The Saudi government has recently enacted a new Civil Transactions Law (Royal Decree No. M/199, dated June 16, 2023), set to take effect on December 16, 2023. This development marks a milestone as the first codification of civil law in the Kingdom, as civil law matters in Saudi Arabia were previously governed by Sharia-based guidelines. The new law focuses on property rights, contractual obligations, and other patrimonial issues, providing foreign investors and businesses with a clear and modern legal framework.
The law’s key features include:
- Contract Formation and Validity: the law establishes clear guidelines for contract formation and validity, emphasizing mutual consent, defined terms, and clear intention, including provisions for electronic contracts.
- Performance of Contracts: the law addresses the performance of contracts, emphasizing good faith and fair dealing, outlining obligations, responsibilities, and consequences of non-performance or breach, and defining remedies for breach.
- Consumer Protection: the law prioritizes consumer protection, introducing provisions for product liability, warranties, unfair trade practices, and dispute resolution mechanisms to safeguard consumer rights.
- Property Rights: the law includes provisions related to property rights, ownership, real estate transactions, and lease agreements, outlining procedures for registration, transfers, and mortgages to provide a secure legal framework for property transactions and encourage investment.
- Dispute Resolution: emphasizing alternative dispute resolution, the law encourages mediation and arbitration to efficiently and amicably resolve civil disputes, promoting a more expedited and cost-effective resolution process.
The new law’s primary benefits to consumers and businesses include the following:
- Legal Certainty: the law enhances legal certainty by providing clearer guidelines and regulations for civil transactions.
- Enhanced Consumer Protection: consumer protection provisions strengthen rights and safeguards for consumers, ensuring fair treatment and quality products or services.
- Facilitated Business Transactions: the law streamlines processes and updated regulations facilitate more efficient business transactions, encouraging investment and economic growth.
- Modernization and Alignment: the law reflects Saudi Arabia’s commitment to aligning its legal system with international standards, promoting a more business-friendly environment.
By establishing a comprehensive framework, the law is intended to instill confidence in investors, especially foreign investors, encouraging long-term partnerships and ventures. Overall, the new Civil Transactions Law in Saudi Arabia will ease entrance to the Kingdom’s business environment for foreign investors and businesses, providing them with a solid legal foundation to thrive and succeed in the country’s dynamic and growing economy.