Category Archives: Legal Updates

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Mergers & Acquisitions 2022

Posted on August 3, 2022 - 7:39 am by

The Saudi market showed more resilience and has started to mature in new sectors such as VC Capital, by attracting global investors and increasing the number of VC firms locally. It is expected that the region in general will witness more M&A deals to streamline costs.

The year 2022 is expected to bring further developments and adoption of new laws and regulations that will aim to boost the Saudi business environment and empower and attract talent. Industry watchers sense Saudi’s Vision 2030 may operate as a long-term economic catalyst to spur deals from companies looking to achieve operational synergy through economies of scale.

We share high-level insights on the M&A market across Saudi Arabia, along with the key legal developments which further reinforce deals.

For the full chapter, click here:

GLI-M&A22_Chapter 12_Saudi ArabiaGLI-M&A22_Chapter 12_Saudi Arabia

The Growth & Impact of Digital Banking in Saudi Arabia

Posted on September 5, 2022 - 8:37 am by

As the world becomes increasingly digitised, so too does the way we bank. In Saudi Arabia, the banking sector has undergone a digital transformation in recent years with new technologies and services being introduced to make the banking experience more convenient and efficient for customers.

By 2024, the number of people who use digital banking apps is projected to reach 2.5 billion. In Saudi Arabia specifically, banks are planning to make significant investments in digital over the coming years. Between 2017 and 2019, fintech transaction values have increased 18 per cent year-on-year in Saudi Arabia and are expected to reach USD$33 billion by 2023. This is in line with the Saudi Vision 2030, which aims to make the Kingdom a global investment powerhouse and diversify its economy away from oil.

 

How KSA’s Digital Banking Sector is Evolving

When it comes to banking, Saudi Arabia is considered a late adopter of digital transformation compared to other countries in the world. However, in recent years, the Kingdom has made great strides in its journey towards a digital future.

As part of Vision 2030, there has been a focus on developing the digital infrastructure and capabilities of Saudi businesses. This has been evident in the investments made by the government and private sector into fostering a healthy digital ecosystem for banking and financial services. Last year, the government granted its first digital banking licences to two locally established banks.

STC Pay was launched by telecoms provider STC in 2018 and is one of the most popular digital banking apps in Saudi Arabia. The app offers a range of features such as the ability to pay bills, send money, and make online purchases. Users can also take advantage of special discounts and offers from STC and partner businesses.

The second digital bank that was approved by the Saudi Monetary Authority (SAMA)

was Saudi Digital Bank, which was created by Abdul Rahman bin Saad al-Rashed and Sons Company — one of the most well-respected construction and real estate businesses in the Kingdom. The bank offers a host of digital services such as personalised banking, mobile payments, and money transfers.

Since the launch of these two digital banks, several more have been approved and there has been an increase in the number of people using digital banking services in Saudi Arabia. According to one survey, 82% of Saudi respondents use a digital bank at least once per week and 88% of people would choose digital banking services over visiting a branch in person.

To further develop the digital banking ecosystem, the government has invested in initiatives to support small businesses. In 2016, the Saudi government launched Monshaat, an online platform that offers a range of services for small businesses, including access to financing. This is in line with the Vision 2030 goal of supporting entrepreneurship and small businesses and will help to create an ecosystem that will promote the development of smaller digital banking and fintech companies in Saudi Arabia.

 

The Challenges of Digital Banking

Despite the clear benefits of digital banking, there are still some challenges that need to be addressed to further develop the sector in Saudi Arabia. One significant issue is the lack of awareness about digital banking and its benefits amongst the older generation. However, since the majority of Saudi Arabia is under the age of 35, this is likely to change over time as more people become comfortable with using digital banking services.

Perhaps the biggest challenge facing digital banking in Saudi Arabia is the risk of fraudulent activity. Phishing scams are a particular problem and there have been several high-profile cases in recent years. According to the Kaspersky Digital Payments survey, 57% of Saudi respondents have encountered some kind of scam activity while using online banking services. This is a significant concern and something that needs to be tackled to ensure the continued growth of digital banking in the Kingdom.

Overall, digital banking is a key part of the government’s Vision 2030 goal to modernise the Saudi economy and make it more competitive on the global stage. By making it easier for people to access banking services and providing support for small businesses, the government is promoting the development of a thriving digital ecosystem.

Dispute Resolution in a Modern Economy

Posted on September 5, 2022 - 8:41 am by

Saudi Arabia, the world’s largest oil producer, has been undergoing a major transformation in recent years as it looks to diversify its economy and reduce its reliance on petroleum revenues. As part of this process, the government has laid out a plan to transform Saudi Arabia into a more business-friendly environment. Part of this transformation includes reforming the legal system with respect to commercial law.

Dispute resolution is a key area of commercial law, and Saudi Arabia’s legal system is currently undergoing a process of reform in this area. As the nation begins to attract significant Foreign Direct Investment (FDI), international businesses are set to benefit from greater transparency and confidence in the legal system with respect to disputes.

 

KSA’s Economic Changes & the Legal System

Saudi Arabia’s legal system is based on Islamic law (sharia) and is therefore distinct from the common law systems of many Western nations. The government has been working to standardise the legal system in recent years, and this process has accelerated in light of the Kingdom’s plans to diversify its economy. These changes are designed to make Saudi Arabia a more attractive destination for Foreign Direct Investment (FDI) and to create a more business-friendly environment.

Some of the key changes that have been made in recent years include:

 

E-Commerce Licencing

As part of a move to provide greater protection to consumers, the government has informed e-commerce enterprises that they must now apply for a licence in order to operate in Saudi Arabia. Online retailers can either make this application via the Ministry of Commerce or the Freelance Platform. This registration can be performed entirely electronically, removing barriers to entry for businesses.

 

New Companies Law

In 2022, the Saudi government signed off on a new companies law, which is designed to make it easier for businesses to set up and operate in the Kingdom. The law includes a number of key reforms, such as the introduction of a new type of company called a Simplified Joint Stock Company with an aim to meet the needs of entrepreneurs.

This new law also addresses ownership, governance and employment to help simplify the process of setting up a business while also regulating the business landscape. Speaking to Asharq Al-Awsat, Osama al-Obaidi, Professor of Commercial Law at the Institute of Public Administration (IPA), said that these legal changes will “boost corporate governance principles, facilitate regular procedures, and reduce disputes.”

 

Commercial Arbitration

The Saudi government has also been working to promote arbitration as a means of dispute resolution and this is an area where businesses can expect to see further reform in the future. The Saudi Center for Commercial Arbitration (SCCA) was established in 2014 and is working to promote the use of arbitration among businesses operating in the Kingdom. It provides training and education on the benefits of arbitration and assists businesses amid disputes.

 

The Impact on Dispute Resolution

The reforms to Saudi Arabia’s legal system will have a significant impact on commercial disputes. Businesses operating in the Kingdom will benefit from greater clarity and certainty with respect to their legal rights and obligations. While Saudi’s business leaders are still slightly hesitant to engage with arbitrators, there is a growing recognition of the benefits of arbitration as a means of dispute resolution.

This will position Saudi Arabia as a more attractive destination for investment since foreign enterprises will be afforded greater protection thanks to the recognition of transnational arbitration awards and the availability of impartial dispute resolution. It removes an element of risk for international businesses and will encourage more companies to invest in Saudi Arabia.

As Saudi Arabia continues to evolve as an economy, businesses can expect to see further reform in the legal system. Overall, these reforms are proving to be a positive development for businesses operating in the Kingdom and will help transform the nation into a safe and profitable destination for FDI.

Digital Banking & The Future Legal Considerations

Posted on September 29, 2022 - 3:04 pm by

The digital banking sectors in the UAE and Saudi Arabia are growing exponentially, allowing them to catch up with the more technologically developed countries in the world. The UAE’s fintech industry is currently growing at a steadier rate than Saudi Arabia’s, but the Kingdom is not far behind. Thanks to Saudi Telecom Bank leading the way, Saudi Arabia is quickly gaining ground in the digital banking revolution.

 

Inevitably, there are legal considerations for some digital banking technologies emerging in these countries. Regulations are being updated and new legislation is being drafted to account for the changes in technology. As such, it is important for businesses to keep up to date with the latest legal developments in order to ensure compliance.

 

Digital Banking Trends Over the Last Four Years

Starting around 2018, mobile technologies became a key feature of digital banking. Millennials and Generation Z saw the value in digital banking and this growing demand resulted in an increase in mobile banking applications.

 

Some other major trends in the digital banking sector have included:

  • A stronger focus on online security in relation to online banking.
  • A shift from desktop to mobile digital banking.
  • The emergence of digital banks with no brick-and-mortar presence.
  • The use of APIs (Application Programming Interface) to create more open banking.
  • The use of blockchain technology (as part of Web 3 technologies) to help create more private and secure online banking channels.
  • The emergence of artificial intelligence and the Internet of Things to create more digital banking experiences.
  • The introduction of the metaverse and the concept of banking in virtual reality.

 

All these present new legal considerations for digital banking in the region. At the same time, these innovations also present exciting opportunities for businesses to explore. It’s worth looking at a few of these in more detail to see what legal challenges they might face over the next couple of years.

 

The Cybersecurity Implications of Using APIs in Digital Banking

Open banking is the new norm within Saudi Arabia and UAE. As part of the former’s Vision 2030 initiative, the use of APIs across banking institutions is helping people and companies share banking information faster and more efficiently.

Since much of this financial data is being communicated through third-party applications, security is a major legal concern. Financial information is one of the most sensitive types of data that can be transmitted digitally, and the sharing of this information can sometimes become problematic.

The integration of multiple technologies and applications can increase the risk of cyberattacks, which cause major legal ripples for both banks and customers. Due to many financial institutions wanting to rush API implementation into their financial infrastructure, some technical vulnerabilities might have been overlooked.

When this happens, many legal problems can occur. The affected parties might sue the bank for damages if a security breach occurs. A data breach can also lead to regulatory issues, especially if customers’ personal information is involved. Only a robust cybersecurity investment and a detailed response plan can help to avert and mitigate these potential risks.

 

Blockchain Technology & Its Unique Challenges

Blockchain technology is a powerful tool that can help businesses overcome certain cybersecurity issues. At the same time, blockchain (or distributed ledger technology) has its own legal implications and risks to consider.

A major aspect of this relates to the lack of accountability during an event in which financial data is compromised. While blockchain is generally considered secure, it’s still possible for data to be breached if passwords or other security keys are stolen.

Data input points could also be compromised, leading to the proliferation of false financial information. Despite the ledgers in blockchain technology being secure, compromising data from the entry point is still a possibility, hence leading to further security risks.

Should data be stolen, the distributed nature of the blockchain makes it difficult to pinpoint responsibility. Pinning blame on one company could create a legal quagmire, resulting in long investigations and little clarity for those who have been affected.

This is one of the key reasons why many businesses have been hesitant to fully adopt blockchain technology. No technology is perfect, which is why businesses need to be aware of the potential legal risks they might face when implementing new digital banking solutions.

 

The Potential Legal Risks of Newer Technologies Such as the Metaverse

We’ve all heard about the Metaverse and Mark Zuckerberg’s mission to restructure the World Wide Web as an interconnected world based in virtual reality.

However, the Metaverse itself still remains a concept in development. Facebook’s parent company — Meta is still working on perfecting the technology. But with VR technology getting more advanced by the day, it’s only a matter of time until the Metaverse becomes reality.

This means it’s inevitable that someday, digital banking will enter the Metaverse. While some critics may consider the Metaverse as a frivolous concept, it will eventually have a profound impact on the way we bank and do business — with the potential for some interesting implications.

Many financial institutions are recommending that banks get ready to use the Metaverse to help new banking customers build relationships with their banks. Since many people no longer visit their bank in person when they open their first accounts, the Metaverse can offer a new digital way to experience this in virtual reality.

Of course, the legal aspects of using the Metaverse mostly fall in the realm of cybersecurity again. With such a complicated digital landscape to design this, there will be many security aspects to consider. The potential legal risks could be higher than with any other digital banking solution currently available.

 

The Use of These Technologies in UAE & Saudi Arabia

The rapid arrival of these digital banking technologies in the UAE and Saudi Arabia has led to a big discussion about the legal and regulatory aspects of their use. But it’s also an exciting time for the region, as both countries are working hard to be leaders in the digital banking world. Thanks to the introduction of over 40 financial free zones and the fintech sandboxes in both countries, there are a lot of opportunities for businesses to operate in these economies.

The Push For Alternative Energy In The GCC

Posted on September 29, 2022 - 3:07 pm by

The worldwide energy industry is headed towards an extraordinary excursion and the Gulf Cooperation Council (“GCC”)  is pushing to be a pioneer in this rising market. The United Arab Emirates (“UAE”) and the Kingdom of Saudi Arabia (the “Kingdom” or “KSA”) are two of the central figures in the movement toward utilising more sustainable and environmentally friendly energy sources, and both have made large investments in research and development for these fields.

From NEOM to ADNOC, the UAE and Saudi Arabia are working to establish themselves as leaders in the global energy market, and it is clear that alternative energy will play a major role in their plans. These two nations have access to the necessary technical expertise and financial resources to drive a more clean-energy strategic focus in the future.

 

GCC Clean Energy Drive Requires $50b for Grid-related Speculations

The GCC would require approximately $50 billion by 2026 to boost the proposed increments from renewables, as highlighted in a recent white paper, ‘Clean Energy — Going Beyond the Grid’.

Improvements in sustainable power innovation are one of the critical mainstays of the UAE’s Operation 300bn and Saudi Arabia’s Made in Saudi Initiative, which are both national plans that envision improving the contribution of renewables in the energy blend of their nations.

The UAE National Energy Plan 2050 calls for clean energy to achieve 50% of the country’s complete energy blend by 2050. This would lower the carbon footprint by 70%, requiring an investment of $190 billion along the way.

Two of the biggest single-site solar plants in the world are currently being created in Abu Dhabi and Dubai. Both will add to the developing UAE green economy while advancing the nation’s status as a global renewable energy player.

Furthermore, Saudi Arabia is focused on deriving 50% of its energy from renewables by 2030 and the Kingdom also intends to spend up to $50 billion on this sector by 2023. Under the normal expansion in grid-related ventures, the transmission and circulation gear industry are supposed to top $312.8 billion universally by 2026.

 

Minerals Projects

Inside the unique energy sector, organisations with a history of upgrading power age and energy stockpiling arrangements are assuming a significant part in empowering the practical creation of minerals universally. This is subsequently assisting the world to decarbonize more quickly.

Perhaps the best illustration of that, is in Saudi Arabia, where at the height of the COVID-19 pandemic in 2020, consent was given to supply a 45 MW power plant to the biggest gold venture for the Saudi Arabian Mining Company.

The Mansourah-Massarah plant uses a crossover of motor innovation and solar power, and Finnish energy company Wärtsilä has the mandate to introduce six power motors — working in close coordination with project worker for hire, Larsen, and Toubro and EPC project worker, Outotec.

The task is important for Saudi Arabia’s Vision 2030, which plans to expand revenue sources for the Saudi economy by moving away from oil dependency and increasing the mining of under-exploited assets such as gold.

 

Changes to the Legal and Regulatory Framework Governing Clean Energy

The GCC’s ambitious plans for alternative energy will have major legal implications, both in terms of the regulatory frameworks that need to be put in place and the contracts that need to be negotiated.

Accordingly, a coordinated approach to alternative energy may need to be taken by the GCC and the applicable GCC national laws and regulations may need to be further developed and enhanced in order to become a suitable regional market for alternative energy.

 

Saudi Arabia

The Ministry of Energy (“MoE”) has introduced the National Renewable Energy Program (“NREP”), which aims to diversify the Kingdom’s energy resources. Several incentives were issued to promote investments into the renewable energy projects under the NREP, which include direct foreign ownership and land incentives that include subsidized leases for projects. This will further entice foreign entities to invest in the Kingdom’s renewable energy schemes, while also resulting in the formation of innovative technologies within the renewable energy sector that include solar photovoltaic technologies, waste to energy technologies, wind energy technologies and concentrated solar power technologies. All such renewable technologies have been identified and developed under the NREP to further diversify the Kingdom’s local energy supply and to further encourage foreign investment along with public-private participation within the energy industry.

To that end, MoE, in collaboration with the Ministry of Industry and Mineral Resources and Non-oil Revenue Development Center, introduced further initiatives that allow companies whose activities involve renewable energy and solar power plants to apply for and obtain industrial licenses. These initiatives aim to support the renewable energy industry and economic growth while enhancing the Kingdom’s capabilities regarding renewable energy, and to achieve an optimum energy usage in electrical productions. Furthermore, the Gulf Cooperation Council (“GCC”) grants industrial projects with benefits and facilities to promote the industrial sector and to attract investments to countries in the GCC under the scope of the Common Industrial Regulatory Law of the GCC Countries (the “Law”). This Law grants companies’ certain exemptions from customs duties in relation to manufacturing and industrial projects. Such exemptions are aimed to enhance investments and increase production and adoption of renewable energy in the KSA.

In addition to having solar power plants, KSA’s 2030 target includes the usage of the aforementioned Solar Photovoltaic (“PV”) Systems. The Water & Electricity Regulatory Authority (“WERA”) issued a regulatory framework for the use of Small-Scale Solar PV Systems. The framework aims to promote the use of Small-Scale Solar PV Systems and ensure efficient and safe production, installation, operation, and maintenance of these systems within the Kingdom. Under the regulatory framework, customers may build/possess and operate on a premises in which a Small-Scale Solar PV System may be installed. This Solar PV System helps convert solar energy into electricity and gives a more efficient way of obtaining electricity using renewable energy, thus, reducing the usage of oil and instead using a renewable energy source that does not emit carbon.

Moreover, the Kingdom has also introduced the Saudi Green Initiative (“SGI”) which works to combat climate change as its main goal while also aiming to offer significant investment opportunities for local and foreign investors in the energy sector in KSA. The SGI’s programs which include environmental protection, energy transformation and sustainability, aims to reduce carbon emissions and increase domestic usage of renewable energy. To that end, the kingdom developed cost-effective technologies for efficient carbon management, with the aim of eliminating gas combustion by 2030.

 

The UAE

The UAE has taken a leading role in the development of renewable energy in the GCC, and currently has the largest installed capacity of solar PV in the region.

The objective of the Dubai Clean Energy Strategy 2050 is for clean energy to contribute 25% of Dubai’s overall energy output by 2030 and 75 per cent by 2060. To achieve this, the Dubai Electricity and Water Authority (“DEWA”) has launched a number of initiatives, including the Shams 1 solar-thermal plant (100MW) and the Mohammed bin Rashid Al Maktoum Solar Park, which represents a total investment of AED 1.2 billion and is the largest single-site solar park in the world.

In addition to this, the Dubai Green Fund has been established to provide financing for renewable energy projects. The Fund is open to both local and international investors and offers a number of benefits, including tax exemptions and visa facilitation.

In the realm of transportation, the Dubai Supreme Council of Energy has initiated free charging, parking, and registration fees. The Dubai Autonomous Transportation Strategy also aims to have 25% of all trips made using driverless vehicles by 2030.

 

The Future

Ultimately, the GCC is at the forefront of the global energy transition, and its ambitious plans for alternative energy will have major legal implications.

In order to meet its renewable energy targets, the GCC will need to make significant changes to its current regulatory frameworks and invest in developing the infrastructure needed to support large-scale renewable energy projects.

The GCC is also likely to face challenges in relation to water availability and land use, as well as the need to develop a skilled workforce for the renewable energy sector.

Despite these challenges, the GCC is well placed to become a global leader in renewable energy, and its commitment to this transition will have far-reaching legal implications.

 

Ebaa Tounesi

Associate – Corporate & Commercial Practice

Market View: Egypt

Posted on October 19, 2022 - 9:01 am by

Egypt’s economy is one of the most diversified in the Middle East and North Africa. The country’s strategic location, rich natural resources, and large population have made it a regional hub for trade and investment.

Egypt’s economy has been growing at around 3-5% per year since 2017 and is expected to grow by around 5.5% by the end of 2022. This growth has been driven by several factors, including strong foreign direct investment inflows, positive economic reforms, and robust domestic consumption.

Exploring Egypt’s Economic Opportunities

Egypt offers numerous advantages for businesses looking to invest in the country. For starters, Egypt’s population of over 100 million provides a large potential market for businesses. Additionally, the country’s geographic location also provides an excellent potential to develop the region as a hub for trade and investment.

Young Population

Egypt has a young and rapidly growing population. Over 60% of the population is under the age of 30, making it an attractive market for consumer-oriented businesses.

Strategic Location

Egypt is located at the crossroads of Africa, the Middle East, and Europe. This makes it an excellent location for businesses looking to tap into regional markets across all three continents.

Rich Natural Resources

Egypt is home to several valuable natural resources, including oil, gas, and minerals. These resources provide a great source of revenue for the government and offer opportunities for businesses in the mining and energy sectors.

Egypt’s Most Well-Developed Sectors

Egypt has many thriving industries, which offer opportunities for businesses looking to invest in the country and local businesses looking to expand their operations.

Agriculture

Egypt is a major producer of agricultural commodities, such as wheat, rice, and cotton. The country’s large agricultural sector provides the largest portion of employment in the nation, representing 21% of the entire workforce.

Manufacturing

Egypt has a large manufacturing sector, which accounts for around 15% of its total GDP. The manufacturing sector is dominated by the textile and food processing industries.

Tourism

Egypt is a major tourist destination, with around 13 million tourists visiting the country in the year prior to the pandemic. Tourism accounts for around 12% of the nation’s total GDP and employs around 2.2 million people.

Oil and Gas

Egypt is a major producer of oil and gas. The country’s oil reserves are estimated at around 4.4 billion barrels, while its gas reserves are estimated at around 77 million cubic feet.

Egypt’s Trade Relationship with Saudi Arabia

Egypt is a major trading partner of Saudi Arabia and has been so for a few decades. In 1989, the two countries signed a trade agreement, which was followed by several other agreements in the 1990s. The two countries continue to have strong economic ties to this day and are both members of the Arab League and the Organization of Islamic Cooperation.

Inbound Trade

Egypt imports a significant amount of Saudi Arabian products, with the number one being crude petroleum. This exchange was worth USD$1.63 billion in 2020. Saudi exports to Egypt continue to grow each year and have increased by 10.1% in total over the past two and a half decades.

Outbound Trade

Egypt also exports a significant number of products to Saudi Arabia. Refined petroleum is the number one export, representing USD$3.88 million in 2020. In total, Egypt exported USD$2.8 billion worth of products to Saudi Arabia in the same year.

Investment

Saudi Arabia is a major investor in Egypt. This year, Saudi Arabia and Egypt signed 14 agreements representing USD$7.7 billion worth of investment. The majority of these deals were signed in relation to renewable energy, fintech, and petroleum-related industries. Saudi Arabia remains Egypt’s largest source of foreign investment and continues to contribute a hefty US$10 billion to the Egyptian economy each year.

Egypt – An Economy on the Rise

The Egyptian economy is growing rapidly, driven by reforms and strong domestic demand. The country has a diversified economy with a strong focus on sectors such as agriculture, manufacturing, tourism, and oil and gas.

There are also some rapidly emerging industries, which have enjoyed recent foreign investment, such as the renewable energy sector and the fintech industry. The Egyptian government has made it easier to start and operate businesses and has worked to attract foreign investment. These reforms have helped to improve the business environment and spur economic growth.

Changes to Saudi’s legal Framework Since COVID-19

Posted on October 19, 2022 - 9:06 am by

Saudi’s legal system is based on the principles of Sharia law and has remained largely unchanged for decades. However, in recent years the government has modernised the system by introducing online court services and other technological advances. There have also been a series of legal reforms seeking to bring the commercial courts closer to international best practice.

The COVID-19 pandemic has resulted in a further acceleration of these changes, with the Saudi government taking steps to digitise the court system and make it more accessible to the public. In this article, we will explore the changes that have taken place, why they were introduced and how they are helping to modernise the Saudi legal system.

Recent Reforms to the Legal System

COVID-19 has acted as a catalyst for change in many areas of life, and one of those is the legal system. However, even prior to the pandemic, the Saudi government was already taking steps to modernise the system and facilitate a more attractive commercial environment for international investors. Here are some of the key reforms that have been introduced in recent years.

Licencing for Foreign Law Firms

In 2022, the Saudi government issued a formal licensing regime for foreign law firms to operate in the Kingdom. This is a significant development, as it officially opens up the Saudi legal market to international firms for the first time. It is also a reflection of the government’s commitment to attracting foreign investment and talent and providing a level playing field for all businesses operating in the Kingdom.

In order to apply for a licence, foreign law firms must have two partners that reside within the Kingdom, no more than 30% of their fee revenue must originate from out KSA, and no work related to Saudi law may be passed on to an external office.

Increase in Female Legal Professors

There has been a significant increase in the number of female legal professors in Saudi Arabia in recent years. This is part of a broader government initiative to encourage women to participate more fully in the workforce and give them equal opportunities to succeed.

Over a decade ago, there were no licensed Saudi female lawyers, and in 2022, there are now over 1,000. Although female lawyers may still be a minority, this figure is expected to grow steadily as more women choose law as a career.

Electronic Legal Services

One of the most significant changes has been the introduction of an online court system, which has modernised the way in which cases are heard and processed. This has resulted in a more efficient and effective system, with faster turnaround times for cases.

It is now possible to file legal documents electronically, submit evidence online, and even attend court hearings via video link. This has made the system more accessible for litigants, as they no longer need to physically attend court in all cases.

Laws for the 21st Century

With the nation’s digital transformation in full swing, it’s become necessary to introduce laws that govern new technologies and business models. In recent years, the Saudi government has enacted a number of laws relating to e-commerce, data protection, and cybercrime.

These laws are designed to encourage innovation and investment, while also ensuring that consumers and businesses are protected from harm. Influencers have also been regulated, with a new law introduced this year that requires anyone generating an income through social media to apply for a licence.

Looking to the Future

The Saudi legal system is continuing to evolve, and the pace of change is likely to accelerate in the coming years. This is positive news for businesses operating in the Kingdom, as it creates a more predictable and transparent regulatory environment.

It is also encouraging to see the government taking steps to increase female participation in the legal profession, as this can only lead to a more balanced and effective system in the long-term. With the right reforms in place, the Saudi legal landscape is well-positioned to meet the challenges of the 21st century.

International Legal Cases in Saudi Arabia

Posted on November 6, 2022 - 6:49 am by

The Saudi Arabian government has taken significant steps towards modernizing and codifying the legal system over recent years. The judicial system is governed by a combination of Islamic Sharia principles and international legal frameworks that have been adopted into Saudi law. As the government continues to promote the Kingdom as an investment destination, it has introduced new regulations and legal mechanisms to ensure that international business deals are protected under its legal system.

For international clients operating in Saudi Arabia, it is important to understand the key legal requirements that must be met when managing a legal case in the country. This includes working with local law firms or international legal teams to ensure that all necessary processes and regulations are followed.

Can You Start a Legal Case in Saudi Arabia as an Overseas Client?

The short answer is yes, you can start a legal case in Saudi Arabia as an overseas client. However, it is important to note that there are certain requirements that must be met in order to do so.

Firstly, the legal issue itself must fall under Saudi jurisdiction. This means that the case must be related to a business transaction, agreement or crime that took place in Saudi Arabia. Additionally, the target of the legal action must be residing in Saudi Arabia. If these conditions apply, then you are eligible to file a legal case in the Kingdom.

The Process of Filing a Legal Case in Saudi Arabia

Filing a legal case in Saudi Arabia is similar to the process in other countries. There are a few key steps that must be followed as outlined below.

1. Consulting with a local law firm

This is an essential first step, as the legal process will be governed by Saudi law and regulations.  Typically, each firm will have a specialty area, whether it is commercial law, family law, or criminal law. You may also need to engage the services of an interpreter if your preferred lawyer does not speak English.

2. Preparing your power of attorney

Once you have chosen a law firm to represent you, they will require you to submit a variety of documents as part of the legal process. It is essential that you provide a power of attorney, which must be notarized in your home country and attested by the Saudi Arabian embassy if you are overseas.

3. Gathering all necessary documentation and evidence to support your case

This includes notarized contracts, agreements, or other documentation related to your legal issue. Your legal representative will be able to advise you on what type of documentation is required to support your case.

4. Filing a legal complaint with the relevant court in Saudi Arabia

Once your legal representative has prepared the necessary paperwork, your representative can submit it to the relevant court in Saudi Arabia. Since the pandemic, the court system now permits cases to be heard remotely, via video conferencing. This is particularly beneficial for overseas clients, who may be unable or unwilling to travel to Saudi Arabia for a court hearing. In some cases, your lawyer will meet with the judge on your behalf to argue your case and you will not be required to attend the court.

How Quickly Will My Legal Case in Saudi Arabia Progress?

Thanks to positive reforms, the Saudi legal system moves relatively quickly, with cases often being resolved within a few months. Of course, this will depend on the complexity of your legal issue and whether it requires additional evidence or resources.

If you are taking a case during the holy month of Ramadan, then you should expect that the process may be slower than usual. During the two annual Eid festivals, the court will also close for a period. However, in general, you can expect to see your case move through the legal process relatively quickly and efficiently.

Overseas clients are treated fairly in the Saudi legal system and have the same rights as local clients. As long as you engage with your legal representative and follow the expected process, you should be able to manage your international legal case effectively in Saudi Arabia.

Changes to Saudi Arabia’s Dispute Resolution Regulations

Posted on November 9, 2022 - 10:41 am by

Dispute resolution is a growing industry in Saudi Arabia, and over the past 18 months, there have been some changes to its regulations. These changes aim to maintain high levels of efficiency and bring the system in line with international best practices.

Another significant change concerns the power of KSA’s enforcement courts. In this article, we will outline what these courts are, and what they can do to help ensure the efficient resolution of disputes.

Updates to the Dispute Resolution Framework

Dispute resolution was not a particularly well-developed area of law in Saudi Arabia until recently. In 2012, the government passed the Saudi Arbitration Law, which introduced a new framework for resolving disputes in the Kingdom. The introduction of this law was in response to growing levels of international arbitration, and it is part of a wider plan by the government to improve its legal infrastructure. Since then, a number of changes have been made to this framework to keep pace with international best practices, including the ones outlined below.

Electronic submissions

The introduction of an online dispute resolution system allows businesses to submit and manage disputes electronically. Since the COVID-19 global pandemic, this has become increasingly popular as it allows disputes to be dealt with remotely at a much faster pace than traditional face-to-face proceedings.

New Fee Structure

A new fee structure is one of the most recent changes to Saudi Arabia’s dispute resolution framework. Under this structure, parties who lose in court will be required to pay a fee of 2-5% of the claim value. This is intended to discourage frivolous claims and ensure that disputes are not being pursued to simply pressure the other party.

Saudi Arabia’s Enforcement Court

Saudi Arabia’s enforcement court has considerable power and is responsible for dealing with a wide range of disputes. These include:

  • Enforcement of court judgments from other countries that apply to people or entities resident in Saudi Arabia.
  • Enforcement of arbitration awards issued in accordance with the new arbitration law.
  • Enforcing family law judgments concerning the division of assets and child custody.
  • Ensuring that financial obligations (such as debts or alimony) are met following a divorce.
  • Enforcing intellectual property rights, such as trademarks, patents, and designs.

The role of the enforcement court is to ensure that these disputes are resolved in a fair and timely manner, which benefits businesses and individuals alike. With its extensive power, it is an important facet of the Saudi legal system.

In the case of arbitration and dispute resolution, the enforcement court has the power to enforce arbitration awards issued under the new arbitration law. This means that, should one party fail to comply with the award, the other party can seek enforcement of it in court. This gives businesses a level of security and ensures that any awards are respected.

Overall, the changes to Saudi Arabia’s dispute resolution framework have introduced higher levels of efficiency and international best practice to the legal system. This has benefited businesses and individuals alike, making Saudi Arabia a more attractive region for investment and entrepreneurship.

Amendments to the Saudi Commercial Agency Law

Posted on December 6, 2022 - 1:21 pm by

Every commercial agency operating in Saudi Arabia is governed by the Law of Commercial Agencies. This law was enacted by Royal Decree back in 1962 and it sets out the legal requirements for businesses to operate as commercial agents in Saudi Arabia. As the Kingdom of Saudi Arabia continues to modernize and develop, the government has decided to review and amend the law in order to help ensure that businesses can operate more efficiently and in line with economic developments. In this article, we will discuss some of the key amendments to the Saudi Commercial Agency Law and how this will affect businesses moving forward.

What’s Changing?

Under Saudi law, a commercial agent can be defined as any entity that “contracts with a manufacturer or his representative in his country for commercial activities”. This covers agents, distributors or franchisees. The Law of Commercial Agencies was originally designed to protect the interests of Saudi citizens against the influx of foreign labor and capital. Currently, the law puts forth that only Saudi citizens may act as commercial agents within the Kingdom. This means that foreign companies were required to partner with a local agent in order to do business. Additionally, local residents who did not hold Saudi citizenship were unable to enter into commercial agency agreements.

However, with the growing presence of international businesses in Saudi Arabia, the government has recognised that there is an opportunity for economic growth if foreign companies are allowed to operate directly. To this end, the government has proposed amendments to the law that would allow foreign companies to appoint either local or foreign commercial agents to operate in Saudi Arabia. This would create a more open market for foreign businesses and could lead to increased competition and investment within the Kingdom.

The new law will also put forward several other changes that may affect businesses operating within Saudi Arabia as shown below.

Intellectual Property Rights

The upcoming law will let commercial agents and distributors use their principals’ trademarks and other intellectual property within the terms of the agreement. This means some registration requirements from Saudi IP law can be bypassed.

Exclusivity

Furthermore, the latest edition of the law modifies how exclusive agency and distributorships are to be treated. In general, exclusive agreements are allowed. However, if necessary, goods or services in the Kingdom would be prevented from being supplied due to said exclusivity, then the Ministry of Commerce has the authority to nullify the agreement.

Consequently, if the exclusive agent or distributor is unable to meet the market’s demands, or if the agent/ distributor creates scarcity artificially, then exclusivity may be voided by the Ministry. In addition to safeguarding supply and market integrity, this policy towards exclusivity also gives principals leeway to revoke an agent/ distributor’s exclusivity in Saudi Arabia should they fail to perform adequately.

Termination & Indemnity

The new law’s provisions concerning terminating limited-term agreements largely resemble those for commercial agency or distributor agreements. Limited-term agreements can only be ended before their expiration date if (1) both parties agree to it, or (2) there is justifiable cause. What entails justifiable cause for termination is specified in a catalog found within the draft of the new law and notably, force majeure does not qualify.

The new law not only changes but also thoroughly explains how to end an agreement that doesn’t have a set expiration date. If you want to dissolve a business relationship with someone who you’ve had an open-ended contract with, you must now give one month’s notice for each year the agreement was effective.

What Does the New Law Mean for Business?

The new amendments to the Saudi Commercial Agency Law are a major development for businesses operating in the Kingdom of Saudi Arabia. Not only will this open up the market to foreign companies by allowing them to appoint either local or international commercial agents, but it also empowers principals to better manage their contractual relationships with agents or distributors. Finally, the proposed amendments give all parties in an agreement a secure platform from which to operate, as it sets forth protocols for termination and indemnity. These amendments are expected to come into force around mid-2023, so businesses should prepare for the changes ahead of time.

Overall, these amendments to the Saudi Commercial Agency Law are a step forward in creating a more equitable business environment in the Kingdom and opening opportunities for foreign businesses and local businesses alike.

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