Saudi Arabia is being sued for $2.3 million by a small Islamic school in Brisbane alleging that the oil-rich kingdom is holding out on paying the school fees of the children of Saudi scholarship holders studying at Australian universities.

The dispute goes back to an original mistake by the Australian International Islamic College. From 2005 to 2008 the College  wrongly received federal and state government funding for the students who instead should have been paid for by the Saudi government. It wasn't until 2009 that the mistake was discovered, by which time the school had recieved $1.4 million in government funding it wasn't entitled to.

According to school CEO Keysar Trad, the school then began lobbying the Saudis for the money after agreeing a repayment plan with the Australian government. It now owes a remaining $200,000 and is surviving on the back of a bank loan. But it claims the debt owed by the Saudi's has blown out to $2.3 million because of further payment delays over the last two years.

``We have been expecting payment but if has been delayed and delayed,'' Mr Trad told The Australian.
 

David Robertson, the executive director of peak body Independent Schools Queensland, said the original error by the school had been a genuine mistake.

``It was a misinterpretation of the rules. The school owned up and both departments accepted that it was a genuine misinterpretation,'' he said.
 

Mr Robertson has lobbied both the Mission and Saudi ambassador Hassan Talat Nazer, on behalf of the school.
``They are all very supportive but nothing seems to happen,'' he said.
 

In its statement of claim to the NSW Supreme Court, the school claims that Saudi's deputy minister for higher education, Dr Ahmad Ibn Mohammad Al Saif, in August last year agreed to make the payments on condition that the school dropped plans to pursue legal action and that it not make any public comment on the matter ``either of which courses could have caused embarrassment and affected the international standing and reputation of the defendants.''

But despite further requests and representations also from the Australian government, the school says the money remains outstanding. Following a letter of demand sent in mid November Mitry Lawyers representing the school, finally filed the claim last month.

However it needs to be approved by the Commonwealth Attorney General Nicola Roxon if it is to be served on the Kingdom as a sovereign country. The school expects to submit the claim to the government within days.
 

The Saudi's embassy on Tuesday didn't return calls and the HES was told that the Saudi Misson's cultural attache was overseas.
 

There are over 6,000 students on Saudi goverment scholarships studying at Australian universties.
The school has had up to 120 students enrolled in any one year who have been the children of Saudi scholarship holders, including over 60 last year. However that could drop given the school is now insisting that parents pay upfront than rather wait on the Cultural Mission to pay. Mr Trad said that so far about 30 such students have promised to re-enrol this year.

Mr Trad, a prominent and sometimes controversial Islamic community leader in Sydney, is a long time trustee of the School and said he had recently agreed to become chief executive of the school partly to help them solve the impasse with the Saudis. He expects to soon move to Brisbane on a one year contract.
 

In 2010 the School had 368 students from prep to year 12.