Saudi Arabia recently approved a new, reformatory bankruptcy law through a royal decree. The new law, coming with a myriad of changes to the practice and procedures in place, will go into effect in the summer of 2018. In its recent awakening and the ensuing overhaul that gave birth to the 2030 vision, Saudi has been eviscerating corruption and planning, executing and troubleshooting heaps of transformations.
The sweeping array of changes that one repeatedly feigns keeping up with has, in resemblance to many neighboring countries, not overlooked preparing the bin for the coming piles. But the Bankruptcy reform does not come alone. The reform is one among many, happening and expected in the economic domain. It is expected to be followed by separate regulations for e-commerce, NGOs, corporate governance and commercial pledges among others. The changes and reforms encompass more than just the economic domain, with an agenda expanding to social, cultural as well as political transformations.
Prior to its approval, a policy paper of the proposed reform was published on the Ministry of Commerce and Investments’. The paper, which was open to commentary, explained the aim of the law, its jurisdictional basis and briefly explained the principles suggested. Most of the concepts are completely novel to the insolvency regime, either for being impracticable or extremely costly to carry on without the rules permitting it. The crown jewel of the new law is the introduction of the three stages approach. This takes the regime from one that used to practice euthanasia on companies by handing them to courts, to a revival mechanism of giving a viable company the chance to rehabilitate itself.
On one hand, the reform puts the current insolvency regime through a metamorphosis, emulating as it was drafted international standards and bench-marked on best practices. Yet on the other, it sheds light on what stands in the way of its existence. Questions arise as to whether the Saudi legal infrastructure would be able to handle such advanced mechanisms and utilize them effectively? And would the same judges who were predominantly trained in Shari’ah law, jurisprudence and Arabic language and grammar be able the ones overseeing this transition?
