Saudi Civil Transactions Law expected to enhance contractual certainty

The Civil Transactions Law has been published in the Saudi Official Gazette and will apply to all aspects of civil contracts within its scope 180 days after its publication – i.e. from 16 December 2023. The codification of Saudi’s civil law brings it in line with other rapidly developing jurisdictions in the Middle East, including the UAE and Qatar, as well as countries with older civil law systems, like France and Spain.

The opening provision of the Civil Transaction Law explains that it will apply to all matters within its scope, and to the extent that the codified provisions do not cover a matter, then the 41 general ‘rules’ enumerated in the final provisions of the law will apply. Failing that, the most appropriate principles derived from Sharia law will apply.

The Civil Transactions Law contains 721 articles, covering matters including contract formation, execution and termination, acts causing harm – similar to tortious acts –  as well as loss and damages and specific provisions tailored to contract types such as contracts of sale, leases, agency and construction contracts.  These provisions will make it easier for businesses to understand their rights and obligations under a contract and enhance the certainty of doing business in the Kingdom.

According to local media news providers Arab News and Zawya, Saudi crown prince Mohammed bin Salman said: “The law will have positive impact on the business environment and increase its attractiveness, and will also contribute to regulating economic movement and the stability of financial rights, in addition to facilitating decision-making with regard to investment. It will also enhance transparency and increase the ability to predict judgments in the field of civil transactions and reducing discrepancies in judicial reasoning to reach prompt justice, apart from contributing to bringing down disputes.”

The Civil Transactions Law is the latest piece of legislation in a wider package of reforms aimed at modernising the legal framework in Saudi Arabia in line with the Saudi Vision 2030. The Personal Status Law and the Law of Evidence have already been announced, while a new Penal Code for Discretionary Sentences is also proposed.

Mark Raymont of Pinsent Masons said: “These reforms are expected to further improve the efficiency and predictability of the Saudi legal system. The purpose of the new law is to make it easier for businesses to operate in Saudi Arabia, which in turn will help attract further foreign investment.”