Article 18 of the Saudi General Warehouses Law
المادة 18 من نظام الإيداع في المخازن العامة
The holder of the pledge document may have recourse against the debtor or endorsers after the goods are sold and their price proves insufficient, within 10 days of the sale; recourse against endorsers lapses if enforcement is not started within 30 days.
Official text (Arabic)
This article has not been amended since the law was issued.
لا يجوز لحامل مستند الرهن الرجوع على المدين الراهن أو المظهرين إلا بعد بيع البضاعة المرهونة وعدم كفاية ثمنها للوفاء بالدين وأن يكون ذلك خلال عشرة أيام من تاريخ البيع وإلا سقطت دعوى الرجوع عليهم. وفي جميع الأحوال تسقط دعوى لحامل مستند الرهن في الرجوع على المظهرين إذا لم يباشر إجراءات التنفيذ على البضاعة المرهونة خلال ثلاثين يوما من تاريخ استحقاق الدين.
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 18 explained in plain English
This article regulates the recourse of the holder of the pledge document against persons other than the goods if their price is not enough to pay his debt, and sets precise conditions and deadlines for him:
First: conditions for recourse against the pledging debtor or the endorsers
- The pledged goods must have been sold.
- Their price must be insufficient to pay the debt.
- Recourse must be made within ten days of the date of sale.
If he does not have recourse within this period, the action of recourse against them lapses. The rule is that the secured creditor starts with the goods, and pursues the debtor or the endorsers only after that.
Second: an additional deadline for recourse against the endorsers
In all cases, the action of the holder of the pledge document for recourse against the endorsers lapses if he does not start enforcement proceedings on the pledged goods within thirty days of the date the debt falls due.
The difference between the two deadlines: the first (ten days) runs from the date of sale and concerns recourse against the pledging debtor and the endorsers, while the second (thirty days) runs from the date the debt falls due and concerns recourse against the endorsers and is tied to starting enforcement proceedings on the goods.
The article is linked to Article 17, which gives the secured creditor priority over the price of the goods after deducting taxes, fees and expenses. Because missing these deadlines extinguishes the action, a holder of an unpaid pledge document is best advised to consult a lawyer specializing in commercial matters or enforcement without delay.
Practical example
The date arrived for a debt secured by a pledge document held by a bank, and the bank started enforcement proceedings on the goods within twenty days of the due date. The goods were sold and their price was not enough to pay the debt. Under this article the bank may have recourse against the pledging debtor or the endorsers for the balance, provided this is within ten days of the date of sale, otherwise the action of recourse against them lapses.
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 18 of the Saudi General Warehouses Law
When can the debtor be pursued if the pledged goods' price is not enough?
After the pledged goods are sold and their price proves insufficient to pay the debt, provided this is within ten days of the date of sale, otherwise the action of recourse lapses.
When does the action of recourse against the endorsers lapse?
It lapses if the holder of the pledge document does not start enforcement proceedings on the pledged goods within thirty days of the date the debt falls due, and also if he does not have recourse within ten days of the date of sale.
Can the debtor be claimed against before the pledged goods are sold?
No. The holder of the pledge document may not have recourse against the pledging debtor or the endorsers except after the goods are sold and their price proves insufficient.
More articles on Loans Secured by Pledged Goods
- Article 5
The article allows the general warehouse to provide loans secured by a pledge of the goods kept with it, and to deal in the pledge documents representing them after the pledgor's consent.
يجوز للمخزن العام أن يقدم قروضا مكفولة برهن البضاعة المحفوظة لديه، وأن يتعامل بمستندات الرهن التي تمثلها بعد موافقة الراهن.
- Article 15
The article allows the holder of the storage receipt, separated from the pledge document, to pay the secured debt before it falls due, and if payment is impossible or refused, to deposit it with a local bank, whereupon the goods are released.
يجوز لحامل إيصال التخزين ـ منفصلا عن مستند الرهن ـ أن يدفع الدين المضمون بهذا المستند ولو قبل حلول ميعاد استحقاق الدين. وإذا تعذر الوفاء لحامل مستند الرهن أو رف
- Article 16
The article allows the holder of the pledge document, separated from the storage receipt, to ask the Board of Grievances for permission to sell the pledged goods if the debt is not paid when due; the Board determines the method of sale and notifies the warehouse keeper and the owner of the receipt.
إذا لم يدفع الدين في ميعاد الاستحقاق جاز لحامل مستند الرهن ـ منفصلا عن إيصال التخزين ـ أن يطلب من ديوان المظالم الإذن له في بيع البضاعة المرهونة، ويحدد الديوان
- Article 17
The secured creditor satisfies his right from the price of the goods in priority over all creditors after deducting taxes, fees and the expenses of sale, storage and keeping, and any surplus is deposited in a bank if the receipt holder is absent.
يستوفي الدائن المرتهن حقه من ثمن البضاعة بالامتياز على جميع الدائنين بعد خصم المبالغ التالية : أ- الضرائب والرسوم المستحقة على البضاعة. ب- مصروفات بيع البضاعة و
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.