The Central Bank is the main authority enforcing debt collection regulations in Saudi Arabia. There are several laws that provide for the recovery of all types of debts, which is why when dealing with such procedures, it is recommended to use specialized services.
Below, our local specialists explain how debt collection in Saudi Arabia is carried out. You can rely on us for support in such proceedings.
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The two debt collection procedures in Saudi Arabia
There are two ways to recover a debt in Saudi Arabia, and they are interconnected. They are:
- the amicable or out-of-court process;
- court proceedings.
It is important to note that if the debt is settled through the first one, the other one will no longer take place.
You can rely on our lawyers in Saudi Arabia for details on each type of process.
Amicable debt recovery in Saudi Arabia
In most cases, out-of-court debt collection in Saudi Arabia implies negotiations. This means that, after noticing an outstanding payment, a creditor will usually send dunning letters or e-mails to the debtor in order to reach an amicable agreement.
Amicable procedures are often used when the amount to be paid is small. In Saudi Arabia is customary for the creditor to make discounts for the debt to be settled as soon as possible. This way, both parties can negotiate a suitable arrangement.
Amicable debt recovery is completed by credit bureaus, which are regulated by the Saudi National Bank.
If the amicable process fails, the creditor can file a claim with a Commercial Court.
Court proceedings in debt collection in Saudi Arabia
A creditor has the right to seek to recover any outstanding amount of money once all other methods have been exhausted. For this purpose, the claimant must file the following documents with a Commercial Court:
- a copy of its Certificate of Registration, as oftentimes, creditors are financial institutions or companies trying to recover debts from business partners;
- a copy of the Incorporation Certificate of the debtor (if it is a Saudi company);
- the contract that stipulates the terms of payments between the parties;
- evidence of the debt (invoices, promissory notes);
- proof that the creditor tried to recover the debt amicably (the dunning letters).
Representation can be provided through a power of attorney, including through our Saudi lawyers.
Is arbitration available in debt collection in Saudi Arabia?
Yes, arbitration can be used in commercial debt recovery, in accordance with the Saudi Arbitration Law M/34/2012, which follows the UNCITRAL Model. This process enables the parties, the creditor and debtor, to appoint a third party to settle the debt through out-of-court proceedings, which are often more effective and cheaper.
Should you need support in debt collection in Saudi Arabia, our lawyers are at your disposal.
Rights of creditors and debtors in Saudi Arabia
As mentioned earlier, the Saudi debt recovery legislation is quite extensive, as it also provides for the rights of the parties involved in such procedures. Specifically:
- the creditor has the right to recover any outstanding amount of money with the help of specialized collection agencies, law firms, or even in court;
- the debtor has the right to fair treatment by agencies and must be given the opportunity to pay the debt in installments.
Debt collection in Saudi Arabia in numbers
Here are some of the most important aspects to consider about debt recovery in Saudi Arabia:
- In most cases, commercial payments must be made in 30 to 120 days, depending on the contract;
- Debt collection cases are usually settled in 12 months by Commercial Courts;
- Appeals can be lodged within 30 days;
- The enforcement of an order will be completed within 6 months after the final decision.
Our clients can rely on us for support in various matters. Among these, we can help with company formation and immigration to Saudi Arabia for those seeking to obtain Saudi residence permits. For financial matters, our accountants in Saudi Arabia are at their service.
For assistance in debt collection, please contact us.