Saudi Arabia opens new civil code court

SPA

• Authority over government bodies
• Arm of complaints court
• Aimed at foreign investors

Saudi Arabia opened an administrative enforcement court this week that will have binding authority over government entities.

The move is part of legal reforms aimed at encouraging foreign investment and assuaging concerns about justice in the kingdom. 

The new body is an arm of the complaints court where commercial disputes are normally heard, complaints court chief Khaled al-Yousef said at a ceremony in Riyadh on January 22.  

“This executive body will encourage the investment environment and social development and tourism,” he said, adding that the court would strengthen justice system reforms including codification aimed at easing life for citizens and residents. 

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Saudi Arabia last year enacted a civil code in an effort to provide foreign investors with clarity on doing business in the country by ending judicial discretion which had been widespread in the country’s traditional Islamic court system. 

The country – whose 2022 census put the population at 32 million, 41.6 percent of whom are expatriates – is also introducing long-term residency visas aimed at attracting high-wealth investors, a niche Dubai has long filled in the Gulf. 

The government still lags behind a foreign direct investment target of $100 billion by 2030, recording $33 billion in 2022. 

Ministry of Investment rules came into effect this month requiring foreign companies to establish regional headquarters in Saudi Arabia for rights to bid on contracts of SAR1 million ($270,000). 

The new civil code’s 721 articles lay down statutory requirements for judges to follow in a wide range of issues including real estate and tort, rather than traditional Islamic principles that give them free rein in interpreting the law and no cause to follow recent precedent. 

It enforces limited liability regardless of losses suffered and limits courts’ ability to increase liquidated damages. It also allows for indirect loss as part of compensation in contractual disputes and introduces statutes of limitation.