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In recent years, Saudi Arabia has witnessed a dynamic shift towards embracing technology in various sectors, including law and justice. One of the notable developments in this landscape is the emergence of Online Dispute Resolution (ODR) platforms, heralding a new era of efficiency and accessibility in resolving disputes. This article delves into the transformative potential of ODR, its benefits, and the necessary framework for its widespread adoption in the Kingdom.

Online Dispute Resolution (ODR) platforms represent a cutting-edge approach to resolving disputes in the digital age. As the Kingdom of Saudi Arabia continues its journey towards a digital economy, integrating ODR platforms is timely and impactful. ODR leverages technology to facilitate efficient and cost-effective dispute resolution, catering to the evolving needs of a digitally connected society.

Benefits of ODR in Saudi Arabia

Adopting ODR brings many benefits, particularly in e-commerce and digital transactions. Accessibility stands out as a critical advantage, allowing parties involved in disputes to engage in the resolution process from anywhere with an internet connection. This accessibility is particularly advantageous in a vast country like Saudi Arabia, enabling citizens and businesses in remote areas to access justice without geographic constraints.

Moreover, ODR enhances affordability by significantly reducing the costs associated with traditional legal proceedings. The streamlined nature of online processes minimises the need for physical infrastructure and personnel, translating into more cost-effective dispute-resolution mechanisms. This affordability is transformative for small businesses and individual consumers, fostering a more equitable legal landscape.

Additionally, ODR platforms offer unmatched convenience. Parties can engage in dispute resolution at their convenience without the constraints of traditional court schedules. This flexibility is precious in the fast-paced realm of e-commerce, where swift resolutions are crucial to maintaining consumer trust and business continuity.

Regulatory Framework and Technological Infrastructure

A robust regulatory framework and technological infrastructure are imperative to fully harness ODR’s potential. Saudi Arabia has made notable strides in this regard, with recent legislative developments reflecting a proactive approach to digital transformation. Clear guidelines and regulations are essential to ensure online dispute resolution’s integrity, security, and enforceability.

Furthermore, investments in technological infrastructure are crucial to support the seamless operation of ODR platforms. This includes ensuring reliable internet connectivity, data security protocols, and user-friendly interfaces that cater to diverse users across the Kingdom.

We delve deeper into some additional details and considerations regarding the adoption of Online Dispute Resolution (ODR) platforms in Saudi Arabia:

1. Addressing Cross-Border Disputes

With the increasing globalisation of commerce, cross-border transactions have become commonplace. ODR platforms can be pivotal in resolving disputes arising from international e-commerce activities involving Saudi businesses. By facilitating efficient cross-border dispute resolution, ODR enhances the Kingdom’s regional and global trade hub attractiveness.

2. Integration with Sharia Law

Given Saudi Arabia’s legal framework, which is rooted in Sharia law, integrating ODR platforms requires careful consideration of religious and cultural sensitivities. ODR processes can be tailored to align with Sharia principles, ensuring compatibility with local norms and values while promoting a modern approach to dispute resolution.

3. Building Trust and Confidence

The successful adoption of ODR hinges on building trust and confidence among users. This requires proactive measures to ensure transparency, data security, and procedural fairness within the digital dispute resolution ecosystem. Establishing accreditation mechanisms for ODR providers and promoting awareness campaigns can bolster public trust in these platforms.

4. Capacity Building and Awareness

Enhancing the adoption of ODR platforms necessitates comprehensive capacity-building initiatives. This includes training legal professionals, judges, and stakeholders on ODR processes and technologies. Additionally, raising awareness among businesses and consumers about the benefits and functionalities of ODR is essential to drive widespread adoption and utilisation.

5. Technological Innovations

The evolution of ODR platforms is closely intertwined with technological innovations such as artificial intelligence (AI), blockchain, and secure online authentication systems. Leveraging these technologies can enhance the efficiency and credibility of ODR processes, enabling faster case resolution and reducing administrative burdens.

6. Collaborative Partnerships

The successful implementation of ODR requires collaborative partnerships between government entities, legal institutions, technology providers, and industry stakeholders. By fostering a collaborative ecosystem, Saudi Arabia can leverage collective expertise to address regulatory challenges, enhance infrastructure, and drive continuous innovation in ODR.

7. Pilot Projects and Evaluations

Conducting pilot projects and evaluations of ODR platforms in specific sectors or regions can provide valuable insights into their effectiveness and scalability. Policymakers can fine-tune regulations and refine ODR frameworks to better serve diverse stakeholders’ needs by monitoring outcomes and soliciting participant feedback.

Looking Ahead

As Saudi Arabia paves the way for a digital future, integrating Online Dispute Resolution (ODR) platforms emerges as a progressive step towards enhancing access to justice and fostering a conducive business environment. The benefits of ODR, from accessibility and affordability to convenience, resonate strongly in a society increasingly reliant on digital transactions.

The embrace of ODR in Saudi Arabia signifies a paradigm shift towards modern, efficient, and inclusive dispute resolution mechanisms. By nurturing a supportive regulatory framework and advancing technological capabilities, the Kingdom is poised to unlock ODR’s transformative potential, ensuring equitable access to justice and reinforcing its position as a leader in digital innovation.

The burgeoning landscape of digital assets, from cryptocurrencies to tokenised securities, presents a dynamic frontier in financial technology. In Saudi Arabia, as in many jurisdictions globally, the custody and storage of digital assets raise intricate legal challenges. This article delves into the nuanced legal risks associated with digital asset custody and storage solutions within the Kingdom, focusing on security breaches, asset recovery, regulatory compliance, and best practices for risk mitigation.

Due to the inherent value of the assets they hold, digital asset custody platforms are prime targets for cyberattacks. Given the evolving nature of cyber threats, the risk of security breaches poses significant concerns in Saudi Arabia. Breaches can result in theft or loss of assets, potentially leading to financial liabilities for custodians. Moreover, breaches may expose custodians to immediate legal actions from affected users or regulatory authorities.

The recoverability of digital assets in the event of loss or theft presents a unique challenge. Unlike traditional financial assets, many digital assets’ decentralised and pseudonymous nature complicates recovery efforts. Custodians face legal uncertainties around the recourse available to asset owners in such scenarios, including potential disputes over liability and responsibility.

Navigating the regulatory landscape is critical for digital asset custodians in Saudi Arabia. The Kingdom’s regulatory framework for digital assets is continuously evolving, focusing on consumer protection, anti-money laundering (AML), and combating terrorist financing (CTF). Custodians must adhere to stringent compliance requirements, including licensing, reporting, and maintaining robust AML/CFT measures. Non-compliance can lead to severe penalties and legal repercussions.

To mitigate these risks, custodians should implement multi-layered security protocols, including encryption, cold storage solutions, and continuous monitoring of suspicious activities. Regular security audits and penetration testing can help identify vulnerabilities and strengthen defences against cyber threats. Establishing comprehensive legal agreements with clients is also essential. Contracts should outline the rights, responsibilities, and liabilities of custodians and asset owners in various scenarios, including breach incidents and asset recovery processes.

Staying abreast of evolving regulations and engaging with regulatory authorities is crucial. Custodians should proactively adapt compliance measures to align with Saudi Arabia’s regulatory expectations, ensuring transparency and accountability. Additionally, obtaining appropriate insurance coverage against cyber risks and asset loss can provide custodians with financial protection and bolster client confidence in the security of their assets.

Digital asset custodians operating in Saudi Arabia must navigate cross-border regulatory challenges. These include compliance with foreign laws governing cross-border transactions, tax implications of international transfers, and adherence to global AML/CFT standards. Custodians also face legal risks related to jurisdictional differences, regulatory alignment, and international enforcement actions. Regulatory oversight and enforcement actions pose legal risks for custodians. Saudi Arabia’s regulatory authorities may conduct audits, investigations, or inspections to ensure compliance with digital asset regulations. Custodians must demonstrate adherence to licensing requirements, operational standards, and reporting obligations to mitigate legal exposure to regulatory sanctions or penalties.

Digital asset custody agreements may involve parties from different jurisdictions, raising legal complexities in dispute resolution and legal jurisdiction. Custodians must define applicable laws, jurisdictional forums, and dispute resolution mechanisms in custody contracts. Legal risks include challenges in enforcing judgments across borders and resolving international disputes. The evolving nature of digital assets presents novel legal issues for custodians. These include legal considerations related to tokenisation, decentralised finance (DeFi), non-fungible tokens (NFTs), and the regulatory implications of emerging technologies. Custodians face legal uncertainties surrounding the legal status of digital assets, smart contracts, and governance frameworks.

Embracing legal technology solutions can enhance operational efficiency and risk management for custodians. Implementing blockchain-based legal contracts, innovative contract auditing tools, and digital identity verification platforms can streamline compliance processes, reduce legal risks, and improve transparency in digital asset custody operations.

Custodians can leverage regulatory sandbox programs offered by Saudi Arabian authorities to pilot innovative digital asset custody solutions in a controlled environment. Participation in regulatory sandboxes enables custodians to test compliance measures, validate operational models, and collaborate with regulators to address legal uncertainties. Investing in ongoing legal education and training is essential for custodians and compliance teams. Custodians should stay abreast of legal developments, attend regulatory workshops, and pursue professional certifications in fintech law and digital asset regulation. Well-informed personnel are better equipped to navigate legal risks and compliance challenges effectively.

The custody and storage of digital assets in Saudi Arabia demand a proactive approach to managing legal risks. Custodians must navigate the complex interplay between technological innovation and regulatory oversight to foster trust and safeguard assets. By implementing robust security measures, establishing clear legal frameworks, adhering to regulatory requirements, and leveraging insurance solutions, custodians can mitigate legal risks and foster a secure environment for the custody of digital assets in Saudi Arabia.

In today’s digitally driven landscape, Saudi Arabia, like many nations, grapples with significant legal challenges in cybersecurity and data privacy. As the Kingdom advances in its digital transformation journey, policymakers and businesses increasingly focus on establishing robust legal frameworks to safeguard sensitive information, combat cyber threats, and foster trust in the digital ecosystem. This article explores the legal hurdles associated with cybersecurity and data privacy in Saudi Arabia, covering regulatory mandates, incident response protocols, liability frameworks for data breaches, and innovative legal solutions.

Regulatory Mandates Concerning Data Protection

Saudi Arabia has taken significant strides towards enhancing data protection regulations. The Personal Data Protection Law (PDPL), enacted in 2019, marked a pivotal moment in the Kingdom’s approach to data privacy. The PDPL sets comprehensive guidelines for collecting, processing, storing, and transferring personal data. It mandates data controllers and processors to implement stringent security measures to protect personal information against unauthorised access or disclosure.

The Saudi Communication and Information Technology Commission (CITC) is also crucial in overseeing data protection and privacy compliance. The CITC regularly updates guidelines and standards to align with global best practices, fostering a more secure and transparent digital environment.

Protocols for Incident Response

Despite preventive measures, cyber incidents remain a pressing concern. To address this, Saudi Arabia emphasises the importance of incident response protocols. Organisations must report data breaches to regulatory authorities promptly and affected individuals, ensuring swift containment and mitigation of cyber threats. The PDPL mandates organisations to establish incident response teams and procedures to handle data breaches effectively while minimising adverse impacts on individuals’ privacy.

Liability Frameworks for Data Breaches

Establishing liability frameworks is essential for holding parties accountable for data breaches. The PDPL outlines penalties for non-compliance, including fines and potential criminal sanctions for severe violations. Organisations are responsible for implementing adequate cybersecurity measures and promptly notifying affected individuals and authorities of breaches. Additionally, the law encourages cooperation between public and private sectors to strengthen cybersecurity resilience across the Kingdom.

Exploration of Innovative Legal Solutions

Saudi Arabia is exploring innovative legal solutions to mitigate cybersecurity risks in an increasingly interconnected world. This includes fostering public-private partnerships to share threat intelligence, investing in cybersecurity education and training programs, and incentivising businesses to adopt emerging technologies like blockchain and AI for enhanced data protection.

Furthermore, the Saudi government encourages the development of cybersecurity startups and research initiatives to drive innovation in the field. Collaborative efforts between academia, industry, and policymakers are vital for developing cutting-edge legal frameworks that anticipate and address emerging cybersecurity challenges.

Regulatory Sandboxes for Innovation

Saudi Arabia has established regulatory sandboxes to encourage cybersecurity technology and solutions innovation. These sandboxes provide a controlled environment where startups and technology companies can test new cybersecurity products and services under regulatory supervision. This initiative fosters collaboration between innovators and regulators, enabling the development of cutting-edge solutions while ensuring compliance with data protection laws.

Investment in Emerging Technologies

Saudi Arabia invests in emerging technologies such as quantum computing and secure multiparty computation to enhance data privacy and encryption capabilities. These technologies have the potential to revolutionise cybersecurity by enabling secure data sharing and processing while protecting privacy rights. By embracing technological innovation, Saudi Arabia seeks to stay ahead of evolving cyber threats and bolster its national cybersecurity posture.

“Saudi Arabia proactively addresses cybersecurity and data privacy legal challenges through robust regulatory mandates, incident response protocols, liability frameworks, and innovative legal solutions. As the Kingdom accelerates its digital transformation, ensuring a secure, privacy-respecting digital environment remains a top priority. Saudi Arabia aims to bolster cybersecurity resilience and build trust in its evolving digital economy by continuously refining legal frameworks and fostering collaboration”.

Suhaib Hammad, Partner

In the rapidly evolving landscape of Saudi Arabia’s knowledge-based economy, protecting intellectual property (IP) has become a crucial concern for businesses, entrepreneurs, and individuals. Intellectual property rights safeguard innovations and creativity and create an environment conducive to investment, technology transfer, and economic growth. This article delves into the essential aspects of IP protection in Saudi Arabia, exploring its legal framework, strategies for securing IP assets, and the pivotal role of IP in driving innovation and competitiveness, all of which are of significant interest to you as a business professional or entrepreneur.

Innovation and creativity are at the heart of Saudi Arabia’s Vision 2030, which aims to diversify the economy and nurture a culture of entrepreneurship and knowledge-based industries. IP protection plays a pivotal role in this transformation by encouraging local and foreign investment in research and development. By securing exclusive rights to innovations, businesses are incentivised to invest in groundbreaking technologies, products, and services, driving economic progress and fostering a competitive market.

Legal Framework for IP Rights

Saudi Arabia has made significant strides in strengthening its legal framework for IP protection. The Kingdom is a signatory to various international conventions, including the Paris Convention for the Protection of Industrial Property and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Domestically, the Saudi Patent Office, the Ministry of Commerce, and the Saudi Authority for Intellectual Property (SAIP) oversee the registration and enforcement of IP rights.

Types of IP Protection

1. Patents: Innovators can protect their inventions through patents, which grant them exclusive rights to exploit their discoveries commercially for a specified period. The Saudi Patent Office oversees the registration and examination of patent applications, providing a robust framework for patent protection.
2. Trademarks: Trademark registration safeguards brand identity and prevents unauthorised use of logos, names, and slogans. Saudi Arabia operates a first-to-file system, emphasising the importance of early registration to secure exclusive rights.
3. Copyrights: Copyright protection extends to literary, artistic, and creative works. Authors, artists, and content creators benefit from automatic protection upon creation, with the option to register copyrights for enhanced enforcement.
4. Trade Secrets: Confidential business information, such as formulas, processes, and customer lists, can be safeguarded as trade secrets. Companies must implement robust confidentiality measures to protect against misappropriation.

Securing and Enforcing IP Assets

Effective IP management begins with comprehensive due diligence and strategic planning. Businesses should conduct IP audits to identify and prioritise valuable assets. Proactive measures, such as registering patents and trademarks, strengthen legal protection. Enforcement strategies include monitoring markets for infringements, engaging in litigation when necessary, and leveraging SAIP’s enforcement mechanisms to combat IP violations.

Driving Innovation and Economic Growth

IP licensing and technology transfer are pivotal in Saudi Arabia’s innovation ecosystem. Licensing agreements enable the commercialisation of technologies, fostering collaboration between innovators and industry. Technology transfer initiatives facilitate knowledge exchange and capacity-building, driving economic diversification and attracting foreign investment.

Challenges and Opportunities in IP Protection

Enforcement remains crucial, with counterfeiting and piracy posing significant business threats. SAIP is taking proactive steps to combat infringement through increased inspections, awareness campaigns, and capacity-building initiatives.

The digital economy presents unique challenges for IP protection. With the rise of e-commerce and digital content, combating online infringement requires innovative strategies, including technology-driven enforcement tools and collaboration with internet service providers to remove infringing content.

Role of IP in Economic Development

Intellectual property rights are integral to Saudi Arabia’s economic development strategy. IP protection attracts investment in high-value industries such as technology, pharmaceuticals, and entertainment by incentivising innovation and creativity. Startups and SMEs benefit from IP protection, gaining access to financing and strategic partnerships.

IP-intensive industries contribute significantly to job creation and GDP growth. Saudi Arabia’s commitment to fostering a knowledge-based economy underscores the importance of continuous improvements in IP laws, regulations, and enforcement mechanisms to support sustainable economic diversification.

International Collaboration and Best Practices

Saudi Arabia actively participates in international forums and collaborations to enhance IP protection. Bilateral agreements with key trading partners facilitate recognising and enforcing IP rights across borders, providing a framework for global innovation and trade.

Future Outlook

Saudi Arabia is poised to become a regional leader in intellectual property protection. As the Kingdom continues its transformation journey, policymakers, industry stakeholders, and innovators must collaborate to address emerging IP challenges and seize growth opportunities.

Strategic investments in research and development, coupled with robust IP protection measures, will drive Saudi Arabia’s transition towards a diversified, knowledge-driven economy. By fostering a culture of innovation and entrepreneurship, supported by a robust IP ecosystem, the Kingdom will unlock new pathways for economic prosperity and global competitiveness in the coming years.

In recent years, the rapid advancement of Artificial Intelligence (AI) and Machine Learning (ML) technologies has revolutionised industries worldwide, including in Saudi Arabia. These cutting-edge technologies hold immense potential for innovation and efficiency, yet they also pose complex legal challenges that must be carefully navigated by businesses and policymakers alike. From liability concerns to data protection and intellectual property rights, the legal landscape surrounding AI and ML in Saudi Arabia is evolving rapidly.

Liability and Accountability

One of the primary legal considerations in deploying AI and ML technologies in Saudi Arabia is determining liability for errors, accidents, or unintended consequences. Traditional legal frameworks often struggle to assign responsibility when AI systems make autonomous decisions. In Saudi Arabia, as in many jurisdictions, questions arise around who is ultimately accountable for AI-driven actions—whether it’s the developer, the user, or the AI system itself.

To address this, Saudi Arabia may need to adapt existing laws or introduce new regulations that establish clear guidelines for liability attribution in AI-related incidents. This could involve defining legal standards for AI governance, setting thresholds for human oversight, and establishing mechanisms for accountability that ensure fairness and transparency in AI applications.

Data Protection and Privacy

Another critical area of concern is data protection and privacy. AI and ML technologies heavily rely on vast amounts of data to function effectively. In Saudi Arabia, where privacy rights are highly valued, businesses must adhere to stringent regulations outlined in the Saudi Data and Artificial Intelligence Authority (SDAIA) and Personal Data Protection Law (PDPL).

Compliance with these laws is essential to safeguarding individuals’ rights and mitigating data breaches or misuse risks. Companies operating in Saudi Arabia must implement robust data protection measures, including data anonymisation, informed consent practices, and secure data storage and processing protocols, to ensure compliance with local regulations.

Intellectual Property Rights

AI and ML technologies raise complex intellectual property (IP) rights issues. Protecting AI-generated creations or algorithms under existing copyright or patent laws in Saudi Arabia presents challenges. Determining ownership of AI-generated works and resolving disputes over IP rights require careful consideration of legal principles and precedents.

Regulatory Framework

Saudi Arabia is actively shaping its regulatory framework to accommodate the rapid advancements in AI and machine learning technologies. The Saudi Data and Artificial Intelligence Authority (SDAIA) plays a central role in overseeing AI-related initiatives and enforcing data protection laws. However, the regulatory landscape is evolving, and there is a need for comprehensive legislation tailored specifically to AI applications.

Cross-border Data Transfers

AI and machine learning thrive on large datasets, often requiring cross-border data transfers. However, data localisation laws and international data transfer regulations can pose challenges for businesses operating in Saudi Arabia. Understanding and complying with these regulations is crucial to avoid legal pitfalls related to data sovereignty and cross-border data flows.

Saudi businesses engaging in international collaborations or leveraging cloud-based AI services must navigate complex legal landscapes to ensure seamless data transfers while upholding data protection standards mandated by local and international laws.

Contractual Arrangements

Contracts play a vital role in defining rights and responsibilities in AI-related transactions. Businesses must draft clear and comprehensive agreements with AI service providers, outlining terms related to data ownership, intellectual property rights, liability, and confidentiality.

As Saudi Arabia embraces AI and ML technologies to drive economic growth and innovation, addressing the legal implications becomes imperative. Businesses must proactively engage with policymakers and legal experts to navigate the evolving regulatory landscape, ensuring compliance with existing laws and advocating for new frameworks where necessary.

By promoting responsible AI deployment, fostering transparency, and prioritising ethical considerations, Saudi Arabia can harness the transformative potential of AI and ML while upholding legal principles that protect individuals’ rights and promote sustainable development.

The legal implications of AI and ML in Saudi Arabia extend across liability, data protection, and intellectual property rights. Businesses must adapt to this dynamic environment, leveraging legal expertise to innovate responsibly and contribute to a thriving AI ecosystem in the Kingdom.

Foreign investors eager to win bids pursuant to public tenders in the Kingdom of Saudi Arabia (“Kingdom”) must take heed of the ever-evolving landscape in the Kingdom impacting their ability to submit bids in light of the current restrictions in place as a result of the Kingdom’s desire to attract more regional headquarters (“RHQ”) to establish in or relocate to the Kingdom.

This Article aims to demystify the current restrictions in place pursuant to the Guidelines for Contracting between Government Agencies and Companies with no Regional Headquarters in the Kingdom and Related Parties issued by Council of Ministers Resolution No. (377) dated 03/06/1444 H (corresponding to 27/11/2022 G) (“Guidelines”), effective as of 01 January 2024, and the interplay between recent amendments to the Executive Regulations of the Government Tenders and Procurement Law, issued pursuant to Ministerial Resolution No. (1242) dated 21/03/1441 H (corresponding to 18/11/2019 G) and amended pursuant to Ministry of Finance Resolution No. (1090) dated 21/09/1445 H (corresponding to 31/03/2024 G) (“Regulations”), which came into effect as of 19 May 2024 G.

The Guidelines have restricted the window of opportunity for foreign investors operating in the Kingdom to qualify for public tenders. Prior to the enactment of the Guidelines, companies in the Kingdom could directly bid for public tenders. Now, with such enactment, one of the underlying and determining factors for any governmental tender is that a foreign entity must have a RHQ in the Kingdom. It should be clarified that while having an RHQ is a prerequisite to qualify in the bidding process, the foreign investor’s operational entity in KSA must execute the project, because RHQs cannot enter into any commercial agreements with third parties, as RHQs are non-revenue generating entities pursuant to the Ministry of Investment of Saudi Arabia’s rules. Despite such restrictions under the Guidelines, there are exemptions to the general rule. For instance, foreign companies with no RHQs may be eligible to participate in public tenders if: (a) the total value of the contract does not exceed one million Riyals, (b) after considering all proposals, it is the most standout proposal in terms of technical specifications, or (c) the contract is being executed abroad.  Under any of the scenarios, the burden is on the government entity in proving that such exemption is applicable to the particular project.

Naturally, and in light of the promulgation of the Guidelines, the Regulations required revisiting. Some of the key amendments to the Regulations are:

1. Adjusting the bid process under article 5 of the Regulations for works executed outside the Kingdom, notably, expanding on the exceptions to the requirements under the Government Tenders and Procurement Law, issued pursuant to Royal Decree No. (M/128) dated 13/11/1440 H (corresponding to 16/07/2019 G) (“Law”)

a. Permitting for framework agreements to being executed abroad;

b. Allowing government entities to accept bids through other means, and not limiting to electronic submission through the Ministry of Finance’s (“MOF”) Etimad portal, so long as the contracts are then uploaded and registered on the Etimad portal after execution;

c. Permitting government entities to disregard requirement of initial guarantee during the bid;

d. Allowing government entities to forgo requirement of the company from providing a final guarantee by taking into consideration alternative options to ensure quality assurance/guarantee of the works executed and in accordance with the specifications of the relevant jurisdiction’s quality assurance guarantee mechanisms. Should the government entity elect to require a final guarantee by the bidder, then it should specify the duration of such guarantee, and ensure it is disclosed in the tender, with such period of guarantee being subject to extension pursuant to the government entity’s discretion.

e. The government entity must comply with the suite of documents related to qualification of the participant such as approved forms of contracts, tender documents, pre-qualification documents, contractor performance assessment, and, to use such templates as a guidance but while taking into consideration the governing qualification documents in the respective jurisdiction of execution of the works. If the government entity was unable to use the same documents or similar documents, the reasons must be provided for the Qualification Committee’s assessment.

2. In regards to changes for contracting work with non-licensed entities for work in the Kingdom, the previous language under article 4 of the Regulations allowed for non-licensed entities to execute work in the Kingdom subject to MISA’s approval, now, such entities must obtain a license from MISA, which is in essence, obtaining a temporary certificate to submit proposals for government projects.

3. In respect to construction projects, article 96 of the amended Regulations mandates that the Government Entity must ensure that the site is ready for commencement of the work and is suitable for execution before opening up for bids. However, if an exigent circumstance exists, the government entity may open the project up for bidding before ensuring safety and suitability of the site, provided that it is disclosed in the bid and ensuring that the site has been evaluated in terms of safety and suitability prior to executing the necessary agreements with the winning bidder.

4. No longer making it a requirement on the company to furnish the Zakat, Tax, and Customs Authority certificate or a General Organization of Social Insurance certificate as a precondition to the final invoice amount

5. Lastly, the major change to the Regulations is article 154, which now mandates that any disputes arising from the project must now be resolved through arbitration by the Saudi Centre of Commercial Arbitration or any other arbitration centres in the Kingdom, which is now also extended to foreign companies. However, there is an exception to this rule when the contracts are being executed abroad, arbitration can be selected elsewhere subject to the MOF’s discretion. Irrespective of where arbitrator occurs, the relevant governmental entity must furnish the arbitral award for the MOF and the General Court of Audit’s records.

In essence, the options for foreign investors to participate in public tenders is now limited to: (a) execution of projects outside of KSA for foreign companies, (b) execution of projects within the KSA without a RHQ subject to the limited exceptions under the Guidelines and in observance of the procedures under article 5 of the Regulations, and (c) through its operational entities in KSA, where an RHQ must exists in parallel as a prerequisite.  Kingdom. It is important that should foreign investors wish to have more opportunities in the Kingdom for public tenders, it must consider, from commercial, legal, and tax standpoints, the option of incorporating an RHQ in the Kingdom.

The tug-and-pull between the Guidelines and the Regulations in practice creates a balance where it opens up the window of opportunity for foreign companies aiming to participate in public tenders, while also creating an incentive for foreign investors to establish their RHQ in the Kingdom.

With the advent of the Guidelines coupled with the ticking of the Vision 2030 clock’s approaching, the Kingdom is aiming to implement such projects with a clearer legal framework, as the Law is also due for a regulatory overhaul, as such proposed drafts were open for public consultation until 19 April 2023, but we have yet to see any indication of its implementation in the near future. Foreign investors should stay abreast of such changes by building repertoire with local counsel.

The landscape of fundraising in the financial markets is evolving rapidly with the advent of blockchain technology and digital assets. One notable innovation is the rise of Security Token Offerings (STOs), which present a regulated and compliant method of issuing digital securities. However, venturing into STOs in Saudi Arabia necessitates a deep understanding of the legal and regulatory framework governing these offerings. In this article, we will explore the essential legal considerations and regulatory challenges associated with conducting STOs in the Kingdom of Saudi Arabia.

Compliance with Securities Laws

One of the primary legal considerations when conducting an STO in Saudi Arabia is compliance with securities laws. The Capital Market Authority (CMA) is the regulatory body responsible for overseeing securities activities in the country. Any offering of security tokens must adhere to the provisions set forth in the CMA’s regulations.

The CMA defines securities broadly, covering traditional securities and extending to digital assets like security tokens. Issuers must navigate the regulatory requirements for offering and trading securities, ensuring proper registration and disclosure to protect investor interests. Compliance encompasses detailed prospectus requirements, periodic reporting obligations, and anti-fraud measures.

In Saudi Arabia, STOs are subject to stringent securities regulations overseen by the CMA. The CMA’s regulations aim to protect investors and ensure the integrity of the capital markets. Key considerations include:

• Registration Requirements: Issuers of security tokens must obtain necessary approvals and register offerings with the CMA. This process involves submitting detailed documentation, including prospectuses that disclose essential information about the offering and associated risks.
• Disclosure Obligations: Issuers are obligated to provide transparent and accurate information to investors. This includes financial statements, business descriptions, risk factors, and details about the token structure and rights conferred.
• Anti-Fraud Measures: The CMA enforces strict anti-fraud measures to combat illicit activities in securities offerings. Issuers must refrain from making misleading statements or omissions and ensure compliance with market conduct regulations.

Investor Accreditation Requirements

The CMA sets criteria for investor eligibility, often focusing on wealth and investment experience. Accredited investors are individuals or entities meeting specific thresholds of wealth, income, or professional expertise. These criteria are intended to safeguard retail investors from the risks associated with high-stakes investments. Accredited investors typically include:

• High Net Worth Individuals: Individuals meeting specified wealth thresholds, such as minimum income or asset levels.
• Sophisticated Investors: Entities with substantial investment experience, such as financial institutions, asset managers, or government bodies.

The CMA’s accreditation requirements aim to restrict access to STOs to qualified investors capable of assessing risks independently.

Navigating these requirements is crucial for issuers, as failure to comply may lead to penalties or regulatory repercussions. Verification of investor accreditation ensures that offerings are made to qualified individuals or institutions capable of assessing risks associated with security token investments.

Tokenisation of Traditional Financial Assets

Another aspect of legal consideration in STOs is the tokenisation of traditional financial assets. In Saudi Arabia, the process of tokenising assets such as real estate, equities, or debt instruments requires legal clarity. Tokenisation involves converting ownership rights into digital tokens on a blockchain, enabling fractional ownership and efficient transfer of assets.

Legal frameworks must address issues such as ownership rights, transferability, and regulatory implications specific to tokenised assets. Smart contracts governing these tokens must align with existing legal principles, ensuring enforceability and clarity in transactions.

Tokenising traditional assets involves converting ownership rights into digital tokens on a blockchain. Legal considerations include:

• Ownership and Transferability: Defining legal ownership rights and mechanisms for transferring tokenised assets securely on blockchain platforms.
• Regulatory Compliance: Ensuring tokenisation adheres to existing laws governing asset ownership, taxation, and regulatory oversight.
• Smart Contract Legality: Smart contracts governing tokenised assets must align with contract law principles to ensure enforceability in case of disputes.

Innovative Legal Structures

To navigate the evolving landscape of STOs, innovative legal structures are emerging. Special purpose vehicles (SPVs) and digital asset custodianships are employed to streamline compliance and governance. SPVs can be used to facilitate fundraising while adhering to regulatory standards, providing a layer of legal separation for token issuers. Innovative legal structures are being developed:

• Special Purpose Vehicles (SPVs): Issuers may use SPVs to facilitate STOs, segregating assets and liabilities from the parent company. SPVs can enhance legal clarity and mitigate risks associated with tokenised offerings.
• Digital Asset Custodianships: Third-party custodians manage and safeguard digital assets on behalf of investors, enhancing security and regulatory compliance.

Security Token Offerings offer a transformative approach to capital markets, bridging traditional finance with blockchain technology. In Saudi Arabia, conducting an STO requires meticulous attention to legal considerations and regulatory challenges. Compliance with securities laws, investor accreditation requirements, and innovative legal structures are essential pillars for a successful STO campaign.

As the regulatory landscape continues to evolve, legal practitioners and market participants must stay abreast of developments to harness the full potential of security tokens within Saudi Arabia’s financial ecosystem. Ultimately, navigating the legal complexities of STOs enables issuers to unlock new avenues of investment while upholding investor protection and regulatory integrity.