Category Archives: Arbitration

Older posts

Legal Implications of Social Media Advertising in KSA

Posted on September 30, 2025 - 5:19 am by

Saudi Arabia’s rapid digital transformation has positioned it as a leader in the Middle East’s digital economy. The Kingdom’s Vision 2030 initiative underscores the importance of diversifying the economy, with a significant emphasis on digital media and marketing. As a result, social media advertising has become a pivotal component of business strategies. However, this burgeoning sector is governed by a complex legal framework designed to ensure compliance with national values, consumer protection, and data privacy.

 

Regulatory Landscape for Social Media Advertising

The General Authority for Media Regulation (GAMR), formerly the General Commission for Audiovisual Media (GCAM), is Saudi Arabia’s regulator for audiovisual and broader media content. Established in 2012, it issues licenses and oversees media content to ensure compliance with the Kingdom’s laws, culture, and policy.

In 2022, GAMR/GCAM introduced the Mawthooq permit, which requires individuals (both Saudi and non-Saudi) who earn revenue from advertising or promotional content on social media to obtain a license (fee ~SR 15,000 for 3 years). The rules came into force on 1 October 2022. Non-Saudis have additional requirements. The purpose is to formalise and regulate influencer marketing under the Kingdom’s media standards.

Failure to obtain the necessary licence can result in penalties, including fines and potential legal action.

Content Compliance and Cultural Sensitivity

Saudi Arabia enforces strict content regulations to maintain its cultural and religious integrity. Advertising content, including that disseminated through social media, must align with Islamic principles and public decency standards. This encompasses prohibitions on content that promotes or depicts nudity, substance abuse, gambling, or content deemed offensive to public morals. Advertisers are also required to ensure that their content does not mislead consumers or make unsubstantiated claims.

The GAMR provides detailed guidelines outlining acceptable content standards for social media advertising. Advertisers must ensure that their campaigns do not contravene these guidelines to avoid sanctions. Additionally, influencers and content creators are encouraged to disclose any sponsored content transparently, fostering trust with their audience and ensuring compliance with advertising standards.

Data Privacy and Consumer Protection

The Personal Data Protection Law (PDPL), enacted in 2020, governs the collection, processing, and storage of personal data in Saudi Arabia. Under the PDPL, businesses engaged in social media advertising must obtain explicit consent from individuals before collecting or processing their personal data. This includes data gathered through cookies, online tracking, and direct marketing activities. Advertisers are obligated to inform consumers about the purpose of data collection, the duration of data retention, and their rights regarding data access and deletion.

Non-compliance with the PDPL can result in significant penalties, including fines and reputational damage. Therefore, advertisers must implement robust data protection measures and ensure that their marketing practices align with the PDPL’s requirements.

Enforcement and Penalties

The enforcement of advertising regulations in Saudi Arabia is stringent. GAMR actively monitors social media platforms for compliance with licensing requirements and content standards. Violations can lead to severe penalties, including substantial fines and potential imprisonment. Individuals or entities found operating without the requisite licence may face fines up to SAR 5 million (approximately £1 million). Moreover, the Kingdom’s legal framework allows for the prosecution of offences related to misleading advertising and the unauthorised use of personal data.

In addition to financial penalties, advertisers may also suffer reputational harm, which can have long-term implications for their business operations in Saudi Arabia. Therefore, adherence to the legal and regulatory framework is crucial for the success and sustainability of social media advertising campaigns in the Kingdom.

Social media advertising in Saudi Arabia presents significant opportunities for businesses to engage with a tech-savvy and youthful population. However, navigating the Kingdom’s legal landscape requires a comprehensive understanding of the regulatory framework governing digital marketing activities. By obtaining the necessary licences, ensuring content compliance with cultural standards, safeguarding consumer data, and adhering to advertising regulations, businesses can mitigate legal risks and leverage the full potential of social media advertising in Saudi Arabia.

For businesses seeking to operate within this dynamic sector, consulting with legal professionals experienced in Saudi Arabia’s advertising laws is advisable to ensure full compliance and to capitalise on the opportunities presented by the Kingdom’s digital economy.

Club financing and expansion: The key legal considerations

Posted on September 30, 2025 - 5:15 am by

The financial management and expansion of professional sports clubs in Saudi Arabia require a nuanced understanding of both commercial law and sports governance. With the Kingdom’s sports sector undergoing rapid professionalisation and internationalisation, clubs are increasingly seeking strategic financing options to support infrastructure development, talent acquisition, and market expansion. Navigating these opportunities effectively necessitates careful legal planning to ensure compliance with regulatory frameworks and protect the club’s long-term interests.

 

Legal Framework Governing Club Financing

Professional clubs operate within a multi-layered legal environment. At the national level, Saudi law governs commercial transactions, corporate structures, financial reporting, and contractual obligations. Simultaneously, clubs must comply with the rules and regulations issued by sport’s governing bodies such as the Saudi Arabian Football Federation (SAFF) and the Saudi Professional League (SPL), which establish standards for financial transparency, sponsorship agreements, and funding practices. Any financing strategy must therefore harmonise with both statutory requirements and sector-specific governance codes.

Structuring Financing Arrangements

Clubs often pursue a combination of equity investment, debt financing, and sponsorship contracts to support their operations and growth. From a legal perspective, structuring these arrangements requires careful consideration of the rights and obligations of all parties. Shareholder agreements, loan contracts, and sponsorship deals must clearly define repayment obligations, revenue sharing, and dispute resolution mechanisms. Additionally, clubs must ensure compliance with any restrictions on ownership, foreign investment, or related-party transactions stipulated by sports authorities or corporate regulations.

Due Diligence and Risk Management

Due diligence is a critical step in any financing or expansion initiative. Legal advisers must review the club’s financial statements, existing contractual obligations, pending disputes, and compliance with regulatory standards. Identifying potential risks,such as unpaid liabilities, encumbrances on assets, or non-compliance with league regulations, allows clubs and financiers to negotiate protective clauses, secure guarantees, or obtain insurance coverage. Thorough risk assessment not only safeguards the club’s financial position but also enhances its credibility with investors and partners.

Regulatory Compliance and Reporting

Transparency and regulatory compliance are central to sustainable club financing. Clubs must adhere to reporting obligations mandated by corporate law, the CMA (Capital Market Authority), and sports regulatory bodies. This includes maintaining accurate accounts, submitting timely financial disclosures, and ensuring that sponsorship or funding agreements are approved in accordance with governance guidelines. Failure to comply can result in financial penalties, suspension of club activities, or restrictions on participation in domestic and international competitions.

Expansion Considerations

Expansion, whether through new facilities, academies, or international partnerships, introduces additional legal complexities. Property acquisitions, construction contracts, and land use arrangements must comply with local real estate and zoning regulations. Strategic partnerships or joint ventures, particularly with foreign investors, require careful contractual drafting to define roles, profit allocation, and dispute resolution. Intellectual property rights, including branding and merchandising, also become increasingly important as clubs seek to capitalise on commercial opportunities beyond domestic markets.

Dispute Resolution Mechanisms

In the event of financing disputes, clubs and financiers may resort to arbitration or mediation, particularly through specialised bodies such as the Saudi Sports Arbitration Center (SSAC). Incorporating clear dispute resolution clauses in contracts ensures that conflicts are addressed efficiently, confidentially, and in accordance with Saudi legal standards. This proactive approach mitigates reputational risk and safeguards the long-term viability of the club’s financial and expansion strategies.

Club financing and expansion in Saudi Arabia require a strategic blend of commercial insight, regulatory compliance, and legal foresight. By carefully structuring financing arrangements, conducting comprehensive due diligence, and adhering to governance requirements, clubs can secure the capital necessary to grow sustainably while minimising legal and financial risks. Understanding the legal landscape is therefore not only essential for protecting the club’s current operations but also pivotal in realising its long-term ambitions both domestically and internationally.

Understanding the SSAC’s Financial Control Arbitration Rules

Posted on September 29, 2025 - 10:21 am by

The Saudi Stock Exchange Arbitration Centre (SSAC) plays a critical role in maintaining the integrity and efficiency of financial markets in Saudi Arabia. One of the key tools in its regulatory framework is the Financial Control Arbitration Rules, which provide a structured mechanism for resolving disputes related to financial oversight, governance, and compliance. Understanding these rules is essential for financial institutions, listed companies, and investors operating within the Kingdom’s increasingly sophisticated capital markets.

 

The Financial Control Arbitration Rules are designed to ensure that disputes arising from financial control matters are addressed promptly, fairly, and in a manner consistent with Saudi regulatory standards. These rules apply to a wide range of scenarios, including disagreements over financial reporting, audit findings, compliance with internal control obligations, and adherence to corporate governance requirements. By establishing a specialised arbitration process, the SSAC offers an alternative to traditional court proceedings, enabling parties to resolve conflicts in a confidential, efficient, and legally binding manner.

One of the distinguishing features of the SSAC’s rules is their emphasis on expertise and impartiality. Arbitrators appointed under the Financial Control Arbitration Rules are typically professionals with specialised knowledge in finance, auditing, and corporate governance. This ensures that decisions are not only legally sound but also technically informed, reflecting best practices in financial oversight. The rules also provide clear guidelines on the selection, appointment, and responsibilities of arbitrators, thereby promoting transparency and trust in the arbitration process.

The procedural framework under these rules is carefully structured to balance efficiency with due process. It includes provisions for initiating arbitration, submitting evidence, conducting hearings, and issuing binding awards. Parties to a dispute are allowed to present their case entirely, including the submission of expert reports, financial analyses, and other relevant documentation. Notably, the rules allow for interim measures to be requested, such as temporary freezes on disputed financial actions or access to essential financial records, thereby protecting the rights and interests of all parties pending the final resolution of the dispute.

Enforcement of arbitral awards under the SSAC’s Financial Control Arbitration Rules is robust and aligned with Saudi law. Awards issued by the SSAC are recognised as final and binding, with limited grounds for challenge, ensuring that parties can rely on the enforceability of the decision. This predictability is particularly valuable in financial disputes, where timely resolution can have significant implications for market stability, investor confidence, and corporate reputation.

Beyond dispute resolution, the rules contribute to the broader objectives of financial governance in Saudi Arabia. By codifying a transparent and professional process for handling financial control disputes, the SSAC reinforces regulatory compliance, encourages responsible corporate behaviour, and supports the overall integrity of the capital markets. For businesses and investors, familiarity with these rules is not only a matter of legal compliance but also a strategic consideration, enabling them to manage risks proactively and engage with the market with confidence.

The SSAC’s Financial Control Arbitration Rules represent a sophisticated and essential framework within Saudi Arabia’s financial regulatory landscape. By combining technical expertise, procedural clarity, and enforceable outcomes, these rules provide a reliable mechanism for resolving disputes related to financial control, thereby safeguarding market integrity and promoting confidence among market participants. For any entity involved in the Kingdom’s capital markets, understanding and effectively navigating these rules is a critical aspect of financial governance and risk management.

Understanding SSAC’s Arbitration Procedures for Club-Financier Conflicts

Posted on September 26, 2025 - 6:29 am by

The Saudi Sports Arbitration Center (SSAC) serves as the Kingdom’s primary institution for resolving sports-related disputes, including conflicts between football clubs and their financiers. Established to ensure fairness, transparency, and efficiency in sports governance, the SSAC operates under a statutory framework that reflects international best practices while adhering to Saudi law.

 

Jurisdiction and Scope

The SSAC’s jurisdiction covers a wide range of sports disputes, including financial conflicts arising between clubs and financiers. Such disputes may involve sponsorship agreements, funding arrangements, loan obligations, or other financial undertakings. Arbitration under the SSAC is typically initiated through contractual arbitration clauses or by appeal against decisions of sports governing bodies, such as the Saudi Arabian Football Federation (SAFF) or the Saudi Professional League (SPL). The Centre ensures that disputes are resolved in accordance with both contractual agreements and the principles of equity and good governance.

Arbitration Procedures

The SSAC provides structured procedures to resolve disputes efficiently:

  1. Ordinary Arbitration – This procedure applies where parties have agreed to refer their dispute to the SSAC. It is suitable for contractual conflicts and allows parties to present claims and evidence, including financial reports and expert testimony, before an independent panel of arbitrators with specialised expertise in sports finance and governance.
  2. Appeal Arbitration – Applicable when disputing parties challenge decisions of sports governing bodies. Appeals must be filed within 21 days of notification of the original decision unless a shorter period is stipulated. The Chamber of Arbitration of Football Disputes typically handles appeals against SAFF decisions, ensuring that internal remedies are exhausted before arbitration.
Specialised Chambers for Financial Disputes

Recognising the complexity of financial conflicts in professional sports, the SSAC has established specialised chambers, including one focused on financial supervision matters. This chamber handles disputes related to the Financial Supervision Committee of the SPL, providing a structured forum for expert adjudication in cases involving financial oversight, compliance breaches, or funding irregularities.

Mediation Services

Beyond arbitration, the SSAC also offers mediation as a confidential and flexible means to resolve disputes amicably. Mediation allows parties to reach mutually acceptable agreements under the guidance of trained mediators, preserving professional relationships while avoiding lengthy formal proceedings.

Enforcement and Finality of Awards

Arbitral awards issued by the SSAC are final and binding, with limited grounds for challenge. This finality provides certainty and legal enforceability, ensuring that parties can rely on the resolution to protect financial stability and operational continuity within professional sports organisations.

The SSAC’s arbitration procedures for club-financier conflicts provide a comprehensive framework for resolving financial disputes within Saudi Arabia’s sports sector. Through a combination of expert arbitration, specialised chambers, and mediation, the Centre promotes financial accountability, market stability, and adherence to governance standards. For clubs, financiers, and other stakeholders, understanding these procedures is essential to managing disputes effectively and maintaining confidence in the Saudi sports ecosystem.

Construction Disputes in the Kingdom

Posted on August 11, 2025 - 5:59 am by

Saudi Arabia continues to experience exceptional expansion in its construction and infrastructure sectors. Fuelled by a portfolio of transformative giga-projects, the Kingdom has become one of the most active construction markets globally. From NEOM and The Line to the Red Sea Global and Diriyah Gate developments, the scale and ambition of ongoing projects are vast.

 

While these initiatives present significant opportunities, they have also led to a notable rise in construction disputes. The combination of complex project structures, evolving regulations, and high-value contracts has created a legal and operational environment where disputes are increasingly common. Understanding the dynamics behind these disputes is critical for contractors, developers, consultants, and legal counsel working in the Kingdom.

The Evolving Construction Landscape

The Kingdom’s construction sector is defined by large-scale, fast-paced developments involving both local and international players. Projects often include multi-tiered arrangements with main contractors, subcontractors, specialist consultants, government bodies, and investment authorities. The interaction of these parties across complex contractual frameworks can create friction, particularly when expectations are misaligned.

Recent developments have further accelerated the market, including increased privatisation efforts, heightened foreign investment, and tighter regulatory enforcement. As timelines compress and budgets expand, so too does the potential for disputes over scope, delivery, and compliance.

Key Drivers of Disputes

Construction disputes in Saudi Arabia often arise from the following recurring issues:

  • Delays in Delivery: Time overruns continue to be a major flashpoint. Causes include regulatory approval bottlenecks, labour and material shortages, weather-related disruptions, and changes in design or scope. Claims for time extensions and associated costs are frequently contested.
  • Cost Escalations and Variations: Unexpected changes to contract scope, disagreements over variation orders, or price fluctuations in materials often lead to financial disputes. Without precise variation mechanisms and strong documentation, parties can find themselves at odds.
  • Quality and Technical Non-Compliance: Divergences between what is built and what is contractually expected remain a leading cause of conflict. Issues may relate to construction standards, use of substandard materials, or misinterpretation of technical drawings and specifications.
  • Ambiguous Risk Allocation: Poorly drafted or inadequately localised contracts often lead to confusion over risk ownership. This is particularly problematic when dealing with force majeure, regulatory intervention, or unforeseen ground conditions.
Contractual Frameworks and Pitfalls

While many projects in Saudi Arabia continue to use FIDIC-based standard forms, these contracts are typically amended to reflect local legal and regulatory norms. Saudi laws, including the Civil Transactions Law, Public Procurement Law, and sector-specific mandates also govern contracts.

A persistent challenge lies in the failure to tailor contracts to project-specific risks appropriately. Vague drafting around critical areas such as delay claims, extension of time, force majeure events, and payment procedures can result in costly disputes. Precision in language and alignment with current legal standards are essential.

Well-drafted contracts should outline:

  • Clear procedures for notices and approvals
  • Defined timelines for claim submissions
  • Consequences of non-compliance
  • Dispute resolution mechanisms that are enforceable in the Kingdom
Trends in Dispute Resolution

In recent years, Saudi Arabia has made significant efforts to enhance its dispute resolution infrastructure. The commercial courts remain available, but alternative dispute resolution mechanisms are increasingly preferred.

  • Arbitration under the SCCA
    The Saudi Centre for Commercial Arbitration (SCCA) has seen a substantial increase in usage for construction disputes. It offers an efficient, neutral, and enforceable forum for resolving disputes. With updated rules (as of early 2025), the SCCA now supports expedited procedures, remote hearings, and digital filings, making it more accessible to international parties.
  • Mediation as a Strategic Tool
    Mediation is gaining wider acceptance as a first-line resolution tool. It allows parties to preserve commercial relationships and avoid lengthy proceedings. The Ministry of Justice has recently launched initiatives promoting pre-litigation mediation across several sectors, including construction.
  • International Enforceability
    Saudi Arabia’s continued commitment to the New York Convention ensures that arbitral awards from approved institutions are enforceable, offering reassurance to foreign investors and contractors.
Legal and Regulatory Developments

The Kingdom is actively reforming its regulatory landscape to foster transparency, accountability, and investor confidence. Notable recent developments include:

  • Updates to the Saudi Building Code to ensure higher safety and sustainability standards
  • Enhanced project oversight mechanisms, especially for state-backed projects
  • Enforcement of more precise payment terms, including retention management and milestone-based payment schedules
  • Introduction of the Civil Transactions Law (2023), which harmonises many contractual principles with international standards while preserving Sharia foundations

In parallel, digital transformation is playing a key role in reducing disputes. Tools such as Building Information Modelling (BIM), e-invoicing, and integrated project management platforms are now standard in significant projects. These technologies improve transparency, coordination, and evidence retention.

Frontline Lessons and Practical Insights

From recent projects and disputes, several practical lessons stand out:

  1. Prioritise Documentation
    Meticulous recordkeeping remains the cornerstone of claim substantiation. Daily site records, approvals, meeting minutes, and variation logs should be maintained and reviewed regularly.
  2. Align Contracts with Reality
    Avoid overly standardised templates. Contracts must be customised to the realities of each project, particularly where multiple jurisdictions or public-private interfaces are involved.
  3. Address Risks Proactively
    Early identification of risks, clear escalation procedures, and regular legal review can significantly reduce the likelihood of disputes.
  4. Engage with ADR Early
    Disputes need not escalate to formal proceedings. Well-timed use of mediation or early neutral evaluation can resolve issues faster and at lower cost.
  5. Understand the Local Legal Landscape
    Familiarity with local law, procedure, and regulatory practice is vital. Legal counsel with in-Kingdom experience is essential for strategic decision-making and dispute prevention.
Looking Ahead

Construction disputes remain a real and present challenge in Saudi Arabia’s fast-moving development sector. However, the Kingdom’s maturing legal framework, enhanced dispute resolution institutions, and greater regulatory clarity offer a path to more efficient and predictable outcomes.

As Vision 2030 projects continue to move from planning into execution, proactive legal and commercial risk management will be vital. With robust contracts, effective project governance, and early engagement with disputes, parties can navigate Saudi Arabia’s complex construction landscape with greater confidence and clarity.

Arbitration in Saudi Arabia: Trends and Best Practices

Posted on July 22, 2025 - 8:37 am by

Arbitration in Saudi Arabia has undergone a remarkable transformation, establishing itself as a cornerstone of commercial dispute resolution in a jurisdiction historically rooted in Sharia law. In line with Vision 2030, the Kingdom continues to promote arbitration to enhance legal predictability, attract foreign investment, and align with global standards. This article examines the latest trends and best practices in Saudi arbitration, offering guidance to investors, legal practitioners, and businesses operating in or with the Kingdom.

 

A Modern Legal Framework Anchored in Reform

The Saudi Arbitration Law (2012), modelled after the UNCITRAL Model Law, remains the legal foundation for arbitration in the Kingdom. It brought a paradigm shift by affirming party autonomy, competence-competence, separability of the arbitration clause, and finality of awards, subject to compliance with Saudi public policy and Sharia.

The Enforcement Law of 2012, complemented by the specialised Enforcement Courts, has improved the efficiency and predictability of arbitral award recognition and enforcement. As of 2025, the Saudi courts increasingly demonstrate a pro-enforcement orientation, including for foreign awards, provided procedural integrity is maintained and public policy is not violated.

Recent court decisions (2023–2025) have further clarified ambiguities surrounding enforcement timelines, the role of public policy, and the validity of foreign-seated arbitrations, reinforcing Saudi Arabia’s commitment to modern dispute resolution.

The Role and Maturation of the Saudi Center for Commercial Arbitration (SCCA)

Since its establishment in 2014, the Saudi Center for Commercial Arbitration (SCCA) has grown into the Kingdom’s leading arbitration institution, playing a central role in advancing dispute resolution in line with international standards. The revised 2023 SCCA Arbitration Rules introduced several modern features, including expedited proceedings, emergency arbitration, virtual hearings, online case filing, bifurcation and consolidation procedures, and greater transparency in arbitrator appointments. These enhancements reflect the SCCA’s commitment to efficiency, fairness, and procedural innovation.

The SCCA continues to expand its presence and capabilities. In early 2025, it opened a branch in NEOM, reinforcing its alignment with the region’s vision as a futuristic commercial and innovation hub. The launch of the SCCA Court, an independent body composed of prominent international arbitration professionals to oversee case administration, marked another milestone in the institution’s maturation. Furthermore, in 2024, the SCCA began administering investor-state disputes under tailored rules, reinforcing Saudi Arabia’s broader strategy to attract and protect foreign direct investment by offering robust legal certainty.

Trends: Harmonisation with International Norms

Saudi Arabia’s arbitration environment continues to strike a careful balance between localisation and globalisation. While Sharia compliance remains a foundational element, Saudi courts are increasingly pragmatic in their interpretation of public policy, particularly in commercial matters. The Kingdom’s commitment to the New York Convention, in effect since 1994, remains strong, and recent decisions by the Enforcement Courts reflect a growing deference to international arbitral standards.

Arbitration clauses that reference institutional rules such as those of the SCCA, ICC, or LCIA with seats in Riyadh, Jeddah, or even foreign jurisdictions are increasingly recognised and enforced by Saudi courts. This trend is particularly evident in sectors such as construction, infrastructure, energy, and technology, where arbitration is becoming the preferred method of dispute resolution. These developments are closely linked to the Kingdom’s Vision 2030 initiatives, including megaprojects like The Line, Qiddiya, and Diriyah Gate, which demand sophisticated, reliable, and enforceable dispute resolution mechanisms.

Best Practices for Arbitration in Saudi Arabia

To effectively navigate arbitration in Saudi Arabia, parties should observe the following best practices:

  1. Draft Robust Arbitration Clauses
    Clearly specify the arbitration institution (e.g., SCCA), seat of arbitration, governing law, procedural rules, and language. Avoid vague or conflicting terms.
  2. Appreciate Sharia and Public Policy Parameters
    While modern in form, Saudi arbitration law remains anchored in Islamic law. Ensure that the dispute is arbitrable and the subject matter does not contravene core Sharia principles.
  3. Use Bilingual Documentation When Necessary
    Arabic remains the official language of the courts. While SCCA and other institutions operate bilingually, translating key documents into Arabic can avoid delays in enforcement or recognition.
  4. Select Arbitrators with Regional and Sectoral Expertise
    Consider arbitrators with strong knowledge of both international arbitration and Saudi law or regional practice. This can help avoid procedural missteps and align expectations with local sensitivities.
  5. Leverage Digital Tools and Institutional Platforms
    The SCCA’s digital case management system allows for seamless filing, hearings, and document exchange. Utilising these tools can significantly enhance efficiency, especially in complex disputes.
Challenges and Opportunities Ahead

Despite marked progress, challenges persist in the Saudi arbitration landscape. Public policy exceptions can still be unpredictably interpreted by courts, particularly in cases involving interest (riba) or vague contract provisions. Additionally, the discretion afforded to domestic judges during the enforcement phase remains a concern for some parties, especially those unfamiliar with the nuances of Sharia-based legal interpretation.

However, these concerns are increasingly being addressed through consistent judicial guidance and greater transparency in SCCA-administered proceedings. The growing presence of licensed foreign law firms in Saudi Arabia, which has expanded significantly since 2023, has also contributed to enhanced legal sophistication and international best practices. Furthermore, ongoing reforms focused on judicial training, alternative dispute resolution mechanisms, and increased private sector engagement continue to strengthen the Kingdom’s arbitration framework and its global credibility.

Contract Negotiations in Saudi Arabia: Critical Challenges in Shareholders’ Agreements

Posted on June 17, 2025 - 7:29 am by

Contract negotiations in the Kingdom of Saudi Arabia (KSA) have become increasingly complex and strategically significant. As Vision 2030 continues to reshape the national economy, Saudi Arabia’s evolving legal and regulatory environment is attracting both domestic and international investors. One area of particular importance is the negotiation of Shareholders’ Agreements (SHA), which serve as foundational documents defining the rights, obligations, and expectations of shareholders in joint ventures and corporate entities.

 

Alignment of Governance Structures and Shareholder Vision

A recurring challenge in SHA negotiations involves aligning expectations around governance. In Saudi Arabia, many joint ventures comprise a mix of family-owned businesses, government-related entities, and foreign investors, each bringing distinct views on corporate oversight. Disputes often arise concerning board composition, reserved matters requiring unanimous consent, and the level of operational control exerted by individual shareholders. The 2022 Companies Law, effective since early 2023, offers increased flexibility in structuring governance frameworks, allowing more bespoke arrangements that protect minority rights while enabling efficient decision-making.

Dividend Policies and Profit Distribution

Shareholders may hold differing views on how profits should be allocated between dividends and reinvestment. These differences are especially pronounced in early-stage ventures where some investors seek immediate returns, while others prioritise long-term capital appreciation. In the Saudi context, these discussions must also take into account Sharia compliance, including considerations such as profit purification and zakat obligations. Addressing both commercial priorities and religious principles requires careful structuring and alignment.

Share Transfers and Exit Mechanisms

Clauses addressing share transfers and exit rights are among the most heavily negotiated in any shareholders’ agreement (SHA). Provisions such as rights of first refusal, tag-along and drag-along rights, and valuation methodologies must be adapted to local legal enforceability. The maturing of Saudi Arabia’s capital markets and the easing of foreign ownership restrictions in many sectors have expanded the range of viable exit strategies. However, transactions may still require approval from regulators such as the Ministry of Commerce or the Capital Market Authority, which should be anticipated in the SHA.

Dispute Resolution and Arbitration

Selecting the appropriate dispute resolution mechanism is a vital component of any SHA. Arbitration is often preferred for its confidentiality and neutrality, particularly in cross-border ventures. The Saudi Center for Commercial Arbitration (SCCA) has gained prominence, providing an increasingly credible forum for dispute resolution. Moreover, the enforceability of foreign arbitral awards has improved significantly following judicial reforms. That said, parties must ensure that arbitration clauses comply with the Saudi Arbitration Law and broader public policy considerations. Institutions such as the LCIA and ICC remain viable options, although careful selection of the seat and language is essential.

Local Regulatory and Cultural Considerations

A deep understanding of Saudi Arabia’s legal culture is essential. The legal framework is grounded in Sharia law, though it has become increasingly codified through commercial regulations. Investors must factor in regulatory requirements such as Saudisation, sector-specific licensing conditions, and ongoing obligations to the Ministry of Investment (MISA), formerly known as SAGIA. Equally important are local business customs, where trust, consensus, and long-term relationships often influence negotiations more than the written contract itself.

Legal Drafting and Enforceability

One of the more practical challenges in SHA implementation involves localising legal drafting. Clauses that are standard in English law jurisdictions—such as those dealing with penalties, restrictive covenants, or non-compete obligations—may not be enforceable in their original form under Saudi law. Effective agreements require bilingual drafting and input from legal counsel who are familiar with both international standards and local legal practices. The 2022 Companies Law has introduced more clarity on key provisions, but has not removed the need for precise and locally informed drafting.

Minority Protections and Deadlock Mechanisms

Where joint ventures include minority shareholders, protections such as veto rights, put and call options, or escalation procedures are commonly negotiated. Mechanisms to resolve deadlocks—such as Russian roulette or Texas shoot-out clauses—can be effective but must be carefully assessed for practical enforceability under local law. The revised Companies Law enables more structured dispute escalation and shareholder remedies, thereby reducing the risk of operational paralysis in the event of disagreement.

Digitalisation of Legal Processes

Saudi Arabia’s commitment to digital transformation has also impacted contract enforcement and regulatory compliance. Platforms such as Absher, Qiwa, and Mudad have streamlined processes, including company registration, contract approvals, and workforce management. These tools can enhance transaction efficiency, but they require early planning and integration into contractual timelines.

As Saudi Arabia continues to liberalise its economy and promote private sector investment, Shareholders’ Agreements will remain a critical tool in safeguarding long-term partnerships. Negotiating SHAs in the Kingdom requires not only legal expertise but also cultural fluency, regulatory awareness, and commercial acumen. By addressing common pain points proactively and leveraging the flexibility introduced through recent legal reforms, businesses can create durable agreements that foster trust, enable growth, and align with both local expectations and global standards.

 

Resolving Family Disputes: Inheritance Challenges and Estate Liquidation in Saudi Arabia

Posted on May 12, 2025 - 5:29 am by

The inheritance of wealth, property, and control over family businesses in Saudi Arabia is not merely a personal matter, it is a legally and strategically consequential transition that often exposes deep fault lines within families. As a new generation steps into leadership and the legal landscape matures, the resolution of inheritance disputes and the liquidation of estates has emerged as one of the most complex legal challenges for high-net-worth families, shareholders, and beneficiaries in the Kingdom.

While family harmony is a cultural imperative, the rise in contested estates and legal proceedings, particularly in multi-branch, high-value families, is forcing both local and international stakeholders to re-evaluate how succession and estate planning are structured, managed, and, when necessary, resolved.

A Distinct Legal Foundation: Shariah Law in Practice

At the heart of the Saudi legal system lies the application of Islamic Shariah, which governs inheritance with mandatory and non-negotiable rules on how estates must be divided. This includes a fixed formula for the distribution of shares among heirs—sons, daughters, spouses, and extended relatives, irrespective of the deceased’s wishes unless very specific pre-conditions have been met.

Unlike many other jurisdictions, there is no concept of a discretionary will that can override Shariah-prescribed allocations. This makes proactive estate structuring and pre-death planning not just advisable, but essential, particularly in families with significant assets, real estate portfolios, or operational businesses.

Inheritance Disputes: Why They Arise

Despite the clarity of Islamic inheritance law on paper, disputes often arise due to real-world complications:

  • Ambiguity in Asset Ownership: Many founders maintain informal ownership of assets or mix personal and business holdings, making it difficult to distinguish what falls into the estate.
  • Heir Disagreement on Valuation and Liquidation: Beneficiaries may contest the valuation of key assets or resist the liquidation of income-generating properties and companies.
  • Exclusion or Disproportionate Benefit Claims: Allegations of unfair enrichment, particularly by second families, distant relatives, or those in managerial roles, frequently trigger formal challenges.
  • Lack of Succession Infrastructure: In many cases, there is no central register of assets, no governance framework for ongoing business operation, and no appointed administrator to oversee the estate. This paralysis can last for years.

These disputes are not only destabilising—they can erode the value of the estate, fracture family unity, and invite regulatory or creditor intervention.

The Process of Estate Liquidation in KSA

The liquidation and distribution of a deceased’s estate in Saudi Arabia typically begins with an application to the Personal Status Court, followed by a formal inventory of the deceased’s assets and a ruling on the rightful heirs. However, in high-value estates or those involving real estate, commercial shareholdings, or offshore components, the process becomes far more intricate.

Where minors are involved, or where the estate includes ongoing businesses, the court may appoint a judicial guardian or administrator. Additionally, estates with foreign heirs or international components often require cross-border legal coordination and recognition of foreign judgments, further complicating proceedings.

Notably, in 2022, the Personal Status Law was codified for the first time under Saudi Vision 2030’s legal reforms, providing more clarity and predictability to issues surrounding guardianship, documentation, and enforcement. Still, estate cases remain time-consuming and procedurally complex without proactive legal guidance.

Strategic Techniques for Dispute Resolution and Prevention

We approach inheritance disputes not merely as legal cases but as strategic family transitions. Our experience shows that the following frameworks significantly reduce conflict and preserve asset value:

  1. Establishing Clear Legal Documentation in Life
    Founders should formalise asset ownership under registered entities, distinguish between personal and business assets, and, where possible, utilise legal vehicles such as holding companies to structure family participation. Shariah-compliant gift structures (hiba) can also be used pre-death to transfer assets within permissible bounds.
  2. Appointing an Estate Administrator or Executor
    A court-recognised administrator can ensure the timely management and safeguarding of estate assets, particularly where businesses or significant liabilities are involved. We work with families to structure these roles in advance, often embedding them in shareholder agreements or trust structures.
  3. Mediation and Arbitration for Heirs
    Rather than litigating disputes in open court, we have successfully resolved complex inheritance matters through family mediation forums and private arbitration panels, particularly in high-profile families concerned with confidentiality and reputation.
  4. Forensic Asset Mapping and Reconciliation
    In cases of unclear ownership or suspected misappropriation, our team conducts comprehensive forensic reviews to trace assets, reconstruct records, and support rightful claims. This often serves as a turning point in resolving contested matters with transparency.
  5. Structuring Multi-Generational Frameworks
    We advise families to look beyond a single estate event and create governance charters, family councils, and long-term wealth vehicles that preserve intergenerational continuity and avoid piecemeal asset dilution.
Cross-Border and Foreign Investor Considerations

Estate-related disputes in KSA increasingly affect foreign investors—either as co-owners, creditors, or partners in family businesses where a principal passes away. Understanding the application of Shariah law, the role of Saudi courts, and the enforceability of shareholder agreements or buy-sell clauses is critical. Where foreign nationals are heirs or claimants, issues of jurisdiction, documentation, and power of attorney must be handled with precision.

Our firm frequently acts as a liaison between Saudi courts, foreign trustees, and consular services to coordinate multi-jurisdictional estate matters and ensure proper legal standing for non-GCC beneficiaries.

The Stakes Are Higher Than Ever

In today’s rapidly changing Saudi landscape, estate disputes are not just about division of wealth—they are often existential events that determine the future of a business, family cohesion, and the credibility of a legacy. For families looking to preserve what previous generations built, and for external stakeholders seeking clarity, there is no room for ambiguity.

Proactive legal structuring, early intervention, and skilled dispute management are the new imperatives. Saudi Arabia’s courts are evolving, but the burden of foresight remains with families and their advisors.

If your family is navigating a succession event, or if you are a business partner or foreign investor facing the impact of an unresolved estate, our inheritance and disputes team at Hammad & Al-Mehdar is ready to assist with discretion, strategic clarity, and unwavering commitment to legal precision.

The Role of Arbitration in Resolving Construction Disputes in the GCC

Posted on May 8, 2025 - 6:13 am by

The Gulf Cooperation Council (GCC) countries continue to witness exponential infrastructure and real estate development growth, driven by national vision strategies such as Saudi Arabia’s Vision 2030 and the UAE’s Projects of the 50. These long-term transformation agendas have stimulated an unparalleled wave of construction activity, from giga-projects like NEOM and The Line in Saudi Arabia to major transit systems, ports, and digital cities across the region.

 

However, the scale and complexity of these projects have also led to a surge in contractual disputes. Arbitration remains the preferred dispute resolution mechanism for construction-related conflicts, offering neutrality, confidentiality, and enforcement advantages in a region where public court proceedings may lack technical expertise or risk undue delays.

Why Construction Disputes Arise in the GCC

The construction industry in the GCC is shaped by several factors that make disputes more likely:

  • Diverse Stakeholders: Projects typically involve joint ventures between international contractors, regional subcontractors, consultants, and government bodies—all with different legal traditions and commercial expectations.
  • Mega-Project Complexities: Many projects are technologically advanced, logistically complex, and executed over multi-year timelines, increasing the potential for cost overruns, delays, and scope changes.
  • Fragmented Regulatory Environments: While culturally aligned, the GCC countries maintain distinct legal systems, complicating contract enforcement and procedural consistency.
  • Labour and Material Constraints: Recent global supply chain disruptions and local Saudization and Omanisation mandates have also led to delays and cost disputes.
Arbitration as the Preferred Dispute Resolution Method

Arbitration offers numerous advantages over litigation in resolving construction disputes:

  • Neutrality: Essential in international disputes, especially where a government entity is one of the parties.
  • Confidentiality: Helps protect commercial reputations and proprietary information.
  • Technical Expertise: Arbitrators with engineering or project finance backgrounds can better evaluate construction claims.
  • Enforceability: All GCC states sign the New York Convention, facilitating cross-border recognition and enforcement of arbitral awards.
  • Procedural Flexibility: Parties can agree on rules, venues, languages, and laws governing the proceedings.
Recent Developments in GCC Arbitration

Saudi Arabia
In 2023, the Saudi Centre for Commercial Arbitration (SCCA) introduced an updated Fast Track Procedure, which enabled the resolution of smaller claims within six months.

A 2024 Ministerial Circular clarified that government entities can refer disputes to arbitration without Royal Decree if contracts are governed by international law—a significant shift that enables more foreign participation.

Vision 2030 projects like the Red Sea Global and Diriyah Gate have embedded SCCA clauses as standard in EPC contracts.

United Arab Emirates
The Dubai International Arbitration Centre (DIAC) completed its consolidation with the Emirates Maritime Arbitration Centre (EMAC) in 2023, simplifying institutional offerings.

The 2023 DIAC Rules now allow emergency arbitrator provisions and broader interim measures.

The ADGM Arbitration Centre continues to gain popularity for high-value disputes, bolstered by common law jurisdiction and enforceability via the ADGM Courts.

Qatar
In 2024, the Qatar International Centre for Conciliation and Arbitration (QICCA) launched a Construction Disputes Board mechanism to support large-scale World Cup legacy infrastructure projects.

New model clauses align QICCA arbitration with FIDIC Red and Silver Book formats.

Oman, Bahrain, and Kuwait
Oman introduced the Construction Claims Tribunal (CCT) in 2023. This hybrid forum combines adjudication and arbitration features, particularly useful for OMR 10M+ projects.

Bahrain’s BCDR has led in digital arbitration, using AI-assisted document review in complex cases since 2024.

Kuwait has increased court enforcement cooperation with the Kuwait Commercial Arbitration Centre (KCAC), reducing execution time for domestic awards by 40%.

Common Challenges and Risks in Construction Arbitration

Despite its benefits, arbitration in the GCC faces certain hurdles:

  • Cost Concerns: High fees and legal expenses deter SME contractors from pursuing arbitration.
  • Duration Drift: Complex claims often lead to prolonged timelines despite institutional fast-track options.
  • Enforcement Uncertainty: While awards are enforceable under the New York Convention, execution can be delayed due to administrative hurdles in local courts.
  • Cultural Dynamics: Informal dispute resolution (e.g. majlis-style mediation) remains preferred in some jurisdictions, particularly for low-value claims.

To mitigate disputes and ensure effective arbitration outcomes, construction firms should consider the following:

  • Draft Robust Arbitration Clauses: Align with institutional rules (e.g., DIAC, SCCA) and clearly specify governing law and venue.
  • Incorporate Multi-Tier Dispute Resolution: Start with mediation or dispute adjudication boards before escalating to arbitration.
  • Appoint Experienced Arbitrators: Choose professionals with sector-specific expertise and prior regional experience.
  • Plan for Enforcement: Identify jurisdictions with effective enforcement mechanisms at the contract stage.
  • Monitor Legal Updates: Stay informed of new arbitration laws, institutional reforms, and court interpretations.
Outlook: Arbitration as a Pillar of GCC Infrastructure Growth

As the GCC continues to attract billions in FDI and deliver mega-infrastructure projects, arbitration will remain a vital tool for managing risk and preserving relationships. Institutional reforms, technology integration, and alignment with global best practices are expected to streamline dispute resolution further and enhance investor confidence.

In 2025 and beyond, arbitration’s role will no longer be reactive—it will be an embedded part of strategic project planning, governance, and contract design. Investing in dispute avoidance and effective arbitration practices is essential to long-term success for construction firms, legal counsel, and government agencies.

Rethinking Insolvency and Liquidation in Saudi Arabia

Posted on May 8, 2025 - 5:59 am by

In today’s evolving commercial environment, the concept of business failure is no longer synonymous with stigma or scandal. As Saudi Arabia accelerates its economic transformation, the ability for businesses to restructure, wind down, or exit the market lawfully and transparently has become a critical feature of the Kingdom’s modern legal infrastructure. For business owners, directors, creditors, and foreign investors alike, understanding the legal landscape of insolvency is no longer optional—it is an essential component of risk management.

 

A Legal Framework Built for Economic Resilience

The introduction of the Saudi Bankruptcy Law in 2018 marked a significant shift in the Kingdom’s approach to managing financial distress. Enacted under Royal Decree No. M/50, the law provided a structured and commercially credible framework for businesses to manage insolvency, preserving economic value and market integrity. Its alignment with global norms—particularly the UNCITRAL Model Law on Cross-Border Insolvency—also signalled Saudi Arabia’s intent to position itself as a globally integrated and investor-friendly jurisdiction.

What sets the Saudi regime apart is its dual focus: it offers tools for early intervention when recovery is possible, and it provides mechanisms for orderly exit where continuation is no longer viable. This flexibility has been crucial in destigmatising bankruptcy and fostering a more proactive, compliance-driven corporate culture.

The Human and Commercial Stakes

For directors and shareholders, insolvency is not just a financial event—it is a test of governance. Saudi law imposes clear duties on company leadership once financial instability is evident. Ignoring warning signs or continuing to operate while insolvent may not only worsen outcomes for creditors but could result in personal liability or sanctions. The role of the Bankruptcy Commission, established under the new regime, is to ensure fairness, transparency, and consistency while holding individuals accountable where negligence or misconduct is identified.

Creditors, meanwhile, have a defined path to recover value through structured repayment hierarchies and legal participation in proceedings. Secured creditors, employees, and government authorities are granted priority; however, even unsecured creditors have a meaningful standing in shaping the outcome of restructuring plans or liquidation terms.

A Tool for Economic Continuity, Not Collapse

Too often, liquidation is viewed as the end of the road. In reality, Saudi Arabia’s legal system treats insolvency as a legitimate—and sometimes even strategic—means of market correction and economic renewal. Whether it involves resolving failed startups, distressed joint ventures, or underperforming family businesses, the law offers mechanisms that protect stakeholders and preserve remaining value.

Smaller entities benefit from simplified procedures that ease administrative burdens. Larger firms can explore supervised restructurings that salvage viable operations. In extreme cases where debts exceed asset value, administrative liquidation ensures a fair and efficient closure with regulatory oversight. This layered system reflects a mature and responsible approach to economic management.

Cross-Border Implications and the Need for Legal Foresight

In an increasingly interconnected Gulf economy, cross-border insolvency poses a significant risk that extends beyond theoretical considerations. Multinational entities, foreign investors, and joint ventures operating in the KSA must be acutely aware of how Saudi law interacts with the legal principles of their home jurisdictions. Recognition of foreign insolvency proceedings, creditor claims from abroad, and the handling of assets across borders are complex but navigable areas, provided legal counsel is engaged early.

From Crisis to Compliance

The reality of doing business includes the possibility of failure, but how that failure is managed can define a company’s legacy, protect reputations, and shape future opportunities. Saudi Arabia’s Bankruptcy Law has laid the groundwork for a responsible, transparent, and modern approach to corporate distress. Yet the law alone is not enough. Business leaders must act early, seek legal advice, and approach distress not as a crisis to be concealed, but as a legal process to be navigated with discipline and foresight.

At HMCO, we advise clients across sectors on strategic responses to financial instability, ensuring their decisions today create options, protections, and clarity for tomorrow.

 

 

Older posts