Notable Points in the Recovery Process – Saudi Arabia

recovery-advisers-saudi-arabia-courts-law

Formal requirements

There are some formal requirements which the claimant needs to fulfill before filing a claim:

  • The claimant’s legal representative must obtain super-legalized Power of Attorney (PoA) which delegates them to commence legal action in front of the Saudi courts
  • In case of ordinary cases, the claimant is required to notify the debtor in writing to make payment, at least 15 days before filing the claim
  • In case of performance/payment orders, the claimant is required to notify the debtor by writing to make payment at least 5 days before filing the claim.

Once these requirements are met, the claimant will file the claim through the commercial courts portal after which the case management team at the court will study the file to verify all requirements are met, before passing it to the competent judicial panel within 15 days.

Digital documentary evidence

The new CCR provides for recognition of documentary evidence copies as conclusive evidence in cases where the debtor acknowledges the document, discusses its content, or where he has explicitly denied it but a court ordered examination has found it to be genuine.

In addition, the claimant can present any electronic evidence whenever was composed by the debtor or with their knowledge or agreement.

Recovery following Amicable Settlement and Mediation

In cases where the debtor and creditor reach an agreement – either through amicable settlement or mediation they can create an enforceable document: Either a signed and notarised Settlement Plan (in case of amicable settlement) or a mutually accepted decision (in case of mediation).

This will become a binding and enforceable document which the creditor can lodge it at the enforcement court without the need to through the hassle of commercial courts procedures.

Duration of litigation

The duration of procedures under the new Commercial Courts Regulation can result in litigation periods as short as ten months from filing to commencement of enforcement.

Enforcement of judicial awards

After obtaining a final judgment or decision, the creditor is free to enforce it right away through the enforcement courts. The judge will review the documents and issue an enforcement order immediately upon receipt of the file (no more than 3 days after submission).

If the debtor has not complied with the order within 25 days the judge will impose the following restrictions:

  • Banning the debtor from issuing PoA regarding the assets
  • Disclosure of debtor’s present and future assets to the extent that satisfies the debt as well as attaching and enforcing against such property
  • Disclosure of commercial and professional licenses and records
  • Notifying a licensed credit agency of non-enforcement

In addition the judge may:           

  • Bar financial institutions from dealing with the debtor
  • Order disclosure of the debtor’s spouse and dependents’ assets whenever circumstantial evidence indicates any property may be transferred
  • Imprisonment “this procedure is held due to Covid-19 until further notice”

These procedures give the creditor great leverage over the debtor, as they are powerfully restrictive to upon his business activities, financial position and credit reputation. Any debtor whose business is operational will strive to avoid the consequences of going through these enforcement procedures, which could eventually lead to bankruptcy depending on the size of the debt.

Therefore, when a creditor obtains an enforceable document we always recommend negotiating with the debtor to settle the document value, especially when the debtor known to have financial difficulties. Otherwise, by going straight away to enforcement the creditor may reduce his chance of recovering debts in cases where the debtor goes bankrupt or under protection against bankruptcy procedures.

Recovery of interest in Saudi Law

Loan interest is not recognised in Saudi Commercial Law. In cases where there is a claim to recover a debt with the accrued interest the court will decide on the principal amount and dismiss the interest. 

However, the new CCR grants creditors the right to request compensation for non-material damages and stipulates that the courts must include in their judgment the compensation for such claim. This provides a possible mechanism to cover some of the loss related to exclusion of interest in the primary claim.