The Code enhances the appeal and transparency of doing business in Saudi Arabia, and secures more predictability and certainty for Saudi Arabia as a jurisdiction, to match other civil law jurisdictions, such as those in the same region like UAE and Qatar, and those further afield like France, Germany and Spain.
Will it apply to contracts I'm signed up to or am about to sign?
The Code covers typical general contract law issues such as formation, execution, termination and damages and also includes provisions relating to specific categories of contract such as leases and sale, agency and construction contracts.
However, it does not apply to all commercial contracts, so you will need to seek local advice on the extent to which any Saudi Law-governed contracts you have agreed to are affected by the Code's provisions.
Further, even where the Code does apply to a contract, if the Code's articles are silent on particular contractual issues, parties will still be able to deploy 41 Sharia-inspired general rules listed at the end of the Code instead. If these too fail to assist, appropriate Sharia principles will apply.
If you're already party to contracts governed by Saudi Law or will sign one before 16 December 2023 and such contracts are covered by the Code, be aware that the Code will apply retrospectively, including to disputes under such contracts, unless a party wishes to rely on provisions in statutes or judicial principles that conflict with the Code and date from before 16 December 2023, and can prove that such elements from the pre-Code regime should be applied to the contract.
Some parties may wish to wait until the Code has some into effect to benefit from the greater certainty and transparency it promises to provide, although, as permitted under the Code, Sharia principles could still end up applying to a contract, at least in part, where the issue under discussion or in dispute is not dealt with in either the 721 articles or the 41 general rules.
The introduction of the Code is part of Saudi Arabia's wider desire to attract inward investment by adopting practices which reassure and are familiar to the international business community, and will be welcome by many who up until now might have been hesitant to engage in legally binding relationships subject to Saudi Law.
Authored by Emerson Holmes, Patrick McPherson, Randall Walker, Mark Crossley, and Jessica Quinlan.