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Payment Orders in Saudi Arabia: An Effective Legal Mechanism for Debt Collection in the Fast-Paced Commercial World

In the dynamic commercial landscape of Saudi Arabia, where time is a critical factor, the need for swift and decisive resolution of debts is paramount. The Saudi legal system has innovatively responded with the introduction of the Performance Order. This rapid legal instrument is designed to expedite commercial operations by compelling debtors to fulfil their financial obligations, typically within a ten-day timeframe. This development is particularly noteworthy as regular commercial cases in the Kingdom are now resolved in less than a year, marking a significant stride in judicial efficiency.

Nature and Characteristics of Payment Orders
The Payment Order, as delineated in Chapter Seven of the Law of Commercial Courts, stands as an exception to traditional litigation rules. Characterized by its rapid issuance, potentially within just ten days from the application, this order functions akin to an interim action or summary judgment. While a court's rejection of a Performance Order is final and non-appealable, creditors retain the right to pursue standard legal claims. In contrast, debtors are afforded a 15-day period from notification to contest the order, ensuring a fair balance between the rights of both parties.

Conditions and Procedures
The issuance of a Payment Order hinges on specific conditions:

1. Written proof of the debt.
2. Maturity of the debt.
3. The debt being a specific amount if monetary, or specific in kind and amount if it involves a movable asset.

Legal Analysis: Advantages and Challenges
The Payment Order's primary advantage lies in its speed and efficiency in debt collection, which enhances investor confidence and accelerates commercial transactions. However, creditors must meticulously adhere to all legal and procedural requirements, including a mandatory five-day advance written notification to the debtor before court application. On the other hand, debtors are challenged by the relatively short 15-day period to object, necessitating a prompt and effective response to protect their rights.

Practical Applications and Examples
Payment Orders have shown effectiveness in scenarios like debt collection on commercial papers, including checks and promissory notes. For example, creditors can utilize a Payment Order for efficient rights' enforcement if a promissory note remains unpaid three years post-due date. Similarly, unpaid checks or overdue promissory notes, which may lose their executory status over time, can be addressed through Performance Orders.

Balancing Creditor and Debtor Rights
The Saudi legal framework ensures a balanced approach between creditor and debtor rights. While facilitating efficient debt collection for creditors, it also provides debtors with the opportunity to contest and object to Payment Orders, safeguarding against potential injustices. A notable aspect is that only defendants can appeal decisions made by a judge on a Payment Order. Creditors, whose requests are denied, are directed to regular commercial courts for redress.

Since their introduction in June 2020 via the Law of Commercial Courts, Payment Orders have led to a marked increase in related cases in Saudi courts. These orders exemplify a model for prompt justice and enhanced judicial efficiency. They reflect Saudi Arabia's commitment to fostering a conducive business environment and streamlining legal processes, thereby attracting investments and reinforcing market confidence. This balanced legal framework not only protects the rights of all parties involved but also cements Saudi Arabia's status as a leading commercial and economic hub both regionally and globally.

This article was written by corporate lawyer Nouf Alyemni and focuses on Payment Orders in Saudi Arabia.

BSA is a regional Law Firm in the Middle East with offices in the UAE, Oman and Saudi Arabia. As a full-service law firm our practice areas include litigation, arbitration and corporate services, including M&A, banking & finance, Intellectual Property, TMT, Fintech, employment and insurance.

Published on 20 December, 2023.

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