How flexible legal resourcing can support mass action claims in the Middle East

The relatively few cases that have been brought under this framework to-date highlight how quickly shareholder-led mass action claims can snowball – and pose questions for targeted companies as to how they can best manage the associated legal and administrative burdens.

Businesses that have access to flexible legal resource are more likely to develop effective defence strategies.

The Saudi mass actions regime

The ability of claimants to come together to bring the same or similar claims against those they believe are responsible for wrongdoing, known as mass actions, is a relatively new concept in many Middle East jurisdictions.

The offshore jurisdictions of the Dubai International Finance Centre (DIFC) and the Abu Dhabi General Market (ADGM) in the UAE both allow group litigation orders to be issued, which essentially allow claims to be managed together when they give rise to common or related issues of law or fact.

In Saudi Arabia, a fully-fledged mass action framework in respect of securities disputes has been established. This legal mechanism enables collective redress for grievances against entities and corporations, offering an accessible avenue for mass litigation.

The roots of Saudi Arabia’s mass action framework are found in the Capital Markets Law (CML), a pivotal piece of legislation under the purview of Saudi Arabia’s Capital Markets Authority (CMA). The CMA sets and polices the regulation of capital markets in Saudi Arabia and established the Committee for the Resolution of Securities Disputes (CRSD), which has jurisdiction over breaches of the CML, including claims brought by shareholders of listed companies. Decisions of the CRSD are capable of appeal to the Appeal Committee of the Resolution of Securities Disputes (ACRSD) and those decisions are final and binding. Since its introduction in 2017, the mass actions framework under the CRSD has been tried and tested, representing a positive advancement in regional legal procedure and practice.

There has only been a handful of mass action claims under the Saudi regime, the most notable of which crystalised in 2022 where a final, enforceable decision of the ACRSD was issued against former board members of a Saudi company. The amounts claimed, and subsequently awarded on appeal, amounted to hundreds of millions of US dollars and involved over a thousand claimant shareholders. The case attracted a significant amount of press attention given it was a first of its kind for the region. The case not only highlighted the scale and capacity – and litigant appetite – under the framework, but also underscored the country’s capacity to address large-scale grievances.

The benefits of flexible legal resourcing with Pinsent Masons Vario

It can be difficult for businesses – and their insurers – that are subject to claims from multiple shareholders to understand how quickly litigation can snowball into considerable exposures, meaning legal resourcing in this environment can be challenging. In-house legal teams need to be able to scale up quickly to manage spikes in workload that attach to handling mass action claims.

When shareholder claims evolve into mass action cases, naturally both the volume and complexity of the workload increases. In-house legal teams need to review each claim individually as and when they materialise and quickly develop a robust, coordinated defence strategy. This task becomes more challenging as the volume of claims spikes and legislative deadlines add their own time pressures.

Without being able to scale-up quickly to handle these challenges, in-house legal teams risk being overwhelmed, compromising their defence. Similarly, the inability to scale back resourcing quickly can lead to unnecessary costs being incurred.

We expect legal resourcing to be a core consideration as the Saudi mass action regime develops further and with the potential for similar frameworks to be emerge in other parts of the region.

Co-written by Nour Aljaghoub and Melissa McLaren of Pinsent Masons.