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We are excited to share the latest edition of the Law Update, beautifully and appropriately titled “Sustainable Horizons: The Saudi Arabian Vision.” Giving special honor to the Kingdom’s 2030 vision, this update focuses on a collection of both informative and inspiring articles.
For those in construction, you can learn about how the tendering environment impacts risk-pricing for contractors, the updates on the legal framework of the construction industry and how contractors can protect themselves against financial difficulties.
There is good news too from the kingdom’s banking sector, from which the practice of “Open Banking” is being pushed for! But what is open banking? We’re answering that too.
Also . . . Are there any women trail blazers in Saudi Arabia you can name? We’ll help you with that. We cover how the Middle East has been making strides in empowering women in the entrepreneurial space,most notably in STEM fields.Read the full edition
Ahmed Hashem - Head of Shipping - KSA, Senior Counsel - Insurance
Ahmed Basrawi - Partner, Head of Office - Jeddah - Litigation
As Saudi Arabia is an Islamic state, its judicial system is based on Islamic law (‘Shari’ah’) for criminal, civil and commercial matters. Although Islamic laws encompass all aspects of life, some have opined that the judicial and legal systems are not ready for the world of modern and international commerce.
In 2007, the Saudi government announced a set of support packages for the judicial system and a series of legal reforms, and among these reforms is the passing of the Commercial Maritime law issued by way of Cabinet Resolution No. 197 of 1440H – Royal Decree (M/33) of 1440H in 2019 (the ‘Maritime Law’).
The Maritime Law is wide-ranging and covers effectively all possible aspects of the industry that requires regulation, including maritime debts and the rights of arrest. As a result, a claimant’s rights to arrest vessels to secure its maritime debt is now guaranteed by law, thereby providing companies trading in Saudi Arabia with more confidence to continue operations. A vessel arrest is effected by way of an Arrest Warrant, which is granted by the Court no more than three days from the date of application. Further, an Arrest Warrant can be served upon any sister ship of the errant or wrongful ship. Sister ships under the Maritime Law, are defined as ships sharing the same registered owner.
The term “Maritime Debt” is defined in Article 75 of the Maritime law, which stipulates that a debt is a” maritime” debt if it arises out of one or more of the following:
The definition of a Maritime Debt in Article 75 of the Maritime Law is exhaustive. Therefore, it is not possible to obtain an Arrest Warrant for debts of any other nature, and the competent court will not grant the Arrest Warrant if the debt claimed is not one of those listed in Article 75 of the Maritime Law.
Besides satisfying the definition of a “Maritime Debt”. it is important that claimants possess supporting documents that will convince the court of the grounds on which to arrest the vessel, together with proof that the debtor has little or no intention of settling the debt.
Therefore, once a claimant has satisfied the criteria of a Maritime Debt and has the relevant supporting documents, the claimant will be in a position to seek the Arrest Warrant from the Court.
It is important to note that the commercial court has jurisdiction over all the maritime activities except for maritime labour contracts, pursuant to Article 2 of the Saudi Commercial Law which states that:
“The commercial activities include the following:
E- Any action related to establishment, repair, sale, or purchase of the commercial and sailing vessels inside and outside. The commercial activities include also rental, lease, sale, and purchase of the equipment, instruments, and gears used on the board of such vessels, in addition to the wages of the workers, the salaries of the crew, and servants. That’s to be added to any lending or borrowing action or shipment carried out on the vessel or as well as all related guarantee contracts and all contracts related to the other matters of maritime trade.”
The claimant seeking an Arrest Warrant is required to file the arrest application through the Court’s online portal, and the Court is required, by law, to respond within three days from the date of the application, without the need to give reasons for its decision. There are two possible outcomes:
The Court hearing the vessel arrest application has the discretionary power to either accept or reject the vessel arrest application. However, if the Court orders a vessel to be arrested, the vessel will subsequently be detained by the port authority, and will be unable to leave Saudi territorial waters unless the Court orders the arrest to be lifted, which is achieved in one of the following ways:
The judge, considering the ship arrest application, has the right to accept or reject the application without giving his reasons. Therefore, it is paramount for any ship arrest application to be supported with sufficient documentary evidence, which should be the original copies. Further, it is recommended that the claimant complete the execution and legalisation of its power of attorney prior to the vessel entering the Saudi territorial waters, as formalization of the power of attorney may be time consuming.
For any information please contact Ahmed Hashem (firstname.lastname@example.org)
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