Saudi Arabia implemented its new Civil Transactions Law on Sunday, in what one expert described as a “quantum leap” in the country’s legal system.
The landmark legislation, which was approved by the Saudi cabinet in June, is a key component of the Vision 2030 reform plan and aims to ensure the Kingdom has a clear, fair and transparent legal system amid a period of rapid development.
Written to reflect Islamic values, the law covers areas such as the regulation of financial transactions and compensation for damage to property or persons. It also provides definitions for contracts, including their validity, termination and all aspects of property.
Lawyer Dr Saud Al-Ammari, who runs a law firm and was educated in both Saudi Arabia and the US, said the new legislation was part of a significant upgrade of the Kingdom’s legal system and introduced a comprehensive set of laws and regulations.
“This is a milestone as it is the first codification of civil law in the Kingdom,” he said. “Previously, civil law matters in Saudi Arabia were governed by the courts’ interpretations of Sharia-based guidelines and principles.”
Its introduction was “a quantum leap in the Saudi legal system”, he said.
“While civil law does not violate Sharia, the codification of many Sharia principles increases the consistency and predictability of the legal system. Specifically, the new law focuses on contract and property rights, torts and other commercial and personal injury matters,” Al-Ammari said.
“It stabilises transactions, reduces the causes of contract invalidity and termination, and expands contractual freedom. It also speeds up the process of resolving disputes and reduces the variability of judicial decisions.”
He added that the law would provide both local and foreign investors with a clear, consistent and modern legal framework for doing business in the Kingdom.
“In addition to guiding the way to proper contract drafting, it limits the causes of contract invalidity and speeds up the process of resolving contractual disputes,” he said.
“In terms of dispute resolution, the law encourages alternative dispute resolution, including mediation and arbitration, to resolve disputes efficiently and amicably. The Saudi Centre for Commercial Arbitration has distinguished itself globally with best-in-class institutional arbitration rules for handling mediation and resolving disputes through arbitration.”
Al-Ammari, who wrote a research paper on the new law for Chambers and Partners with his colleague Amnah Kidwai, said a key feature of the new legislation is “good faith, which requires parties to act honestly, reasonably and with integrity in the performance of their contractual obligations”.
“As far as the application of this law in the courts is concerned, there should be no problems. I know that Saudi judges and lawyers are well trained and can easily adapt to the application of the new law”.