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Reconsidering Dispute Resolution in Saudi Arabia: A Comparative Study of Consumer Arbitration and Class Action’s Mechanism By Alhanouf A. Alsolami A dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Juridical Science in the The School of Law Of the University of California, Berkeley Committee in charge: Professor Amanda Tyler, Chair Professor John Yoo Professor Vinod Aggarwal Spring 2019 Reconsidering Dispute Resolution in Saudi Arabia: A Comparative Study of Consumer Arbitration and Class Action’s Mechanism Copyright © Alhanouf A. Alsolami, 2019 Abstract Reconsidering Dispute Resolution in Saudi Arabia: A Comparative Study of Consumer Arbitration and Class Action’s Mechanism by Alhanouf A. Alsolami Doctor of Juridical Science University of California, Berkeley Professor Amanda Tyler, Chair Consumer arbitration can act as a vehicle for bringing justice against corporate misconduct. There is a proliferating global trend toward confirming an unprejudiced system of collective redress. In the context of consumer arbitration, class action is a prime example of a legal mechanism that supports the weaker party by giving a group of people an option to present their claims in front of an arbitral tribunal. Enabling consumers to use this mechanism can cultivate a just system with a healthy balance between businesses and consumers. The purpose of this paper is to define an adequate device that can be fair to consumers while also protecting the interests of businesses. The ultimate goal is for such a framework to be incorporated in Saudi Arabia. The current framework is not as effective as consumers in Saudi prefer to use social media as an outlet instead of adjudicating disputes. Through a comparative analysis methodology, this paper conducts a search for a compromise that can protect consumers’ rights while also acting as an incentive to attract foreign investment. There are two distinct paradigmatic approaches to the areas of consumer arbitration and collective action. Some jurisdictions’ practices could be viewed as favoring businesses at the expense of consumers by focusing on enforcing a pre-dispute arbitration clause. Moreover, such contracts mostly exclude the use of class action. On the other end of the spectrum, other jurisdictions concentrate on the protection of consumers from the misuse of contracts of adhesion by businesses, and they even consider arbitration unfair if the clause was not negotiated after the dispute. In view of these points, the best choice is seemingly to default to arbitration with an opt-out option in addition to an implemented class-action mechanism. These objectives are proposed to further economic and legal development in Saudi Arabia. 1 Dedication To my Partner, Mohammed, and my Parents, Dalal and Abdulaziz. i Acknowledgements An Arabic proverb states that a person “who plants favors harvests gratitude.” I would like to thank several people for their immense support, which has made it feasible to finish this dissertation. First, my supervisor, Prof. Amanda Tyler, has guided me throughout each step of the process. In the midst of writing an outstanding book, she found the time to “show me the ropes” and provide me with tangible comments. I would like to express my sincere gratitude for her encouragement. In addition, Prof. John Yoo advised me along this academic journey and aided in the developing process of this paper. I could always rely on his tremendous knowledge and trenchant observations; for these, I am forever thankful. Prof. Vinod Aggarwal also encouraged me to explore beyond my academic “comfort zone.” His constructive feedback helped immensely in shaping this dissertation and I sincerely appreciate his excellent mentorship. Likewise, I would like to thank the faculty members of Berkeley Law, particularly Prof. Kathryn Abrams, Prof. Andrew Bradt, Prof. Richard Buxbaum, and Prof. Katerina Linos. I am deeply indebted to them for advising me and sharing invaluable insights. It was a true honor to have encountered such brilliant and remarkable professors. Finally, without the encouragement of my family, this journey would not have been feasible. It took a village of supporters to help me finish this dissertation. My husband who did not hesitate to move 13,133.64 km away so that we can be in Berkeley. Who stood beside me through it all and encouraged me to achieve my dreams. Thank you for being my biggest supporter. My parents, who believed in me, and provided me with their encouragements and prayers. My brother and sisters who gave me the ultimate emotional support. And my Son, Odai, who pushed me to write without even realizing it. For all of them, I am grateful. ii Table of Contents ABSTRACT 1 DEDICATION I ACKNOWLEDGEMENTS II LIST OF FIGURES V INTRODUCTION VI CHAPTER 1 1 THE POLITICAL AND ECONOMIC SYSTEMS IN SAUDI ARABIA 1 I. CURRENT ECONOMIC ASSESSMENT OF SAUDI ARABIA 1 A. CONSUMER COMPOSITION 5 B. NATURAL RESOURCES 6 C. PLANS FOR ECONOMIC REFORM 8 II. POLITICS IN THE KINGDOM 18 III. ROLE OF RELIGION 21 A. INTERRELATION OF LAW AND RELIGION 23 B. ISLAMIC FINANCE 30 CHAPTER 2 33 THE LEGAL SYSTEM IN SAUDI ARABIA 33 I. THE CURRENT STATE OF SAUDI COURTS 33 II. THE IMPORTANCE OF A STABLE LEGAL SYSTEM 37 III. DEFINING CONSUMER ARBITRATION 40 A. EXAMPLES FROM THE MIDDLE EAST 43 B. HISTORICAL BACKGROUND 45 C. BEYOND CONSUMERS, TO BUSINESS-TO-BUSINESS 47 IV. ATTITUDE TOWARD DISPUTE RESOLUTIONS IN SAUDI ARABIA TODAY 50 A. SOCIAL MEDIA AS AN OUTLET 50 B. CONSUMER SURVEY 52 CHAPTER 3 59 DIFFERENT APPROACHES TO CLASS ACTION AND CONSUMER ARBITRATION 59 I. THE CONSERVATIVE APPROACH 61 A. THE US MODEL 61 II. THE LIBERAL APPROACH 65 A. THE EUROPEAN AND COMPARABLE MODELS 65 CHAPTER 4 68 HOW DOES CLASS ACTION FIT IN? 68 iii I. STATUS QUO OF CONSUMER ARBITRATION AND CLASS ACTION IN SAUDI ARABIA 69 CHAPTER 5 76 THE CASE AGAINST CONSUMER ARBITRATION AND CLASS ACTION 76 I. CONTRACT THEORY 76 II. PUBLIC POLICY DEFENSE 79 III. A COMPARATIVE PERSPECTIVE 82 IV. MORAL HAZARD 83 V. UNCONSCIONABILITY 85 CHAPTER 6 89 THE CASE FOR CONSUMER ARBITRATION AND CLASS ACTION 89 I. FREEDOM OF CONTRACT 92 II. CONSUMERS RIGHTS 93 III. ACCESS TO JUSTICE 94 IV. OVERCOMING THE HINDRANCE OF FINE PRINT 98 V. OPTING OUT ALONGSIDE DUE PROCESS 101 A. OPT-OUT IN AN ARBITRATION CONTEXT 101 B. OPT-OUT IN A CLASS ACTION CONTEXT 103 CONCLUSION 105 BIBLIOGRAPHY 109 iv List of Figures Figure 1, Estimates based on sources and methods. Adapted from "The Changing Wealth of Nations: Measuring Sustainable Development in the New Millennium", The World Bank (2011.) ___________________________________________________________________ 4 Figure 2, FDA net inflows 2016-2018 in Saudi Arabia. Adapted from Trading Economies. 14 Figure 3, oil and gas exports as a percentage of total exports. Adapted from Brookings, Future Development, It’s hard to diversify when you’re swimming in oil, Farrukh Iqbal, March 31, 2015. ___________________________________________________________ 17 Figure 4, Information on the stages of consumer to business dispute resolution. _________ 35 Figure 5, Alhanouf Alsolami, (2019), Survey, Do you read the terms of use when getting a new service? ______________________________________________________________ 53 Figure 6, Alhanouf Alsolami, (2019), Survey, Evaluating the likelihood of one’s actions when experiencing harm from a business. _______________________________________ 54 Figure 7, Alhanouf Alsolami, (2019), Survey, Relationship between choosing courts as a forum and gender. __________________________________________________________ 55 Figure 8, Alhanouf Alsolami, (2019), Survey, Assessing the importance of several factors. 56 Figure 9, Alhanouf Alsolami, (2019), Survey, Relationship between procedures' flexibility and gender. _______________________________________________________________ 57 Figure 10, Alhanouf Alsolami, (2019), Survey, Relationship between disputes’ short duration and gender. _______________________________________________________________ 58 Figure 11, Alhanouf Alsolami, (2019), Survey, Relationship between cost of the dispute and age. _____________________________________________________________________ 58 Figure 12, Individuals using the Internet (% of population), (2016) The World Bank. _____ 75 Figure 13, Proposed circle of consumer dispute resolution. __________________________ 94 v Introduction One of the pillars of the 2030 vision is to attract foreign investment to simulate economic development. To this end, from a legal perspective, a solid legal foundation is crucial to resolve disputes. This paper focuses on the consumer to business disputes and their chain reaction over the economy. While parties may not expect to encounter a dispute, the knowledge that a reliable mechanism is in place could ease the process. The ultimate goal should be to create an arbitration-friendly jurisdiction that protects both parties. However, this objective is not an easy one to accomplish. The Saudi judicial system is traditionally governed by Sharia’ principles. While this framework is not problematic in itself, the application of outdated interpretations of Islamic jurisprudence have manifested into an inflexible attitude toward codified laws.1 A result has been reluctance on the part of businesses to enter the Saudi economy. Leveling power relations in consumer-to-business transactions should be a focal point for several reasons, including to attract investment to Saudi Arabia. To gain more answers about the correlation between these points, it is necessary to understand

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