Saudi Arabia Update – March 2018

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Anti-bribery and corruption

New anti-corruption bodies 

As mentioned in our November / December Update, November 2017 saw an unprecedented corruption “crackdown” in the Kingdom involving influential local businessmen and officials, followed by assurances from a high level that corporations and those doing business in Saudi Arabia should not be affected by the proceedings. 

Following on this trend, King Salman announced this month the creation of new anti-corruption bodies under the auspices of the Public Prosecution Office specialising in prosecution and investigation of corruption and bribery in Saudi Arabia.

Arab News – 12 March 2018

Saudi Arabia’s Corruption Perception Index

Transparency International’s newly-issued 2017 Corruption Perception Index rankings appear to support the validity of the latest trends against bribery and corruption in Saudi Arabia.

Saudi Arabia’s ranking (from most corrupt to least corrupt countries) jumped five places from number 62 in 2016 to number 57 in 2017. Further, the overall score for Saudi Arabia, on a scale of 0 (highly corrupt) to 100 (very clean) increased from 46 in 2016 to 49 in 2017 – which is higher than the regional average of 33.

Saudi Gazette – 24 February 2018

Foreign investment

SAGIA licence: five-year validity 

Foreign investment licences are currently issued for a period of one year by default. However, as mentioned in a previous update, in June 2017 the Saudi Arabian General Investment Authority (SAGIA) announced new provisions whereby certain companies can purchase an online service allowing them to renew their foreign investment licences for a period of up to five years.

In line with recent trends aimed at easing foreign investment limitations and obstacles, SAGIA announced this month that companies will have the option to issue their foreign investment licences with up to five years’ validity. This announcement, however, did not specify whether or not the categories and fees announced in June 2017 are still applicable.

Saudi Gazette – 27 February 2018

Digital payments business

E-commerce is a growing industry in Saudi Arabia. In a sign of further growth, SAGIA has issued the first foreign investment licence for “payment solutions business” to PayFort – an Amazon company specialised in digital payment services in the Middle East.

As SAGIA becomes more efficient and pragmatic, it will be interesting to see how the licensing regime takes shape in light of ongoing reforms and liberalisations.

Saudi Gazette – 25 February 2018

Atomic Energy in Saudi Arabia

As the Kingdom prepares to begin utilising nuclear energy, the Cabinet of Ministers has approved a national atomic policy setting out the purposes and needs of a nuclear energy programme in Saudi Arabia. The policy emphasises that Saudi nuclear plants are only to be used for peaceful purposes and calls for advanced safety measures, including best practices for the management of radioactive waste.  

It is expected that contracts will be awarded to companies specialising in this field for construction of the first nuclear power plants in Saudi Arabia, with 16 reactors to be constructed over the next 20 years for around US$80 billion.

Arab News – 14 March 2018

Rare change in the SAGIA Negatives List

The general rule in Saudi Arabia is that foreign investment in all sectors and activities is permitted. However, certain sectors require a minimum Saudi shareholding, while others are completely closed to foreign investment. Such prohibited activities are enumerated by SAGIA in what is colloquially known as the “Negatives List”, which includes recruitment and employment services.

It is rare to see any changes to the Negatives List; however, this month SAGIA and the Ministry of Labor and Social Development (MOL) announced that foreign investment in recruitment agencies for domestic workers would be permitted. Applicants are required to have a minimum of three years’ experience in domestic workers’ recruitment activities.

Only time will tell if additional changes to the Negatives List take place in the wake of fast-moving liberalisations in foreign investment.

Saudi Gazette – 19 March 2018

Administration of justice

Protection of intellectual property

Saudi Arabia is signatory to several international intellectual property treaties, including the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works. As a member of the World Trade Organization, Saudi Arabia is also subject to the Agreement on Trade Related Aspects of Intellectual Property Rights.

Nevertheless, enforcing IP rights in Saudi Arabia can be time-consuming and unpredictable and, in practice, typically requires in-Kingdom registration of the IP in order to enforce. 

In that regard, the courts have reported that a total of only 173 IP theft cases have been heard before the courts within the past two years. This is an apparently low number that may be indicative of the inefficacy of pursuing IP infringement cases in Saudi Arabia. 

Saudi Gazette – 27 February 2018

Automation of courts system

Litigation in Saudi Arabia can be a time-consuming and unpredictable process requiring two years or more in many cases. 

In recent years, Saudi Arabia has been engaged in a drive towards automating all government services and bringing such services online to the furthest extent possible. To that end, the Ministry of Justice (MOJ) has sought to increase the efficiency of the court system by introducing electronic filing and paperless communications.  

This month, the MOJ announced new measures within the commercial courts whereby all administrative and office tasks associated therewith will be fully automated. This means that cases will be heard a maximum of 20 days after filing, whereas the post-filing wait time in the past has been a minimum of two months.

Hailed as a measure aimed at facilitating the quick resolution of commercial disputes, it will be interesting to see how the judiciary continues to evolve as foreign investors wary of the opaque legal system in Saudi Arabia seek to enter the market.

Saudi Gazette – 5 March 2018

Enforcement of judgments

Following a successful claim, enforcement against the judgment debtor in Saudi Arabia is required to take place in the Enforcement Courts.

In that regard, the MOJ has reported an increase in the value and number of petitions filed for enforcement, as well as new rules protecting plaintiffs. The MOJ notes that, in one month, enforcement petitions increased by 24 per cent when compared to the same month the previous year. Further, the value of claims increased from SAR 13.9 billion to SAR 23.7 billion.

According to new rules, the Enforcement Courts now require the judgment debtor to deposit the full amount claimed by the petitioner with the court or risk imprisonment for failing to do so.

Because the process of enforcing judgments in Saudi Arabia can be time-consuming and unpredictable, the requirement of depositing the judgment amount with the Enforcement Courts may have the effect of bringing adverse parties to the settlement table more quickly and earnestly in the future.

Saudi Gazette – 25 February 2018

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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