Relaxation of foreign investment rules

In general, any non-GCC investment in Saudi Arabia resulting in ownership of a Saudi-registered entity requires approval of the Saudi Arabian General Investment Authority (SAGIA) and issuance of a Foreign Investment Licence.

Obtaining a Foreign Investment Licence can be a tedious and document-heavy due diligence exercise, requiring the submission of numerous different documents regarding the company’s history and future plans. All documentation is further subject to numerous procedural formalities, which can make the process more time-consuming and expensive.

Recently, obtaining a Foreign Investment Licence has become easier for publicly-listed companies with the implementation of the “10 Minute Licence”, whereby the applicant need only produce evidence that it is publicly listed on a regulated stock exchange in its home jurisdiction. In some cases, SAGIA will issue the 10 Minute Licence to wholly-owned subsidiaries of publicly-listed companies.

As Saudi Arabia’s reforms and liberalisations carry on in light of a new normal following the plummet of oil prices, the Kingdom continues to be open to foreign investment. Accordingly, SAGIA has further simplified the Foreign Investment Licensing procedures requiring only that an applicant submit evidence of its commercial registration in the jurisdiction of incorporation, as well as the previous year’s audited financial statements.

Saudi Gazette – 28 January 2018

Local media this month reported that the Saudi Enforcement Court (which has the power, inter alia, to enforce foreign judgments and arbitral awards) ordered a Saudi company to pay arbitral awards in the amount of around SAR 280 million (~ US$75 million) to two Japanese claimants who sought to enforce arbitral awards against the debtor in Saudi Arabia. This was an uncharacteristic show of transparency given that, in Saudi Arabia, judicial opinions are typically not published, dockets are considered private, disputes are not heard by juries, and courts are not open to the public.

Although reports indicate that the arbitral awards were issued by “an international jury”, it is not clear whether the arbitration proceedings were held in Saudi Arabia (and thus subject to the Saudi Arbitration Law) or whether the proceedings were held abroad.

Arab News – 21 January 2018

Privatisation of labour inspections

In the past, government employees have carried out inspections for government ministries in Saudi Arabia. In light of new austerity measures and tightened spending, the Ministry of Labour and Social Development (MOL) will hand over inspection responsibilities to the private sector. The MOL intends this this new measure to increase fee collections and improve supervision.

Companies doing business in Saudi Arabia may expect more frequent inspections, and should ensure that all operations are in compliance with the Saudi Labour Law, Saudisation requirements, and/or any additional MOL directives.

Saudi Gazette – 15 January 2018

40-hour work-week

The MOL has increasingly targeted certain industries and job categories for Saudisation. Recently, the MOL has decreed that such positions as HR directors, receptionists and security guards, and such industries as car rental and the retail industry with respect to certain categories of goods, may only be held/engaged in by Saudi nationals.

Under the Labour Law, the private sector’s workweek is 48 hours, with Friday as a paid day of rest. The public sector’s more relaxed schedule is thought to be (at least in part) why it is the largest employer of Saudi nationals. Thus, seemingly in an effort to attract more Saudis to the private sector and away from public sector employment, this month the Shoura Council approved a recommendation to limit the workweek for Saudised jobs and industries to 40 hours.

Arab News – 8 February 2018

The Shoura Council has approved new fines for employers based upon violations of the Labour Law. The new fines are as follows:

  1. Employers will be fined SAR 10,000 if they violate the leave entitlements of employees (which include paid vacation, religious pilgrimages, paid holidays, maternity leave, etc.).
  2. Employers will be fined SAR 10,000 if they allow a non-Saudi employee to work in a profession other than the profession specified in their work permit (iqama).
  3. Employers will be fined SAR 10,000 if they don’t open a file for the firm with the MOL or update the firm’s data.
  4. Employers will be fined SAR 10,000 if they fail to submit their Wage Protection System (WPS) file to the labour office (the WPS observes the payment of wages to employees to ensure that employees are paid in full, on time, and through electronic transfer).
  5. Employers will be fined SAR 15,000 if they fail to meet health and occupational safety requirements for their staff. The fine will be doubled for repeat offences.
  6. Employers will be fined SAR 2,000 if they keep an employee’s passport, residency permit or medical insurance card without the employee's consent.
  7. Employers will be fined SAR 10,000 for failing to draft and post Work Organisational Regulations (WOR) or failure to comply with the WOR.

Fines must be paid within one month of issuance and will be doubled if not settled before the deadline, but it is unclear whether this requirement will apply to all the new fines. Note also that these changes have not yet been formally issued, and thus, are not yet legally binding.

Lexis Middle East Weekly Spotlight – 2 February 2018

Saudi Customs has announced new fines for violators. Bill manipulations to evade tax or customs duty will incur a fine of between SAR 500 and SAR 5,000. The amount of the fine will vary depending on whether the goods are tax-free or not and the level of taxes applicable to the goods. Violators may also be subject to imprisonment for not more than two years and, in some cases, possible revocation of licences.

Saudi Gazette – 5 February 2018

In order to prevent any violation of its regulations, the CMA has imposed more serious sanctions. The CMA recently announced penalties exceeding SAR 1 billion and imprisonment of five years. These new sanctions are part of the CMA's continued efforts to enforce the requirements for listed companies, enhance the capital market, and help to achieve the Kingdom’s Vision 2030.

CMA – 9 February 2017