Saudi Arabia introduces bespoke maritime law

Robert Lawrence, Khurram Ali & Ahmed Alhudaithi of Clyde and Co have updated clients on Saudi Arabia’s recently introduced Maritime Law, which the writers said had been made necessary by the projects set out in Vision 2030, under which Saudi Arabia aims to become a logistics and maritime hub

The Maritime Law, passed and approved in January, came into effect on July 3rd.

It applies to all Saudi Arabian flagged vessels and foreign vessels that call at the Kingdom’s ports and territorial waters. It does not apply to warships and public vessels which have been allocated for non-commercial purposes.

Previously maritime issues were dealt by the Commercial Court Law, which was published in early 1931 and was based on the Ottoman Commercial Code. The maritime sections of the Commercial Court Law were brief and arguably not suited for modern day shipping.

Nationality / flag

For a vessel to acquire Saudi nationality / flag, it must be:

  • Registered in one of the Kingdom’s ports
  • Wholly owned by a Saudi national or a company that is 100% owned by a Saudi national.
  • Alternatively, if the vessel has multiple owners, the majority of the shares must be owned by a Saudi national.

Vessel registration

The Maritime Law provides that any self-propelled vessel shall not fly the flag of the Kingdom unless it is registered in accordance with the Maritime Law and its Implanting Regulations, which are scheduled to be issued imminently.

  • Vessels exempt from registration are:
  • Vessels less than 24 metres in length.
  • Fishing vessels whose tonnages does not exceed 30 metric tons and which are not more than 20 meters in length;
  • Recreation and diving vessels whose tonnage does not exceed 10 metric tons and which are not more than 11 meters in
  • length
  • Vessels of primitive construction, sailing vessels and non-propelled marine units, lighters, barges and other floating structures that normally operate within a port.

Non-Saudi vessels

Non-Saudi vessels are not allowed to undertake towage, pilotage, supply services and coastal transportation activities within Kingdom’s waters unless an exemption licence is obtained from the president of the Public Transport Authority (the PTA).

Clyde observed that this provision was quite significant as it applied to all Offshore Support Vessels (OSVs), the majority of which operating in the Kingdom were not Saudi-flagged.

Clyde said that the impact that this provision could have on an OSV owner that was in breach of the same, or who did not obtain the exemption certificate from the president of the PTA, potentially would be quite significant from both a financial and commercial perspective, including:

  • The owner might be fined between SAR2,000 and SAR50,000;
  • The OSV might be detained; although this is not provided for in the Maritime law; and
  • The OSV might be refused clearance to leave the Kingdom’s waters.
  • Limitation of Liability

Clyde also observed that limitation of liability generally was not allowed under Sharia law (which is the overarching law of the Kingdom), as one of the basic principles of Sharia law was that one should compensate the other fully in respect of the harm that one has caused to the other.

Where a law contradicts Sharia law, the court should apply Sharia law as Sharia law prevails over any other law of the Kingdom.

The writers therefore concluded that it remained to be seen if the courts of the Kingdom would apply the limitation of liability as per the 1996 Protocol, or at all. “That said, the courts of the Kingdom have previously upheld limitation provisions in bills of lading on the basis that the parties are free to contract and did expressly negotiate the said provisions”, said Clyde.

Should the Kingdom’s courts enforce the 1996 Protocol, this would see “a dramatic shift in the Kingdom’s liability regime and will be a fundamental game changer for ship owners and operators alike”, the writers concluded.