Category Archives: Finance

The Kingdom of Saudi Arabia, with its rapidly evolving economic landscape and proactive approach towards technological advancement, has emerged as a hotspot for startups and innovative ventures. As the nation diversifies its economy and reduces its dependency on oil, the Saudi government has implemented robust legal frameworks to encourage entrepreneurship, attract foreign investment, and facilitate the growth of startups. Two pivotal legislations – the Companies Law and the Investment Law – stand at the forefront of this legal ecosystem, providing a solid foundation for entrepreneurs to launch and scale their new ventures.

The Companies Law: Fostering Business Formation and Operations

Starting a business in Saudi Arabia has never been more accessible, thanks to the modernised Companies Law. Enacted in 2015, this law introduced several significant changes that have simplified the business formation process and enhanced the flexibility of company structures.

One of the standout features of the Companies Law is the introduction of the “one-person company” concept, allowing single entrepreneurs to establish a limited liability company with ease. This enables solopreneurs to take advantage of the legal protection afforded by a corporate structure while maintaining a streamlined operational framework.

Furthermore, the Companies Law introduced the option for a single shareholder to hold multiple board positions, fostering a more dynamic and efficient decision-making process. This empowers startups to respond swiftly to market changes and aligns with the agility required for innovation-driven ventures.

Investment Law: Opening Doors to Foreign Investment

Recognising the importance of foreign capital and expertise in driving economic growth, Saudi Arabia has bolstered its Investment Law to attract international investors to its burgeoning startup ecosystem. Recent amendments to the Investment Law have addressed key concerns, making the country a more attractive destination for foreign investment.

Removing restrictions on foreign ownership in certain sectors and introducing a streamlined licensing process has significantly eased the path for international investors. Startups seeking foreign investment can now do so with greater confidence, knowing that the regulatory framework is designed to facilitate collaboration and growth.

Moreover, the Investment Law offers various incentives to foreign investors, including extended lease terms for real estate and the ability to repatriate profits and funds quickly. These provisions enhance the overall investment climate and give startups a competitive edge when securing funding from international sources.

Navigating the Legal Landscape: Challenges and Opportunities

While Saudi Arabia’s legal landscape has witnessed remarkable improvements, navigating it can still present challenges, especially for entrepreneurs unfamiliar with local regulations. Cultural nuances, language barriers, and evolving legal interpretations may pose hurdles. However, various legal firms and advisory services have emerged to assist startups in understanding and complying with the legal requirements.

Understanding the Companies Law and Investment Law is just the beginning. Entrepreneurs should also be well-versed in labour laws, intellectual property protection, and tax regulations to ensure their ventures’ smooth operation and growth. Collaborating with legal experts specialising in startup law can prove invaluable in avoiding potential pitfalls and seizing growth opportunities.

Paving the Way for Saudi Startup Success

Saudi Arabia’s commitment to fostering innovation and entrepreneurship is evident through its progressive legal framework, particularly the Companies Law and Investment Law. These laws simplify launching and scaling startups and demonstrate the nation’s dedication to welcoming local and foreign entrepreneurs. By embracing these legal foundations and seeking expert guidance, startups can confidently embark on their journey to contribute to Saudi Arabia’s economic transformation while reaping the rewards of a supportive and dynamic business ecosystem.

Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. Readers are encouraged to seek legal advice on their specific circumstances.

The global financial landscape has been undergoing a seismic shift with the rise of cryptocurrencies. As a significant player in the Middle East, Saudi Arabia has not been immune to this transformative wave. As digital assets like Bitcoin, Ethereum, and others gain prominence, governments worldwide are grappling with the need to establish clear regulations that balance innovation, investor protection, and national security. In this article, we delve into the intriguing realm of cryptocurrency regulations in the Kingdom of Saudi Arabia (KSA), exploring how the nation navigates the complex legal landscape of digital assets.

A Tale of Technological Advancement and Prudent Regulation

Saudi Arabia, known for its rich oil reserves, has been gradually expanding its technological prowess and diversifying its economy in recent years. Cryptocurrencies, often hailed as the technological disruptors of traditional finance, have caught the attention of both investors and regulators in the nation. The Kingdom’s approach to cryptocurrency regulation is a delicate dance between embracing innovation and safeguarding its financial ecosystem.

The Regulatory Landscape: A Balancing Act

The Saudi Arabian Monetary Authority (SAMA), the country’s central bank, has taken a measured approach to regulating cryptocurrencies. In 2017, SAMA issued a public warning about the risks of trading cryptocurrencies due to their highly speculative nature and potential links to illicit activities. This cautious stance highlighted the need for investor education and protection.

Fast forward to 2021, and Saudi Arabia made a significant stride by introducing the Draft Electronic Transactions Law, which includes provisions related to virtual currencies. This draft law aimed to establish a legal framework for various electronic transactions, including those involving cryptocurrencies. While the details of the law’s final version are awaited, the move underscores the government’s acknowledgement of the growing importance of digital assets.

Investor Protection and Anti-Money Laundering (AML) Measures

As cryptocurrencies gained popularity, concerns about their potential misuse for money laundering and terrorist financing also emerged. In response, Saudi Arabia has been working on bolstering its AML regulations. Cryptocurrency exchanges and service providers must now register with relevant authorities and adhere to stringent AML and counter-terrorism financing standards.

The Saudi Arabian Vision 2030 and Blockchain

Saudi Arabia’s Vision 2030, a comprehensive plan aimed at reducing the nation’s dependence on oil and diversifying its economy, has recognised the potential of blockchain technology. Blockchain, the underlying technology behind cryptocurrencies, is seen as a tool that can enhance transparency, efficiency, and security across various sectors, including finance, supply chain, and government services. As a result, the nation has been investing in blockchain-related initiatives, signalling a nuanced approach to technological innovation.

Challenges on the Horizon

While Saudi Arabia has taken notable steps toward regulating cryptocurrencies, challenges remain. The volatile nature of cryptocurrencies presents a constant challenge for regulators worldwide. Striking the right balance between fostering innovation and mitigating risks is an ongoing endeavour. Moreover, the evolving global regulatory landscape adds complexity as nations grapple with harmonising their digital asset approaches.

Navigating the Future

Cryptocurrency regulations in Saudi Arabia are emblematic of a more significant global trend – the convergence of technology and finance. As the nation regulates digital assets, it seeks to harness the potential benefits while minimising risks. The journey entails not only the creation of a legal framework but also continuous adaptation to a rapidly evolving technological landscape.

As Saudi Arabia works toward achieving its Vision 2030 and embraces the transformative potential of blockchain technology, its approach to cryptocurrency regulations will likely serve as a template for other nations in the region and beyond. Striking the right balance between innovation and prudence is a challenge, but it’s a challenge that reflects the dynamic nature of the financial world in the 21st century.

Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. Readers are encouraged to seek legal advice on their specific circumstances.

Introduction

In Saudi Arabia’s continuous efforts to maintain its position as a global powerhouse in the international field, Saudi Arabia becomes the 96^th country to accede to the Convention on Contracts for the International Sale of Goods (the “Convention”), as evidenced in Royal Decree No. M/196 dated 4/12/1444H (corresponding to 22/06/2023 G) (“Royal Decree M/196”). The Convention shall come into force in Saudi Arabia on 1 September 2024, and is a welcomed opportunity to continue shaping contracts related to the provision of international goods, as local legislation only speaks to the provision of goods in respect to agreements between foreign principals with local agents and/or distributors under the Commercial Agencies Law issued by Royal Decree No.11 dated 1/1/1382H (corresponding to 30/6/1962 G) and, most recently, the E-Commerce Law issued by Royal Decree No. M/126 dated 7/11/1440H (corresponding to 10/7/2019 G). By Saudi Arabia acceding to the Convention, this invites further clarity as to the defined terms between the parties to an agreement for the provision of goods in cross-border transactions but carries certain implications should a dispute arise.  This article will walk merchants through the subtle yet significant changes and how this may impact their business with Saudi Arabian buyers and sellers.

Demystifying the Scope of the Convention

• Who is subject to the Convention?

The Convention applies to any contract for the sale of goods between parties whose places of business are in different states. The Convention considers states as different states when the parties are Contracting States (meaning, states that have ratified or acceded to the Convention) or when the rules of private international law (meaning, a conflict of law analysis) lead to the application of the law of a Contracting State (even if the other party’s country is not a Contracting State). Further, determining the place of business is not extrapolated from the nationality of the parties, rather, it considers whether the place of business is a permanent establishment (which means warehouses or seller’s agent’s offices disqualify as a place of business), and whether the substance of the contract between the parties or from prior dealings speaks to the place of business.

• What types of goods are covered under the Convention?

The Convention inversely defines goods by determining what’s out rather than what’s in. The Convention’s reach  does not extend to the sale of goods intended for personal use (such as household items), by auction, execution or by authority of law,  stocks, shares, investment securities, negotiable instruments, or money, ships, vessels, hovercraft or aircraft, electricity, and contracts for the provision of services (such as manufacturing or producing the goods supplied, supply of labor or other services) in which the provision of goods is incidental to the services contract.

• What does the Convention Cover?

The Convention only governs the formation of the contract for the sale of goods (i.e. what constitutes an offer, acceptance, rejection) and the rights and obligations between seller and buyer. The Convention does not speak to the validity of the contract, the effect on title of goods, and third-party rights. Neither does it address liability of seller for death or personal injury caused by the goods to any person.

Filling in the Gaps: Interpretation of the Convention, the Contract, and the Parties’ Conduct  

While in principle, the Convention promotes uniformity, it does have gaps in application. The Convention permits Contracting States’ courts to interpret Convention on a good-faith basis (an international principle set in stone and promotes finding solutions rather than findings ways to terminating agreements). In respect to interpreting the parties conduct, the Convention allows courts to consider the intent of the parties (from a subjective standpoint), the parties’ statements made to each other (from an objective standpoint), and/or to consider any usage of trade or prior dealings between the parties.

Main Pillars of Contract Formation Under the Convention

Part II of the Convention governs the process of formation of an international sale of goods contract. In general, proposals with definite terms (including quantity and price) and an intention to be bound is deemed as an offer, however, a proposal addressed to multiple people is an indication to make offers.

Other principles are worth noting, such as receipt, which is a definitive factor in determining whether an offer or acceptance has been satisfied. For instance, an offer becomes effective upon receipt by the offeree. An irrevocable offer can be withdrawn or rejected upon the offeror’s receipt of the offeree’s intention to withdraw or reject arrives prior to the offeree’s acceptance.

Moreover, methods of accepting an offer is not limited to written statements; an offeree’s conduct (unless such conduct is in the form of silence or inactivity by the offeree), or verbal statements can be deemed as an acceptance. However, silence may be sufficient if followed by affirmative conduct.

Further, modifications to offers is not necessarily an outright rejection of the offer (and thereby creating a counteroffer). As a general rule, the Convention considers different terms that do not materially alter the offer to form an integral part of the offeree’s acceptance. However, should the offeree materially alter the offer in respect to: price, payment, quality, quantity of goods, place and time of delivery, extent of party’s liability to another, and settlement of disputes, such deviation will be deemed as a rejection of the offer and the creation of a counteroffer.

For example, let’s say you are a seller whose head office is domiciled in Bahrain (a Contracting Party) and wish to enter into a sales agreement for office furniture with a buyer whose headquartered in Saudi Arabia (another Contracting Party). You draft up an offer which includes the quantity and the price of the office furniture but does not specify the manner in which your proposal may be accepted. You send the proposal across to your buyer in Saudi Arabia, and buyer goes silent; neither accepting nor rejecting your proposal. Two weeks later, you receive information from a third-party that the buyer is selling all his previous office furniture for a significant amount. Under the Convention, the buyer would be deemed to have accepted the offer; while the buyer was silent, his affirmative conduct (freeing up space and securing additional financing in order to facilitate a purchase order) can be deemed as acceptance.

Based on the liberal interpretation of offer, acceptance, and counteroffer under the Convention, it is best for any buyer and seller to draft up letters of intents, proposals, and acceptances with the Convention in mind, i.e. the seller may limit the method of acceptance to be in writing, draft proposals with specificity and certainty. The more terms not addressed, the more likely the agreement between the parties will be prone to interpretation or gap filling by Contracting States’ courts.

Reservations and its Implications

The Convention permits Contracting States to declare that they will not be bound by Part II (Formation of the Contract) or Part III (Sale of Goods) of the Convention upon its accession or ratification of the Convention. Saudi Arabia has submitted its reservation both to the United Nations Depository including its reservation to Part III of the Convention, and in the Royal Decree M/196, expressly stating that Saudi Arabia will not be bound by Part III of the Convention.

Part III forms a substantial part of the Convention, detailing the rights and obligations of the parties, passage of risk of loss, payment and delivery terms, damages, anticipatory breach, and instalment contracts. However, Saudi Arabia has indicated in Royal Decree M/196 that the main purpose of its reservation to Part III is the presence of the application of interest for failure to pay in a timely manner and payment of any interest rate on refunds. Islamic (Shariah) law strictly forbids the application of interest on payments or receipt of interest on payments (also known as riba under Islamic law), any provision within an agreement including interests would render the agreement void.

In light of the above, Royal Decree M/196 mandates that the Minister of Commerce continue investigating ways for Saudi Arabia to accede to the entire Convention permitted under international law – with the exception of provisions related to the application of interests – thereby allowing the remaining provisions of Part III to form part of Saudi’s accession to the Convention.

In the event that Saudi Arabia and another Contracting State have certain disputes arising as to the formation of the contract, and, one Contracting State has not made a reservation to either Part II or Part III of the Convention, the rules of private international law (such as a conflicts of law analysis) may lead to the law of either the Contracting State who has not made any reservation, or Saudi Arabia’s laws (who is not bound by Part III). Should the forum of the dispute be in Saudi Arabia, the Saudi Arabian courts will need to conduct a conflict of laws analysis to reach a determination as to which of the two Contracting States law would apply.

Let’s take the same example as above. Imagine the Bahraini seller and the Saudi buyer face a dispute, and resort to a Bahraini court to seek resolution. The agreement between the buyer and the seller fails to specify the governing law and the damages recognized under the agreement. Bahrain has not declared any reservations, while Saudi has declared not being bound by Part III of the Convention. The Bahraini court will need to conduct a conflict of law analysis, determining which Contracting States’ law will apply. The Bahraini court conducts the conflict of law analysis and concludes that Saudi’s law applies, because of majority of the transaction occurred in Saudi Arabia. Since Saudi Arabia is not bound by Part III (which addresses damages), the Bahraini court cannot apply damages based on the Convention and will consider other Saudi laws, such as shariah principles, or the recently promulgated Saudi Civil Transactions Law, issued by Royal Decree No. M/191 dated 29/11/1444H (corresponding to 18/6/2023G) (“Royal Decree M/191”)

Similarly, should Saudi Arabia and a non-Contracting State have a dispute arising in respect to a contract for the sale of goods, the non-Contracting State would possibly be subjected to the Convention pursuant to a conflicts of law determination, despite not acceding to it.

Conclusion

Saudi Arabia’s accession to the Convention may appear on its face to provide much needed clarity to how goods will be governed in cross-border transactions. However, it is unclear how certain rights and obligations between sellers and buyers will be determined given Saudi Arabia’s reservation to Part III of the Convention, perhaps Royal Decree No. M/191 will provide guidance as to defenses to contracts, damages, and rights and obligations. Further, non-Contracting States should be wary that agreements concluded with Saudi Arabia for the provision of goods may subject them to the Convention. When preparing a proposal or accepting an offer, parties to an international sale of good transactions should draft up agreements with the Convention in mind, expressly stating the terms of the agreement, the manner in which a contract is formed, and create a solid foundation for damages and governing law (without inviting the application of a conflicts of law analysis).

Over the past few years, the Kingdom of Saudi Arabia has emerged as a significant player in the financial technology (fintech) sector. Recognising the potential of fintech to transform the financial landscape, the Saudi Central Bank (SAMA) and the Capital Market Authority (CMA) launched Fintech Saudi in April 2018. Fintech Saudi operates under the Financial Sector Development Program (FSDP) and is dedicated to fostering the growth of the fintech industry in the Kingdom.

One of the pivotal steps the regulatory authorities took was the establishment of a regulatory sandbox. This sandbox allows fintech companies and banks to test and certify their products in a secure and controlled environment. Since its inception, the regulatory sandbox has enabled fintech businesses to develop and thrive in the Kingdom.

SAMA and CMA have significantly progressed in developing fintech regulations and licensing frameworks. They have introduced new fintech licenses and experimental sandbox licenses, which have provided fertile ground for fintech companies to flourish. Initiatives such as the Fintech Accelerator Program, the Fintech Ecosystem Directory, and the Fintech Job Portal have further supported the growth of the Fintech sector in the Kingdom. Additionally, Fintech Saudi has undertaken the Fintech Data & Research Initiative and the Fintech Regularity Assessment Tool to enhance transparency in Fintech data and regulations.

As a result of these efforts, the fintech ecosystem in Saudi Arabia has experienced rapid growth. The number of fintech businesses has increased by an impressive 14.7 times since the launch of Fintech Saudi. By the end of 2022, there were 147 fintech businesses registered with Fintech Saudi, and investments in fintech companies had reached SAR 1,508.4 million ($401.56 million).

Open banking has been a significant driver of fintech growth in the Kingdom. Open banking lets Customers securely share their financial data with third-party fintech companies. This data access enables fintech firms to offer innovative financial products and services, allowing customers to manage multiple accounts and conduct transactions from a single dashboard.

To support open banking, SAMA introduced the Open Banking Lab in 2022. This sandbox environment allows banks and fintech businesses to experiment with their product offerings and ensure compliance with the Open Banking Framework. The Open Banking Framework, released by SAMA in November 2022, comprises legislation, regulatory guidelines, and technical standards that enable banks and fintech companies to provide open banking services to customers in Saudi Arabia.

In January 2020, SAMA introduced the Payment Service Provider Regulations (PSP Regulations) to oversee the operations of PSPs within the Kingdom. These regulations encompass various payment services, including direct debits, credit transfers, payment execution, electronic money issuance, etc. The PSP Regulations are modelled on the European Union’s Payment Services Directive, making it easier for international PSPs to establish operations in Saudi Arabia.

Introducing the PSP Regulations led to a surge in the PSP industry in Saudi Arabia. The establishment of Saudi Payments (SADAD) and the launch of Apple Pay contributed to a significant increase in smartphone payment transactions in the Kingdom. From 9 million transactions in 2019, the number of transactions skyrocketed to 54 million in 2020 and 128 million in 2021, as SAMA’s April 2022 Bulletin reported.

The Kingdom has also made notable strides in digital banking. The Council of Ministers approved digital banking licenses for STC Bank and the Saudi Digital Bank in June 2021, followed by the approval of a third bank, D360, in February 2022. These three banks are the first digital-only banks in Saudi Arabia, offering low-cost customised services to customers by leveraging data collection and analysis.

Furthermore, crowdfunding has seen significant developments, particularly with SAMA’s introduction of rules for debt-based crowdfunding in January 2021. Reward-based crowdfunding is exempt from licensing requirements.

Although the Kingdom has been receptive to emerging technologies like blockchain, it exercises caution about crypto-based businesses due to the high volatility and lack of supervision in cryptocurrency markets. SAMA conducted a joint initiative with the central bank of the United Arab Emirates called Project Aber to explore the viability of a dual-issued digital currency. While trading in cryptocurrency remains restricted, a survey by the KuCoin exchange revealed that three million Saudis either own cryptocurrencies or have traded them in the past.

Saudi Arabia’s fintech landscape is evolving rapidly, driven by a proactive regulatory approach, innovative initiatives, and growing investments. The Kingdom’s commitment to fostering the fintech sector will likely attract more businesses and drive further advancements in the financial technology industry. As fintech continues to gain traction, it is set to play a pivotal role in shaping the future of Saudi Arabia’s financial services.

The Kingdom of Saudi Arabia has made significant strides in fintech in recent years. As part of its broader push towards a cashless economy, the government has introduced supportive regulations and funding mechanisms to stimulate innovation and investment in the financial technology space. This article delves into the funding options available to fintech companies, the regulatory environment, and the key initiatives fostering the growth of fintech in Saudi Arabia.

Funding for Fintech Companies

In the Kingdom, equity and debt financing avenues are open to businesses. However, the Finance Companies Control Law strictly governs financing activities, and any entity wishing to engage in financing activities must obtain a license from the Saudi Arabian Monetary Authority (SAMA). Shareholders of financing companies must adhere to Shariah requirements and organise themselves as joint-stock companies.

The Capital Market Authority (CMA) has issued rules and regulations to accommodate crowdfunding businesses for equity crowdfunding. Five companies have received experimental licenses from the CMA to test their equity crowdfunding models. Successful trials may lead to the issuance of permanent crowdfunding licenses.

On the other hand, debt crowdfunding is regulated by SAMA’s Updated Rules for Engaging in Debt-Based Crowdfunding, which mandates entities to obtain the required licensing. A minimum capital requirement of SAR 5 million is necessary for obtaining the crowdfunding license, which SAMA may adjust based on market conditions.

Saudi Arabia’s Commitment to Fintech

The Kingdom’s dedication to fostering fintech innovation is evident through the Financial Sector Development Program (FSDR). In May 2022, the Council of Ministers approved the Kingdom’s Fintech Strategy, a vital component of the FSDR, aiming to establish 525 Fintech businesses by 2030. The strategy focuses on talent nurturing, improving regulatory landscapes, and encouraging collaboration among local and international fintech players.

Tax Schemes and IPO Opportunities

The Kingdom’s tax policies favour fintech start-ups, particularly local companies. Zakat, Tax, and Customs Authority (ZATCA) impose a 2.5% zakat on local companies’ enterprise value and a 20% tax on foreign companies’ generated revenue. Local shareholders and Gulf Cooperation Council nationals enjoy favourable tax treatment.

Approval from the CMA is mandatory for fintech companies considering an initial public offering (IPO). The CMA governs the offering of securities through the Saudi Stock Exchange (Tadawul) and the Nomu-Parallel Market. Companies seeking listing on Tadawul must fulfil specific criteria, such as being organised as joint-stock companies, having at least three years of operation under the same management, and offering at least 30% of shares to the public.

Regulatory Framework for Fintech

Fintech companies in Saudi Arabia are regulated by various authorities, including the CMA, SAMA, and the Communications and Information Technology Commission (CITC). While specific regulations for cryptocurrencies and crypto assets are yet to be introduced, SAMA has explored distributed ledger technology through Project Aber.

Regulatory Sandboxes: Facilitating Innovation

SAMA and CMA offer fintech businesses the opportunity to operate within regulatory sandboxes. These sandboxes allow companies to test their technologies and services live while the relevant regulations are being developed. This collaborative approach has already led to the introduction of regulations for debt-based crowdfunding, payment service providers, and Open Banking.

Challenges and Data Privacy

Foreign fintech companies may face challenges entering the Saudi market due to the requirement for a local presence during the trial period within the regulatory sandboxes. However, introducing the Personal Data Protection Law (PDPL) offers greater protection to data privacy. The PDPL applies to all businesses processing data in Saudi Arabia, including foreign entities processing data related to Saudi residents.

Saudi Arabia’s commitment to becoming a fintech hub is evident through its supportive funding mechanisms, regulatory sandboxes, and dedication to data privacy. The government’s focus on nurturing talent and encouraging collaboration between local and international players bodes well for the growth and innovation in the fintech sector. With a robust regulatory framework and favourable tax policies, the Kingdom is paving the way for a vibrant and dynamic fintech ecosystem.

In the ever-evolving landscape of the fintech industry, the Kingdom of Saudi Arabia has emerged as a dynamic player, attracting businesses from across the globe. As fintech ventures expand, accessing talent from both local and international markets becomes crucial for sustaining growth and innovation. However, businesses must understand the legislative framework governing employment and intellectual property (IP) in the Kingdom to operate successfully. This article will explore the regulations surrounding talent acquisition and the protection of innovations in Saudi Arabia’s fintech sector.

Saudi Arabia’s employment regulations are governed by the Labour Law, which covers all aspects of employment, including recruitment, termination, employment contracts, and hiring non-Saudi employees. All employees must be registered with the Ministry of Human Resources and Social Development (MHRSD) for a smooth hiring process. On the other hand, foreign employees must obtain work and residence permits under their employer’s sponsorship.

Employment contracts can be fixed-term, indefinite-term, or project-based, depending on the nature of the work. In termination cases, employers must provide notice periods: 30 days for fixed-term contracts and 60 days for indefinite-term contracts. In the event of unfair dismissal, employees are entitled to severance payments.

Saudization: Encouraging Local Talent:

Saudi Arabia’s Saudization initiative is a nationalisation program that encourages businesses to hire a certain percentage of Saudi nationals in qualified positions. This initiative aims to boost local employment and create opportunities for the local workforce in the fintech sector.

Mandatory Employment Benefits:

The Labor Law mandates several benefits for employees in Saudi Arabia, including health insurance, paid vacation (increasing to 30 days after five years of employment), reduced working hours during Ramadan, observance of public holidays, and end-of-service benefits based on the employee’s last wage and length of employment.

Accessing Foreign Talent:

Hiring foreign talent in Saudi Arabia requires adherence to specific requirements set by the MHRSD and the Ministry of Interior. Foreign employees must have entered the country legally and be authorised to work. They must also have an employment contract with a local employer under the employer’s sponsorship. Moreover, the foreign employee must possess the necessary qualifications and skills not readily available among the Saudi workforce.

When the employment relationship concludes, employers hiring foreign employees are responsible for the associated recruitment fees, including work and residence permits and exit procedures.

Protecting Innovations and Intellectual Property:

Safeguarding innovations and intellectual property is paramount for fintech businesses in Saudi Arabia. Here are the critical methods of protection:

Patents: Innovators can apply for a patent for exclusive protection for their inventions for up to 20 years, provided the invention is new, innovative, and industrially applicable. However, certain items like business practices, mathematical algorithms, and computer codes may not be eligible for patent protection.

Copyrights: Saudi Copyright Law protects computer programs, software, and audio-visual works without registration. The Saudi Authority for Intellectual Property (SAIP) recently introduced an optional registration service for computer software and applications.

Trade Secrets: Fintech businesses can protect innovative codes and programs as trade secrets to prevent unauthorised usage.

Trademarks: Registering trademarks enables businesses to protect their brand names and identity.

Ensuring Ownership of Intellectual Property:

In Saudi Arabia, the ownership rights for patents typically lie with the inventor. For copyrights, the author is usually the owner unless the work is created during employment, in which case the employer becomes the beneficiary. Trademarks, on the other hand, belong to the applicant who filed for registration.

To safeguard their IP, fintech businesses should include specific provisions in employment contracts, agreements with contractors, and confidentiality clauses to protect sensitive information and trade secrets.

The International Landscape:

Saudi Arabia is a member of various international treaties and conventions that govern intellectual property rights, such as the TRIPS Agreement, the Berne Convention, and the Paris Convention. These treaties provide territorial rights, meaning IP protection requires registration within the Kingdom.

As Saudi Arabia’s fintech sector continues to flourish, accessing talent and protecting innovations remain vital considerations for businesses operating in the Kingdom. Complying with the Labor Law and Saudization requirements ensures a smooth and compliant recruitment process while understanding the various methods of IP protection empowers businesses to safeguard their creations and investments. By embracing these aspects, fintech ventures in Saudi Arabia can truly thrive and make their mark in the rapidly evolving world of financial technology.