Saudi Arabia's new enforcement system: guaranteeing rights and enhancing the investment environment

Comprehensive judicial reform to enhance the business environment

In a historic move aimed at expediting justice and enhancing the investment climate, the Saudi Cabinet approved the new Enforcement Law, representing a significant leap forward in mechanisms for enforcing rights and protecting creditors. This legislation is part of a broader package of reforms adopted by the Kingdom under Vision 2030, which aims to build a prosperous economy and an attractive legislative environment aligned with international best practices.

General context and historical background

The new system builds on the experience gained from implementing the previous system issued in 2012 and addresses the challenges that have emerged with the evolution of financial and commercial transactions. Previously, enforcement procedures could be lengthy, negatively impacting investor confidence and the flow of capital within the economy. The new system aims to bridge these gaps by adopting a more rigorous and expeditious approach, focusing on digital financial instruments rather than traditional measures such as imprisonment for debt, which has been significantly reduced in financial cases to align with modern legal trends.

Key features of the new implementation system

The system offers a comprehensive set of tools that grant the enforcement judiciary broad powers to ensure that debts are not delayed or evaded. Key features include:

• Mandatory disclosure of funds: The system requires the debtor to disclose all his funds within a short period of being notified of the enforcement order, while expanding the scope of the obligation to include the parties with whom he deals financially, thus limiting the ability to conceal assets.
• Immediate seizure and enforcement: Once the short payment period (5 working days) has ended, the court automatically begins enforcement procedures, which include the immediate seizure of the debtor’s current and future funds, including bank balances, investments, and receivables from governmental and private entities.
• Deterrent daily fines: To combat procrastination, the system grants the court the authority to impose a daily financial fine on the debtor who is late in payment, up to 5,000 riyals, which constitutes direct financial pressure to expedite the payment of the debt.
• Travel ban: As an escalation measure, the court can issue an order banning the debtor from traveling for up to three years, renewable, to ensure that he does not evade his financial obligations.

Importance and expected impact

The new system is expected to have profound positive effects on various levels:

• Domestically, the system will boost confidence in the business sector and financial institutions, and encourage expansion in lending and financing by reducing the risk of default. It also guarantees the protection of the rights of individuals and creditors, and accelerates the flow of capital in the national economy, thus contributing to the achievement of development goals.
• Regionally and internationally, the system places the Kingdom among the most advanced countries in terms of legislation regarding the enforcement of contracts and court rulings. This development enhances the Kingdom's attractiveness as a destination for foreign direct investment, assuring investors of a robust and efficient judicial infrastructure that protects their rights and ensures the efficient recovery of their debts. Furthermore, the regulation of international cooperation in tracing funds aligns with the demands of the globalized economy.

Balancing strictness with human considerations

Despite the strictness of the procedures, the system did not overlook the humanitarian aspect, as it exempted from seizure some assets necessary for the life of the debtor and his family, such as the residence he lives in, the necessary means of transportation, and a specific percentage of the salary or pension to ensure the provision of the minimum requirements for a decent life, while giving absolute priority to alimony debts.