Article 19 of the Saudi Commercial Pledge Law
المادة 19 من نظام الرهن التجاري · الفصل السادس: التصرف في المال المرهون وانتقاله
The article lets a pledgee with a right of pursuit enforce against the pledged asset in the hands of whoever acquired its ownership even if unaware of the pledge, and gives that person recourse against the pledgor or seller.
Official text (Arabic)
This article has not been amended since the law was issued.
يترتب على ثبوت حق المرتهن في تتبع المال المرهون حقه في التنفيذ عليه في يد من انتقلت إليه ملكيته وإن لم يعلم بوجود الرهن، ويحق لمن انتقلت إليه ملكية المال المرهون الرجوع في هذه الحال على الراهن أو البائع بالقيمة ودون إخلال في حقه بالتعويض ما لم يتنازل عن هذا الحق كتابة.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 19 explained in plain English
This article explains the consequences of the right of pursuit, which is the pledgee's right to follow the pledged asset wherever it passes.
If the pledgee has this right, it may enforce against the pledged asset in the hands of whoever acquired its ownership, even if the new owner was unaware of the pledge.
The article protects the new owner by giving it a right of recourse against the pledgor or the seller for the value, without prejudice to its right to claim compensation, unless it has waived this right in writing.
The article itself does not state when the right of pursuit arises; it builds its rule on the establishment of this right first. Once established, two things follow:
- The pledgee's right to enforce against the asset in the hands of whoever acquired its ownership.
- The right of the person who acquired ownership to have recourse against the pledgor or the seller for the value, while keeping its right to compensation unless it waives it in writing.
Article 20 provides that the pledged asset passes by inheritance or bequest burdened by the pledge.
So anyone buying valuable movable assets in a commercial business is advised to check that they are free of pledges before buying. Anyone facing enforcement against an asset they bought is advised to consult a lawyer specialized in commercial and finance matters or in enforcement cases.
Practical example
An establishment in Khobar bought a filling machine from a factory without knowing that the machine was pledged to a financing entity under a pledge that gave the entity a right of pursuit over it. The factory defaulted on the financing, so the entity pursued the machine and enforced against it in the establishment's hands. The establishment is entitled to have recourse against the selling factory for the machine's value, with its right to compensation unless it waived it in writing.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 19 of the Saudi Commercial Pledge Law
I bought an asset without knowing it was pledged. Can it be enforced against?
Yes. If the pledgee has a right of pursuit, it may enforce against the pledged asset in the hands of whoever acquired its ownership even if unaware of the pledge.
Against whom does the buyer have recourse if the pledged asset is enforced against?
It may have recourse against the pledgor or the seller for the value, without prejudice to its right to compensation unless it waives this right in writing.
Do I lose my right to compensation if I claim the value from the seller?
No. Recourse for the value is without prejudice to the right of the person who acquired ownership to compensation, unless it waives this right in writing.
More articles on Disposing of the Pledged Asset
- Article 20
The article provides that a pledged asset passing by inheritance or bequest passes burdened by the pledge, so the pledge does not lapse upon its transfer.
ينتقل المال المرهون بالإرث أو الوصية محملاً بالرهن.
- Article 21
The article lets whoever acquired ownership of the pledged asset clear it by paying the debt, costs and expenses, and then have recourse against the pledgor within the limit of what the pledgor would have paid.
يجوز لمن انتقلت إليه ملكية المال المرهون تطهيره بأداء الدين المضمون والنفقات والمصروفات التي تكبدها المرتهن، ويحق له في هذه الحال الرجوع على الراهن بما لا يتجاو
- Article 41
The article allows the pledgee under an effective pledge contract to transfer to others its right to recover the secured debt together with the pledge securing it.
للمرتهن -في عقد الرهن النافذ- أن ينقل إلى الغير حقه في استيفاء الدين المضمون مع الرهن الضامن له.
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.