SAUDI ARABIA Law and Practice Contributed by: Dana Halwani and Leanne Farsi, Derayah LLPC
1. Legal System 1.1 Legal System and Judicial Order Islamic Law Since the creation of the Kingdom of Saudi Arabia on 23 September 1932, it has been the government’s express policy that the country is governed by Islamic law (Sharia). This was con - firmed in 1992 by the Basic Law of Rule (Royal Order No A/90 of 27 Sha’ban 1412 Hejra corre - sponding to 1 March 1992), which is, in effect, the country’s constitution. Historically, the Han - bali school of Islamic law has been dominant in the territory that is now Saudi Arabia. The Islamic law texts that Saudi jurists regard as authorita - tive were compiled during the 13th to 17th cen - turies CE; as such, they reflect the concerns of a pre-industrial society and do not address many commercial, business or economic issues. There are numerous areas of law where Islamic law offers few or no guidelines, and where gov - ernment-made legislation is, therefore, the only law. For example, company law, capital markets law, foreign investment law and employment law are governed by largely self-contained codes. However, until recently the Saudi Arabian gov - ernment was reluctant to legislate in areas where a given subject matter is covered in some detail in the authoritative Islamic law texts. This has changed with an ambitious reform programme under the supervision of the Main Committee for the Preparation of Judicial Legislation, who have been working on a modern model of legis - lation consistent with Islamic law principles and international norms. The Evidence Regulation was enacted under Royal Decree No M/43 of 26 Jumada Awwal 1443 Hejra corresponding to 30 December 2021, the Personal Status Regula - tion under Royal Decree No M/73 of 6 Sha’ban 1443 Hejra corresponding to 9 March 2022, and the Civil Transactions Regulation under Royal
Decree No M/191 of 29 Shawwal 1444 Hejra corresponding to 18 June 2023. Taking their cue from the codes of other Arab states as well as European and North American laws, these new Regulations are primarily a codification of Islamic law rules with guidance from internation - ally accepted principles where Islamic law is silent or unclear. Therefore, they are not a radical departure from Saudi law, but rather have con - solidated and clarified existing rules, with some changes where this is possible without conflict - ing with Islamic law. For example, Article 385 of the Civil Transactions Regulation confirms the clear Islamic law rule that agreements to charge or pay interest are void, while Article 137 per - mits awarding damages for loss of anticipated income, which was traditionally opposed by the Saudi judiciary without being based on a clear Islamic law prohibition. An obvious advantage of the new Regulations is that one no longer has to ascertain legal princi - ples with reference to 400 to 800-year-old texts, the language of which requires a specialist edu - cation to understand – the equivalent of read - ing Blackstone’s commentaries in their original language. Contract law The Civil Transactions Regulation entered into force on 20 December 2023, with retroactive effect except for relevant conflicting regulations and judicial principles. It codifies Saudi Arabian contract law, liabilities for harm caused other than in contract, and property rights. There is a section on general principles of contract law, and another section covering nominate con - tracts such as sales, leases, loan agreements, service contracts, agencies, bailments and part - nerships that are not covered by the Companies Regulation. Areas of law which are covered by existing legislation remain largely unaffected; for
712 CHAMBERS.COM
Powered by FlippingBook