Introduction
The Commercial Courts Law (“Law”), which consists of (96) articles, was promulgated for the purpose of organising the work of commercial courts in a manner that serves and balances efficiency and effectiveness in light of the qualitative and quantitative flow of commercial cases. It was published in Umm Al-Qura newspaper under No. (4827) on 27 Shaban 1441 A.H. [20/04/2020 A.D.], and it will go into effect sixty days after its publication date.
The law has been divided into (11) sections, containing a set of general provisions related to litigation before commercial courts specifically, such as subject matter jurisdiction and territorial jurisdiction, case filing procedures, the types of evidence and evidence presented in these cases, and the mechanisms for objecting to judgments.
However, in addition to these general provisions, the law sets out special provisions that can be classified into two phases: Pre- and post-arrival at the commercial court, in order to reduce the length of litigation and adapt to the fast-paced commercial reality. We present the most important of these provisions as follows:
How does this law affect the business sector?
The law will undoubtedly affect the mechanism and drafting of commercial contracts because the law set out a broad area for adding a number of clauses regarding various topics, including the aforementioned. It also designated some clauses and imbued them with legitimacy, such as transferring the burden of proof, etc.
The law may also affect the negotiation process when a dispute occurs, because the law specified mechanisms, set out avenues and imposed mandatory provisions when petitioning the commercial court. We believe they encourage alternative legal options to resolve the dispute before reaching the commercial court.
Finally, the law clearly aims to reduce the duration of a case before the commercial court, because business reality necessarily requires that, and the goal is consistent with the requirements of justice as these cases are related to money and what may happen to it.
*Note: The executive regulations for the law, which are expected to interpret, detail and explain many of its provisions and implementation mechanisms, have not been issued yet.
With the emergence of the coronavirus and the precautionary measures adopted by countries necessitating remote work, the need for electronic transactions has become more apparent than ever. This shift, which we’ll examine from a legal perspective, signifies an evolution in contemporary technology.
Electronic signatures represent a revolution, enabling users to execute contracts and legal transactions easily and securely online. They play a vital role in speeding up procedures and reducing operational costs across various sectors including banking, real estate, and government services. Additionally, they enhance efficiency and reduce the need for paper documents, contributing to environmental protection.
| Sector | Benefits of Electronic Signature | Practical Example |
|---|---|---|
| Real Estate | Facilitates signing sales and purchase contracts without face-to-face meetings | Electronically signing a real estate sales contract |
| Banking | Secures transactions and speeds up financial operations | Opening a bank account and signing agreements electronically |
| Government Services | Provides round-the-clock services more quickly | Renewing documents and licenses without visiting government offices |
Scope of the Electronic Transactions System
Article 1, clauses 10, 12, and 13 of the system state that the terms and phrases following—wherever they appear in this system—have the meanings next to them, unless the context indicates otherwise: 10 – Electronic transactions: Any exchange, communication, contracting, or any other action concluded or performed—wholly or partly—by electronic means. 12 – Electronic data system: One or more electronic devices or programs used for creating, extracting, sending, broadcasting, receiving, storing, displaying, or processing electronic data. 13 – Electronic record: Data that is created, sent, received, broadcast, or stored electronically and retrievable in an understandable form.
These definitions encompass all dealings involving electronic means, including specific transactions such as those in the insurance and government sectors, alongside email use and more.
The importance of defining the scope is evident in what the system aims to achieve:
- Ensuring the validity and integrity of electronic transactions, signatures, and records.
- Legally, these electronic dealings are considered valid unless proven otherwise, thus needing differentiation between electronic transactions and electronic signatures due to different requirements for legal validity.
The Difference Between Digital and Electronic Signatures
Digital Signature
A digital signature is a type of electronic signature that uses complex encryption technologies to verify the authenticity of a document and protect it from tampering. It provides a high level of security and is particularly used in transactions requiring high legal guarantees and protection against forgery.
Electronic Signature
An electronic signature is simpler and more general and can be any electronic representation of a person’s signature, such as a scanned image of a handwritten signature or even a click on an “I agree” button in an electronic form. It is mainly used in less sensitive transactions that do not require high levels of security.
| Type of Signature | Technology Used | Security Level | Appropriate Use |
|---|---|---|---|
| Digital | Digital encryption to verify document and signer identity | High | Sensitive contracts, legal documents |
| Electronic | Scanned images, mouse clicks, tablet input | Medium to Low | Service agreements, routine approvals |
Electronic Signature in the Saudi Legal System
The electronic signature has become an integral part of the legal system in Saudi Arabia, with the development of legislation and regulations to support its recognition as a legal means of documentation.
Also, read about the personal data protection Law in Saudi Arabia and its importance for individuals and companies, in our comprehensive analysis available on Eyad Reda Law Firm’s website.
Legitimacy of Electronic Signatures in Saudi Arabia
Electronic signatures are legally recognized in Saudi Arabia under the “Electronic Transactions System” which was established to regulate and support the use of digital technologies in legal transactions. According to this system, an electronic signature is considered equivalent to a handwritten signature, provided it meets certain criteria that ensure its validity and security.
Conditions and Standards for Electronic Signatures in Saudi Arabia
For an electronic signature to be recognized as a legal tool in Saudi Arabia, it must meet the following standards:
- Identity Verification: The signature must be able to verify the identity of the signer.
- Protection Against Changes: The signature must be protected against alterations after being affixed to the document.
- Integrity: The signature must ensure the integrity of the contractual document, and any changes made after signing must be documented and clear.
- Confidentiality: The confidentiality of the information associated with the signature must be maintained.
How to Use Electronic Signatures Safely and Effectively
To ensure the safe and effective use of electronic signatures in Saudi Arabia, the following guidelines should be followed:
- Use Trusted Software: Use electronic signature software approved by official bodies to ensure security and efficiency.
- Training and Awareness: Train users and raise their awareness about the importance of digital security and how to use electronic signatures safely.
- Continuous Verification: Implement ongoing verification procedures to ensure electronic signatures’ validity and assess the processes’ security.
- Record Keeping: Maintain accurate records of all signing operations and related documents to facilitate audits and legal investigations when necessary.
By adopting these guidelines, the maximum benefit from electronic signatures in Saudi Arabia can be achieved, enhancing trust in electronic processes and supporting digital transformation in the kingdom.
Also, read about holidays in the Saudi labor system and the new related regulations in our detailed article available on Eyad Reda Law Firm’s website.
Types of Electronic Signatures and Their Uses
Examples of electronic signature uses in various fields: Electronic signatures are used in a variety of contexts, each demonstrating their effectiveness and flexibility in facilitating legal and business transactions:
Business Transactions: Electronic signatures are used to sign contracts and agreements between companies, speeding up business procedures and reducing costs.
Government Documents: Many governments have adopted electronic signatures to facilitate transactions such as passport renewals and national IDs.
Healthcare Sector: Used to sign medical records and consents for medical procedures, enhancing privacy and security.
Real Estate Transactions: Enables buyers and sellers to sign real estate contracts without the need for face-to-face meetings.
Benefits of Electronic Signatures for Businesses and Individuals
Electronic signatures offer numerous benefits that are advantageous to both businesses and individuals:
Efficiency and Speed: Speeds up the signing and approval processes, improving overall institutional efficiency and reducing the time required to complete transactions.
Cost Reduction: Reduces the need for paper and expenses related to printing and mailing, thus lowering operational costs. Security and Credibility: Provides advanced security technologies that ensure the validity and safety of documents.
Ease of Use: Can be easily implemented via mobile devices and computers, allowing users to sign documents anytime and anywhere.
Environmental Sustainability: Contributes to environmental preservation by reducing the use of paper and natural resources.
With these benefits and wide applications, electronic signatures have become a fundamental element in modernizing and accelerating daily and business transactions, making it an ideal solution for individuals and institutions seeking to achieve maximum efficiency and effectiveness in their operations.
Challenges and Concerns Related to Electronic Signatures
Legal and Technical Challenges of Electronic Signatures: Despite the many benefits of electronic signatures, there are legal and technical challenges that may affect the acceptance and use of this technology:
Legal Recognition: In some countries, there may still be challenges in the legal recognition of electronic signatures, especially in transactions requiring high-level official authentications.
System Compatibility: Institutions may face challenges in integrating different electronic systems that support electronic signatures.
Security and Forgery: Technical challenges such as the risk of hacking or electronic forgery can pose serious threats to transactions.
How to Overcome Security Concerns Related to Electronic Signatures
To address security concerns related to electronic signatures, several steps can be taken to ensure safety and confidence in using this technology:
- Encryption: Use strong encryption techniques to protect data and signatures from interception and forgery.
- Multi-factor Authentication: Implement multi-factor authentication mechanisms to verify user identities before allowing electronic signatures.
- Compliance with Standards: Adhere to international and local standards for electronic signatures to ensure legal recognition and security.
- Training and Awareness: Provide ongoing training for users about the risks and how to use electronic signatures safely.
- Audit and Tracking: Create detailed audit records to track the use of electronic signatures and regularly review them to identify and address any suspicious activity.
By implementing these strategies, organizations and individuals can reduce security concerns and increase confidence in using electronic signatures as legal and effective tools for daily and business transactions.
The Future of Electronic Signatures in Saudi Arabia and the World
Electronic signatures are moving towards greater spread and development, especially with the increasing reliance on digital solutions in business and personal transactions. In Saudi Arabia, digital transformation is supported by national initiatives like Vision 2030, which aims to transform infrastructure and government services into electronic systems, enhancing the role of electronic signatures. Globally, with an increased focus on cybersecurity and the need for faster and more efficient transactions, the market is expected to expand the use of electronic signatures.
Why Should Electronic Signatures Be Adopted in Business Operations?
Adopting electronic signatures in business operations offers a range of benefits suitable for modern requirements:
- Efficiency: Electronic signatures speed up the processes of contracting and approving documents, enabling companies to accomplish more in less time.
- Cost: Electronic signatures reduce costs associated with paper, printing, and shipping, contributing to budget savings for other investments.
- Global Access: Electronic signatures allow companies to interact and contract with global partners without the need for travel or long waits for the exchange of paper documents.
- Security: Thanks to encryption and verification technologies, electronic signatures provide a high level of security, ensuring the protection of documents from forgery and tampering.
- Flexibility and Ease of Use: Electronic signatures can be executed across various smart devices and systems, making them convenient and easy to use for everyone.
With these benefits, it is clear that electronic signatures represent a strategic choice for companies looking to enhance their efficiency and expand their operations in the global market, underscoring their importance in supporting business and economic growth in the digital age.
Also, read about the Electronic Transactions Law and its impact on businesses in Saudi Arabia in our comprehensive analysis available on Eyad Reda Law Firm’s website.
Are electronic signatures allowed?
Yes, electronic signatures are generally allowed and legally recognized in many countries around the world. They are used to sign documents electronically and are considered valid and enforceable under the law in numerous jurisdictions, provided they meet specific legal requirements. These requirements often include ensuring the signature is uniquely linked to the signatory, that it is capable of identifying the signatory, and that there is a way to verify the integrity of the signed document.