Article 4 of the Saudi General Warehouses Law
المادة 4 من نظام الإيداع في المخازن العامة
The article bars the warehouse keeper, whether an individual or a company, from commercial activity or speculating in goods of the type he keeps; the bar covers a partner owning 10% or more and exempts state-owned companies.
Official text (Arabic)
This article has not been amended since the law was issued.
لا يجوز للخازن فردا كان أو شركة أن يمارس بأية صفة كانت سواء لحسابه أو لحساب غيره نشاطا تجاريا، أو يضارب على بضائع من نوع البضائع المرخص له بحفظها في مخزنه، وإصدار مستندات تمثلها. ويسري هذا الحظر على الشريك الذي يملك نسبة 10% (عشرة في المائة) على الأقل من رأس مال الخازن إذا كان شركة.
ويستثني من هذا الحكم الخازن إذا كان شركة من الشركات المملوكة للدولة واقتضت المصلحة العامة ذلك.
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 4 explained in plain English
This article places a prohibition on the warehouse keeper, intended to prevent his interests from conflicting with those of depositors.
What is prohibited?
The warehouse keeper, whether an individual or a company, may not engage in any capacity, whether for his own account or for the account of others, in:
- commercial activity, or
- speculating in goods of the type he is licensed to keep in his warehouse, and issuing documents representing them.
Who is covered by the prohibition?
- The warehouse keeper himself, whether an individual or a company.
- If the warehouse keeper is a company, the prohibition applies to a partner who owns at least 10% of its capital.
The exception: this provision does not apply to the warehouse keeper if it is a state-owned company and the public interest requires it. The exception depends on both conditions together.
The reason is clear: the warehouse keeper keeps the goods of others and issues documents representing them, such as the storage receipt and the pledge document defined in Article 2, so if he traded in the same goods there would be a risk of him exploiting his information or of his interests conflicting with those of depositors.
It is preceded by Article 3 on licenses to establish and to carry on the activity, and followed by Article 5, which allows the general warehouse to provide loans secured by a pledge of the goods kept with it. Anyone who is a partner in a general warehouse company or plans to set one up would do well to consult a lawyer specializing in commercial and corporate matters.
Practical example
Faisal owns 15% of the capital of a company that runs a licensed general warehouse for keeping rice, and he wanted to trade in rice for his own account. Under this article the prohibition applies to him because he owns more than 10% of the capital of the warehouse-keeper company.
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 4 of the Saudi General Warehouses Law
May the owner of a general warehouse trade in the goods he stores?
No. The warehouse keeper may not engage in commercial activity or speculate in goods of the type he is licensed to keep, whether for his own account or for others.
Does the prohibition cover partners in the warehouse keeper's company?
Yes. It applies to a partner who owns at least 10% of the capital of the warehouse keeper, if it is a company.
Is there an exception to this prohibition?
An exception applies if the warehouse keeper is a state-owned company and the public interest requires it.
More articles on Warehouse Keeper's Obligations and Liability
- Article 7
The article makes the warehouse keeper responsible for guarding the deposited goods with the utmost care, within the limit of their value recorded in the deposit documents, and not liable for damage or shortage caused by force majeure or an inherent defect.
يعد الخازن مسؤولا عن البضاعة المودعة لديه وعليه حراستها والمحافظة عليها وأن يبذل في ذلك العناية القصوى، وتكون مسؤوليته في حدود قيمتها المثبتة في مستندات الإيداع
- Article 8
The article allows the warehouse keeper to ask the Board of Grievances for permission to sell goods threatened with rapid damage he had no part in, if the depositor refuses to take them or dispose of them after being notified by registered letter.
للخازن أن يطلب من ديوان المظالم الإذن له ببيع البضاعة إذا كانت مهددة بتلف سريع لا دخل له فيه ورفض المودع تسلمها أو التصرف فيها بعد إبلاغه بذلك بخطاب مسجل، ويحدد
- Article 9
The article obliges the warehouse keeper to take out cooperative insurance on the goods deposited with him.
على الخازن أن يقوم بالتأمين التعاوني على البضاعة المودعة.
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.