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E-commerce Law Finally Introduced in the Kingdom of Saudi Arabia

E-commerce Law (the “Law”) was finally approved on the 9th of July 2019, demonstrating the Ministry of Commerce and Investment’s (“MoCI”) efforts in contributing to the Kingdom of Saudi Arabia’s (“Saudi” or the “Kingdom”) Vision 2030 and its efforts to enhance Saudi’s economy. The Law is comprised of 26 articles with constant references to its implementing regulations which are not published yet but shall be issued during the next 90 days as per Article (25) of the Law. The continuous mention of the implementing regulations indicates that their issuance shall provide more clarity as to the way the Law shall govern and apply e-commerce transactions. The Law drafted as guidance for its service providers and means of protection for its consumers.

I.    Flexibility in application

One of the essential aspects of this Law is its flexibility through the domain of its form. This flexibility is evident through the Law’s differentiation between its service providers – the Law provides for different definitions for ‘dealers’ and ‘practitioners’ while allowing both categories to enjoy the rights of the Law and offering electronic commercial transactions. Article (1) of the Law defines ‘dealers’ as persons with commercial registrations (CR) who wish to provide e-commerce transactions.  ‘Practitioners,’ on the other hand, are defined as persons who want to offer e-commerce services without obtaining a CR. Defining both terms as persons who may provide commercial electronic services highlights the Law’s attempt in being lenient through allowing both legal entities and natural persons to transact electronically. Such differentiation, allowing natural persons without CRs to transact, waives the obligation to be legally established to offer the services that may be provided through the Law. Furthermore, Article (2) moves to promote more flexibility by allowing locals and foreigners to enjoy the rights of the Law. This is because Article (2) states that the Law shall apply to i) persons offering e-commerce services inside the Kingdom, and ii) persons outside the Kingdom who are transacting electronically, intending to provide the services to consumers inside the Kingdom. Accordingly, this article allows for both locals and foreigners to offer e-commerce services inside the Kingdom, which, again, illustrates the leniency of the Law through it is broad enough to cover local and foreign service providers. Moreover, Article (6) section (A), of the Law states that dealers/practitioners shall ensure the publication of specific information on their website unless such information is registered with the relevant authentication authorities. The wording of the article implies that registration is not mandatory but slightly preferable since, in some instances, the information has to be published on the website for it being nonregistered with the relevant authority. Thus, such a provision illustrates how the Law aims to facilitate mild conditions which could be easily met by the service providers.  Hence, the Law’s broad application and easy to assemble conditions provide a permissive structure for service providers to follow.

II.    Consumer-friendly

Another key feature worth noting is that the Law seems to be tailored to be consumer-friendly, enhancing the protection of the consumers. This is demonstrated through the Law’s data protection provision. Article (5) of the Law states that dealers/practitioners shall not keep any record of their consumers’ information, upon completion of the transaction, unless agreed otherwise. The provision then moves to impose a duty on dealers/practitioners to take all necessary measures to ensure the protection of their consumers’ data. This article is one with a unique feature as it is Saudi’s first attempt to protecting consumers’ privacy by imposing a duty on service providers to safeguard the confidentiality of the information of their consumers. Another example that demonstrates how the Law seems to enhance consumers’ protection is Articles (10) and (11) on commercial advertisements content. Article (10) of the Law states that electronic ads shall be treated as supplemental material to electronic contracts which renders them to be binding in nature. The binding element adds rigidity to the content of the ad, ensuring that all content is accurate, which results in reliability by the consumers. Article (11) then moves to list down the content that is prohibited from being displayed in commercial ads; i.e., any false or misleading claims that may deceive consumers. Both articles emphasize how the Law is aimed to be consumer-friendly, protecting the consumers from privacy infringements and inaccurate information, which may confuse their judgment in trading. Finally, Articles (13) and (14) on termination state that the consumer has the right to terminate an electronic contract any time prior to the end of the 7 days’ period from the day of contract provided that the reason for termination does not fall under the few exceptions listed in Article (13) section (2), or if the services provider fails to deliver the service/product within 15 days unless agreed otherwise. Once again, the consumer’s right to termination portrays how the Law is tailored in a way to guarantee the consumer’s protection and wellbeing when contracting electronically with a service provider.

III.    Regulatory

About ensuring the Law’s application, Article (17) touches upon the penalties for violating any provision of the Law to be as one or more of the following:

1.    Sending a warning to the relevant party,

2.    Blocking the service provider’s website permanently or temporarily until the violation is remedied,

3.    Issuing a fine not exceeding SAR 1,000,000, and;

4.    Permanent or temporary suspension from practicing e-commerce transactions.

Also, Article (19) states that a committee shall be established to be the Law’s regulatory body – its purpose will be one of supervision and sanctioning when violations are committed.

Finally, as per Article (24) of the Law, in cases where the Law remains silent as to the mechanism of dealing with a specific transaction or issue related to e-commerce, then the laws of e-transactions shall apply to the matter in hand.

Due to the Law recently approved, we believe there isn’t any case law concerning the application of the Law’s provisions. Also, we are still not aware of any drafts of its implementing regulations. However, based on the articles of the Law, we believe it to be flexible in application and consumer-friendly protecting the rights of the consumers against privacy infringements, misleading advertising, and unreasonably late deliveries.