Debt Collection in Saudi Arabia
We can assist businesses with debt collection in Saudi Arabia. Via our international debt collection platform, we connect you to local law firms and debt collection agencies. Learn how we can simplify the process for you.
How do we help you achieve successful debt collection in Saudi Arabia?
Through our international debt collection platform, we support companies worldwide in recovering payments from their customers abroad. We have partnered with the most experienced debt collection agencies and law firms around the world to offer a first-class debt collection service, no matter where your debtors are located. You set up an account and your case in just a few minutes, and you’ll get all the expertise of our Saudi Arabia law firm to help you with your commercial debt collection.
Our local debt collection agency, located in Saudi Arabia, will initiate collection actions immediately:
We are pleased to introduce Hashem & Partners as our law firm and debt collection partner in Saudi Arabia. They will begin collection efforts as soon as you submit a case.
The debt collection process in Saudi Arabia
Below is a brief description of the debt collection process in Saudi Arabia. From the initial out-of-court collection attempts to the stage where legal action becomes necessary to obtain payment.
- Out-of-court debt collection in Saudi Arabia.
- Judicial debt collection in Saudi Arabia:
- Saudi Arabia’s legal system.
- Taking your claim to court in Saudi Arabia.
Out-of-Court Debt Collection in Saudi Arabia
So the debt collection process in Saudi Arabia starts when a debt is due. That is, the agreed date for payment has passed, without the debt having been settled. If the debtor does not dispute the claim, the process moves to the extrajudicial collection stage. In Saudi Arabia, law firms (not debt collection agencies) handle this stage, using their expertise to persuade the debtor to pay.
Since a lawyer in the debtor’s “home country” is the one who makes the collection demand, and who makes it clear to the debtor that the case may be taken to court, it has a huge impact on the Saudi debtor’s willingness to pay. This makes the debtor aware of the seriousness of the situation and motivates them to avoid costly and time-consuming legal action. Contact with the debtor is made by the Saudi law firm, e.g., letter, telephone, email, etc. If the debtor has poor solvency (i.e., poor ability to pay), then some negotiation and perhaps setting up an instalment plan may be necessary.
Most cases taken to debt collection in Saudi Arabia are resolved at this stage. This is also preferable as it does not involve extra costs or time for either party. If the debtor still fails to pay, a decision must be made, case by case, whether to escalate the matter to legal debt collection.
Judicial debt collection in Saudi Arabia
Saudi Arabia’s legal system
The Kingdom of Saudi Arabia is an Islamic monarchy. Its system of government is based on the principles of Sharia law, which refers to the moral, religious, social, and legal precepts contained in the Holy Qur’an, the teachings (Sunnah) of the Prophet Mohammad (PBUH), and the various interpretations of these teachings by Islamic scholars. The king holds ultimate authority and serves as the focal point of governance. He conducts national policy in accordance with the precepts of Islam. He oversees the implementation of the Islamic Shari’ah and of Saudi statutory laws, regulations, and resolutions, as well as the country’s system of government and general state policy. He directs state policy, guides government bodies, and ensures unity within the Council of Ministers.
The King has the Council of Ministers to help him govern the country. It consists of the King, who is the Prime Minister, the Crown Prince, who is the Deputy Prime Minister, and the Cabinet Ministers. It serves as the kingdom’s executive authority, determining policy and supervising the management of state affairs. It has final authority over the executive and administrative affairs of all ministries and other state agencies. The Council of Ministers has both executive and legislative functions, and it shares the legislative function with the King and the Shura Council. Each minister has the right to propose a bill or an ordinance concerning the affairs of his ministry.
Local authorities, branches of ministries, and other public bodies are also considered part of the executive. The country is divided into several provinces, which are subordinate to the central government and accountable to the Minister of the Interior. This division aims to improve administrative efficiency, maintain security and order, and protect citizens’ rights within the framework of Shari’ah. Legal sources in Saudi Arabia:
There are three sources of law in Saudi Arabia:
- Sharia
- Royal decrees
- Traditional tribal law and custom
Saudi Arabia’s legal system is primarily based on Sharia law. It is Islamic law based on the Qur’an and Sunnah (traditions) of the Islamic prophet Muhammad. The sources of Sharia also include Islamic scientific consensus developed after Muhammad’s death. In Saudi Arabia, Sharia has been adopted in an uncodified form, meaning it is considered the law of the land in its entirety. It is therefore unique not only in comparison with Western systems but also in comparison with other Muslim countries.
The lack of codification of Sharia has led to significant variations in its interpretation and application. In addition, there is no system of judicial precedent as Saudi judges are prohibited from engaging in taqlid (or unquestioningly following the interpretations of others) and must instead use independent reasoning (ijtihad). As judges may disregard previous rulings and apply their own interpretation of Sharia through ijtihad, divergent rulings can occur even in similar cases. This factor has resulted in considerable uncertainty regarding the scope and content of the country’s rules. The government announced plans to codify Sharia in 2010 and published a sourcebook of legal principles and precedents in 2018.
Saudi Arabia’s Civil Transactions Law (نظام المعاملات المدنية), which came into force in December 2023 under Royal Decree No. M/191, provides creditors with a codified framework for contract law, obligations and legal remedies. This law confirms that debtors must fulfil their obligations once they become due and that creditors can pursue enforcement if the relevant legal requirements are satisfied.
If negotiation cannot resolve a commercial debt, the matter can be brought before the competent Saudi Commercial Court. Any resulting judgment or other qualifying enforcement instrument may then be pursued through Saudi Arabia’s enforcement system.
In Saudi Arabia, the Civil Transactions Law operates alongside Sharia principles and other national legislation. Before taking legal action, creditors should review the contract and supporting evidence, and consider the most appropriate enforcement route available to them.
In terms of the legal and judicial system, the impact of Sharia is demonstrated by the fact that no regulation shall be considered valid if it contradicts one of the Sharia principles. Similarly, a contractual provision that is contrary to Sharia (e.g., a clause providing for the charging of interest) shall be deemed invalid and may not be enforced. So, contractual provisions that are contrary to Shariah law shall not be recognised and enforced by Saudi courts, even if the parties have agreed otherwise.
Royal decrees (ordinances) are the second main source of law. These are subordinate to Sharia and complement Sharia in areas such as labour law, commercial law, and company law. To cover areas not fully addressed by Sharia and keep pace with modern developments, the Saudi government has issued decrees on capital markets, company formation and governance, franchising, leasing, and more. In 2018, Sharia was supplemented by royal decrees addressing modern issues such as intellectual property and company law. However, Sharia remains the primary source of law in Saudi Arabia. Particularly in areas such as criminal law, family law, commercial law, and contract law, it should also be mentioned that traditional tribal laws and customs still play a role. For example, judges will apply tribal customs relating to marriage and divorce.
Taking Your Claim to Court in Saudi Arabia
The Saudi court system consists mainly of the Shari’ah courts, which hear the vast majority of legal cases in Saudi Arabia. There are also state courts outside the Sharia courts that handle disputes relating to specific royal decrees and, since 2008, some specialised courts. However, the following presentation will focus on the Shari’ah courts, as it is these that are in fact relevant to legal debt collection in Saudi Arabia. The Shari’ah courts are organized into several levels:
- High court – The highest judicial authority, seated in Riyadh.
- Courts of Appeals – The law provides for the establishment of one or more courts of appeal in each province of the Kingdom. They include specialised labour, commercial, criminal, personal records, and civil courts, handling appeals from first-tier courts.
- Courts of First Instance – Established in provinces, governorates, and districts as needed. They include general courts, criminal courts, commercial courts, labour courts, and personal status courts, as well as specialised circuits, including enforcement, licensing, and traffic circuits.
For a commercial dispute that may be subject to judicial collection in Saudi Arabia, the Commercial Court has jurisdiction. An action is therefore filed before the Commercial Court of the first degree.
Enforcement courts may also be relevant to the Saudi debt collection process. This is when a judgment has been obtained confirming the right to payment, but a Saudi debtor nevertheless fails to pay the claim. The creditor can then apply to an enforcement court for enforcement of the claim. This means that the court assists in transferring assets to the creditor. The enforcement judge is obliged to follow the provisions of the Shariah Court Procedure Act 2013, unless the Enforcement Act provides otherwise. He may request assistance from the police and competent authorities, impose and lift travel bans, order detention and release, require a declaration of assets, and hear insolvency proceedings.
To initiate a case for judicial collection in the courts of Saudi Arabia:
Court proceedings are initiated by filing a writ of summons with the court. A plaintiff can initiate court proceedings without serving a formal demand for payment on the defendant or completing any pre-trial formalities. A writ of summons can now generally be filed via the website of the Ministry of Justice. Commercial courts accept electronic versions of a claim, but some exceptions still apply.
Proceedings are normally held in open court unless the judge, on his own initiative or at the request of one of the parties, decides to hold a closed session. This is to maintain order, observe public morals, or protect the privacy of the family. Saudi Arabian courts do not usually award costs to the winning party, which means that each party bears its own costs. However, success-based fee agreements are common in Saudi Arabia. A party often agrees with their attorney to make an upfront payment of the fee, and that the remainder of the fee is contingent on the lawyer winning the case. Compensation for successful outcomes in court is expressed as a percentage of the actual amount of the claim.
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