RIYADH (Reuters) - Plans to modernise Saudi Arabia's legal system -- key to reassuring foreign investors -- will take years due to a chronic shortage of qualified judges and lawyers and resistance from the powerful religious elite.
The top oil exporter said this month it would set up commercial and appeal courts in the main cities as part of a $2 billion reform to modernise courts and train judges who apply the kingdom's austere version of Sunni Islam.
The move coincides with a crackdown on trading violations on the Arab's biggest bourse by slapping heavy fines on major banks or withdrawing licenses for financial firms.
The United States last month also removed its key regional ally from a list of alleged intellectual property violators, citing a better law enforcement environment.
Overhauling the judiciary and improving education are key reforms King Abdullah has tried since taking office in 2005 to create a modern state and combat Islamist militancy.
But the monarch has to balance the views of conservative princes and clerics, who helped the Al Saud family to found the kingdom in 1930s. Many oppose big changes.
"The set up of commercial and other specialised courts will make our legal system very efficient," said Saudi commercial lawyer Majed Garoub.
But he cautioned it might take more than five years to see the full impact of reform as the kingdom needs to train thousands of judges and faces a shortage of 10,000 lawyers able to deal with more specialised cases.
"We will improve little by little," said Garoub, who runs a well-establish law firm in the commercial hub of Jeddah.
The Gulf Arab state needs to attract foreign investors to prepare for the day when its vast oil resources -- more than a fifth of global reserves -- run dry and to create jobs for its mostly young population of 18 million nationals.
With the kingdom rolling out a $400 billion investment programme and opening up its bourse, industrial firms and banks have been coming, but weak legal standards still deter some.
"Concerns about contact enforcement and legal consistency are among the main issues for foreign investors," said Paul Gamble, head of research at Saudi bank Jadwa Investment.
"The deficiencies of the current local system mean that high-profile commercial disputes are being heard in foreign courts," he added.
Several struggling family firms have filed multi-billion lawsuits abroad as they have little trust in Saudi courts and law enforcement.
"Effective enforcement of the judgement can take years," the U.S. Department of Commerce said on its website.
Despite being the biggest Arab economy and a member of the G20 group of the world's biggest economies, Saudi Arabia lacks codification of judicial verdicts to act as precedent for cases.
In 1992 the kingdom issued a "basic law" to act as a constitution and it confirms Islamic law as the basis of its legal system.
Only some regulations come via the kingdom's appointed quasi-parliament, the Shura Assembly.
Much is left vague, to custom, royal decrees or religious edicts which are non-binding but have influence in the tribal society. Saudi Arabia is only country where women are banned from driving even though there is no law explicitly stating that.
The lack of rulings based on precedent gives judges wide powers. Rulings for the same charge can differ from region to region and human rights activists say criminal trials are often not fair and lawyers are denied timely access to files.
"Many judges do not accept that lawyers or witnesses are part of the process to find the truth in court. (A judge) thinks his understanding of the case is enough," said a Western diplomat.
Most judges graduate from the Imam Mohamed Ibn Saud Islamic University in Riyadh, a bastion of the kingdom's austere version of Islam called Wahhabism, said columnist Abdullah al-Alami.
"More specialised judicial training centres in collaboration with international legal training institutes need to be established," Alami said.
"There will probably be resistance to emerging secular law, but I'm convinced that the judicial reforms will take place sooner or later."
To bring changes, King Abdullah removed the hardline head of the Supreme Court, Sheikh Saleh al-Lohaidan, last year.
The government is also sending judges abroad to train in modern court procedures but activists are not holding their breath.
"They should send the young judges abroad, not just the old ones who will not change," said Ibrahim al-Mugaiteeb, head of the independent First Human Rights Society.
"There is movement but we will have to wait 15-20 years to see real changes until 60-70 percent of judges of the old regime are retired."
Editing by Robin Pomeroy