Welcome to the Saudi Arabia focus edition of Law Update.
One of the key markets in the Middle East and North Africa (MENA) that continues to lead from the front is the Kingdom of Saudi Arabia (KSA). As the largest country in the Middle East and the 18th largest economy in the world, the progress KSA continues to make is underpinned by its Vision 2030 that envisions developing the country as an investment powerhouse and hub that ultimately connects Asia, Europe, and Africa. Given Saudi Arabia’s significance to the regional economy, our team of experts have prepared a range of pertinent articles that provide insights into new laws, regulations, and the legal landscape in the Kingdom.
This edition will provide you with an up-to-date guide on matters such as; the framework issued by the Saudi Central Bank on IT governance, the anti-corruption landscape under Vision 2030; we also provide practical tips for dispute avoidance. This is only a snapshot; there are many more articles within the KSA focus section for you to read, which we hope you will find valuable and enjoyable.Read the edition
A key difference between the two legal systems is that there is no system of binding precedent under a civil law system.
The primary legislation that governs guarantees in Qatar is the Civil Code. While other contracts may be concluded verbally, guarantees must be concluded in writing. For a guarantee to be valid under the laws of Qatar, reference should be made to the underlying debt being guaranteed. In other words, the guarantor must guarantee a specific debt. Notwithstanding this, a guarantor may guarantee future and unspecified obligations of a debtor, provided that the maximum amount being guaranteed and the maximum duration of the guarantee are specified in the guarantee document.
Where a future obligation is being guaranteed and there is no specification of either the upper limit of the guarantor’s exposure or the time limit on the length of the guarantee, the guarantor may withdraw the guarantee. Under article 824 of the Civil Code the creditor must first exhaust its remedies against the primary obligor before taking enforcement measures against the guarantor. However, article 824 would not apply if the primary obligor and the debtor are said to be jointly liable for the debt.
Pursuant to the Civil Code, a guarantee must state a maximum time-frame for the obligations of the guarantor. However, there is no reference in either the Civil Code or the Commercial Code as to a limit on the guaranteed amount. Therefore, the concept of a so-called all monies guarantee is not prohibited under Qatari law, provided that a maximum duration and an amount for the guarantee are stated in the guarantee.
Demands under a guarantee must be made in writing. Where the primary obligor has defaulted on its obligations and the guarantor notifies (or warns) the lender that such a default has occurred, the lender has six months from the date of notification to commence enforcement proceedings.
The Civil Code provides, inter alia, in relation to contracts of guarantee that:
There is no general concept of corporate benefit under Qatari Law. However, under the Commercial Code, the board of directors must act in the company’s best interests when determining if a guarantee should be provided. The board of directors must also act lawfully and may not misuse its power. This article was first published in the April 2016 issue of IFLR Magazine.