On August 10, Saudi Arabia’s Minister of Investment, Khalid Al-Falih, announced that the updated Investment Law and its executive regulations will take effect at the beginning of 2025.
The Council of Ministers approved the updated investment law, consolidating it into a single framework aimed at offering investors greater transparency, flexibility, and confidence. According to a statement from the Ministry of Investment, the new law is designed to regulate all investments in the Kingdom, whether owned by local or foreign investors, natural or legal entities, and including government-owned investments. Exceptions apply to special economic activities and zones governed by their own specific laws and regulations. The law ensures that investors will enjoy, at a minimum, the rights stipulated within it.
Key Provisions of the Updated Law
The updated Investment Law introduces several key provisions that distinguish it from the previous Foreign Investment Law, with the primary aim of levelling the playing field for all investors in the Kingdom and improving the business environment. Among the most notable changes are:
- Unified scope: The new law applies to both domestic and foreign investors, ensuring that all are subject to the same regulations and protections. This marks a significant departure from the previous regime, which had separate provisions for foreign investors.
- Registration Over Licensing: In a move to streamline processes, the requirement for investment licensing has been replaced with a simpler registration process within the Ministry of Investment. This change is expected to reduce bureaucratic hurdles and make it easier for investors to enter the Saudi market.
- Economic Activity Freedom: The law grants investors the freedom to engage in economic activities, with exceptions limited to a list developed by the Ministerial Standing Committee. This list will be based on objective criteria, promoting fairness and clarity in the investment process.
- Capital Transfer Freedom: Investors will have the freedom to transfer capital without delay, a provision that underscores Saudi Arabia’s commitment to facilitating business operations and improving investor confidence.
- Intellectual Property Protection: The updated law places a strong emphasis on the protection of intellectual property and confidential business information, aligning with global best practices and ensuring that investors’ innovations and proprietary information are safeguarded.
- Expropriation Provisions: The law addresses both direct and indirect expropriation, outlining clear provisions to protect investors’ assets from unjust government seizure, thus providing a more secure investment environment.
- Violation Clarifications: The executive regulations will delineate what constitutes serious and non-serious violations by investors, along with the corresponding fines for such violations introduces by the updated law.
- Dispute Resolution: In cases of disputes between investors and a government authority, investors are granted the right to take their cases to a competent court. Furthermore, the law allows for arbitration, provided that the government authority obtains the necessary approvals in accordance with the Kingdom’s laws and regulations.
Impact on the Investment Climate
The updated Investment Law represents a significant step forward in Saudi Arabia’s ongoing efforts to attract and retain investment. By providing a more transparent and equitable legal framework, the Kingdom is positioning itself as a more attractive destination for global investors. However, while the Ministry of Investment is committed to promoting alternative dispute resolution, it is important to exercise caution and undertake careful investment planning, given the current lack of a ‘default’ dispute arbitration option.
Cardinals specialises in the protection of investments. Should you require legal advice regarding the structuring of your investment in the Saudi Arabian market with a view to optimising its protection, we can provide expert guidance and support to assist you.
