………... 60 3.2.4 The Definition of Public Interest (Maslaha) …………………….. 62 3.2.5 The Objectives of Public Interest………………………………… 62 3.2.6 The Rules of Public Interest……………………………………… 63 3.3.1 Sharia Law and International Agreements………………………. 65 3.3.2 The Principle of International Agreement in Sharia Law………... 66 3.3.3 The Categories of International Agreement in Sharia Law……… 70 3.3.4 The Types of Agreements in Sharia Law………………………... 71 3.3.5 General Peace Agreements………………………………………. 72 3.3.6 Dhimmi (non-Muslim) Agreements……………………………… 73 3.4 The Provisions of Negotiations in Sharia Law…………………... 75 3.5.1 The Legitimacy of the GPA in Light of Sharia Law…………….. 77 3.5.2 The Implementation of the GPA Provisions on Transparency and Non-discrimination………………………………………………. 79 3.5.2.1 Implementing the Principle of Transparency…………………… 79 3.5.3 The Importance of Coordination between the GPA Parties and Saudi Arabia to turn the transactions to Islamic Financial transactions………………………………………………………. 82 3.5.4 The Permissible (Halal) Financial Instruments in Public Procurement……………………………………………………… 83 3.5.5 Transparency Standards under Sharia Law……………………… 84 3.5.5.1 Ethical Standards of Transparency under Sharia Law…………… 84 3.5.5.2 The Administrative Standard for Transparency………………….. 90 3.5.5.2.1 Implementing the Principle of Non-Discrimination……………... 92 3.6 Dispute Settlement in Islamic Jurisprudence……………………. 94 Summary………………………………………………………... 95 V Chapter Four: The Saudi Arabian Legal System and Procurement Law 4.1 Introduction………………………………………………………... 98 4.2 Saudi Arabian Legal system………………………………………. 99 4.2.1 The Saudi Arabian Legal System (an overview) …………………. 99 4.3 Saudi Arabian Legal System and the WTO……………………….. 99 4.3.1 The Impact of Joining the WTO…………………………………... 99 4.4 Saudi Arabian Legal System and Public Procurement Law………. 106 4.4.1 The Basic Law of Governance in Saudi Arabia (The Constitution). 106 4.4.2 The Relationship Between the Basic Law of Governance and Sharia Law………………………………………………………… 108 4.4.3 The Basic Law of Governance Regulating Trade…………………. 109 4.4.4 The Basic Law of Governance Regulating International Agreements………………………………………………………... 113 4.5.1 The Legal Framework for Public Procurement in Saudi Arabia….. 114 4.5.2 The Legal Background to Public Procurement in Saudi Arabia…... 114 4.5.3 The Reconstruction of the New Law……………………………… 116 4.5.4 The Concept of Public Procurement………………………………. 117 4.5.5 The Objective of the Public Procurement System………………… 118 4.5.6 The Aims of the New Procurement Law in Saudi Arabia………… 119 4.6 Government Tenders and Procurement Law in Saudi Arabia: (An Outline of the New Law) …………………………………….. 123 4.6.1 Applicability………………………………………………………. 123 4.6.2 Methods of Procurement…………………………………………... 125 4.6.3 The Specifications and Terms before Publishing the Tender……... 127 4.6.4 The Advertisement of Tenders in the New Law…………………... 128 4.6.5 Submission of Bids and Opening of Sealed Bids……………….… 130 4.6.6 Examination of Bids and the Power to Contract…………………... 131 4.6.7 Drafting the Contract and the Period of Execution……………….. 131 4.6.8 Penalties and Extensions of the Contract………………………….. 132 4.6.9 The Cancellation of Tender……………………………………….. 133 4.6.10 The Exclusion of Bidders…………………………………………. 135 4.6.11 The Provisions of Assignment of the Contract and Sub-contract in the New Law……………………………………………………… 135 4.7 The Settlement of Disputes in Saudi Public Contracts…………… 136 4.7.1 The Committee for Review of Compensation and Boycott of Contractors………………………………………………………… 137 4.7.2 The Rules of Procedure……………………………………………. 138 4.7.2.1 Conditions for Review of Compensation Claims…………………. 139 4.7.2.2 Procedure of the Committee………………………………………. 140 4.7.3 The Board of Grievances (preamble) ……………………………... 141 4.7.3.1 Diwan Al Mazalim (The Board of Grievances in Saudi Arabia)….. 141 4.7.3.2 The Board of Grievances Circuits………………………………… 145 4.7.3.3 High Administrative Court………………………………………… 145 VI 4.7.3.4 The Administrative Court of Appeal……………………………… 146 4.7.3.5 The Jurisdiction of the Board in Resolving Disputes in Government Procurement Contracts………………………………. 146 4.7.4 The Arbitration Tribunal…………………………………………... 146 Summary…………………………………………………………. 148 Chapter Five: The Compatibility between the GPA and the Saudi Legal System in the Light of Sharia Law 5.1 Introduction……………………………………………………… 150 5.1.1 The Principle of Non-Discrimination…………………………… 150 5.1.1.1 The Forms of Discrimination in Saudi Tenders and Procurement Law……………………………………………………………….. 151 5.1.1.2 The Interrelation Foreign Investment Law………………………. 151 5.1.1.3 The Tax Rate under Foreign Investment Law…………………… 154 5.1.1.4 The Sharia Law Approach to the Issue of Zakat and Tax in the Light of the GPA Requirements………………………………….