Institute of
Saudi Arabia
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The Civil Transactions Law (CTL)

Enacted in December 2023, the CTL represents a watershed moment for the Saudi legal system. For the first time, contract law is codified, moving away from discretionary interpretations of Sharia principles.

Certainty for Foreign Capital

Historically, foreign investors faced "legal risk premium" in Saudi Arabia because uncodified Sharia law meant judges had wide latitude. Contracts could be voided if deemed speculative (Gharar) or involving interest (Riba) without clear precedent.

The new CTL aligns closely with Egyptian and French civil codes, establishing clear rules for contract formation, dissolution, and damages. This predictability is essential for complex PPP (Public-Private Partnership) agreements funding the giga-projects.

Key Provisions:

  • Recognition of liquidated damages (subject to judicial review for proportionality).
  • Statute of limitations introduced (generally 10 years, varying by specific claims).
  • Good faith requirement in contract negotiation and execution.