Saudi Arabia sits at the centre of one of the world’s most active construction markets. The Kingdom accounts for approximately 39 percent of the total MENA project pipeline by value,^[1]Youssef + Partners, “MENA Surge in Construction Disputes: Delays, Cost Overruns & Contract Claims” (August 2025). and construction and engineering disputes already account for approximately 47.3 percent of the 2025 caseload at the Saudi Center for Commercial Arbitration (SCCA), the largest share of any sector.^[2]Chambers and Partners, “Construction Law 2026 — Saudi Arabia: Trends and Developments” (2026) (SCCA 2025 caseload data); see also Global Arbitration Review, “The Middle Eastern and African … Continue reading

HKA’s Eighth Annual CRUX Insight Report, analysing over 2,200 projects in 114 countries worth $2.43 trillion, found that time extensions sought by contractors globally amounted to 65.8 percent of planned schedules. The Middle East has historically exceeded this. HKA’s Seventh Report recorded 80.9 percent across 480 projects in the region and 97.2 percent across the 133 Saudi projects within that dataset. While the Eighth Report notes reductions in schedule overruns, the region’s disputes remain disproportionately severe.^[3]HKA, CRUX Insight Eighth Annual Report: “From Insight to Foresight” (November 2025); HKA, CRUX Insight Seventh Annual Report: “Changing the Narrative” (October 2024); HKA, “Key lessons for … Continue reading

The scale of disputes is not surprising given the volume and complexity of the Kingdom’s construction activity. What is less well understood, particularly by practitioners entering the Saudi market for the first time, is how fundamentally the legal and institutional framework for resolving those disputes has changed in recent years. This article focuses on the litigation landscape: the courts, codified law, and what practitioners need to understand when a construction dispute comes before a Saudi judge.

Where Construction Disputes Are Litigated

The first question in any Saudi construction dispute is jurisdictional, and the answer depends on who the contracting parties are.

For government contracts governed by the GTPL, the default forum is the Board of Grievances, the Kingdom’s independent administrative judiciary. For certain technical disputes, the Executive Regulations contemplate amicable settlement and, failing that, referral to a dispute-resolution body comprising a representative of the government authority, a representative of the contractor, and a Ministry-appointed chair. The decision is enforceable, without prejudice to the affected party’s right to resort to the competent judicial authority.^[4]Ministry of Finance, Government Tenders and Procurement Law, Articles 72, 74, 92 and 93; Ministry of Finance, Executive Regulations of the Government Tenders and Procurement Law, Articles 154 and … Continue reading

Arbitration is available for government contracts, but only with the Minister of Finance’s approval and a contract value exceeding SAR 100 million — a threshold the Minister of Finance may adjust.^[5]Ministry of Finance, Government Tenders and Procurement Law, Articles 72, 74, 92 and 93; Ministry of Finance, Executive Regulations of the Government Tenders and Procurement Law, Articles 154 and … Continue reading Below that threshold, which captures much of the mid-value government infrastructure work, litigation before the Board of Grievances will usually be the principal formal route.

The distinction between a government ministry contract and a contract with a state-owned company or Public Investment Fund (PIF) subsidiary is equally critical. Many PIF subsidiaries and state-owned companies contract as commercial bodies rather than as government authorities, in which case disputes will usually fall before the Commercial Courts, not the Board of Grievances. The analysis is fact-specific: it turns on which entity actually signed, whether it contracted commercially or as an arm of the State, and whether it was in substance procuring for a government body — any of which can bring the GTPL and the Board of Grievances back into play.^[6]Chambers and Partners, “Litigation 2026 – Saudi Arabia” (2025).

In the private sector, parties who have not agreed on arbitration will litigate before the Commercial Courts. Many domestic contracts still default to litigation.^[7]Chambers and Partners, “Litigation 2026 – Saudi Arabia” (2025).

The Civil Transactions Law

The CTL, enacted by Royal Decree No. M/191, effective from December 2023, is the most significant legislative development affecting construction litigation in Saudi Arabia.^[8]Royal Decree No. M/191 of 29 Dhu al-Qi’dah 1444H, corresponding to 18 June 2023, enacting the Civil Transactions Law, including Articles 95, 97, 179, 470 and 471(3). It represents the Kingdom’s first comprehensive codification of principles relating to contracts, obligations, property rights, and torts.

The CTL did not invent new legal principles. Saudi courts had long applied concepts of good faith, hardship, and proportionality. But their application was a matter of individual judicial discretion, informed by Sharia scholarship rather than statutory language, resulting in inconsistency.^[9]Al Tamimi & Company, “Navigating The Concept of Exceptional Circumstances in Saudi Construction Contracts: Legal Insights and Practical Implications” (September 2025).

Critically, the CTL applies retroactively to contracts and events that predate its entry into force.^[10]King & Spalding, “Saudi Arabia’s New Civil Transactions Regulation” (January 2024). There are two exceptions: where a party demonstrates that retroactive application would conflict with an existing statutory provision or established judicial principle, or where a limitation period had already commenced before December 2023.^[11]Quinn Emanuel, “Third Wave of Codification: Saudi Civil Code” (August 2023). The burden falls on the party resisting application.^[12]Legal Community MENA, “When and under what circumstances is the Saudi Arabian Civil Code applicable?” (July 2023). The practical consequence is that construction contracts signed years ago, including those currently before the Board of Grievances or the Commercial Courts, are now subject to CTL provisions that the original drafters never contemplated. Any litigation strategy that relies solely on contractual arguments without engaging the CTL is incomplete.

Three CTL provisions are of particular relevance to construction litigation:

Article 95 — Good Faith. Parties are under a statutory obligation to perform their contracts in good faith. This matters wherever one party seeks to enforce a strict contractual provision (a notice time-bar or a penalty clause, for example) in circumstances where the other party’s awareness of the underlying facts is not in dispute. A court may find that enforcing a technical time-bar conflicts with the statutory duty of good faith. A contractor who tactically withholds notice faces exposure under the same provision.^[13]Royal Decree No. M/191 of 29 Dhu al-Qi’dah 1444H, corresponding to 18 June 2023, enacting the Civil Transactions Law, including Articles 95, 97, 179, 470 and 471(3).^[14]Burford Capital, “Notices in Saudi construction disputes: How the Civil Code is shaping risk allocation” (November 2025).

Article 97 — Extraordinary Events / Hardship. This codifies a hardship-type doctrine. If unforeseeable extraordinary events make performance excessively onerous and threaten heavy losses, the affected party may seek renegotiation. If renegotiation fails, the court may reduce the onerous obligation to a reasonable level. The muqawala chapter contains a construction-specific provision in Article 471(3): where general exceptional circumstances disrupt the contractual balance and invalidate the basis on which the contract was priced, the court may extend the time for completion, adjust the remuneration, or terminate the contract.^[15]Royal Decree No. M/191 of 29 Dhu al-Qi’dah 1444H, corresponding to 18 June 2023, enacting the Civil Transactions Law, including Articles 95, 97, 179, 470 and 471(3).^[16]Al Tamimi & Company, “Navigating The Concept of Exceptional Circumstances in Saudi Construction Contracts: Legal Insights and Practical Implications” (September 2025).

Article 470 — Statutory Quantity Notification. Contractors must immediately notify employers when unit-based quantities significantly exceed expectations. This statutory duty exists regardless of what the contract provides.  A contractor that fails to give that notice forfeits its right to recover the additional cost of the excess quantities; if the increase is substantial, the employer may instead withdraw from the contract, suspend execution, and pay for the work done.^[17]Royal Decree No. M/191 of 29 Dhu al-Qi’dah 1444H, corresponding to 18 June 2023, enacting the Civil Transactions Law, including Articles 95, 97, 179, 470 and 471(3).

What This Means in Practice

Consider a scenario drawn from the type of government infrastructure dispute that is increasingly common in the Kingdom. A foreign contractor is engaged under a bespoke GTPL-governed contract for a major urban infrastructure project valued in excess of SAR 300 million, with a completion period of approximately three years. Over the course of the project, the employer issues revised designs, suspends works on multiple occasions, restricts site access, and significantly increases quantities.

The contractor is awarded only partial extensions of time. The project is delayed by more than two and a half years beyond the original completion date, and independent analysis attributes the majority of the delay to employer-caused events. The employer takes beneficial use of the principal completed element and opens it to the public, while withholding the preliminary acceptance certificate and continuing to deduct delay penalties. Payments are persistently late throughout.

This pattern is not unusual. HKA’s CRUX data has historically shown that projects in the Middle East face some of the longest schedule overruns globally.^[18]HKA, CRUX Insight Eighth Annual Report: “From Insight to Foresight” (November 2025); HKA, CRUX Insight Seventh Annual Report: “Changing the Narrative” (October 2024); HKA, “Key lessons for … Continue reading The question is how the CTL changes the way such a dispute is now litigated.

Under the pre-CTL framework, the contractor’s arguments about beneficial use, the inequity of applying penalties while withholding payments, and the disproportionality of deductions rested on general Sharia principles and the wording of the GTPL. Outcomes depended heavily on the individual judge.

Under the CTL, these same arguments rest on codified provisions. Article 95 provides a basis to challenge penalty deductions where the employer has simultaneously benefited from the works and breached its own payment obligations. The design changes, suspensions, and access restrictions are addressed through the contract’s variation and disruption provisions, the statutory EOT route, and the same good-faith duty; Articles 97 and 471(3) provide mechanisms to seek rebalancing where unforeseeable extraordinary events or general exceptional circumstances disrupt the basis on which the works were priced. The contractor’s position no longer rests solely on general Sharia-based discretion; it can now be framed with reference to statutory provisions.

The penalty provisions in such contracts also deserve attention. Under GTPL Article 72, delay penalties are capped at 20 percent of the contract value for non-supply contracts and 6 percent for supply contracts, unless a higher cap was approved by the Minister of Finance and notified to tenderers before submission of proposals.^[19]Ministry of Finance, Government Tenders and Procurement Law, Articles 72, 74, 92 and 93; Ministry of Finance, Executive Regulations of the Government Tenders and Procurement Law, Articles 154 and … Continue reading But bespoke contracts frequently contain layered penalty mechanisms: a tiered general conditions regime alongside a separate special conditions deduction regime, with ambiguity about whether they operate concurrently or sequentially, and whether the 20 percent statutory cap applies to each mechanism independently or in aggregate.

Pre-CTL, resolving that ambiguity was purely a matter of interpretation under Sharia. Post-CTL, the court can apply the Article 95 good-faith obligation, the codified rules on contractual interpretation, and, most importantly, Article 179, which empowers the court to refuse agreed compensation where no harm is proved, or reduce it where it is excessive or the original obligation was partially performed.^[20]Gibson Dunn, “Liquidated Damages Made Simple: What Saudi Arabia’s Civil Transactions Law Says” (May 2025), citing Civil Transactions Law Article 179.

The practical effect is that penalty arguments are now at least as much about statutory proportionality as about contractual construction. GTPL Article 74 separately provides a statutory route to extensions of time and waiver of fines where, among other things, additional work is instructed, delay is attributable to the government entity, work is suspended for reasons not attributable to the contractor, or matters beyond the contractor’s control cause delay.

Practical Takeaways

For practitioners working on these disputes, a few things are worth keeping in mind. The forum question comes first, and it is rarely a single-step analysis: whether the matter falls before the Board of Grievances or the Commercial Courts depends on whether the counterparty is a ministry, a PIF subsidiary, or a private entity, and the GTPL’s SAR 100 million arbitration threshold will usually rule out arbitration for much of the mid-value government infrastructure work in the Kingdom. Procedure, timeline, and remedies follow from that determination.

The CTL’s retrospective reach changes how older contracts should be argued. Good faith, hardship, and the court’s power under Article 179 to reduce excessive penalties are all available on agreements signed well before December 2023, and the burden of resisting retroactive application sits with the other side. That cuts both ways. Contractors may have stronger arguments against strict reliance on a contractual time bar where the employer had actual knowledge of the event; equally, they cannot sit on their rights and expect the CTL to bail them out. The code rewards the party with the better-documented position, not the party with the more creative argument.

That last point on documentation is worth pausing on. The Evidence Law (2021) has already tightened the standards for what a Saudi court will accept as proof.^[21]Law of Evidence, Royal Decree No. M/43 dated 30 December 2021, Articles 1–2. Written instructions, notice records, progress updates, and cost substantiation matter more under a codified regime than they did under a judge’s open-ended Sharia discretion. A well-papered file is doing more work than it used to.

Conclusion

The litigation landscape in the Kingdom is more codified than ever before. While this brings greater predictability, it also means the legal framework has moved faster than many existing contracts. A large number of disputes now before the Board of Grievances or the Commercial Courts are being decided under a body of statutory law that was not in force when the underlying contracts were signed. Parties that engage properly with the CTL, rather than treating it as background, will be in a materially stronger position.

About the author

Haitham Khaireldin is a testifying, accredited delay and quantum expert witness with civil engineering, quantity surveying, and legal backgrounds. He has notable expertise in giga projects, having led the preparation of detailed delay analysis and advisory services on the third expansion of the Holy Mosque project and the King Salman Park in Saudi Arabia.

He has experience as a party-appointed expert in arbitration and as an expert in litigation and has given written and oral evidence to the arbitral tribunal and cross-examined by counsel. He has been appointed as a court expert more than 200 times, providing independent expert determination as part of legal proceedings for various types of disputes, including civil engineering, buildings and real estate. 

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