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
The ongoing and rapid development of property-focused legislation in the Emirate of Dubai together with the large quantity of property decisions being made by the Dubai Courts, particularly the Court of Cassation, has led to the derision of new legal principles which are intended to guide the operation of the law.
Law No. 13 of 2008 was issued on 14 August 08 and was published in the Official Gazette on 31 August 2008; its date of entry into force.
Article 11 of Law No. 13 of 2008 was amended by Law No. 9 of 2009 (which was issued on 12 April 2009). Further, on 14 February 2010, Executive Council Decision No. 6 of 2010 promulgated the Implementing Regulations to complement Law No. 13 of 2008. The amendments and Implementing Regulations clarify and explain more clearly the correct application of the law and the legislator’s intention.
Naturally, prior to the introduction of the amendments and Implementing Regulations, the Dubai Courts were deciding cases. Consequently, court decisions issued after the promulgation of Law No. 13 of 2008 and the formation of property courts in Dubai serve not as a mandatory precedent but as a non-binding guide for the courts, which are compelled to rule based on their understanding of the legal provisions and legislation in force at the time their decisions are rendered. Careful consideration of the relevant laws and decisions is therefore necessary to understand how they are applied.
It is worth noting at this point that the most contested provision in Law No. 13 of 2008 is Article 3, which reads as follows:
A careful reading of this Article reveals two distinct phases:
Phase One: Pre-31 August 2008
Phase Two: Post-31 August 2008
Contracts executed during Phase One are not referred to as void contracts. On the contrary: they are considered valid and effective contracts given that developers are asked to register them within the 60 day deadline mentioned. In essence, Phase One contracts are valid and effective but conditional on registration. Phase Two contracts are void if they are not registered in the Interim Real Estate Register, as explicitly provided in Article 3.
This interpretation was confirmed by Article 3 of Executive Council Decision No. 6 of 2010, which states:
“If the main developer or sub-developer applies to register a legal disposition over the real estate unit after the 60 day deadline stipulated in subsection 2 of Article 3 of the Law, the Department shall proceed as follows:
Again, Phase One contracts may be registered but subject to a fine if registration is not carried out within the designated 60 day period. Phase One contracts are not void, but are conditional on registration. This approach is further confirmed by Article 210 of the Federal Civil Transactions Code which provides:
A void contract is of no effect and cannot be rectified by consent. Article 3 of Law 13 of 2008 deals with, in respect of Phase One, conditional contracts. At most, unregistered Phase One contracts can be considered defective contracts within the meaning of Articles 211 & 212 of the Civil Transactions Code:
On 24 October 2010, the Dubai Court of Cassation in Property Appeal No. 85-10, upheld the decisions of the lower courts which had been issued prior to the implementing regulations and the now settled practice of regarding the 60 days as a regulatory deadline.
I therefore suggest a fresh look at the issue, given the importance of both distinguishing between a void contract and a suspended or defective contract and recognising the effects of declaring a contract void and ordering it rescinded for non-registration. These questions are of paramount importantance as a court may rescind a contract for genuine reasons to do with the contractual relationship and the performance of contractual obligations, which would give rise to a right to claim damages, whereas according to Article 210 of the UAE Civil Transaction Code, a void contract produces no effect.
The intention of this article is to encourage reflection on how the changing laws of Dubai are applied and to draw attention to the importance of the performance and enforcement of contracts and the exercise of judicial discretion under Article 272 and 273 of the Civil Transactions Code. The promotion of legal discussions in this vital area should be encouraged due to the rapid evolution of legislation and precedents.