SAUDI ARABIA Trends and Developments Contributed by: Zeyad Khoshaim, Abdullah Alajlan and Kamil Mehiz, Khoshaim & Associates
were addressed through various statutes, much of the legal regulation remained embedded in Shari’ah and judicial interpretation. This lack of codification often created uncertainty, particularly for foreign investors and businesses less familiar with Islamic legal prin - ciples. The CTL, which took effect on 16 December 2023, represents a landmark step in the Kingdom’s legal modernisation under Vision 2030. It provides a clear, comprehensive codification of core civil law princi - ples, governing contractual relationships, tort liability and property rights. The CTL aims to enhance legal certainty, promote transparency and foster predict - ability in commercial transactions, all while maintain - ing full consistency with Shari’ah. Crucially, the CTL respects and preserves Saudi Ara - bia’s foundational legal structure. It neither establishes binding precedent nor overrides Shari’ah’s primacy. Courts apply the CTL in alignment with Islamic law, resorting to Shari’ah principles where the code remains silent. In this way, the CTL functions as a formal articu - lation of the Kingdom’s legal tradition – designed to support modern commerce without compromising its religious and legal heritage. The increasing complexity of domestic and cross- border commercial activities, alongside Saudi Ara - bia’s strategic objective to attract foreign investment, underscored the urgent need for a codified, trans - parent legal framework. The CTL addresses these demands by reducing uncertainty, encouraging fair dealing and aligning Saudi law more closely with inter - national commercial standards – while fully upholding the constitutional mandate to apply Shari’ah as the supreme law of the land. Structure and Scope of the Civil Transactions Law The CTL comprises 721 articles divided into several key chapters. It applies exclusively to civil transac - tions and does not override specialised laws such as the Commercial Law, Labour Law or Personal Status Law. Key areas covered by the CTL include the following.
• General provisions – definitions, principles of legal capacity and the overarching principle of good faith. • Obligations – sources of obligations (contracts, torts, unjust enrichment), rules on performance and termination. • Contracts – formation, validity, specific types (sale, lease, agency, etc), interpretation and remedies. • Torts – liability for unlawful acts causing damage. • Property – ownership, possession, transfer and security interests. • Limitation periods – prescription rules for claims. This breadth enables the CTL to function as a funda - mental legal code for civil transactions in the Kingdom. The Enduring Role of the Shari’ah Principles Under the CTL While the CTL is a comprehensive codification, it expressly preserves the foundational role of Islamic Shari’ah within the Saudi legal system. Article 720 of the CTL articulates this by setting out a series of gen - eral legal principles that must be applied in harmony with the CTL’s provisions and without contradiction. Crucially, whenever the CTL is silent on an issue, Arti - cle 720’s principles apply to fill the gaps. These principles represent a synthesis of Islamic legal maxims and practical rules designed to guide judicial and arbitral interpretation. They shape the application of the CTL and ensure consistency with the Kingdom’s religious and legal traditions. Some of the key principles enshrined in Article 720 include the following. • Intention governs legal effects – matters are deter - mined according to the parties’ intentions rather than mere formalities. In contract interpretation, effect is given to meaning over form. • Custom has legal effect – established customs carry the same weight as written provisions and contractual conditions, allowing commercial use to play a vital role in interpreting agreements. • Certainty is preferred – doubts do not override established certainty; matters are presumed unchanged unless proven otherwise.
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