Business Legal Updates — Issue 4 · October 2026
Five regulatory updates: Qiwa Saudisation salary rules, revised electricity and water tariffs, the new Enforcement Law framework completed, and the Commercial Transactions Law approved — plus the issue article on breach of contractual obligations.
Business Legal Updates
Five regulatory updates and an article on breach of contractual obligations in commercial contracts and its effect on the parties’ rights. We review the regulations and decisions that matter most to establishments, focusing on their practical impact and what is worth preparing for.
Saudisation Credit Rules Updated in Qiwa
The salary required for a Saudi employee to count fully toward Saudisation ratios rises to SAR 5,000 as of 25 April 2027, then to SAR 6,000 as of 25 April 2028.
Review the wages of Saudi employees counted toward Saudisation and prepare to adjust salary structures so the establishment’s Qiwa band is not affected.
Electricity Service Tariff Revision Approved
Saudi Electricity Company announced a revision of the electricity tariff effective 1 January 2027: the commercial-sector consumption tariff rises from 22 to 25 halalas/kWh for consumption up to 6,000 kWh/month, and from 32 to 35 halalas/kWh above that, plus a fixed monthly charge based on breaker capacity.
Assess the new tariff’s impact on operating costs and 2027 financial projections.
Water & Sewerage Service Tariff Revision
National Water Company announced a revision of water and sewerage tariffs for residential, non-residential and government sectors effective 1 January 2027. The previous non-residential tiered tariff — ranging from SAR 0.10 to 6/m³ for water and SAR 0.05 to 3/m³ for sewerage — is replaced by a unified SAR 8/m³ for water and SAR 4/m³ for sewerage.
Assess the new tariff’s impact on operating costs and 2027 financial projections.
Enforcement Law’s Regulatory Framework Completed
The new Implementing Regulations have been issued, setting out the provisions and procedures required to apply the law and initiate enforcement proceedings; the law and its regulations take effect on 29 October 2026.
A clear procedural path for enforcement and reduced ambiguity in its application.
Commercial Transactions Law Approved
The Council of Ministers approved the Commercial Transactions Law, governing the provisions of commercial activity and the obligations, contracts and commercial papers associated with it.
Follow the law’s publication to assess the impact of its provisions on commercial contracts and practices, before it takes effect 180 days after publication.
Breach of Contractual Obligations in Commercial Contracts and Its Effect on the Parties’ Rights
Commercial contracts are among the most important legal instruments governing relations between companies and institutions: they define the parties’ rights and obligations and set the regulatory framework for delivering the agreed work and services. Yet concluding a contract does not guarantee its performance as required — one party may breach its contractual obligations, raising legal questions about the injured party’s entitlement to demand performance, termination, or compensation.
1. What Constitutes a Breach of Contractual Obligations
A contractual breach means a party refrains from performing its obligations under the contract, or performs them in a manner inconsistent with what was agreed — whether through delayed delivery of services, failure to supply products, non-payment of amounts due, or deviation from agreed specifications and terms. The Saudi Civil Transactions Law codified the binding force of contract in Article (94): “Once a contract is validly concluded, it may not be rescinded or amended except by agreement or pursuant to a statutory provision,” while Article (95) requires that “the contract be performed in accordance with its contents and in a manner consistent with the requirements of good faith.”
2. The Legal Consequences of Breach
Breach of contractual obligations produces a number of legal consequences that vary with the nature of the obligation and the gravity of the breach. Article (107) of the Civil Transactions Law provides: “In bilateral binding contracts, the party whose obligation has not been performed may demand performance or termination of the contract, after putting the defaulting party on notice, with a claim for compensation in either case where justified.” However, the mere occurrence of a breach does not automatically entitle the injured party to immediate termination: the statutory provisions and contractual terms must be considered, along with the extent to which the breach defeats the purpose of the contract.
3. The Importance of Formal Notice and Documenting Breach
Documenting any breach is one of the most important steps companies should take before pursuing legal action — retaining official correspondence, meeting minutes, delay notices, and documents proving non-performance. Formal notice to the defaulting party, where required by law or agreement, is equally important: it gives the party a chance to cure the breach, subject to the cases in which the law dispenses with notice. This strengthens the injured party’s legal position should a dispute arise, and reduces the risk of treating the termination of the contractual relationship as an unlawful act.
4. The Role of Legal Review in Reducing Contractual Disputes
Legal review is not limited to resolving disputes after they occur — it extends to preventing them before contracts are concluded: drafting obligations clearly, setting performance timeframes, organising notice and formal-warning mechanisms, specifying termination and rescission cases, and allocating liability for damages arising from breach. Including clear dispute-resolution mechanisms in contracts also protects commercial interests and reduces the legal and financial risks companies may face while performing their obligations.
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Disclaimer: This content is for general awareness and does not constitute legal advice, nor does it create an attorney-client or advisory relationship.