Article 23 of the Saudi Law on Security Rights in Movable Assets

This article opens the provisions on enforcement against the collateral, and its most notable feature is the possibility of enforcement without going to the courts.

Agreement on non-judicial enforcement (paragraph 1): the grantor and the secured party may agree to enable the secured party to enforce against the collateral without the courts to recover his right if the debtor breaches performance of the secured obligation, on two conditions:

1. The agreement must be in writing.
2. It must be made before any breach occurs of the secured obligation.

Forms of enforcement (paragraph 2): non-judicial enforcement includes:

• Selling the collateral by public auction.
• Selling it directly.
• Taking ownership of it to satisfy the secured party's right.

The Implementing Regulations set the provisions and procedures needed for this, so the article does not set out the steps of enforcement, its timing, or how the grantor is notified, but refers them to the Implementing Regulations.

What does this mean? For the debtor and the grantor: signing a non-judicial enforcement clause means accepting that the creditor may recover his right from the collateral without a court judgment upon breach, as the Implementing Regulations set out. For the creditor: he benefits from this route only if he obtained the agreement in writing and before the breach.

It follows Article 22 on the right to follow the collateral, and is followed by Article 24, which allows the secured party to repair the collateral and prepare it for sale. Before signing or activating a clause like this, it is advisable to consult a lawyer specialized in commercial and finance matters.