Data Display Page

Highlights of Personal Data Protection Law

Date: October 28, 2021

• Khalid Alarfaj
• Faris AlYousef

Category: Insights

Preview: The Kingdom of Saudi Arabia (the "Kingdom") has issued its first data protection law, the Personal Data Protection Law (the "PDPL"). to regulate the collection and processing of personal data.

Description:

The Kingdom of Saudi Arabia (the “Kingdom”) has issued its first data protection law: the Personal Data Protection Law (the “PDPL”), to regulate the collection and processing of personal data.

What is the purpose of the PDPL and what is the scoop of its application?

The PDPL comes in line with the technological development in the Kingdom and it emphasizes the importance of protecting the personal data of individuals.The PDPL applies to any personal data processing carried out by a controller, which is any entity that determines the purpose of processing personal data and how it is processed (the “Controller”), whether the data processing is initiated by it or through any entity that processes data on its behalf (the “Processer”).

The PDPL applies to any processing that takes place in the Kingdom, including the processing by entities outside the Kingdom of personal data related to individuals residing in the Kingdom. Foreign data Controllers must appoint a licensed representative within the Kingdom to perform the Controller obligations under the PDPL.
The PDPL also applies to personal data of a deceased if it would lead to identifying the deceased or one of his or her family members.

The PDPL grants Controllers a period of one year from its enforcement date to comply with it and grants the Competent Authority the right to grant Controllers longer periods to comply.It also grants the Competent Authority the right to review and suggest amendments within the first year and over a five-year period regarding the implementation of some provisions of the PDPL.

What is the difference between Personal Data and Sensitive Data?

The PDPL defines the “Personal Data” as any data that would lead to the identification of the individual specifically or make it possible to identify him or her directly or indirectly.
The “Sensitive Data” is defined as any Personal Data that includes a reference to:

• an individual’s ethnic or tribal origin.
• an individual’s religious, intellectual or political belief.
• information that indicates an individual’s membership of civil associations or institutions.
• forensic and security data, biometric data, genetic data, credit data, health data or location data.
• data that indicates that an individual’s one or both parents to be unknown.

What rights do the PDPL gives to the Personal Data owner?

The PDPL grants several rights that guarantee the protection of Personal Data, including the following rights:

• The right to be informed. This includes informing the data owner of the legal or practical reasons for collecting his or her Personal Data and the purpose of such collection, and that his or her data is going to be processed only for the purpose for which he or she was informed of.
• The right to have access to his or her Personal Data with the Controller. This right includes the right to view the Personal Data and to obtain a copy of it without any fees. The Controller may set specific periods for exercising access to the data.
• The right to correct, complete or update his or her Personal Data held by the Controller.
• The right to delete the Personal Data whenever the need for it is over.
• The right to not process the Personal Data nor change the purpose of its processing without the consent of its owner.

Can data processing be performed without consent?

The PDPL allows the Controller to process data without obtaining consent only in the following situations:

• If the data processing is in the interest of the data owner, and it is impossible to contact him or her.
• If the processing is in accordance with another law or in implementation of a previous agreement with the data owner.
• If the Controller is a public entity and such processing is required for security purposes or to satisfy judicial requirements.

What are the Controller’s obligations?

The PDPL sets obligations on the Controller, including:

1. The Controller must adopt a data privacy policy, and the policy should be available to individuals to view before collecting their data.
2. When choosing a Processor, the Controller must choose an entity that provides the necessary guarantees for the implementation of the PDPL and its regulations, and it must also continuously verify that the Processor has fulfilled its obligations.
3. If the Controller is collecting data directly from the data owner, it must inform him or her of: a) the legal or practical reasons for collecting his or her Personal Data, b) the purpose of collecting such data, c) the information of those who collect it, d) the parties to whom the data will be disclosed to, and e) whether the data will be transferred, disclosed, or processed outside the Kingdom.
4. The Controller may not process Personal Data without taking necessary steps to verify its accuracy, completeness, currentness and relevance to the purpose for which it was collected.
5. The Controller must destroy the Personal Data when the purpose of its collection ceases to exist. The Controller:
   
   1. May keep the Personal Data, if it removes all information that may lead to identifying its owner.
   2. Must keep the Personal Data until the reason for the keeping is over:
      
      1. if there is a legal reason to keep it for a specific period, or
      2. if the Personal Data is related to a case before a judicial authority.
6. The Controller may not transfer Personal Data outside the Kingdom or disclose it to a party outside the Kingdom unless it is in implementation of an obligation under a convention to which the Kingdom is a party, or to serve the interests of the Kingdom, or for other purposes as determined by the regulations, after the following conditions are met:
   
   1. Sufficient guarantees are provided for preserving the confidentiality of the Personal Data transferred or disclosed.
   2. The transfer or disclosure does not prejudice the national security or the vital interests of the Kingdom.
   3. The transfer or disclosure must be limited to the minimum Personal Data needed.
   4. The Competent Authority must approve the transfer or disclosure.

When is disclosure allowed?

The PDPL Limits the situations in which a Controller is allowed to disclose data to the following:

1. If the owner of the Personal Data agrees to the disclosure.
2. If the Personal Data was collected by a publicly available source.
3. If the disclosure is limited to processing it in a way that does not lead to the identification of the owner or any other individual.
4. If the entity requesting disclosure is a public entity and it is for security purposes.
5. If the disclosure is to implement another law or fulfill a judicial requirement.
6. If the disclosure is necessary to protect health or public safety, or to protect an individual or certain individuals or their health.

The PDPL, however, prohibits disclosure in the first three cases in some situations such as when the disclosure constitutes a security risk, prevents the discovery of a crime, violates another individual privacy, leads to disclosure of a confidential source, or other situations as stated in the PDPL and regulations.
The PDPL also prohibits disclosure when the disclosure conflicts with the interests of the Kingdom, damages its reputation or impacts its relationship with other countries.

What are the penalties for violating the provisions of the PDPL?

Criminal Penalties:

1. Unlawful disclosure or publishing of Sensitive Data in violation of the provisions of the PDPL with the intent of harming the data owner or achieving personal interest shall be punished with imprisonment of up to two years and/or a fine of up to three million Saudi Riyals (USD $800,000).
2. Unlawful transfer of Personal Data outside the Kingdom or disclosure to a party outside the Kingdom without the disclosure being in implementation of a convention to which the Kingdom is a party, or if the reason for the transfer is to serve the interests of the Kingdom, or if the aforementioned conditions are not met, shall be punished with imprisonment of up to one year and/or a fine of up to one million Saudi Riyals (USD $266,666.67).

Administrative Fines:

The Competent Authority may punish violators of the PDPL with a fine of up to five million Saudi Riyals (USD $1,333,333.33).

Court Confiscation Orders:

The courts have the right to confiscate the funds obtained as a result of violating the PDPL.

Compensation:

Individuals may seek compensation for damages incurred as a result of violations of the PDPL and its regulations.

Conclusion

Like other international data protection laws, the PDPL is intended to ensure the privacy of Personal Data, prevent its misuse and regulate its sharing.The PDPL will come into force on March 23, 2022. The executive regulations to be issued is expected to clarify the PDPL.Subject to some exceptions, local and foreign data Controllers, to whom the PDPL is applicable, will have one year from the effective date to comply.Controllers shall start taking steps to ensure their compliance with the PDPL.

File: uploads/1720013429552-Highlights of Personal Data Protection Law.pdf

Labor Reform Initiative for Private Sector Foreign Employees in Saudi Arabia

Date: November 5, 2020

Category: News

Preview: The Ministry of Human Resources and Social Development ('HRSD') launched on November 4, 2020, the Labor Reform Initiative ('LRI'), which applies to all foreign employees in the private sector.

Description:

The Ministry of Human Resources and Social Development ("HRSD") launched on November 4, 2020, the Labor Reform Initiative (“LRI”), which applies to all foreign employees in the private sector. LRI has brought about changes regarding job mobility, exit and re-entry visa procedures and final exit visa procedures. Effective March 14, foreign employees in Saudi Arabia will no longer need their employer’s permission to change jobs, travel abroad or leave the country permanently, according to LRI.

The job mobility service under LRI will allow foreign employees to transfer between employers upon the expiry of their binding employment contracts, without the employer’s consent. It also allows the transfer during the contract term, provided there is compliance with the notice period and the specified measures and mechanisms in the employment contract.

The employer’s consent will no longer be required for traveling outside the country. The exit and re-entry visa service will allow a foreign employee to travel outside the country, upon submitting an electronic application with an electronic notification to the employer. The final exit visa service enables foreign employees to leave immediately after the termination of their employment contracts, with an electronic notification to the employer but without requiring its approval. Foreign employees may also leave the Kingdom during their contract terms, with the employee bearing all consequences of the termination of their employment contracts.

The new reforms seek to increase the flexibility, effectiveness, competitiveness and attractiveness of the labor market in line with the best international practices and the Saudi Labor Law, according to HRSD.

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Contract of Sale Under The Civil Transactions Law

Date: November 4, 2024

• Khalid AlArfaj
• Abdulelah AlSalamah

Category: Insights

Preview: In our previous publication, we introduced the Civil Transactions Law (the “CTL”) of the Kingdom of Saudi Arabia (the “Kingdom”). This article continues our CTL series by delving into the application of the CTL in commercial transactions, providing further insights into various aspects covered by the CTL.

Description:

In our previous publication, we introduced the Civil Transactions Law (the “CTL”) of the Kingdom of Saudi Arabia (the “Kingdom”). This article continues our CTL series by delving into the application of the CTL in commercial transactions, providing further insights into various aspects covered by the CTL.

Before the enactment of the CTL, contracts were generally governed by uncodified general principles of Islamic Shari’ah Law. The CTL is the first codified legislation in the Kingdom’s history regulating contracts, ensuring they align with Islamic Shari’ah Law jurisprudence, while addressing modern commercial needs for more clarity and predictability. The CTL regulates 18 types of contracts. In this article, we focus on two types of contracts: the contract of sale and the exchange contract.

The contract of sale, is defined in the CTL as “a contract under which a seller transfers ownership of the sold item to a buyer in return for a cash amount.” The contract of exchange is defined as “a contract under which the parties transfer to each other ownership of property other than cash.” Article 365 states that “[a] contract of exchange shall be subject to the provisions governing the contract of sale in a manner not inconsistent with the nature of the exchange contract.”

Formation of a Contract of Sale or a Contract of Exchange

A valid contract of sale or contract of exchange requires:

• Mutual Consent: Both parties must mutually agree to the terms of the contract through offer (Ijab) and acceptance (Qabul).


• Competent Parties: Both the buyer and the seller must have the legal capacity (sound mind and legal age) to enter into a contract.


• Subject Matter: The subject of the sale must be defined, and it must be lawful and permissible under Islamic law. The CTL clarifies, however, that if the buyer’s knowledge of the subject matter is indicated in the contract of sale, the buyer shall not have the right to demand nullification of the contract due to lack of knowledge, unless the buyer can show deceit by the seller.


• Consideration (Thaman): The price or consideration for the sold item must be defined and agreed upon. Estimation of the sale price may be made based on valid pricing criteria. The CTL clarifies that even if the price for the sold item is not stated by the parties, the sale shall not be nullified if the circumstances indicate that the parties intended to apply the market price, or the price applied in the usual dealings between the parties.


• Delivery (Tasleem / Qabd): The item sold must be deliverable. If the item cannot be delivered or is nonexistent at the time of the contract, the sale may be deemed void. The CTL clarifies, however, that the following shall be deemed delivery:
  
  
  • If the parties agree to the case in which the buyer is deemed to have taken delivery.
  • If a legal provision provides for the case in which the buyer is deemed to have taken delivery.
  • If, with the buyer’s consent, the seller retains the sold item in his possession after the sale for a reason other than ownership.
  
  

Seller and Buyer Obligations and Warranties

The CTL imposes specific obligations on both the seller and the buyer and includes statutory warranties. These obligations and warranties should be applicable, in addition to any agreed upon contractual obligations and warranties (which should be included in the contract).

ENTITLEMENT WARRANTY:

The Seller warrants that the purchased item is free from any third-party rights. The purchased item must be transferred free from any unknown right to a third party. The parties, however, can agree to limit the seller’s warranty to only cases where the third-party right arise from the seller’s acts or the seller’s deliberate concealment. An agreement to relieve the seller from warranty of title shall not preclude the buyer’s right of recourse against the seller for the amount paid, unless it is established that the buyer was aware of the third-party right at the time of the sale.

FREE FROM DEFECTS WARRANTY:

The seller warrants that the purchased item is free from any defects that would diminish its value or render it unfit for its intended use. If a defect is discovered in purchased goods, the buyer may cancel the contract or claim the price difference from the seller unless the seller replaces the item by an identical one free from defects.

This warranty is not applicable, however, in the following circumstances:

• The defect was known to the buyer at the time of the sale or would have been discovered by a reasonable person upon inspection, unless the seller warrants to the buyer that the product is free from a certain defect, or the seller deliberately conceals the defect.
• The defect is customarily acceptable.
• information that indicates an individual’s membership of civil associations or institutions.
• The defect occurs after delivery, unless the cause of it existed prior to delivery.
• The sale was made at auction by judicial or administrative authorities.

Nonetheless, the CTL places an obligation on the buyer to inspect the condition of the purchased items promptly upon delivery. Failure to notify the seller of any defects within a reasonable timeframe will result in the buyer being deemed to have accepted the purchase item as is.

A 180 day statute of limitation is applicable to claim for warranty against defects, unless a longer period has been agreed upon or it can be proven that the concealment of a defect was a fraudulent act by the seller.

FREE FROM DAMAGE DELIVERY:

The seller must deliver the purchased item free from damage. If a purchased item is damaged before delivery due to the actions of the seller or a third party (not the buyer), the buyer will have the following options:

• cancel the sale;
• accept the damaged item and recourse for compensation from the responsible party; or
• information that indicates an individual’s membership of civil associations or institutions.
• terminate the sale of the damaged part of the item only.

If a purchased item is destroyed before delivery due to force majeure or any reason not attributable to the parties of the sale or a third party, the sale is terminated and the buyer must be reimbursed. If only part of the sold item is destroyed, the buyer can terminate the sale for that damaged portion alone or choose to cancel the entire transaction.

BUYER’S FINANCIAL RESPONSIBILITIES:

Unless agreed otherwise, the buyer must pay the price of the purchased item prior to delivery. If there is a deadline for the payment and the seller stipulates that the sale will be terminated if no payment is made by said deadline, the sale shall be deemed terminated if the buyer fails to meet the deadline, and the seller so elects, without the need for notification. The buyer is responsible for covering the costs of payment, delivery, the sale contract, and registration unless agreed otherwise.

Conclusion

The CTL provides a legal framework for contracts in Saudi Arabia, including contract of sale and contract of exchange, and outlines rights and obligations of the parties involved. This framework ensures that these contracts are legally binding and enforceable. While integrating Islamic Shari’ah law principles, this framework also promotes consistency and predictability by creating a standardized set of rules and principles which helps mitigate disputes arising from these contracts and provides legal recourse and remedies for breaches or conflicts. It specifies the essential elements required for the contract to be valid and enforceable and helps parties understand their warranties and obligations and the legal consequences of their actions.

File: uploads/1730744298326-CONTRACT OF SALE UNDER THE CIVIL TRANSACTIONS LAW (1).pdf

Saudi Arabia Government Announces Gradual Reopening of the Country

Date: May 31, 2020

Category: News

Preview: As of Sunday, May 31, the offices of Saudi Arabian ministries, government agencies and private sector companies will reopen and attendance to the workplaces will be implemented gradually

Description:

As of Sunday, May 31, the offices of Saudi Arabian ministries, government agencies and private sector companies will reopen and attendance to the workplaces will be implemented gradually, the Saudi Press Agency reported on Tuesday. Full attendance at the workplace shall be by Sunday, June 14, the Minister of Human Resources announced.

The Saudi Arabian Supreme Council of Judiciary announced that courts will resume hearings, virtually, on June 7. All cases that have been deferred from March 16 to June 12 will be heard virtually. Notices of hearings will be served electronically.

Wholesale and retail shops, malls, restaurants, cafes, as well as other economic and commercial activities will also be allowed to reopen to the public.

However, commercial activities where social distancing rules are difficult to achieve such as barbershops, beauty salons, sports and health clubs, will remain closed until further notice.

The decision shall ease the curfew in all cities other than Makkah. Movement between cities and regions will again be permitted. Domestic flights will be permitted, although international flights are still prohibited until further notice.

Later, on June 21, all curfews, other than in Makkah, shall be lifted.

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Civil Transaction Law of the Kingdom of Saudi Arabia

Date: May 15, 2024

• Khalid AlArfaj
• Abdulelah AlSalamah

Category: Insights

Preview: The Kingdom of Saudi Arabia has made a significant advancement in its legal framework by enacting the first Civil Transactions Law in the Kingdom (the “CTL”) , which came into effect on December 16, 2023. The CTL represents a substantial shift in the legal landscape of Saudi Arabia, as it codifies various principles of Islamic Law (Shari'ah) into a single set of code.

Description:

The Kingdom of Saudi Arabia has made a significant advancement in its legal framework by enacting the first Civil Transactions Law in the Kingdom (the “CTL”) , which came into effect on December 16, 2023. The CTL represents a substantial shift in the legal landscape of Saudi Arabia, as it codifies various principles of Islamic Law (Shari'ah) into a single set of code. With its 721 articles covering civil relationships, the CTL is one of the largest legislative issuances in the country's history and is seen as a cornerstone of Saudi Arabia's Vision 2030 reform plan to create a market that is attractive to local and foreign investors and align the governance of day-to-day transactions closer to international best practices. It also assimilates various international treaties and agreements to which Saudi Arabia is a party.

Below, we will speak generally about the CTL and its importance. As the CTL is a long legislation, we will issue other insights covering different subjects covered by the law.

Higher Level of Predictability

The CTL aims to provide a higher level of certainty and predictability in commercial transactions. The CTL covers a wide range of areas within business transactions that were not codified before including parties’ rights and obligations under general and specialist contracts, property rights, financial transactions, torts, damages and more. By codifying various principles of Islamic Law (Shari’ah) into a comprehensive civil code, the CTL aims to provide greater predictability and clarity in the application of transactions law in the Kingdom, as it reduces the discretionary application of Shari’ah principles by courts and judicial committees.

Retrospective Effect

One of the notable features of the CTL is its retrospective effect. Unlike previous laws where they typically applied prospectively, the CTL applies retrospectively, meaning it applies to contracts signed before the CTL’s effective date, unless:

1. a party has relied on a previous statutory provision or judicial principle that contradicts the provisions of the CTL; or
2. a statutory provision provides for a statute of limitation that has commenced prior to the CTL coming into effect.

Islamic Law (Shari’ah) Maxims

For situations not explicitly covered by the CTL’s articles or where further clarity is needed, CTL’s Article 720 provides 41 Shari’ah jurisprudential rules, offering a structured approach to filling legal gaps, to the extent that it does not conflict with other legal provisions.

Conclusion

The enactment of the CTL reflects Saudi Arabia’s commitment to modernizing its legal system and enhancing its business environment as part of Vision 2030. The CTL’s introduction is a strategic move to attract investments and streamline the governance of civil transactions. By providing a more predictable legal environment, the CTL is poised to enhance the attractiveness of the Saudi market to both local and foreign investors, thereby contributing to the country's economic growth and development.

File: uploads/1715822238789-CTL Article.pdf

Postponement of Full Enforcement of the Personal Data Protection Law

Date: March 24, 2022

Category: News

Preview: The Saudi Data and Artificial Intelligence Authority ('SDAIA') postpones the full enforcement of the Saudi Personal Data Protection Law

Description:

The Saudi Data and Artificial Intelligence Authority ("SDAIA") postpones the full enforcement of the Saudi Personal Data Protection Law (the "PDPL") until March 17, 2023. SDAIA stated that the decision to postpone was taken after receiving comments and views on the PDPL’s executive regulations draft during the public consultation period.

The PDPL applies to any personal data processing carried out in the Kingdom of Saudi Arabia by a controller or a processer.

For more information about the PDPL, please see review our insight: Highlights of the Personal Data Protection Law.

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Amendment to the Rules for Offering Securities and Continuing Obligations

Date: March 24, 2022

• Khalid AlArfaj
• Abdulrahman AlHusain
• Sarah AlShalan

Category: Insights

Preview: The Board of the Capital Market Authority approved the amendment to The Rules on the Offer of Securities and Continuing Obligations.

Description:

On March 3, 2022, the Board of the Capital Market Authority (the “CMA”) approved the amendment to The Rules on the Offer of Securities and Continuing Obligations. The amendments regulate an additional option through which the capital of companies listed in the capital market (both the main market and the parallel market (Nomu)) is increased through share issuance with the suspension of preemptive rights. This new option, now available for listed companies, is in accordance with Article 140 of the Companies Law, which states that the extraordinary general assembly of a joint-stock company has the right to increase its capital by issuing new shares with the suspension of preemptive right to shareholders.

Limitations

The maximum percentage of the capital increase with the suspension of preemptive right has been set at 15% of the issued capital. The CMA stated that it will continue to study this percentage and may increase it in the future. The amendments also limit the categories of investors to whom the shares are issued through this option to: “Qualified Clients” and “Institutional Clients,” as defined by the CMA. Investors owning the shares through this option may not dispose of such shares for six months following their listing date.

Issuance Requirements

Issuance through this option requires the submission of a prospectus in accordance with the requirements of Annex 10(a) of the Rules on the Offer of Securities and Continuing Obligations. But, unlike in the case of a rights issue, underwriting is not required.

Offering Period

The financial advisor, in consultation with the issuer, may extend the offering period stipulated in the prospectus before the period expires. But investors who subscribed before the extension have the right to cancel or amend their subscriptions.

Capital Increase Options

This new option comes as an additional option to the currently available options to increase the capital of listed companies, which are: 1) rights issue, 2) capitalization issue, 3) debt conversion, 4) acquisition of a company, and 5) asset purchase. All capital increase options require the approval of the CMA before convening the issuer's Extraordinary General Assembly. The approval of the issuer's Extraordinary General Assembly must also be obtained within six months from the CMA’s approval.

File: uploads/1720217816258-Amendment to the Rules for Offering Securities and Continuing Obligations (1).pdf

Energy Transition in Saudi Arabia

Date: March 15, 2022

• Khalid AlArfaj

Category: Insights

Preview: Kingdom of Saudi Arabia has been in the forefront of the environmental and energy news. Big changes are happening.

Description:

Kingdom of Energy

In the last couple of months, the Kingdom of Saudi Arabia has been at the forefront of the environmental and energy news. Big changes are happening in Saudi Arabia. Since 1933, when oil was first discovered in Saudi Arabia, the Kingdom has been perceived as a Kingdom of oil. As biggest producer of oil for long time, Saudi Arabia was always in the news whenever the topic of oil is considered.

The big change that we are witnessing, however, is the bold steps taken by Saudi Arabia, especially when appreciating the transformative reforms introduced as part of the Vision 2030 and the energy-specific initiatives pursued by the Ministry of Energy. As such, the Kingdom should no longer be seen only as a Kingdom of oil but recognized as a Kingdom of energy. As a global oil producer, Saudi Arabia plays a critical role in supplying energy to the world economy in a reliable and secure manner. At the same time, the Kingdom recognizes its responsibility in the fight against climate change and its role in the net-zero transition. Recognizing the need in mitigating the climate crisis, Saudi Arabia is already engineering innovative energy solutions to become an international leader in addressing the energy trilemma (providing energy in a secure, affordable and sustainable manner).

Clearly, Saudi Arabia has long-standing role in the energy world and as such plays a critical role for global trade and commerce. This gives the Kingdom an advantage that the Kingdom can utilize while transitioning to new sources of energy. The bold plans described below show the commitment that the Kingdom is undertaking to achieve its goal of becoming the biggest producer of energy, not just in oil but also in gas, renewables, hydrogen and the circular carbon economy as a whole, whilst be a key player in fighting climate change at home and abroad.

Saudi Green Initiative and COP26

In October 2021, Saudi Arabia held its own regional environmental conference, the Saudi Green Initiative (“SGI”) conference. SGI oversees all the Kingdom’s work to combat climate change. As a bold goal of SGI, Saudi Arabia announced in the SGI conference a "net-zero" greenhouse gas emissions plan by 2060.

Announced jointly with SGI, the Middle East Green Initiative (“MGI”) amplifies SGI’s efforts on an international scale, in coordination with Gulf Cooperation Council (“GCC”) countries, MENA region countries, and other international countries.

SGI brings together environmental protection, energy transformation and sustainability programs to work towards three goals: 1) reduce carbon emissions by more than 4% of global contributions, 2) plant 10 billion trees across Saudi Arabia, and 3) raise protected areas to more than 30% of total marine and land area.

Recognizing the complexity of reaching a “net-zero” emissions, Saudi Arabia is placing the circular carbon economy (“CCE”) framework at the heart of its climate change strategy. The CCE was a centerpiece of Saudi Arabia’s G20 presidency in 2020 and was endorsed by G20 leaders. It enables countries to manage their carbon emissions in their own way, at their own pace, while considering their own national economic and social circumstances. The CCE is based on four pillars: reduce, reuse, recycle and remove carbon emissions.

Saudi Arabia already started its CCE transition. The think-tank KAPSARC (King Abdullah Petroleum Studies and Research Center) has developed the CCE Index, which was unveiled to COP26 participants. The purpose of the index is to present common metrics that can be applied to the different countries and keep track of their gradual progress. Saudi Arabia participated in COP26 in Glasgow and emphasized the Kingdom’s keenness on climate change and environmental protection, as well as energy transition.

Carbon Capture and Reduction Technologies

Saudi Arabia is one of the largest oil and natural gas producers in the world with one of lowest costs in oil production and with Saudi oil being one of the lowest CO2 emitting crude grades globally. The Kingdom has developed also innovative and cost-effective technologies for carbon management, focusing on Carbon dioxide capture and sequestration, Carbon dioxide emissions reduction, and energy efficiency.

The Kingdom has presented its advances in the Carbon dioxide capture, utilization and storage technologies, removing 200 million tons of carbon emissions from the environment through the "reduce, reuse, recycle and remove" strategy. While having the lowest intensity of gas burning in gas plants in the world (less than 1%), Saudi Arabia plans to totally eliminate gas burning by 2030.

Renewable Energy

The National Renewable Energy Program (NREP) aims to significantly increase the share of renewable energy production. Saudi Arabia plans that by the year 2030, renewable energy and natural gas contribution to the overall national energy mix reaches 50%. It aims to stop burning oil for electricity by 2030; and have gas power half the grid and solar and wind power the rest. The Kingdom aims to produce 27.3GW of renewable energy by 2024 and to reach 58.7GW of renewable energy by 2030.

The Ministry of Energy’s Renewable Energy Project Development Office has been issuing RFPs (three rounds so far) to develop 30% of the 2030 target.

• The first round of renewable energy projects was in 2017. It included Sakaka (300 MW solar PV, now connected to the national electricity grid) and Dumat Al Jandal (400 MW wind, currently under construction, expected to be in commercial operation in 2022) projects.
• The second round was in 2019. It comprised of six solar PV projects amounting to 1,470 MW. The projects were divided into two categories: Category A, which target smaller companies, includes Rafha (20 MW solar PV) and Madinah (50 MW solar PV) projects. Category B includes Qurrayat (200 MW solar PV), Rabigh (300 MW solar PV), South Jeddah (300 MW solar PV) and Al Faisaliyah (600 MW solar PV) projects.
• The third round was in 2020. The projects were also divided into two categories. Category A includes Layla (80 MW solar PV) and Wadi Al Dawaser (120 MW solar PV) projects. Category B includes Saad (300 MW solar PV) and Ar Rass (700 MW solar PV) projects.

The Public Investment Fund (“PIF”) is committed to develop the remaining 70% of the 2030 target.

Hydrogen Energy

Saudi Arabia plans to become the largest hydrogen energy exporter, according to the Minister of Energy. Saudi Arabia has big potential producing blue hydrogen from its gas plants and it can make the world’s cheapest green hydrogen.

In July 2020, Neom, ACWA Power and Air Products announced plans to build the largest green hydrogen plant, powered by 4 GW of wind and solar energy, and producing 650 tons of green hydrogen daily for export to global markets. The plant will be based in Neom, a futuristic smart city located along the coast of the Red Sea in the Northwest of Saudi Arabia and is planned to be operational by 2025. Neom aims to be powered 100 percent by renewable and green hydrogen energy.

Saudi Arabia said it would use its Jafurah natural gas project to make blue hydrogen. Jafurah, one of the world’s biggest natural gas projects, is estimated to hold 200 trillion cubic feet of gas. A large portion of this gas will be used for blue hydrogen, according to the energy minister. The Kingdom’s national oil company, Saudi Aramco, stated that its large-scale blue hydrogen exports will probably begin after 2030. In 2020, Aramco exported the world’s first shipment of blue ammonia, which is produced by converting hydrocarbons to hydrogen then to ammonia and capturing the carbon dioxide byproduct. Aramco exported 40 tons of high-grade blue ammonia to Japan. Aramco is also investing in green hydrogen. In October 2021, Aramco Signed an MoU to develop a green hydrogen project in Saudi Arabia.

In 2019, Saudi Aramco and Air Products jointly built Saudi Arabia’s first hydrogen fueling station. This project as well as other research by different research centers in Saudi Arabia demonstrate the potential of hydrogen in the Kingdom’s transport sector. In December 2021, Aramco announced collaboration with French companies including a deal with Gaussin to explore manufacturing of hydrogen vehicles in Saudi Arabia.

Nuclear Energy

The King Abdullah City for Atomic and Renewable Energy (“KACARE”) was established in 2010 with the goal of developing an ambitious nuclear and renewable energy program. In 2017, the Kingdom launched the Saudi National Atomic Energy Project (“SNAEP”). The project focuses on four objectives: 1) large nuclear power reactors, 2) small modular reactors, 3) nuclear fuel cycle, and 4) legislative and regulatory framework. In 2018, Saudi Arabia issued the National Policy for the Kingdom’s Atomic Energy Program, the Law of Nuclear and Radiological Control, and the Law of Civil Liability for Nuclear Damage and established the Nuclear & Radiological Regulatory Commission (NRRC) as an independent agency monitoring nuclear energy and radiological emissions. The Kingdom also established the Saudi Nuclear Energy Holding Company (SNEHC), as an independent legal entity, to achieve the goals of the SNAEP by participating and investing in economically viable projects locally and internationally.

In 2019 the IAEA stated in its final report of its integrated nuclear infrastructure review (INIR) mission in Saudi Arabia that “significant progress” has been made in the Kingdom, including the establishment of a legislative framework and development of nuclear infrastructure.

Saudi Arabia plans to build two large nuclear reactors. In late 2021, news agencies reported that K.A.CARE is about to determine the winning technical advice bidder for its first nuclear power program.

Conclusion

While Saudi Arabia recognizes that oil and gas will continue to play a vital role in the global energy mix in the coming decades, the energy transition to cleaner sources of energy is already underway and the Kingdom will play a major role in this transition. Instead of being an observer, Saudi Arabia is taking the lead in this transition. With bold plans and initial steps, Saudi Arabia is diversifying its energy mix by adding hydrogen, renewable and nuclear energy to the existing oil and gas industry and is investing in innovative and cost-effective technologies for carbon management. Saudi Arabia is opening these projects to local and foreign investors. This makes Saudi Arabia an attractive market for energy companies that would like to be part of this big transition.

File: uploads/1720012115749-Energy Transition in Saudi Arabia.pdf

International Companies are Moving their RHQs to the Kingdom as Saudi Arabia’s RHQ Rules and RHQ Tax Rules Come into Force

Date: March 1, 2024

• Khalid AlArfaj
• Ghada AlMuataz

Category: Insights

Preview: In February 2021, the government of the Kingsom Saudi Arabia (the “KSA”) announced that by 2024 it would cease doing business with international companies whose regional headquarters (“RHQ”) were not based within the country.

Description:

In February 2021, the government of the Kingdom of Saudi Arabia (the “KSA”) announced that by 2024 it would cease doing business with international companies whose regional headquarters (“RHQ”) were not based within the country. The region is defined by the Ministry of Investment (“MISA”) as the Middle East North Africa (“MENA”) region.

Pursuant to MISA’s Investment Manual, an RHQ is a unit of a multinational group duly established under the laws of the KSA, “for the purpose of supporting, managing, and providing strategic direction to its branches, subsidiaries, and affiliates operating in the MENA region.”

The RHQ Rules:

Sarting from January 1, 2024, this requirement has come into force. New Controls for Contracting with Firms that do not have Regional Headquarters in the Kingdom and Related Parties (the “RHQ Rules”) were issued subsequently. Government entities are prohibited from contracting with companies (or their related parties) that do not have their RHQs in the KSA, unless exempted under the RHQ Rules.

The RHQ Rules exclude contracts whose estimated cost does not exceed SAR 1 million, or that are conducted outside the KSA. The RHQ Rules also permit governmental entities to accept offers submitted by companies without RHQs in the KSA in the following two scenarios:

1. When there is no more than one technically acceptable offer.
2. When the offer is the best out of all offers, and is 25% or more, less than the second-best offer.

The RHQ List

MISA, in coordination with the Ministry of Finance and the General Authority for Foreign Trade, will prepare a periodically updated list of Companies with no RHQ in the KSA and publish it in the government procurement unified electronic portal (“Etimad”). Companies on the list shall not be awarded government projects, unless exempted under the RHQ Rules.

Getting the RHQ License

The Ministry of Investment (“MISA”) issued its guidance to obtaining the RHQ License of establishing an RHQ in the Kingdom. The RHQ must be a centre of administrative control and not engage in revenue generating activities. Within a year of obtaining the RHQ license, the RHQ must employ at least 15 full-time employees, including at least three C-level executives.

Tax and Other Incentives Attracting International Companies

On December 5, 2023, MISA announced that there will be tax incentives for companies having RHQ in the KSA. On February 16, 2024, the Regional Headquarters Tax Rules (the “RHQ Tax Rules”) were issued on the official gazette. Effective as of the date of its publication, the new rules state that companies having RHQ licenses in KSA will enjoy, for 30 years subject to renewal, zero percent tax on eligible activities (i.e., 0% corporate income tax rate and 0% withholding tax rate related to eligible RHQ activities only).

International Companies Getting their RHQ Licenses

With the RHQ Rules and the RHQ Tax Rules coming into force alongside other incentives, more than 200 international companies, including Amazon, Microsoft and Google among other firms, have already received their RHQ licenses from MISA to establish their RHQs in Riyadh.

File: uploads/1710883304054-International Companies are Moving their RHQs to the Kingdom as Saudi Arabia’s RHQ Rules and RHQ Tax Rules COME into Force.pdf

New KSA Professional Companies Law and Implementing Regulations

Date: June 24, 2020

• Khalid AlArfaj

Category: Insights

Preview: On April 24. 2020. the Implementing Regulations of the new Professional Companies Law (the "Regulations") had been issued.

Description:

On April 24, 2020, the Implementing Regulations of the new Professional Companies Law (the “Regulations”) had been issued. The new Professional Companies Law issued pursuant to Royal Decree number M/17 dated 26/01/1441H (September 25, 2019) (the “Law”) replaces the old Professional Companies Law, issued pursuant to Royal Decree number M/4 dated 18/02/1412H (August 28, 1991) (the “Old Law”). Below is a summary of the most notable provisions of the Law:

Professional Company Definition

The Law defines the professional company as a civil company with a separate legal personality established by one or more individuals who are licensed to undertake one profession or more, alone or with other non-professionals for the purpose of providing these professions.

Corporate Form

Under the Old Law, a professional company was to be formed only as general partnership company (“GPC”). Currently, under the Law, a professional company may be formed as: 1) a GPC; 2) a joint stock company (“JSC”); 3) a limited partnership company (“LPC”); or 4) a limited liability company (“LLC”), as defined under the KSA Companies Law (2016).

Shareholders of a Professional Company

A professional company must be owned by at least one Saudi natural person who is licensed to undertake the profession that the company intends to undertake. For example, a Saudi licensed attorney is required to establish a professional company that undertakes the provision of legal services.

Single Shareholder LLC

For the first time, the Law now allows the establishment of a single shareholder professional LLC. This would be applicable to Saudi shareholders only as the Law requires that Saudi shareholders hold no less than 25% of any professional company’s share capital.

Foreign Professional Companies

Under the Law, non-Saudi professional companies may become partners of Saudi professional companies, as long as the share of the Saudi shareholders is not less than 25% of the company’s capital, as stated in the Regulations. To become a shareholder, the foreign professional company must: 1) have a distinguished reputation in its professional field in its home country; 2) have one or more representatives who have a license to practice the related profession in their home countries; and 3) transfer its expertise and technical knowledge to the Saudi professional company and train Saudi nationals in it.

The foreign professional company must obtain the license required from the authority regulating its profession in Saudi Arabia. The various authorities regulating different professions have specific requirements applicable to each respective profession. For example, the Ministry of Justice and the Saudi Bar Association regulate the law practice profession. The Ministry of Justice, along with the Ministry of Commerce and the Saudi Bar Association are working on a new project to amend the Code of Law Practice and its Implementing Regulations regulating the law practice profession in Saudi Arabia. The new proposed amendments would include provisions which would be applicable to foreign law firms and lawyers practicing law in Saudi Arabia. Once these amendments are approved, issued and enforced, they will regulate the activities of foreign law firms operating in Saudi Arabia and determine the specific requirements applicable to them.

Non-professional Shareholders

The Law also allows Saudi non-professional shareholders to become shareholders in a professional company, as long as the share of the professional shareholders does not fall below 70% of the company’s capital.

File: uploads/1720010657094-New KSA Professional Companies Law and Implementing RegulationS.pdf

Saudi Government Increases VAT Rate from 5% to 15%, Effective July 1, 2020

Date: July 1, 2020

Category: News

Preview: "As of July 1, 2020, the value-added tax (“VAT”) rate in Saudi Arabia increases from 5% to 15%. Saudi Arabia’s Value-Added Tax Law (the “VAT Law”) was published in 2017 and came into effect on January 1, 2018.",

Description:

As of July 1, 2020, the value-added tax (“VAT”) rate in Saudi Arabia increases from 5% to 15%.

Saudi Arabia’s Value-Added Tax Law (the “VAT Law”) was published in 2017 and came into effect on January 1, 2018. According to Article 2 of the VAT Law and Article 14 of the Value- Added Tax Implementing Regulations (the “VAT Regulations”), all imports and supplies of goods and services in the KSA are subject to VAT, except for zero-rated and exempt categories. Prior to the VAT rate increase, the standard VAT rate was 5%. The VAT Law is now amended to include the new rate, 15%.

As a measure to mitigate the negative financial and economic impact of COVID-19 on the government budget, the Saudi government announced on May 11, 2020 the increase to the VAT rate. On June 25, 2020, the General Authority of Zakat and Tax (“GAZT”) issued its guidelines for the VAT increase. The rate increase is applicable to all imports and supplies of goods and services subject to the 5% rate. The zero-rated and exempt categories will not be affected.

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Foreign Investment Permitted in Real Estate Listed Companies Operating in Makkah and Madinah

Date: January 29, 2025

Category: News

Preview: Effective January 27, 2025, the Saudi Capital Market Authority (the “CMA”) has approved foreign investment in listed companies that own real estate within Makkah and Madinah.

Description:

Effective January 27, 2025, the Saudi Capital Market Authority (the “CMA”) has approved foreign investment in listed companies that own real estate within Makkah and Madinah. This significant move aligns with the Kingdom’s goals to:

• Attract foreign capital.
• Enhance the capital market’s competitiveness.
• Provide necessary liquidity for current and future projects in the holy cities.

Key Highlights of the New Regulations:

• Foreign ownership is limited to shares or convertible debt instruments.
• Total foreign ownership is capped at 49% of a company’s shares.
• Strategic foreign investors are excluded from ownership.

This initiative aims to finance developmental projects in Makkah and Madinah while ensuring compliance with the Law of Real Estate Ownership and Investment by Non-Saudis, following the approval of the Controls for the Exclusion of Companies Listed in the Saudi Stock Exchange (Tadawul) from the definition of the Phrase (Non-Saudi) in accordance with the Law.

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Deadline for Compliance with Saudi Arabia's New Companies Law - January 18, 2025

Date: January 13, 2025

Category: News

Preview: The Saudi Ministry of Commerce has announced that, in accordance with the New Companies Law effective January 19, 2023, all companies must amend their Bylaws and Articles of Association issued under the old Companies Law, to align with the New Companies Law by January 18, 2025.

Description:

The Saudi Ministry of Commerce has announced that, in accordance with the New Companies Law effective January 19, 2023, all companies must amend their Bylaws and Articles of Association issued under the old Companies Law, to align with the New Companies Law by January 18, 2025.

Amendments for “alignment” can be submitted through the Saudi Business Center Platform with no publication fees currently applicable. Non-compliance by the deadline may result in legal action.

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Capital Market Law Amendment - Reforming Brokerage Licensing

Date: February 2, 2025

Category: News

Preview: The Capital Market Authority (the “CMA”) has launched a public consultation on proposed amendments to brokerage licensing requirements under the Capital Market Law. This initiative represents a significant step toward aligning Saudi regulations with international best practices, enhancing competition, and driving innovation in the Saudi capital market.

Description:

The Capital Market Authority (the “CMA”) has launched a public consultation on proposed amendments to brokerage licensing requirements under the Capital Market Law. This initiative represents a significant step toward aligning Saudi regulations with international best practices, enhancing competition, and driving innovation in the Saudi capital market. The reforms aim to:

• Enhance market accessibility and foster competition.
• Stimulate the growth of the asset management industry by developing the services provided in dealing and custody activities and promoting the development of innovative financial products and services.
• Reduce costs and improve service quality for market participants.
• Attract international brokerage firms to strengthen Saudi Arabia’s capital market.

Key Proposed Changes

The proposed amendments introduce greater flexibility by:

• Expanding legal structures (Article 32): Shifting the determination of legal structure for brokerage firms to the CMA’s implementing regulations, allowing firms to adopt legal structures suited to their activities rather than requiring joint-stock company status.
• Revising capital requirements (Article 33): Transferring the determination of minimum capital requirements for brokerage firms to the CMA’s implementing regulations, replacing the fixed SAR 50 million threshold.

Provide Your Feedback

The CMA invites stakeholders to submit their feedback on these proposed changes by February 20, 2025 (21/08/1446H) via:

• The Unified Electronic Platform for Public Consultation: istitlaa.ncc.gov.sa
• Email: Laws.Regulations@cma.org.sa

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Saudi Supreme Court’s Decision regarding the Covid-19 Pandemic Impact on Contracts

Date: February 17, 2021

• Khalid AlArfaj
• Alya AlEssa

Category: Insights

Preview: AlArfaj & Partners' managing partner Khalid AlArfaj authored the Saudi Arabia chapter of Mondag's M&A Country Comparative Guide.

Description:

The World Health Organization declared the COVID-19 as a ‘pandemic’ on March 11, 2020 (the “Pandemic”). Saudi Arabia and many other countries around the world implemented a series of precautionary measures to limit the spread of the Pandemic. Since then, many contracts governed by Saudi law have been impacted by the Pandemic and the related governmental measures.
Contracts in Saudi Arabia are governed by the principles of Islamic Law (Sharia). Under these principles, parties to a contract must abide by their contractual terms unless these terms are excused for a legitimate reason under Sharia or found to be inconsistent to Sharia principles and public policy or enacted legislation. To clarify the relevant judicial principles to be applied to contracts affected by the Pandemic, the General Authority of the Saudi Arabian Supreme Court (the “Court”) has issued its Decision Number (45/M) on 08/05/1442H (December 23,2020). The decision stated that the Pandemic will fall under:

• the exceptional circumstances category if a contract cannot be performed without an unusual loss; and
• the force majeure category if it causes the performance of a contract to be impossible.

Conditions for Application

The Court set the following conditions to apply what is stated in the decision on contracts affected by the Pandemic:

1. The contract was concluded prior to the Pandemic’s precautionary measures, and its implementation continues after the occurrence of the measures.
2. The impact of the Pandemic on the contract is direct and unavoidable.
3. The impact of the Pandemic on the contract is independent of any other cause.
4. The party affected by the Pandemic has not waived nor settled its rights.
5. The impact of the Pandemic was not addressed by a specific law or under a decision of a competent authority.

The Court also stated that the impact of the Pandemic on the contract should be severe and unusual. When assessing the impact, the contract’s activity and timeframe should be considered, and the assessment of the harm should not exceed the period in which the impact of the Pandemic appeared on the contract. One or more experts should do the assessment.

Modification of Contractual Obligations

The decision stipulated that courts, upon the request of the aggrieved party, and after balancing between the parties and considering the surrounding circumstances, may amend a contract impacted by the Pandemic as follows:

1. Property and movable assets lease contracts:
1. If it was impossible to use the leased property fully or partially due to the Pandemic, a court will reduce the rent to the extent that the normal intended use of the property was diminished.
2. The lessor does not have the right to terminate the contract if the tenant was late in paying the rent for the period during which it was impossible to use the property fully or partially due to the Pandemic.
2. Construction and supply contracts:
1. If the Pandemic leads to an increase in the cost of materials, labor wages or operations, etc., a court will increase the value of the contract for the obligor (contractor or supplier), to the extent of usual reasonable increase. The obligee (owner or customer) has the right to seek termination of the contract due to the price increase.
2. If the materials’ cost increase due to the Pandemic is temporary, a court will temporarily suspend the implementation of the contract.
3. If the Pandemic causes a shortage of materials in the market, a court will reduce the quantity to the extent it deems sufficient to protect the obligor from the unusual harm.
4. If the shortage of materials due to the Pandemic is temporary, a court will temporarily suspend the implementation, if the obligee is not seriously harmed by this suspension. If the obligee is harmed, the obligee may request termination of the contract.
5. If shortage of materials due to the Pandemic is permanent, which make it impossible to implement all or some of the contractual obligations, a court, at the request of one of the contracting parties, will annul the clauses that are impossible to implement.
6. If it is impossible to implement the obligation to perform the work under a construction contract due to the Pandemic, a court will suspend the implementation of that obligation for a temporary period. If the obligee is seriously harmed by this suspension, it may request termination of the contract.

Restrictions on Hearing COVID-19-Impacted Contract Cases

The Court stipulated that a court considering cases of contracts affected by the Pandemic must adhere to the following:

• Decline to enforce liquidated damages or other penalties or termination provisions included in the contract if the Pandemic was the reason for delaying the implementation of the obligation.
• Cancel the effect of any condition included in the contract that exempts a party from liability in the event of exceptional circumstances or force majeure.
• The burden of proof that the Pandemic has caused any breach of any obligation is on the party that breached the obligation.

Conclusion

The Court’s decision will clearly be relevant to cases involving contracts affected by the Pandemic. Parties to contracts affected by the Pandemic should be aware that the terms of their contracts may be modified by this decision. They should carefully consider the effect of this decision on their rights and obligations related to these contracts and plan to take the appropriate actions.

File: uploads/1720013943872-Saudi Supreme Court’s Decision regarding the Covid-19 Pandemic Impact on Contracts.pdf

Mergers & Acquisitions Comparative Guide

Date: February 14, 2022

• Khalid AlArfaj

Category: Insights

Preview: AlArfaj & Partners’ managing partner Khalid AlArfaj authored the Saudi Arabia chapter of Mondaq’s M&A Country Comparative Guide.

Description:

AlArfaj & Partners’ managing partner Khalid AlArfaj authored the Saudi Arabia chapter of Mondaq’s M&A Country Comparative Guide.

Click here to read https://www.mondaq.com/saudiarabia/corporatecommercial-law/1161334/mergers-acquisitions-comparative-guide

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Pillsbury announces intent to open in Riyadh partnering with Alarfaj & Partners: Pillsbury Alarfaj

Date: December 17, 2024

Category: News

Preview: Pillsbury has announced its intention to launch an office in Riyadh, Saudi Arabia, following its recent filing of required paperwork with the Saudi Ministry of Justice. While the license is still pending, Pillsbury intends to partner with local firm AlArfaj & Partners to establish its on-the-ground presence upon approval.

Description:

Pillsbury has announced its intention to launch an office in Riyadh, Saudi Arabia, following its recent filing of required paperwork with the Saudi Ministry of Justice. While the license is still pending, Pillsbury intends to partner with local firm AlArfaj & Partners to establish its on-the-ground presence upon approval.

After approval, the firm will be operating in Saudi Arabia under the name of Pillsbury AlArfaj. AlArfaj & Partners’ managing partner Khalid AlArfaj, a Pillsbury alum with broad expertise and an established reputation when it comes to Saudi corporate matters and energy projects, is expected to join the firm as partner at that time.

“Pillsbury has been involved in a wide range of work in the Kingdom over several decades, and the demands for in-country legal support are growing,” said Firm Chair David Dekker. “We’re hearing this from clients in all the U.S., European and Asian financial and technology centers in which we operate, and from within Saudi Arabia itself. Against that backdrop, the time is right to expand our commitment to the Saudi Arabia market and the wider Middle East region.”

“Through my experience working with Pillsbury in the United States, and our continued cooperation since I returned to Saudi Arabia,” added AlArfaj, “I have developed a deep appreciation for Pillsbury’s longstanding relationship with the Kingdom. In recent decades, the firm has been an important partner in the country’s development. Together, we can achieve great success for our clientsand for the Kingdom as a whole.”

AlArfaj has extensive experience practicing law in Saudi Arabia and the United States. His broad practice spans M&A, joint ventures, corporate structuring, restructuring and governance. He frequently supports IPOs, rights offerings in Saudi Arabia’s capital markets, and advises on private equity and venture capital transactions.

As the first lawyer on the Atomic Energy Team at King Abdullah City for Atomic and Renewable Energy, contributing to reviewing the Saudi Nuclear Law draft as well as Saudi Arabia’s international nuclear agreements, and through his tenure with Pillsbury's energy team in the United States, AlArfaj is highly regarded for his experience in energy. He advises international energy companies on projects and ensures compliance with regulatory requirements in Saudi Arabia.

Prior to founding AlArfaj & Partners, AlArfaj worked at several international law firms in the United States and Saudi Arabia, including Pillsbury. He is fluent in both Arabic and English, and is admitted to practice law in Saudi Arabia, New York and Washington D.C.

Pillsbury has a long history of notable work in and relating to Saudi Arabia, with the firm’s diversity of strong practices well-aligned with growing international interest and investment in the Kingdom. This has included engagements relating to groundbreaking energy, petrochemical and other infrastructure projects; major transactions for leading aviation, food & beverage, and hospitality brands; multinational tech start-up investments; and complex cross-border disputes.

Recent notable Pillsbury engagements relating to Saudi Arabia include:

• Advising the Ministry of Energy and the King Abdullah City for Atomic and Renewable Energy on the development of a civil nuclear power program in the Kingdom of Saudi Arabia.
• Advising Saudi investors, including HRH Prince Khaled bin Alwaleed bin Talal Al Saud, a well-known entrepreneur and investor, on investments both in Saudi Arabia and various other geographies.
• Represented Snap Inc. in connection with the opening of corporate offices in Saudi Arabia, and on corporate and public policy and marketing deals in the Kingdom.
• Represented joint lead managers, including Abu Dhabi Commercial Bank, on Saudi-based aircraft leasing company AviLease’s USD 2.5 billion aviation financing. The matter will be recognized as Transport Finance Deal of the Year at the 2025 Global Banking & Markets Saudi Arabia Awards.
• Represented the Saudi Bid committee, as a sub-contractor, on matters involving its 2034 FIFA World Cup Bid submission.

The firm’s standout reputation and long track record of innovation within the Energy, Technology, Financial, Real Estate & Construction and Life Sciences industries should be especially valuable to entities operating in the Kingdom given the priorities set forth in the country’s Vision 2030. Of particular relevance, the firm was recently recognized as the Energy Transition Law Firm of the Year in North America by the Financial Times for a second consecutive year.

Pillsbury’s broader Middle East practice consists of more than 40 practitioners across the globe who are actively working alongside clients in the region, on in-country, inbound and outbound matters. Pillsbury counsels clients based and operating in the Middle East on large scale energy and infrastructure projects; commercial transactions, including corporate formations, venture investments, public offerings, private placements, cross-border M&A transactions and sophisticated joint venture agreements; compliance programs and regulatory obligations; and complex disputes and arbitration.

Nadia Barazi, a London-based Pillsbury partner who leads the firmwide Middle East practice, said: “A Riyadh presence benefits all our clients with business interests in the region, whether they are based in the Kingdom or elsewhere. As Saudi Arabia’s economy continues its rapid ascent—with particular attention on the Energy, Technology, Financial, Real Estate & Construction and Life Sciences sectors—the opportunities available to companies and investors there are multiplying just as quickly. Pillsbury has a leading reputation in those industries and more.

About Pillsbury

Pillsbury is one of the world’s foremost law firms, advising technology companies and their investors, as well as clients in the energy and natural resources, financial, life sciences and digital health, real estate and construction, and other dynamic industries. From microchips to blue chips, Pillsbury advises clients ranging from entrepreneurs and startups working out of a garage to the largest public and private companies. The firm and its lawyers are known for their collaboration across disciplines, authoritative commercial awareness, and market leading practices that are consistently recognized by Chambers & Partners, Financial Times and other publications.

File: uploads/1734447985285-Pillsbury AlArfaj.pdf

New Thresholds for Merger Filings and Increasing Merger Control Enforcement in Saudi Arabia

Date: December 13, 2022

• Khalid AlArfaj
• Sarah AlQahtani

Category: Insights

Preview: On November 1, 2023, the Kingdom of Saudi Arabia’s General Authority for Competition (the “GAC”) announced significant revisions to its merger control notification thresholds.

Description:

On November 1, 2023, the Kingdom of Saudi Arabia’s General Authority for Competition (the “GAC”) announced significant revisions to its merger control notification thresholds. These changes, raising the minimum turnover threshold and adding local nexus requirement, along with the GAC increasing merger control enforcement demonstrate the GAC’s dynamic approach to merger enforcement and its commitment to addressing competitive concerns in the Kingdom.

New Thresholds:

Saudi Arabia’s Competition Law, enacted in 2019, (the “Competition Law”) introduced initial merger control notification thresholds based on parties’ turnover. A filing was initially required, by the Implementing Regulations of the Competition Law and the GAC Merger Review Guidelines, if the combined turnover of participating entities exceeded SAR 100 million (≈USD$ 26.6 million), leading to concerns of excessive filings for transactions with minimal impact on competition. In March 2023, the GAC raised the threshold to SAR 200 million (≈USD$ 53.3 million). The GAC also decreased the filing fee cap from SAR 400,000 (≈USD $106,666.6) to SAR 250,000 (≈USD $66,666.6). However, with the lack of a local nexus requirement, this adjustment still posed challenges, particularly for foreign transactions unrelated to the Kingdom. About two thirds of the 316 notifications received by the GAC in 2022 were submitted by foreign companies. On November 1, 2023, the GAC introduced the new thresholds applicable to mergers and acquisitions making it more challenging to trigger a filing requirement. Now, a local nexus requirement is included. A filing is mandatory only if all the below conditions are met:

1. Worldwide annual turnover of the parties exceeds SAR 200 million (≈USD$ 53.3 million).
2. Worldwide annual turnover of the targets exceeds SAR 40 million (≈USD$ 10.6 million).
3. Domestic annual turnover of a party or parties in the Kingdom exceeds SAR 40 million (≈USD$ 10.6 million).

These changes, integrated into the GAC Merger Review Guidelines with immediate effect, signify a positive shift, reducing unnecessary filings and allowing the GAC to concentrate on transactions with higher potential competition implications.

The GAC’s Increasing Merger Control Enforcement:

The revised thresholds align with heightened competition enforcement in Saudi Arabia. Under the Competition Law, the GAC can: 1) approve, 2) conditionally approve, or 3) reject the transaction, based on potential competitive effects.

• The Fund as a Special Purpose Entity


In late 2021, the GAC issued its first rejection (on procedural grounds) of a transaction, blocking the Germany-based Delivery Hero’s proposed acquisition (through a free zone UAE company) of its rival Saudi-based food delivery app The Chefz SPV Ltd (a registered UAE company as well).



• First Rejection on Substantive Grounds


In June 2022, the GAC issued its first rejection (on substantive grounds) of a transaction, blocking National Gas and Industrialization Co.’s (GASCO) proposed acquisition of a 55% stake in Best Gas Carrier Co., because of vertical competition concerns.



• First Conditional Approvals


In May 2023, the GAC issued its first conditional approval (setting requirements and conditions for the new entity arising from the acquisition) for Tadawul Advanced Solutions Co. (Wamid) to acquire a 51% stake in Direct Financial Network Co. (DirectFN). The GAC added that it will oversee the conduct of companies once the deal is closed to ensure parties’ commitment to the set requirements for three years. Similarly, in August and September of the same year, the GAC conditionally cleared the following transactions: Arabian Contracting Services Co.’s (Al Arabia) full acquisition of competitor Faden Media for SAR 1.05 billion (≈USD 280 million); and the Saudi based food delivery app Jahez International Company for Information System Technology full acquisition of its rival, The Chefz SPV Ltd. (the deal did not go through at the end). Conditional approvals include various commitments

Conclusion:

It remains to be seen but it is expected that the new thresholds will reduce the number of transactions reviewed by the GAC. The GAC is also expected to continue refining its merger control regime, demonstrating its proactive stance in adapting to evolving market dynamics. The combination of new thresholds and increasing merger control enforcement reflects the GAC’s commitment to fostering fair competition while analyzing transactions on an individual basis. As businesses navigate these changes, early engagement and transparent communication with the GAC become pivotal for successful clearances.

File: uploads/1707618832742-New Thresholds for Merger Filings and Increasing Merger Control Enforcement in Saudi Arabia.pdf

The New Commercial Courts Law and its Implementing Regulations: A Legislative Reform to Enhance Doing Business in Saudi Arabia

Date: August 12, 2020

• Khalid AlArfaj

Category: Insights

Preview: An effective dispute resolution system is essential for local and foreign companies undertaking business in the kingdom.

Description:

An effective dispute resolution system is essential for local and foreign companies undertaking business in the kingdom. As a step to enhance the business environment, the Saudi Commercial Courts Law (the “Law”) its Implementing Regulations (the “Regulations”) have been enacted. According to the Law and the Regulations, Commercial Courts have subject matter jurisdiction to hear:

1. Disputes arising between merchants due to their original or ancillary business.
2. Cases brought against a merchant over commercial contract disputes when the original claim’s value exceeds 500,000 Saudi Riyals.
3. Disputes between partners of a Mudaraba company. (Mudaraba company is a partnership in profit whereby one party provides capital and the other party provides skill and labor.)
4. Claims and violations arising under the application of the provisions of the Companies Law, the Bankruptcy Law, and other intellectual property and commercial laws.

File: uploads/1720010447551-New Commercial Courts.pdf

Amendments to the Investment Funds Regulation & Real Estate Funds Regulation

Date: April 6, 2021

• Khalid AlArfaj
• Layan AlQehidan

Category: Insights

Preview: The Capital Market Authority the "CMA" is the regulator of investment funds in Saudi Arabia. The CMA announced on March 1. 2021

Description:

The Capital Market Authority (the “CMA”) is the regulator of investment funds in Saudi Arabia. The CMA announced on 17/7/1442H (March 1, 2021) the amendments of the Investment Funds Regulation and the Real Estate Investment Funds Regulation (the “Regulations”), according to the resolution of the board Number (2/22/2021) in 12/7/1442H (February 24, 2021). The amendments to the Regulations will be effective as of 19/9/1442H (May 1, 2021), except for some amendments that will be effective as of other dates stipulated in the Regulations.

Introduction about Investment Funds

The CMA defines the investment fund as: “a collective investment scheme aimed at providing investors therein with an opportunity to participate collectively in the profits of the scheme which is managed by a fund manager for specified fees.” According to the CMA’s regulations, Investment funds have many types. In terms of the nature of the fund there are two types:

1. Open-Ended Investment Fund: “an investment fund with changing capital, the units of which would increase with the issuance of new units and decrease with redemption by unitholders of some or all of their units. Unitholders are entitled to redeem the value of their units at their net asset value on dealing days set in the fund’s terms and conditions in accordance with the Investment Funds Regulations.” Examples of open-ended funds include equity funds, money market funds, and debt instruments funds.
2. Closed-Ended Investment Fund: “any investment fund which is not an open-ended investment fund.” Rather, it is often capital-specific, and units are only allowed to be recovered at the end of the fund’s term disclosed in its terms and conditions or when the units are sold to other investors. Closed-ended investment funds may increase their capital by inviting participation in the fund if conditions and provisions permit. The closed-ended investment fund may or may not be traded. An example of a closed-ended investment fund is a real estate investment fund.

In terms of offering there are 3 types of funds:

1. Public Fund: an investment fund which is established in Saudi Arabia and its units may be offered to investors in Saudi Arabia in any way other than a private placement.
2. Private Fund: a non-public investment fund which is established in Saudi Arabia and its units may be offered by a private placement to investors in Saudi Arabia.
3. Foreign Fund: an investment fund, which is established in a jurisdiction outside Saudi Arabia and its units may be offered by a private placement to investors in Saudi Arabia.

Funds can also be classified by nature of assets to:

1. Equity Fund: is a fund that invests mainly in listed companies’ stocks.
2. Money Market Fund: is a fund that invests in short-term securities and money market deals. It is characterized with high liquidity, short-term maturity, and low-risk rates compared to other funds.
3. Debt Instruments Fund: is a fund that invests in debt instruments such as Sukuk and bonds issued by companies, government and semi-government entities or any other entity that can issue any kind of debt instruments.
4. Multi-asset Fund: is a fund that invests in several types of assets, such as stocks, debt instruments, money market deals, and other investment funds.
5. Fund of Funds: is a fund that invests all its assets in other investment funds.
6. Feeder Fund: is a fund that invests all its assets in another investment fund.
7. Balanced Fund: is a fund that combines between equities and debt instruments in its assets and devotes part of its investments to short-term financial instruments.
8. Index Fund: is an investment fund that tracks the performance of a specific market index.
9. These funds can be traded funds or non-traded funds. Traded investment funds are subjected to the same trading rules in the stock exchange, and investors can trade investment fund units like any security. The Investment Funds Regulation stipulatesinvestment restrictions on the various types of investment funds.
10. Real Estate Investment Fund: “a collective real estate investment scheme aimed at providing investors with an opportunity to participate collectively in the profits of the scheme.” The objectives of real estate investment funds include:
    • Initial development then selling.
    • Construction development then selling.
    • Initial or constructional development to leasing for a specified period then selling.
    • Ownership of properties to leasing for a specified period then selling.

If the real estate fund is traded, the value of its investments in developed real estate, capable of generating periodic rental income, must not be less than 75% of the total value of the fund’s assets. The fund must distribute no less than 90% of its net profits to the unitholders annually.

The New Amendments

• The Fund as a Special Purpose Entity
Prior to the new amendments, the contracting has been entered into between the fund manager and the unitholders directly. The new amendments have enabled investment fund managers to establish a special purpose entity so that the investment fund has a legal personality that can be contracted with. This reduces the risk to investors. Keeping the contracting between fund managers and unitholders is still an option. All provisions applicable to investment funds generally apply to investment funds in the form of a special purpose entity.
• Investment Funds Governance
The amendments included several aspects related to governance, to raise the level of governance in line with international best practices and standards. For example:
Strengthening the role of the board of directors of public funds and real estate private funds in monitoring and supervising the fund manager and protecting the unitholders. According to the Regulations, each fund is supervised by a board of directors, which must have no less than three directors. The number of its independent directors must be no less than two or one third of the total number of the directors, whichever is greater.
The amendments enhanced the definition and the role of the independent director, which contributes to a higher level of governance of these funds. Independent fund director has been defined to be fully independent of the fund manager. The fund manager does not have the right to remove any independent director. Independent directors may only be removed by unitholders. The board must also conduct an annual assessment of the extent to which the independence of each independent director has been achieved and ensure that there are no relationships or circumstances that affect or may affect its independence. A director who has any direct or indirect interest in a matter may not vote on any board resolution on this matter, and any such interest shall be disclosed to the board.
The amendments also raised the level of transparency and disclosure in the investment funds’ periodic reports, with a uniform time limit for the disclosure of financial statements and annual reports.
• Regulating Termination and Liquidation Proceedings
The amendments also included regulating the procedures for the termination and liquidation of public and private investment funds in line with international best practices and standards. As of 28/07/1443 AH (March 1, 2022), the fund manager must specify the fund’s termination provisions in the fund’s terms and conditions. For the termination and liquidation of a fund, the board must approve the termination and liquidation proceedings.
• Offering in the Parallel Market (“Nomu”)
Traded Investment funds are offered in the main market exchange (the “Exchange”). Nomu is the parallel stock exchange market in Saudi Arabia, with lighter listing requirements, and the investment in which is restricted to qualified investors. When the new amendments come into force, it will also be possible for the following funds to be offered in the parallel market (Nomu): 1) Real estate investment traded funds (REITs), 2) Closed-ended investment traded funds, and 3) Exchange traded funds, provided that the offering of their units is restricted to qualified investors.
• Buyback of Investment Funds’ Units
The new amendments enable close-ended investment traded funds and real estate investment traded funds to buy back its units through the market with the goal of keeping them as treasury units or cancelling them, in accordance with the specific provisions stipulated in the Regulations. These funds can also sell their treasury units through the Exchange under specific provisions. However, the sale is not required to take place through the Exchange if the treasury units are intended for use in exchange for the purchase of an asset in accordance with the fund’s terms and conditions.

File: uploads/1720011947672-Amendments to the Investment Funds Regulation & Real Estate Funds Regulation (1).pdf