What is direct implementation? Why does it matter to companies? And what are the consequences of not implementing?

What is direct implementation? Why does it matter to companies? And what are the consequences of not implementing?

“Direct enforcement” is a crucial issue for companies in Saudi Arabia, especially given the expanding role of enforcement courts and their strict application of enforcement procedures. While many human resources managers and executives believe enforcement only pertains to financial claims, non-financial obligations, primarily the delivery of documents, have become a source of enforcement disputes in the business sector. This article from the Abdulaziz bin Yasser Al-Anzi Law Firm will explain what direct enforcement is, why it matters to companies, and the consequences of non-enforcement.

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Elements of the article

Definition of direct implementation

What is direct implementation in companies?

What is the importance of direct implementation for companies?

How is direct non-financial implementation carried out in companies?

Questions and Answers: –

Definition of direct implementation

Article 1 of the Enforcement Law defines enforcement disputes as (claims arising from enforcement, relating to the availability of conditions for its validity, and brought by parties to the enforcement dispute or others). The Saudi legislator did not define direct enforcement, but jurisprudence defined it as the second method of compulsory enforcement, which is for the creditor to obtain the exact thing that the debtor has committed to, whatever its location and subject matter, even if the debtor's obligation is to perform an act or refrain from it.

What is direct implementation in companies?

Direct enforcement is simply obligating the judgment debtor (the company) to perform a specific action stipulated in the enforceable instrument (the judgment). When the required obligation is an action that only the judgment debtor can perform, such as handing over copies of documents held by the establishment, this type of obligation is enforced directly, not through seizure, sale, or the usual financial procedures.

Therefore, the enforcement judge in the enforcement courts spread throughout Saudi Arabia, such as Riyadh and Jeddah, has broad powers to compel the establishment to comply. It begins with the decision of Article (34), which informs the company and gives it a grace period of five days, then it moves to more severe decisions such as the decision of Article (46), which stipulates the suspension of financial transactions, and may reach the daily fine stipulated in Article (70), the highest of which is ten thousand riyals for each day, which doubles with the passage of time, and even prohibition from dealing if the refusal continues.

What is the importance of direct implementation for companies?

The importance of “direct enforcement” for companies is evident in the fact that non-financial obligations may seem simple at first glance, but they may turn into a serious enforcement responsibility if they are not dealt with with the required speed and professionalism. For example, delivering copies of documents requested by the enforcement applicant may lead, if their issuance is delayed, to a daily fine that accumulates for the company over weeks or months, and in some cases may reach very large amounts, for example, 10,000 riyals for each day for six months, which would then total one million eight hundred thousand riyals. Companies are unaware that the enforcement judge has the authority to impose a “threatening fine” for each day of delay to force the company to comply, which turns a simple piece of paper into a financial disaster.

What distinguishes this type of obligation is that failure to fulfill it is not merely a violation, but rather a “refusal to implement” that requires the intervention of the enforcement judge by force of law, until it is fulfilled, and it falls upon the party against whom enforcement is to prove this implementation in a clear and verifiable manner.

If the request is not fulfilled, or if it is fulfilled in a manner that cannot be substantiated, the company faces a range of regulatory measures, most notably: daily fines, suspension of services, account freezes, prohibition from dealing with government entities, and potential legal action against the company representative if the refusal continues. Therefore, prompt action on these requests is a practical necessity to protect the organization from escalating enforcement risks.

The impact of “direct execution” is becoming increasingly important in light of the digital transformation in the Kingdom and the adoption of electronic documents; as sending them via email has become easy and is considered an acceptable means of fulfillment, and companies can protect themselves from enforcement procedures by simply documenting that they have delivered their commitment correctly and on time.

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How is direct non-financial implementation carried out in companies?

Article (9) of the Enforcement Law clarifies that direct enforcement is carried out by means of an enforceable instrument for a right of a specific amount that is due and payable, and enforceable instruments include: –

1- Judgments, decisions, and orders issued by the courts:

Let's assume a court ruling was issued by the Labor Court obligating a company to hand over a former employee's experience certificate and original educational qualification. However, the company ignored the ruling, treating it as a mere "administrative document." The employee then took the matter to the Enforcement Court. Due to the company's procrastination, the judge imposed a penalty fine of 1,000 riyals per day. After three months, the company found itself required to pay 90,000 riyals, not as compensation to the employee, but as a penalty to the state (or compensation to the plaintiff, as determined) for withholding the document.

2- Arbitrators’ rulings endorsed with an enforcement order in accordance with the Arbitration Law.

An arbitrator issued a ruling obligating the "contracting company" to deliver the final plans for the project to the owner. What happened was that the technical department in the company delayed preparing the plans for two months, and the owner implemented the ruling, and daily fines accumulated due to the owner's inability to benefit from the building, and the obligation to deliver a "paper plan" turned into huge financial compensations for the loss of benefit.

3- Settlement reports issued by the authorized authorities or ratified by the courts.

Two companies reached a settlement agreement (via a platform like “Taradhi”) whereby the first company agreed to remove billboards from a shared location within 10 days. However, the branch manager considered the matter minor and postponed the removal. The second company then submitted the settlement agreement as an enforceable document. The enforcement judge may impose a fine for each day the billboards remain and may resort to force to remove them at the non-compliant company's expense, incurring double the cost.

4- Commercial papers.

Although commercial papers are financial, there are cases in which the judge requests the delivery of the original check or bond after payment or in the event of a substantive dispute, such as if Company (A) paid Company (B) the value of a promissory note, and Company (A) requested the return of the original note to destroy it, and Company (B) refused or delayed on the pretext of “losing it among the files,” Company (A) can execute to recover the note, and here fines may be imposed on Company (B) to force it to deliver the paper that proves the debtor’s innocence.

5- Notarized contracts and documents.

The company's articles of incorporation stipulate in a notarized clause that the manager is obligated to allow the partner access to the financial statements within one week of requesting them. If the partner requests access and the manager ignores the request, the notarized contract becomes an enforceable instrument. The partner then goes to the enforcement court to compel the company to disclose the documents. The delay in this case results in a daily penalty imposed on the company (or, in some cases, the manager personally) until the statements are delivered.

6- Judgments, court orders, arbitration awards, and notarized documents issued in a foreign country.

A London court ruling ordered a Saudi company to cease using a specific trademark. While the enforcement procedures were completed in Saudi Arabia, the company continued to use the logo on its products, disregarding the ban. This non-compliance is now the subject of enforcement. The enforcement judge will impose hefty fines for each day the violation continues, potentially reaching millions due to the significant international commercial damage.

7- Ordinary documents whose contents are acknowledged as being fully or partially due.

Example: The CEO sends a letter to a supplier stating, “We acknowledge that we have 500 units of your merchandise in our warehouse and will return them to you next week.” This acknowledgment (if admitted by the company in court) becomes an enforceable instrument. If the warehouse manager delays returning the merchandise, the company will be subject to a penalty levied because of this ordinary document that has acquired legal force.

8- Contracts and other documents that have the force of an enforceable instrument under the system.

A company leased premises under a financing agreement stipulating immediate eviction in case of default. The company subsequently defaulted but failed to vacate the premises. The lease agreement serves as a direct enforcement order for eviction. Delaying the handover of the premises could result in penalties for the company equal to or exceeding the rent, in addition to the costs of forced eviction.

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Questions and Answers: –

What is the enforcement system in Saudi Arabia?

Implementation is carried out in accordance with the 1433 Enforcement System, the Sharia Procedure System, and other relevant regulations.

Who is responsible for implementation in Saudi Arabia?

The execution judge is responsible for the power of compulsory execution and its supervision, and he is assisted in this by a sufficient number of execution officers. He is responsible for deciding on execution disputes, whatever their value, in accordance with the provisions of summary proceedings, and he is also responsible for issuing decisions and orders related to execution.

Is it possible to directly enforce the terms of service suspension against a company?

Yes, it is possible to request the suspension of services for companies that do not fulfill their obligations, except for services related to treatment, education, work, commercial registration, and documentation of civil events and official documents.

In conclusion, companies that understand the concept of direct enforcement and manage their non-financial obligations with legal awareness avoid the greatest amount of enforcement risks and maintain their reputation and the trust of their clients and government agencies. However, companies that delay or are lenient in this aspect may find themselves facing large enforcement claims that they did not expect, even though the solution was originally simple.

And inAbdulaziz bin Yasser Al-Anzi Law FirmFor legal consultations, we are considered the best lawyers in Jeddah for managing this type of obligation before problems arise, and the best lawyers for handling enforcement procedures, proving fulfillment, and filing the necessary enforcement disputes to protect your interests. Proper handling of non-financial obligations has become an essential part of legal governance within any organization, so don't hesitate to contact us.Contact us.