Article 27 of the Saudi Privatization Law
المادة 27 من نظام التخصيص
A privatization contract may include a delay fine, penalty clause or compensation for breach, and if the contract so provides the contracting authority may perform it itself or through others after notifying the private party and it fails to correct the breach.
Official text (Arabic)
This article has not been amended since the law was issued.
1- يجوز أن يتضمن العقد -أو العقد التابع- فرض غرامة تأخير، أو شرط جزائي، أو تعويض؛ نتيجة إخلال أي من طرفيه في تنفيذ التزاماته التعاقدية، ويحدد العقد -أو العقد التابع- آلية حساب ذلك سواءً على أساس مبلغ مقطوع، أو نسبة مئوية من قيمة العقد، أو غير ذلك وفق ما يُتفق عليه في العقد أو العقد التابع.
2- دون الإخلال بحقوق الجهة التنفيذية وفقًا لعقد الشراكة بين القطاعين العام والخاص، للجهة التنفيذية -في حال نص العقد على ذلك- أن تباشر بنفسها، أو من خلال أي طرف آخر تختاره تنفيذ عقد الشراكة بين القطاعين العام والخاص؛ لضمان استمرار تقديم الخدمات والمنتجات باطّراد، وذلك في حال إخلال الطرف الخاص بتنفيذ التزاماته التعاقدية، أو عجزه عن تحقيق مستوى الجودة المتفق عليه، شريطة إخطار الطرف الخاص كتابةً بالإخلال الواقع منه، وتخلّفه عن تصحيح الوضع خلال المدة المحددة في الإخطار. ويحدد عقد الشراكة بين القطاعين العام والخاص الحالات والضوابط المتعلقة بمباشرة الجهة التنفيذية بنفسها، أو من خلال طرف آخر تنفيذ العقد، والآثار المترتبة عليه.
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 27 explained in plain English
This article addresses what happens when one of the parties breaches:
First: financial penalties. The contract or subsidiary contract may include:
- A delay fine; or
- A penalty clause; or
- Compensation,
as a result of a breach by either party, meaning they may also fall on the government entity. The contract sets the method of calculation: a lump sum, a percentage of the contract value, or otherwise.
Second: the contracting authority steps in to perform. Without prejudice to its rights under the contract, the contracting authority may perform the partnership contract itself or through another party it chooses, to ensure that services continue, on these conditions:
- The contract provides for this.
- The private party breaches its obligations or fails to achieve the agreed level of quality.
- The private party is notified in writing of the breach.
- It fails to correct the situation within the period set in the notice.
The contract sets the cases, controls and effects of this. The text does not set the length of the notice period; it is stated in the notice itself. A private party that receives a notice of breach should act quickly and consult a lawyer who specializes in commercial and administrative matters.
Practical example
A company fell short of the agreed quality level in operating a transport station, so the contracting authority notified it in writing, giving 60 days to correct it. The company did not correct the situation, and because the contract so provides, the contracting authority took over operation through another company to keep the service running.
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 27 of the Saudi Privatization Law
Can a penalty clause be included in a privatization contract?
Yes. The contract may include a delay fine, penalty clause or compensation for a breach by either party, and the contract sets the method of calculation.
When may the government carry out the project itself?
If the contract provides for it and the private party breaches its obligations or fails to meet the agreed quality, after being notified in writing and failing to correct the situation within the set period.
More articles on Amending and Terminating a Partnership Contract
- Article 21
Within the contract's controls, when the public interest requires and with the competent authority's approval, the contracting authority may amend a partnership contract in writing or suspend the project; the Implementing Regulations set the effects and compensation unless the contract does.
1- للجهة التنفيذية -في إطار الأحكام والضوابط المتفق عليها في العقد- متى اقتضت المصلحة العامة ذلك، وبعد الحصول على موافقة الجهة المختصة، ما يأتي: أ- تعديل شروط ع
- Article 28
With the competent authority's approval, the contracting authority may terminate a partnership contract unilaterally for material breach after notice, bankruptcy, the public interest, or cases set in the contract; the contract determines the effects and compensation.
1- مع مراعاة الأحكام التعاقدية ذات العلاقة، للجهة التنفيذية -بعد الحصول على موافقة الجهة المختصة- إنهاء عقد الشراكة بين القطاعين العام والخاص والعقد التابع أو أ
- Article 29
The contracting authority may transfer, amend or terminate existing government contracts without the counterparty's consent where the project requires it, while preserving the counterparty's right to compensation.
إذا تطلب تنفيذ مشروع التخصيص نقل عقود قائمة لتقديم خدمات، أو مقاولات، أو توريد سلع، بين جهة حكومية وأطراف أخرى متعاقدة معها إلى الطرف الخاص، أو إجراء تعديل عليه
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.