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Dr. Adli Hammad Joins OPEC Appeals Committee

Posted on May 29, 2023 - 9:49 am by

Dr. Adli Hammad, the Founding Partner of Hammad & Al-Mehdar (HMCO) and an esteemed expert in disputes, has been appointed as a member of the OPEC Appeals Committee by the Board of Governors. This notable achievement not only emphasises Dr. Adli’s outstanding reputation in the field of disputes but also showcases his diverse experience gained across the legal industry. The Appeals Committee, an independent body responsible for addressing employment-related matters within the OPEC Secretariat in Vienna, will benefit greatly from Dr. Adli’s extensive knowledge.

Commencing on 1st July 2023, Dr. Adli Hammad’s appointment to the OPEC Appeals Committee will span a period of five years. Throughout this tenure, Dr. Adli will leverage his expertise and experience to ensure equitable and impartial resolutions for employment-related issues that arise within the organisation. This appointment is of utmost importance to the legal profession as it showcases the recognition of Dr. Adli’s contributions and positions him as a leading authority in the field of disputes and employment law.

Furthermore, Dr. Adli Hammad’s additional appointment as an alternate President further attests to his esteemed standing within the OPEC Appeals Committee. This elevation of responsibilities underscores the trust placed in Dr. Adli’s leadership abilities and his capacity to make significant contributions to the committee’s objectives.

The selection of Dr. Adli Hammad to the OPEC Appeals Committee acknowledges his exceptional qualifications and highlights the significance of his contributions across the legal profession. Dr. Adli brings a wealth of knowledge and experience to the Appeals Committee and his past accomplishments and contributions to the field have solidified his reputation as a valuable asset to the OPEC Secretariat.

This appointment benefits the OPEC Appeals Committee and aids in positioning Saudi Arabia, Dr. Adli’s home country, in key discussions. Saudi Arabia’s active participation and representation in international organisations, such as OPEC, contribute to its influence and presence on the global stage. Dr. Adli Hammad’s role as a member of the Appeals Committee enables him to advocate for the interests of Saudi Arabia and contribute to important discussions regarding employment disputes within the OPEC Secretariat. His presence aids in maintaining a fair and balanced approach to resolving employment-related issues and strengthens Saudi Arabia’s voice in matters of global significance.

The Intersection of Law and Technology: Navigating the Legal Implications of Innovation

Posted on May 24, 2023 - 9:54 am by

The rapid transformation of industries globally is fuelled by innovation and technological advancements. As technology evolves at an unprecedented rate, businesses must adapt to address emerging challenges and opportunities. Navigating the legal implications of innovation necessitates a deep understanding of the intersection between law and technology.

In Saudi Arabia, innovation and technology are crucial in driving economic growth and development. With the Kingdom embracing digital transformation and investments in emerging technologies, it is vital to navigate the legal implications of innovation effectively. The convergence of law and technology in Saudi Arabia presents opportunities and challenges, demanding a comprehensive understanding of the legal landscape. Here, we outline key areas where law and technology intersect in Saudi Arabia and provide strategies for successfully navigating this complex terrain.

Intellectual Property Rights:

With the rise of digital platforms, artificial intelligence, and biotechnology, protecting intellectual property (IP) rights has become paramount. Patents, copyrights, trademarks, and trade secrets form the foundation for safeguarding innovations. Saudi Arabia has made significant strides in enhancing IP protection by implementing robust laws and regulations. The Saudi Patent Office and the Saudi Authority for Intellectual Property oversee registering and enforcing patents, trademarks, copyrights, and trade secrets. To navigate the legal implications, innovators and businesses should proactively seek IP protection and stay informed about updates in IP regulations.

Data Privacy and Security:

The digitisation of information and the widespread use of data-driven technologies have raised concerns about data privacy and security. Understanding the legal frameworks around data collection, storage, usage, and transfer is vital to avoid breaches, protect user privacy, and maintain customer trust. The Kingdom has introduced regulations to safeguard personal data, including the Personal Data Protection Law (PDPL) and the implementing regulations. Organisations must ensure compliance with these regulations, which outline the rights and obligations of data controllers and processors, consent requirements, data breach notification, and cross-border data transfers.

E-Commerce and Consumer Protection:

The growth of e-commerce in Saudi Arabia necessitates legal frameworks to protect consumers and ensure fair business practices. The Kingdom has implemented the Electronic Transactions Law, which recognises electronic contracts and signatures. Additionally, the Consumer Protection Law safeguards consumer rights in online transactions. Businesses operating in the e-commerce sector must be aware of these regulations and comply with consumer protection, advertising, warranties, and dispute resolution provisions.

Fintech Regulation:

The rapid growth of financial technology (fintech) in Saudi Arabia has prompted the development of specific regulatory frameworks. Fintech companies must navigate licensing requirements, regulatory sandboxes, and compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations to ensure legal compliance. The Saudi Arabian Monetary Authority (SAMA) oversees fintech regulations to foster innovation while maintaining financial stability and consumer protection.

Emerging Technologies and Regulation:

Saudi Arabia actively promotes emerging technologies such as blockchain, artificial intelligence, and the Internet of Things (IoT). As these technologies evolve, the legal landscape must keep pace. Through various initiatives like the National Strategy for Data and Artificial Intelligence, the government is actively working on developing regulatory frameworks to govern emerging technologies. Businesses involved in these sectors should closely monitor regulatory developments and engage with relevant authorities to ensure compliance and address legal implications.

Cybersecurity and Cybercrime:

As digital technologies advance, the risk of cybersecurity threats and cybercrime increases. Saudi Arabia has enacted laws and established institutions to combat cyber threats, including the Cybercrime Law and the National Cybersecurity Authority (NCA). Organisations should implement robust cybersecurity measures, including risk assessment, incident response plans, and compliance with data breach notification requirements, to navigate the legal implications of cybersecurity.

Contracting and Licensing:

Adopting new technologies often involves complex contractual arrangements and licensing agreements. Clear and comprehensive contracts, intellectual property licensing, and software development agreements are essential for protecting parties’ rights and defining the scope of innovation. Businesses must navigate evolving legal frameworks to negotiate and draft agreements that address the unique aspects of technology-driven innovations.

Regulatory Compliance:

As technology disrupts traditional industries, regulatory frameworks must adapt to ensure fair competition, consumer protection, and public safety. Compliance with sector-specific regulations, such as financial technology (fintech), health tech, and e-commerce, is crucial. Business leaders must stay updated on regulatory developments, anticipate potential legal challenges, and proactively guide the business in meeting compliance requirements.

International Law and Jurisdiction:

Technology transcends borders, creating complex legal challenges related to jurisdiction and cross-border transactions. Legal professionals within a business must navigate the complexities of harmonising legal frameworks and resolving disputes in a globalised, technology-driven business environment. Issues such as data localisation, jurisdictional conflicts, and intellectual property protection across multiple jurisdictions require expertise in international law.

Collaborations and Partnerships:

With the growth of technology-driven innovation ecosystems in Saudi Arabia, collaborations and partnerships between government entities, businesses, and research institutions are common. Legal expertise is crucial in structuring and negotiating contracts that protect the interests of all parties involved. Navigating the legal implications of such associations requires thorough due diligence, clear contractual agreements, and compliance with competition laws.

Navigating the legal implications of innovation in Saudi Arabia requires a proactive and adaptive approach. Businesses and innovators should closely monitor changes in laws and regulations and engage.

Exploring Saudi Arabia’s New Economic Zones: Legal Considerations and Implications for Businesses

Posted on May 24, 2023 - 9:52 am by

Under Saudi Arabia’s Vision 2030 plan, the country has established special economic zones (SEZs) that play a pivotal role in driving economic growth, fostering innovation, and generating employment opportunities.

These SEZs represent significant potential for transforming Saudi Arabia’s business landscape. In this article, we delve into the new special economic zones in Saudi Arabia, shedding light on their distinctive characteristics and emphasising the crucial legal aspects that businesses should carefully consider. By understanding these economic zones comprehensively, businesses can make informed decisions and effectively navigate the dynamic business environment in Saudi Arabia.

  1. a) Special Economic Zones (SEZs): SEZs focus on specific industries such as technology, logistics, and manufacturing. They offer tax incentives, simplified regulatory processes, and infrastructure development to attract domestic and foreign businesses.
  2. b) Free Zones: Free zones provide a favourable environment for international trade by allowing duty-free imports, relaxed customs regulations, and simplified business setup procedures. They are typically located near major ports or airports, facilitating logistics and transportation.
  3. c) Industrial Cities: Industrial cities are designed to promote industrial development and manufacturing activities. They provide infrastructure, utilities, and services tailored to the needs of industrial businesses, enabling cost-effective operations.

When establishing or operating a business within Saudi Arabia’s economic zones, it is essential to consider the following legal aspects:

Company Formation: Businesses must adhere to the applicable company formation regulations, including obtaining the necessary licenses, permits, and approvals from the relevant authorities. The legal structure options include limited liability companies, joint ventures, and branches of foreign companies.

Foreign Ownership and Investment: The Kingdom has introduced initiatives to liberalise foreign investment, allowing increased foreign ownership in certain sectors. However, specific regulations and restrictions may still apply, and businesses should review the Foreign Investment Law and sector-specific regulations to understand the extent of foreign ownership allowed.

Employment and Labour Laws: Companies operating within the economic zones must comply with Saudi Arabia’s labour laws, including regulations related to employment contracts, wages, working hours, and the recruitment of foreign workers. Understanding the local labour regulations is crucial to ensure compliance and maintaining healthy employer-employee relationships.

Intellectual Property Rights (IPR): Protecting intellectual property is vital for businesses. It is essential for businesses to register their patents, trademarks, and copyrights. Saudi Arabia has significantly strengthened its IPR laws and enforcement mechanisms.

Businesses that choose to operate within Saudi Arabia’s economic zones can benefit from the following:

Tax Incentives: Economic zones offer attractive tax incentives, including corporate income tax exemptions for specific periods, reduced customs duties, and exemptions from certain local fees. These incentives aim to enhance the business environment and improve the overall competitiveness of the zones.

Access to Markets: Saudi Arabia’s strategic location and extensive transportation infrastructure provide businesses in the economic zones with easy access to regional and global markets. This accessibility can facilitate trade and boost business growth.

Infrastructure and Support Services: Economic zones provide modern infrastructure, utilities, and support services tailored to the needs of businesses. This includes access to transportation networks, power supply, telecommunications, and business support facilities, creating an enabling environment for operations.

Collaboration Opportunities: Economic zones often foster collaboration and knowledge exchange among businesses. This can lead to partnerships, joint ventures, and innovation, providing business expansion and growth opportunities.

Regulatory Flexibility: SEZs have streamlined regulatory processes, making it easier for businesses to establish and operate within the zones. This includes simplified licensing, permits, and approvals procedures, reducing bureaucratic hurdles.

Access to Talent: SEZs promote talent development and entrepreneurship by fostering collaboration between businesses, universities, and research institutions. This encourages knowledge sharing, innovation, and the growth of a skilled workforce, creating a conducive environment for businesses to thrive.

Saudi Arabia’s new economic zones present exciting prospects for businesses looking to establish or expand their operations in the Kingdom. However, understanding these economic zones’ legal considerations and implications is paramount for success. Businesses should be aware of the regulatory frameworks, licensing requirements, and potential tax incentives specific to each economic zone. Additionally, they should carefully assess intellectual property rights, labour laws, and dispute resolution mechanisms applicable within these zones.

It is crucial for businesses to engage legal counsel with expertise in Saudi Arabian laws and regulations to navigate the complexities of operating within the economic zones. Furthermore, maintaining compliance with local laws, regulations, and business practices is essential for long-term success and avoiding legal complications.

By proactively addressing the legal aspects associated with Saudi Arabia’s economic zones, businesses can capitalise on the opportunities presented by these zones while mitigating potential risks. A robust understanding of the legal landscape will enable businesses to make informed decisions, establish a strong foothold in the Kingdom, and contribute to the country’s overall economic diversification goals outlined in Vision 2030.

Keeping it in the Family: Resolving Disputes in Family Businesses

Posted on May 16, 2023 - 9:42 am by

Family businesses are unique in their dynamics, combining the intricacies of both business and personal relationships. These enterprises often span generations, with a deep-rooted sense of tradition and shared history. However, the qualities that make family businesses successful can lead to conflicts and disputes. Disagreements can arise due to differences in vision, management styles, and expectations among family members. Resolving these disputes amicably is crucial to maintain harmony within the family and ensuring the long-term sustainability of the business.

When conflicts emerge within a family business, the stakes are high. Disagreements can not only strain personal relationships but also jeopardise the financial health and reputation of the enterprise. It is essential to address disputes promptly and amicably to prevent them from escalating and causing irreparable damage.

Preserving the family’s unity and fostering a collaborative environment can help overcome challenges and lay the foundation for continued success and prosperity in the family business. Family members can work together to find mutually beneficial solutions by opting for amicable resolution methods. There are several measures available, which include:

Mediation and Conciliation:

Mediation and conciliation often provide a less adversarial and more collaborative approach to resolving disputes, preserving family relationships and business interests. Engaging a neutral third party, such as a professional mediator or a trusted family advisor, can help facilitate open communication and negotiation between conflicting parties.

Review the Business’s Legal Framework:

Familiarise yourself with the legal structure of the family business, including any governing documents such as partnership agreements, bylaws, or shareholder agreements. These documents can outline dispute resolution mechanisms, including arbitration or alternative dispute resolution methods, which may offer a faster and more cost-effective means of resolving conflicts than traditional litigation.

Engage Experienced Legal Counsel:

When legal complexities arise, seeking the advice of experienced legal counsel specialising in family business disputes is essential. A skilled legal professional can guide you through the legal process, help assess the merits of your case, and suggest the most appropriate course of action. They can also provide valuable insights into relevant Saudi Arabian laws and regulations, ensuring compliance and protecting your business interests.

Explore Alternative Dispute Resolution (ADR):

ADR methods, such as arbitration or mediation, can offer advantages over traditional litigation. These processes are often more time-efficient, confidential, and flexible, allowing the parties to tailor the resolution process to their needs. ADR can be particularly beneficial for family businesses, providing a more private and less adversarial setting for resolving disputes and minimising potential damage to family relationships.

Document Agreements and Compromises:

In a settlement or agreement reached through mediation or negotiation, it is crucial to document the terms in writing. This agreement should include clear details regarding the resolution of the dispute, any financial settlements, and future actions or obligations. A written agreement helps prevent misunderstandings and provides a legal reference point in further disputes.

Litigation:

While litigation should be the last resort, there may be instances where it becomes necessary to protect the interests of the family business. In such cases, it is crucial to ensure that all legal requirements are met, including filing the appropriate documents and adhering to prescribed procedures and timelines set by the Saudi legal system. Engaging experienced legal counsel specialising in family business litigation can provide valuable guidance and representation throughout the process.

Family businesses play a vital role in the economic landscape of Saudi Arabia, making substantial contributions to its growth and employment. Given their significance, these businesses are subject to various legal laws and regulations in the country. These laws serve as a framework to ensure the smooth functioning and stability of family businesses, protecting the interests of all stakeholders involved. They aim to promote transparency, accountability, and fairness within family businesses while providing clear guidelines for their management and operations; these regulations include:

Saudi Arabian Companies Law:

The Companies Law, issued by the Ministry of Commerce and Investment, provides the general legal framework for all companies in Saudi Arabia, including family businesses. It covers company formation, governance, shareholder rights, and capital requirements matters.

Commercial Companies Law:

The Commercial Companies Law, enacted in 2015, specifically addresses regulations related to joint-stock companies, limited liability companies, and partnerships in Saudi Arabia. It defines the rights and obligations of shareholders, directors, and managers and rules for capital contributions, profit distribution, and shareholder meetings.

Saudi Arabian Labour Law:

The Labour Law governs the relationship between employers and employees, including family members working in the family business. It addresses employment contracts, wages, working hours, leave entitlements, termination, and dispute resolution between employers and employees.

Inheritance Law:

Family businesses are often closely tied to inheritance in Saudi Arabia. The Sharia-based inheritance law governs the distribution of assets and shares within the family upon the death of a business owner. It outlines the rights and entitlements of heirs, including family members involved in the family business.

Regulatory Laws:

Family businesses may also be subject to sector-specific regulations and laws based on their industry or activities. For example, finance, healthcare, real estate, or construction businesses may have to comply with specific laws and regulations about those sectors.

Compliance with these legal requirements is crucial for family businesses to uphold their integrity, sustain long-term growth, and navigate potential challenges effectively. By adhering to the applicable laws and regulations, family businesses in Saudi Arabia can foster a favourable environment for business continuity, preserve family harmony, and contribute to the overall economic prosperity of the nation.

Resolving legal disputes within family businesses requires a delicate balance between protecting the business interests and maintaining family relationships. Family businesses can effectively navigate and resolve disputes by employing mediation, exploring ADR methods, seeking legal counsel, and ensuring compliance with relevant legal frameworks. Ultimately, the goal should be to preserve family harmony and the long-term sustainability of the business.

Saudi Arabia Passes New Amendments to the Personal Data Protection Law

Posted on May 2, 2023 - 5:09 pm by

Saudi Arabia has taken a momentous stride towards safeguarding individual privacy by passing the new amendments to the Personal Data Protection Law (“PDPL”). In a rapidly evolving digital landscape, privacy regulations have become crucial in ensuring personal data’s secure collection, processing, and storage.

This article delves into the key revisions introduced by the new amendments to the PDPL in Saudi Arabia and their potential implications for businesses and individuals. The Saudi Council of Ministers recently approved the amendments to the PDPL pursuant to Royal Decree No. M147 dated 05/09/1444H corresponding to 27/03/2023G. The PDPL was originally issued in September 2021 and was planned to come into effect during March 2023 due to it being revised and subject to public consultation which has seen some changes made to the original PDPL. The amended PDPL will now come into effect 720 days following its publication in the official gazette, which will be by 14/09/2023, where those who are subject to the PDPL being granted a one-year grace period to comply with the PDPL.

The PDPL brings about significant changes to the existing legal framework for data protection, aimed at aligning the country’s data protection practices with international standards. The key factors and changes introduced by the PDPL and its amendments include:

Applicability:

The PDPL applies to the processing of personal data of individuals in the Kingdom of Saudi Arabia (“KSA”), including if such processing of data occurs from outside of KSA. An exception to this is where the processing of personal data is done by an individual for personal or family use, so long as such personal data is not published or disclosed to others. It should be further noted that the upcoming Implementing Regulations should clarify the meaning of ‘personal or family use’.

Legitimate interests for processing:

Controllers may now process and disclose personal data on the basis of legitimate interest, as long as it does not breach the data subject’s rights or interest under the PDPL and that such data is not regarded as ‘sensitive data’. The forthcoming Implementing Regulations are expected to provide further guidance with respect to what constitutes ‘legitimate interest’.

Data breaches:

Unlike the previous PDPL, controllers are now relieved from the obligation to immediately notify the competent authority upon discovering a data breach, including unauthorized access or loss of personal data. The Implementing Regulations are expected to provide the deadline for such notifications in case any personal data has been leaked or damaged.

International data transfers:

The amendments have brought about one of the most significant changes to the original PDPL. Under the old framework, controllers were prohibited from transferring personal data outside of KSA or disclosing it to any entity outside KSA, except under extreme circumstances, which typically required the approval of the competent authority. However, under the recent amendments, controllers are no longer required to obtain approval from the competent authority prior to transferring or disclosing personal data to an entity outside KSA. The transfer or disclosure of personal data is generally allowed (with certain conditions) under the amendments for specific purposes, including obligations under international agreements in which KSA is a party, serving national interests, performing obligations to which the data subject is a party, or for any other purpose as determined by the Implementing Regulations.

However, controllers must comply with certain conditions when transferring or disclosing personal data outside the Kingdom for any of the aforementioned purposes. These conditions include ensuring that the transfer or disclosure does not adversely affect the national security or vital interests of KSA and ensuring that the jurisdiction to which the personal data is transferred or disclosed has protection measures that are no less than those provided under the PDPL and its Implementing Regulations. The Implementing Regulations may exempt controllers from these conditions under certain circumstances as specified by SDAIA.

Registration requirement and appointing local representative:

Prior to the amendments, the original PDPL mandated controllers to register through SDAIA’s electronic portal and pay an annual fee not exceeding SAR 100,000. However, the amendments have removed this obligation. Nevertheless, the Implementing Regulations will outline situations where controllers are required to designate one or more personal data protection officers and define their responsibilities in accordance with the provisions of the PDPL.

Penalties and criminal sanctions:

The amended PDPL has now removed the restrictions and penalties relating to the transfer of personal data outside of KSA which were imposed by the original PDPL, as the criminal sanctions under the amended PDPL have now been somewhat limited. Such sanctions under the amended PDPL would be applicable in the event of unlawful publishing or disclosure of sensitive personal data in breach of the provisions of the PDPL if it was done with the intention of harming the personal data subject or for the purpose of personal gains. Such penalties include a fine not exceeding SAR 3,000,000 and/or imprisonment for a period not exceeding two (2) years. Further sanctions may be imposed in case of violating the PDPL including issuing a warning or a fine not exceeding SAR 5,000,000 which may be doubled in case of repeat violations.

Compliance Checklist: Essential Steps for Companies to Comply with the PDPL:

Organizations and businesses subject to the PDPL are required to take necessary steps to ensure compliance with the law upon its commencement on September 14th, 2023. In order to comply with the PDPL, businesses are advised to:

  • Conduct staff training on the PDPL and integrate data protection policies and measures in the business.
  • Revise internal and external policies, such as privacy notices, to ensure compliance with the PDPL.
  • Identify the types of data collected and the purpose of collection.
  • Implement data minimization procedures to limit personal data processing and collection.
  • Monitor internal data flow to ensure transparent storage and transfer of personal data.
  • Develop and amend policies and procedures, including contracts, to reflect individual data rights and obligations.
  • Implement technical and organizational procedures to safeguard and protect personal data.

The data privacy landscape in KSA is changing rapidly, requiring companies to adopt effective privacy practices. To ensure compliance with the PDPL, local and international businesses should conduct a privacy audit assessment and follow the steps outlined above. Developing and implementing a clear privacy framework will help inform employees and consumers about internal processes that keep information secure and the individuals responsible for managing the program. It is important to note that privacy frameworks can and should be tailored to a business’s specific needs, resulting in an appropriate privacy governance framework that meets the necessary standard under the PDPL.

If you need further support or information regarding the PDPL or require assistance with your privacy policies, please do not hesitate to contact us.

Unlocking the Potential of Project Financing in Saudi Arabia’s Energy Sector

Posted on May 2, 2023 - 9:59 am by

Project financing has played a significant role in the development of the energy sector in Saudi Arabia. The Kingdom is a critical player in the global energy industry, and its vast oil and natural gas reserves have helped fuel economic growth for decades. In recent years, however, the Saudi government has recognized the need to diversify the country’s energy mix and reduce its reliance on fossil fuels. As a result, there has been a surge in investment in renewable energy projects, which has required innovative financing solutions.

Project financing is a method in which the lender provides financing for a specific project based on its expected cash flows rather than the borrower’s assets. This method of financing is often used in large infrastructure projects, such as those in the energy sector, where the risks and costs are high. In Saudi Arabia, project financing has become an increasingly popular method of financing energy projects, particularly those involving renewable energy sources.

The Saudi government has set ambitious targets for renewable energy development, with plans to generate 9.5 gigawatts of renewable energy by 2023 and 58.7 gigawatts by 2030. The government has launched several initiatives to achieve these targets, including the National Renewable Energy Program (NREP) and the Green Middle East Initiative, which aim to attract private sector investment in renewable energy projects.

One of the advantages of project financing is that it allows investors to spread their risks across multiple stakeholders. In the energy sector, this means that lenders can share the risks associated with the project developers, contractors, and other stakeholders. This approach can help reduce the project’, making it more attractive to investors.

Another advantage of project financing is that it provides a structured framework for managing the project’s cash flows. This is particularly important in the energy sector, where projects can have long lifetimes and complex cash flow structures. Project financing allows investors to manage these cash flows in a predictable and structured manner, which can help to mitigate the risks associated with the project.

In Saudi Arabia, project financing has been used to fund a range of energy projects, including solar and wind power plants and transmission and distribution infrastructure. For example, in 2018, the Saudi Arabian government signed an agreement with a consortium of international lenders to finance the 300 MW Sakaka solar project, which is expected to generate electricity for 75,000 households. The project is being developed by ACWA Power, a Saudi-based energy developer, and is one of the first utility-scale solar projects in the country.

Another notable project in Saudi Arabia is the Dumat Al Jandal wind farm, which is being developed by a consortium led by French energy company EDF Renewables. The project, which is expected to have a capacity of 400 MW, will be the country’s first utility-scale wind farm and is expected to generate electricity for up to 70,000 homes. The project is financed through a mix of equity and debt, with international lenders providing project financing.

Project financing is a complex process that requires careful consideration of various legal aspects. This is particularly true in Saudi Arabia, where the legal system is based on Islamic law, and local regulations can differ from those in other countries. This article will explore some critical legal aspects investors and developers should consider when seeking project financing in Saudi Arabia.

Contractual Frameworks

One of the most important legal aspects of project financing in Saudi Arabia is the contractual framework that governs the project. The contractual framework should clearly define the rights and obligations of all parties involved in the project, including the lender, borrower, and other stakeholders. It should also establish dispute resolution mechanisms in case of disagreements.

In Saudi Arabia, project agreements are typically governed by Saudi Arabian law, and ensuring that the contracts comply with local regulations is essential. Investors should also consider incorporating Shariah-compliant financing structures based on Islamic finance principles.

Security and Collateral

Another critical legal aspect of project financing in Saudi Arabia is the security and collateral required to secure the loan. Lenders typically require a range of security and collateral to protect their investment, including mortgages, pledges, and guarantees.

In Saudi Arabia, the legal system recognizes various forms of collateral, including real estate, movable assets, and shares in a company. Ensuring that the collateral is appropriate and enforceable under Saudi Arabian law is important. It is also essential to ensure that the collateral is sufficient to cover the loan in case of default.

Regulatory Compliance

Saudi Arabia has a highly regulated business environment, and project financing transactions are subject to various regulatory requirements. Investors and developers must comply with various laws and regulations related to foreign investment, taxes, and environmental protection.

Working with experienced legal advisors familiar with the local legal and regulatory environment is essential to ensure regulatory compliance. Before starting the project, investors and developers should also obtain all necessary licenses and permits.

Dispute Resolution

Disputes are an inevitable part of any project financing transaction, and it is essential to establish clear and effective dispute resolution mechanisms. In Saudi Arabia, disputes can be resolved through various methods, including arbitration, litigation, and mediation.

Arbitration is often preferred as it is more efficient and confidential than litigation. Investors should ensure that the dispute resolution mechanism is clearly defined in the contractual framework and complies with local regulations.

As the Kingdom progresses toward a more sustainable future, project financing in the energy sector will undoubtedly play a crucial role. By prioritizing the legal aspects of project financing, investors and developers can ensure that their renewable energy projects in Saudi Arabia are set up for success. With the right approach and partnerships, project financing in Saudi Arabia can unlock opportunities for growth, innovation, and long-term success in the energy sector.

However, investors and developers must know the various legal aspects of project financing in Saudi Arabia. This includes ensuring the contractual framework is transparent and complies with local regulations, providing sufficient collateral, and meeting all necessary regulatory requirements. Effective dispute resolution mechanisms must also be established to mitigate potential conflicts. Working with experienced legal advisors can help ensure a successful project financing transaction in Saudi Arabia.

Powering Up: M&A in Saudi Arabia’s Energy Sector

Posted on May 2, 2023 - 9:57 am by

Mergers and acquisitions (M&A) within the energy sector in Saudi Arabia has become increasingly common in recent years. With the country being the largest oil exporter in the world, the energy sector is a critical component of the Saudi Arabian economy. As such, M&A activity within this sector has significant implications for both the country and the global energy industry.

M&A activity within the energy sector in Saudi Arabia is primarily driven by a desire to increase operational efficiencies, gain access to new technologies, and expand market share. Additionally, the recent economic and political reforms in the country have encouraged foreign investment, which has further fuelled M&A activity within the energy sector.

One notable example of an M&A within the energy sector in Saudi Arabia is the acquisition of a 70% stake in Saudi Basic Industries Corporation (SABIC) by Saudi Aramco, the state-owned oil company. The acquisition was completed in 2020 and was one of the largest M&A deals in the world, valued at $69.1 billion. The acquisition allowed Saudi Aramco to diversify its business and expand its downstream capabilities, while also giving it access to SABIC’s technology and expertise.

Another notable example of an M&A within the energy sector in Saudi Arabia is the acquisition of a 51% stake in ACWA Power, a leading developer and operator of power generation and desalinated water plants, by the Public Investment Fund (PIF), the sovereign wealth fund of Saudi Arabia. The acquisition was completed in 2018 and was valued at $1.2 billion. The acquisition allowed PIF to expand its investments in the renewable energy sector and support the country’s efforts to diversify its energy mix.

Here are some continued themes impacting the energy sector in Saudi Arabia:

Diversification of the energy mix: Saudi Arabia has set ambitious goals to diversify its energy mix and increase its share of renewable energy. The country plans to develop 58.7 gigawatts (GW) of renewable energy capacity by 2030, which would account for 30% of the country’s energy mix. This shift towards renewables is expected to reduce the country’s reliance on oil for power generation and support its efforts to reduce greenhouse gas emissions.

Continued investment in the energy sector: Saudi Arabia has signaled its commitment to investing in the energy sector to support its economic growth and diversification goals. The country’s Public Investment Fund (PIF) has announced plans to invest $40 billion annually in the domestic economy, with a significant portion of this investment expected to be directed toward the energy sector.

Expansion of Renewable Energy: The country has set ambitious targets for renewable energy, with a goal of generating 50% of its electricity from renewable sources by 2030. This target is expected to drive significant investment in the renewable energy sector, particularly in solar and wind power.

Increased Foreign Investment: Saudi Arabia has been actively seeking foreign investment in the energy sector, particularly in the form of joint ventures and partnerships. The recent reforms in the country, coupled with its large reserves of oil and gas, are likely to attract continued foreign investment in the sector.

Growth in the downstream sector: The country has significant downstream capabilities, with its state-owned oil company, Saudi Aramco, being one of the largest downstream players in the world. The country is expected to continue to invest in its downstream sector to capture more value from its oil and gas resources and support the growth of its petrochemicals industry.

Adoption of new technologies: Saudi Arabia has been exploring the use of new technologies in the energy sector, such as carbon capture and storage (CCS) and hydrogen production. These technologies could help the country reduce its carbon footprint and increase its energy efficiency. Saudi Arabia is expected to adopt new technologies to increase operational efficiencies and reduce costs in the energy sector. This includes the adoption of digital technologies such as artificial intelligence, the internet of things, and blockchain to improve efficiency, reduce costs, and enhance safety.

Impact of Global Energy Transition: The global transition to cleaner energy sources is likely to have a significant impact on the energy sector in Saudi Arabia. While the country is taking steps to diversify its energy mix, it remains heavily dependent on oil exports. As the demand for oil declines in the global market, Saudi Arabia may need to adjust its energy strategy to remain competitive.

M&A activity within the energy sector in Saudi Arabia is subject to a range of legal and regulatory requirements. The Saudi Arabian General Investment Authority (SAGIA) and the Capital Market Authority (CMA) regulate M&A activity in the country and must approve all transactions. Several laws impact energy companies in Saudi Arabia who are considering an M&A. Some of the key laws are as follows:

Companies Law: The Companies Law in Saudi Arabia governs the formation, operation, and dissolution of companies in the country. The law provides guidelines on the various types of companies that can be formed, their legal structure, and the rights and obligations of shareholders. Any M&A transaction involving a company in Saudi Arabia must comply with the requirements of the Companies Law.

Antitrust Law: The Saudi Arabian General Authority for Competition (GAC) is responsible for enforcing the country’s antitrust laws. These laws prohibit anti-competitive practices, such as price fixing and market allocation, and require that M&A transactions be reviewed for potential anti-competitive effects.

Foreign Investment Law: The Saudi Arabian General Investment Authority (SAGIA) is responsible for regulating foreign investment in the country. The Foreign Investment Law outlines the rules and regulations governing foreign investment in Saudi Arabia, including the procedures for establishing and registering foreign-owned companies.

Environmental Laws: Energy companies in Saudi Arabia are subject to a range of environmental laws and regulations that are designed to protect the environment and public health. These laws cover areas such as air and water pollution, waste management, and environmental impact assessments.

Tax Laws: M&A transactions may have tax implications for energy companies in Saudi Arabia. The country has a complex tax system, with different tax regimes for different types of companies and industries. Energy companies should seek professional tax advice before engaging in an M&A transaction.

Securities Law: The Capital Market Authority (CMA) regulates the securities market in Saudi Arabia. Any M&A transaction that involves a public company or the issuance of securities must comply with the requirements of the Securities Law.

In conclusion, the energy sector in Saudi Arabia is expected to undergo significant changes in the coming years, driven by a range of factors such as diversification, renewable energy, foreign investment, new technologies, and the global energy transition. While these changes may bring challenges, they also present opportunities for the country to adapt and thrive in a rapidly evolving energy landscape.

Capitalizing on Saudi Arabia’s Digital Future

Posted on August 5, 2021 - 3:56 pm by

Being one of the colossal economies in the Middle East, Saudi Arabia has been a critical player in shaping digital transformation across the region. With a population of 31 million, nearly half of which are under 25 years old, there exists an opportunity for businesses to capitalize on this demographic’s growing appetite for technology.

 

The country’s GDP is growing at an annual rate of 7%, and private sector growth rates have been as high as 12%. With such strong economic conditions, Saudi Arabia has set out to capitalize on the digital future with several ways to help them get there.

 

In this blog post, we will discuss how Saudi Arabia fits into the broader landscape of digital transformation and highlight some ways that companies can seize emerging opportunities while still respecting their customers’ needs and values.

5G Technology

What 5G technology means is that the demand for satellite infrastructure and services in Saudi Arabia will skyrocket. 5G network guarantees faster browsing speeds and uninterrupted streaming. It also supports the development of more sophisticated tech products, such as virtual and augmented reality, and the introduction of big complex data and machine learning interventions on the business and industrial level. And as the country makes it fully available nationwide, there will be an increased demand for satellites with capacity well beyond what’s currently being offered on a global scale.

 

This increase is also imperative because of another critical factor: more people switch to wireless broadband than ever before to get faster speeds at cheaper rates. It has become standard practice not only in Saudi Arabia but across the globe. Mobile operators have provided their customers with higher quality service over less expensive networks thanks to new technology developments.

The 5G technology will also improve communication and data transfer rates and deliver a more robust Internet infrastructure. This is because these networks’ improved bandwidth and latency enable new applications to provide internet connectivity in rural areas, such as agricultural drones used for plant monitoring or precision farming. In Saudi Arabia, this technology could help support its goal to become a global leader in agriculture by 2030.

It will be an essential step in speeding up development and making it easier to better connect with various devices worldwide. The retail industry is also poised to benefit from these changes because they’ll get fast access through sales channels like stores or kiosks.

Digitization of Customer Service

Organizations are digitizing their customer services through cloud-based solutions that help them eliminate the need for physical contact with customers. With the rise of e-commerce, the need for customer support has also risen.

Shoppers expect a seamless online shopping experience to save them time and quicker access to purchase and service delivery. With the rise in popularity of mobile devices, it’s no surprise that consumers are looking for a customer service experience tailored to their tastes. More than ever before, businesses need to offer live chat and other digital channels not to alienate customers seeking assistance on an app or another device while juggling work obligations.

Cybersecurity

Cybersecurity is a significant issue in Saudi Arabia. Cyber-attacks are rising as more and more of our personal, professional, military, and government data is stored online or transmitted over digital networks.

These attacks can cause significant harm to individuals’ careers, companies’ financial positions, and national security interests if they breach critical systems like medical records, for example. As a result, businesses should protect their customers by investing heavily in cybersecurity solutions such as firewalls that block unauthorized access from outside users.

 

Due to working from home during the pandemic, there has been an increase in cybersecurity threats. As a result, businesses in Saudi Arabia are upgrading their cybersecurity portfolio to cover their cloud-based networks that their employees can access remotely.

In Saudi Arabia, the healthcare system is no longer centralized, but it’s now spread across remote settings, increasing the chances of threats from non-firewalled systems and unsuitable hardware.

Investing in digitalization has raised awareness around cyberattacks. It has made the region solid in making investments in processes, people, and technology that can preserve clinical services and patient safety.

Growth of Edutech and Fintech

The COVID-19 pandemic may continue for some time as vaccination programs are underway, which means online learning and cashless payments are here to stay. There has been an increase in the use of fintech technology during the global health crisis. Hence, an increase in contactless payments and other forms of digital banking.

Saudi Arabia has already transcended itself with cashless transactions and fintech licenses. The adoption of fintech will play an essential role in building the economy, fiscal growth, and influence on banking.

 

Edutech has become a necessity for educational institutions. In preference to the classroom, Google Classroom, zoom, and other podiums provide other online learning spaces where students can learn and interact with their teachers. Even after the pandemic, some of these online platforms will still be used by students in remote areas or those that cannot attend traditional schools.

Sustainability

Businesses must be highly flexible to meet the challenges of the evolving post-COVID-19 era, meaning that companies need to develop solutions through collaborative methods that are equipped to innovate and adapt rapidly. As a result, more companies and industries are introducing automation to free up resources from scheduled tasks and using them in higher-value projects. Saudi Arabia has capitalized on automation as a capacity driving tool which is the key to increasing production across the industries.

Utilizing Data and Analytics

In this digital era, data and analytics are the new oil. With Saudi Arabia’s recent investments into data and analytics, they follow suit with other G20 countries to maximize their digital future. In 2016, it was reported that “Saudi McKinsey & Company” projected an investment of $44 billion by 2020 to capitalize on this big opportunity.

The Kingdom is investing billions of dollars annually in developing a workforce ready for emerging jobs such as cybersecurity experts or machine learning specialists. This will be invaluable when competing head-to-head against tech giants from Silicon Valley (like Google) or China’s Belt Road Initiative.

 

In Conclusion;

Saudi Arabia’s digital future is bright, and the country has some of the most prominent players in technology investing there. Therefore, it’s a perfect time to capitalize on Saudi Arabia’s burgeoning tech industry. Capitalizing on their digital future through automation, investing in technological advancements, 5G technology, and utilization of data and analytics will generate significant returns. If you are looking for the best lawyers, please contact HMCO today to get started.

Crypto Center: Dubai’s DMCC to Tap into Blockchain’s Potential

Posted on August 5, 2021 - 3:57 pm by

The latest reports indicate Dubai is poised to venture into the crypto world and tap into the enormous blockchain potential. Through the Dubai Multi Commodities Center (DMCC), the country has created the Crypto Center, a space for companies developing cryptocurrency and blockchain technology.

 

The Crypto Center comes in the wake of the country’s partnership with Switzerland’s CV Labs, the company spearheading the Swiss-backed Crypto Valley. The Center is expected to form an ecosystem for blockchain, cryptographic, and distributed ledger technology enterprises in the UAE.

What’s cryptocurrency?

Cryptocurrency has exploded onto the scene in recent years, and it’s no wonder that some governments are beginning to embrace it. Despite the common concerns over its effect on the regular currency, many people and businesses across the globe continue to use it.

This digital or virtual currency secured by cryptography is nearly impossible to counterfeit or double-spend because it’s based on blockchain technology. Cryptocurrency derives its name from the encryption techniques used to secure the crypto network, making it immune to central authorities.

Word from DMCC executive director

Ahmad Hamza, the free zone executive at the DMCC, hailed the move terming it “a fantastic new development”. He emphasized that the crypto and blockchain technologies would transform supply chains and global trade immensely, noting that it was perfectly in line with the DMCC’s vision of driving future trade for the UAE.

Hamza expressed hope that the crypto Center will soon fill up with companies looking to scale up their digital currency businesses. However, he fell short of disclosing the number of businesses and entities the DMCC was expecting to draw to the Center.

The DMCC oversees companies and businesses involved in the trade of commodities ranging from pulses to diamonds. It has grown in popularity over the years, receiving up to 2,050 new companies last year alone. This was the highest figure recorded in the last five years for the free zone.

Role of the Crypto Center

The Crypto Center has its work clearly cut out. It will be home to all types of crypto businesses, ranging from companies that issue, list, offer, and trade crypto assets, to those developing blockchain-enabled trading platforms.

Throwing his weight behind the Center, Thani Al Zeyoudi, Minister of State for Foreign Trade, confirmed the central role it will play in boosting the use of digital currencies in the country. He said the Center will support all types of crypto businesses and play home to a comprehensive system for pioneers, innovators, and entrepreneurs in crypto and blockchain technology.

Blockchain is the technology behind cryptocurrencies, such as Bitcoin, and is a digital chain of transactions connected via cryptography, a medium for secure communications on open ledgers. It employs a real-time database with tamper-proof records because every change would create a new record.

The high level of security and integrity of the crypto database makes it quite attractive to businesses and organizations whose activities involve large sums of money, and which they need to handle securely. The UAE wants a piece of this pie and has moved to establish the Crypto Center to tap into this immense business opportunity.

 

Blockchain in the Middle East

The use of crypto and blockchain spending in the Middle East and Africa has grown tremendously in the last five years, at a rate of more than 70%. In fact, it is expected to hit a whopping $307 million this year, if reports by the US-based International Data Corporation are anything to go by.

Initially, there was reluctance on the part of individuals and governments based on security and economic concerns. The highly confidential and anonymous nature of blockchain transactions may make it possible for criminals to exploit them for money laundering. Economically, it was feared cryptocurrency would destabilize regular currencies.

But with regulations and measures in place, blockchain can be harnessed for legal purposes and used to propel a country’s economy to the next level. Dubai has taken a step in the right direction, establishing a center where all companies and organizations wishing to deal in cryptocurrency can practice their trade in a safe environment.

The benefits of cryptocurrency and blockchain to UAE

The UAE is among the early movers in the Middle East tapping into the great potential of blockchain. Already, the country has embarked on an ambitious plan to switch half of the government transactions to the blockchain platform by the end of this year – in a move dubbed Blockchain Strategy 2021.

The adoption of blockchain is expected to save the country a staggering Dh11 billion in document and transaction costs, up to 77 million work hours, and eliminate the need for a mind-boggling 393 million printed documents a year. The government will channel the massive savings to other important sectors of the economy, and help reduce government spending. This would be crucial in reducing the budget deficits.

It’s also expected that the Crypto Center will, in the next 18 months, outperform many leading blockchain spaces, according to Ralf Glabischnig, founder and board member of CV VC, CV Labs parent company.

Blockchain and cryptocurrency are also likely to spur technology progress in the UAE, attracting lots of interest in the country. Glabischnig said that everyone wants to part of Dubai’s technology journey. This will likely translate into many investors willing to pump money into the project, or other similar areas in the country.

CV VC runs co-working spaces in Zug, Switzerland, and Dubai is home to more than 130 of the leading cryptocurrency and blockchain projects worldwide. Dubai is expected to become a global hotspot for blockchain companies and applications and play a leading role in cryptocurrency innovations. So far, the future burns brightly for the country poised to grow its economy exponentially over the next few years.

Take advantage

Your business can take advantage of the blockchain technology introduced officially into the country through the establishment of the Crypto Center in Dubai. But cryptocurrency and blockchain technology can be quite challenging without proper knowledge of the legal framework. You need to work with professional and experienced lawyers to help you navigate the volatile world of cryptocurrency. Contact HMCO today to start the conversation.

Inside Saudi Arabia’s Plan to Raise $55bn through Privatization

Posted on August 5, 2021 - 3:57 pm by

Saudi Arabia is planning to raise about $55 billion in the next four years as it embarks on a nascent privatization plan to boost revenue and plug its yawning budget deficit. The move by Crown Prince Mohammed Salman is part of the Saudi government’s plan to pull the country from the oil-addicted, state-dominated economy, and modernize the Kingdom.

 

A pipeline of 160 projects

According to the finance minister, Mohammed al-Jadaan, Riyadh has settled on a total of 160 projects across 16 sectors and public-private partnerships as major beneficiaries of the privatization program. This plan will go a long way in filling the yawning budget deficit, which has been a significant challenge in Saudi’s plans to upgrade its economy and modernize the country.

As part of the privatization program set to run through to 2025, Riyadh intends to outsource the management and financing of health infrastructure and services to the private sector. The move will also rope in transportation networks, school buildings, water desalination, sewage treatment plans, and airport services.

 

The government is also targeting the sale of particular assets, including television broadcasting towers, district cooling, and desalination plants, and government-owned hotels. The move is expected to raise the funds needed to drive the economy forward and improve the living standards of the people.

 

Driving force behind privatization move

Shedding light on the privatization issue, the finance minister stated that it no longer makes economic sense for the central government to run some services and utilities, hence, the need to outsource them to the private sector. This will go a long way to cut down government expenditure and ease the pressure on public finance.

 

The minister further said that Riyadh expected to raise revenue through the privatization program, and the funds would go into plugging the $79 billion deficit, the equivalent of 12% of its gross domestic product. This would improve state services to the citizens. Mr. Jadaan is hoping to raise $38 billion through asset sales, and another $16.5 billion through public-private cooperation.

The Aramco connection

Talks are already underway for the possible sale of 1% government stake in Saudi Aramco, which listed 1.7% of its shares in 2019. Aramco is the country’s global energy company. Shedding more light on the Aramco connection, the finance minister said Aramco was free to monetize its assets and channel the funds into new investments, but the government would monetize its shares in the company.

However, funds raised through future sales of Aramco shares would go to the Public Investment Fund (PIF), the body spearheading the country’s efforts to diversify its economy, rather than the treasury. PIF itself will remain immune to the privatization efforts because of its role in the growth of the economy.

The beginning

The country’s privation plans have been ongoing for the last three years, beginning with the sale of public flour mills, sports clubs, and a water desalination plant. But it wasn’t as fast as people would have expected, as only five asset sales had been made so far — Saudi Service Medical Center, and four milling companies.

However, the government isn’t expecting much foreign interest in privatizations. A Gulf analyst stated that the initiative would largely attract local businesses because foreign investors were still circumspect over the issue. He attributed the reluctance of foreign investors to the tarnished image of the Crown Prince’s leadership by the international community, citing alleged human rights abuses.

Benefits of privatization

The Saudi government looks forward to leveraging privatization to enhance its economy and plug its budget deficits. Although it seems to be slower than expected, the government hopes to raise a massive $55 billion in the next four years.

 

Here are some reason pushing the privatization program:

1.       Improved efficiency

The public sector is known to perform below par because it usually isn’t under any pressure to perform. Many public industries don’t even worry about competition because they are monopolies. By privatizing sports clubs, the health sector, and some milling companies, the Saudi government is looking forward to bettering services for its people. This is because private companies work for profits, forcing them to provide better goods and services.

2.       Way of raising funds internally

The government hopes to raise a whopping $55 billion internally, so it won’t have to worry about foreign dependence. Privatization will help it gather the financial resources needed to plug its budget deficits, instead of having to borrow from external financial firms, as other countries do.

3.       Cuts down government expenditure

Privatizing certain sections of the public sector relieves the government of its financial responsibility. Some of these public entities need huge sums of money to run and maintain, but may not fetch enough money in profits. A good example is the management of sports clubs, which the government hopes to sell to the private sector.

4.       Fosters economic democracy

The Saudi government hopes to broaden the space for the private sector struggling in a state-dominated economy. There had been numerous complaints from companies crowded out of the market by the PIF. Privatization should be a lasting solution to this challenge. As John Sfakianakis, a Gulf expert based at Cambridge University puts it, the government now wants to include the private sector in economic growth.

5.       Creation of jobs

The many Saudis locked out of employment from the public corporation now have something to look forward to as privatization takes shape in the country. The Gulf expert at Cambridge says the government wants to slim down on its business operations, reduce its liabilities, and outsource financial and health services to private entities. This would open up the private sector for more jobs.

 

You can take advantage of the privatization program

As the privatization move gathers momentum, it’s clear that local businesses stand to gain massively if they position themselves well. As a local businessperson, you need professional and experienced lawyers to help you understand the legal implications of privatization. Such lawyers will also help you interpret the privatization law, which the government will enact in July.

 

You can ensure your business is in the best position to tap into the privatization move by the government by partnering with the best law firm. If you are looking for the best lawyers, please contact HMCO today to get started.

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