Introduction
In mid-December 2023, 16 December 2023, the Kingdom of Saudi Arabia witnessed the entry into force of Cabinet Decision No. 820/1444 (also known as the the Civil Transactions Law or CTL or in this publication Saudi Civil Law), 180 days after its official publication on the 19th June 2023.
This publication governs the content of the Saudi Civil Law, how law was made and applied prior to the entry into force of the Saudi Civil Law and what its entry into force mean for the Kingdom of Saudi Arabia.
Legal Life before the Saudi Civil Law
Before the entry into force of the Saudi Civil Law, the legal system was primarily based on Islamic Law (Sharia), wich served as the foundation for the country’s legal system.
Sharia Law encompasses an ample array of principles derived from the Quran, the Hadith (sayings and actions of the Prophet Muhammad), and interpretations by Islamic scholars over centuries.
In Saudi Arabia, Sharia law was applied in various areas of law, including criminal law, family law, and contract law. The legal system relied heavily on the interpretations of Islamic jurists and religious authorities, with judges applying these interpretations to resolve legal disputes and administer
Key features of the legal system before the introduction of the Saudi Civil Law:
- Customary Law: together with Sharia, customs played a key role in the legal system, especially in rural areas and communities. Customary law encompasses traditional norms and practices that govern social and legal interactions within culturally specific contexts.
- Royal Decrees: the Monarch leading the Saudi government issued royal decrees and regulations on legal aspects of society.
- Islamic Courts: composed by judges, trained in Islamic law who applied Sharia Law principles in the adjudication of disputes in the criminal, family and civil law domain.
- Limited Codification: while some areas were codified such as commercial law or criminal law, there was no legal backbone covering contracts, property rights or personal status matters. Judges relied on Islamic law and principles to adjudicate the disputes and cases.
The Saudi system prior to the Saudi Civil Law was a blend of Islamic law, customary practices and royal decrees.
Areas covered in the Saudi Civil Code
The Saudi Civil Code has 7 Chapters and contains 720 articles covering an overview of aspects regarding contract law, together with an important note on application:
- Retrospective Application: the Saudi Civil law received a retrospective application, 180 days after its publication unless a party can demonstrate that a contract signed before the 180 days if the new law is applied would contradict Sharia law principles.
- Contracts: requirements for valid contracts are addressed, including offer, acceptance, consideration, and capacity to contract. It addresses contract formation, interpretation, performance, and remedies for breach of contract.
- Interpretation: the new law recognizes the capacity to contract and that a contract is the law of the parties. In the event of lack of clarity, judges would be expected to look in customs, traditions, the nature of the transaction and the level of trust.
- Liquidated damages: permitted by the law to be agreed between Parties with judges being capable to adjust the figures agreed.
- Good Faith: in contractual frameworks requires parties to act honestly, reasonably and with integrity.
- Dispute Resolution: reference is made to them in support of the usage of such alternative mechanism methods.
- Force Majeure: is regulated and brought to region’s standards.
- Suspension and termination of contracts is regulated.
- Contracts of Adhesion: judges will be able to adjust potential abusive clauses within contracts of adhesion
Impact of the Saudi Civil Law
The introduction of the Saudi Civil Law signifies a before and after. The Saudi Civil Law represents a key milestone in the countries’ development, not only affecting the legal field, with a number of implications for people, businesses and the broader legal system:
- Clarity and Consistency: What is a legal system without these two? An expanded in written legal system shall provide clarity and consistency to contracts, property rights, inheritance and personal status leading to a stable framework for individuals and businesses.
- Legal Reform: its introductions shows a commitment to development by enhancing the rule of law, protecting rights and promoting stability, all essential to foster growth.
- Modernization: this is very evident from the Sharia Law framework in an effort to bridge the gap with international standards.
- Enhanced Legal Protection: to individuals including women, children and minorities.
- Investment and business Environment: a strong reliable stable fair legal system is required when aiming to attract foreign businesses and investments. Enforceable laws and regulations is a plus when having plans such the Saudi 2030 goals in order to attract investment, stimulate economic activity and support sustainable development.
Conclusion
Overall the new Saudi Civil Law falls within the communicated efforts to reach a number of milestones by 2030 under the Saudi Vision 2030. Saudi Vision 2030 is a strategic framework and roadmap for the future development of Saudi Arabia with the aim to transform Saudi into a prosperous and energetic country with a thriving diversified economy and dynamic plus ambitious population.
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We hope this publication will help you understand the legal developments in Saudi Arabia and remain available for any questions regarding this post of general application.
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*The information on this page is not intended to be legal advice. This article is intended to provide an initial introduction to the legal developments in the Kingdom of Saudi Arabia.