Saudi Arabia introduces five-year claims limitation period

The Commercial Courts Law is effective from 16 June 2020. It includes, among other provisions, the introduction of a five-year time limit on the ability of parties in commercial proceedings to bring their claims to court.

Commercial law expert Ibrahim Alajaji of Alsabhan & Alajaji Law Firm, the Saudi Arabia associate firm of Pinsent Masons, the law firm behind Out-Law, said that the new law was highly significant.

“By developing the efficiency and procedures of Saudi Arabia’s commercial judiciary system, the substantive quality of the law’s provisions will allow the Kingdom to grow and expand its economy, which will benefit its commercial companies and traders,” he said.

The introduction of the five-year ‘prescription’ period on claimants’ rights was particularly noteworthy and the first of its kind, he said.

“Until now, there were no other regulations or statutes that placed a period of prescription on commercial suits. As a result, the commercial judiciary was unable to dismiss suits that occurred many years earlier,” he said.

“By enacting a period of prescription, Saudi Arabia’s commercial judiciary is witnessing a significant qualitative development - one that recognises that commercial relations and rights are better protected when individuals and companies are obliged to bring their claims earlier,” he said.

Under the new law, the court must dismiss a claim filed more than five years after the date of the incident to which the proceedings relate, unless the respondent acknowledges the claimant’s case. The court will be able to make exceptions where the claimant provides sufficient reasons for the delay.

The new law will not override specific provisions in other laws.