Civil Transactions Law: Contractual certainty aids businesses in the Kingdom

Saudi Arabia has unveiled the Civil Transactions Law, set to revolutionize the way businesses comprehend and execute contracts within the nation. The law, now published in the Saudi Official Gazette, will be operational from 16 December 2023, aligning Saudi Arabia with other evolving Middle Eastern jurisdictions such as the UAE and Qatar, and mirroring older civil law systems found in countries like France and Spain.

This comprehensive legislation encompasses 721 articles detailing contract formation, execution, termination, and specifications for different contract types, including sales, leases, agency, and construction contracts. Additionally, the law outlines provisions analogous to tortious acts, and those pertaining to loss, damages, and responsibilities. This structured approach offers businesses clarity regarding their contractual rights and duties, fortifying confidence in the Saudi business environment.

Should there be gaps in the codified stipulations, the law provides 41 general ‘rules’ to address them. In the absence of these, principles derived from Sharia law will take precedence.

Crown Prince Mohammed bin Salman emphasized the law’s transformative potential for the nation’s business ecosystem. He highlighted the advantages it brings in terms of bolstering the business ambiance, ensuring financial rights, streamlining investment decisions, heightening transparency, and fostering consistent judicial judgments. Ultimately, this paves the way for prompt justice and fewer legal disputes.

This law is a pivotal component of Saudi Arabia’s broader strategy to rejuvenate its legal system in tandem with Saudi Vision 2030. This transformational journey has already witnessed the introduction of the Personal Status Law and the Law of Evidence. Additionally, the inception of a new Penal Code for Discretionary Sentences is on the horizon.

We believe that these systematic reforms promise enhanced efficacy and predictability for Saudi’s legal system. The primary intent is to simplify business operations, which is anticipated to magnetize further international investments.