Saudi Arabia: Introduction of the New Investment Law

22 Aug 2024    2 minute read

In brief

The Ministry of Investment of Saudi Arabia ("MISA") has published a new Investment Law (the "Investment Law"), which will replace the Foreign Investment Law issued by Royal Decree No. (M/1) dated 5/1/1421 H (corresponding to April 10, 2000) and its executive regulations issued by the resolution of the Board of Directors of the General Authority for Investment -MISA's predecessor - No. (2/74) dated 12/5/1435 H (corresponding to March 13, 2014).

The Investment Law aims to further Vision 2030 by facilitating the diversification of Saudi's economy and enhancing its competitiveness as a global investment hub. The law was drafted after conducting a thorough study with a detailed research methodology/ benchmarking exercise to consolidate best international practices. (Benchmark jurisdictions included Indonesia, Singapore, Germany, the U.A.E., Turkey, and the U.S.A.) The Investment Law will come into force 180 days after its publication in the Official Gazette and its implementing regulations will be issued within the same period.

Contents

Key Takeaways

Following are key takeaways from the new law:

  • The Investment Law calls for re-evaluating the existing restrictions on foreign investment in certain economic activities and for treating domestic and foreign investors equally, subject to considerations of public order. It also introduces a mechanism for foreign investors to apply to engage in restricted activities on a case-by-case basis.
  • The Investment Law reaffirms and broadens provisions in the Foreign Investment Law for guaranteeing investors the right to repatriate funds, including profits and proceeds of liquidation or sale of the investment, and protection from expropriation and supplements these with guarantees of equal treatment of local and foreign investors under similar circumstances, protection of intellectual property and trade secrets and facilitation of administrative procedures and provision of necessary governmental support, including available information and statistical data.
  • The Investment Law anticipates granting incentives for investment in certain sectors (e.g. tax or regulatory exemptions) according to specific objectives and pre-announced eligibility and evaluation standards.
  • The Investment Law calls for the replacement of the current foreign investment licensing process with a simplified registration procedure.
  • The Investment Law introduces a new penalty regime that distinguishes between serious and less serious violations by taking into account the frequency of the violation, the size of the facility and the severity of the penalty. In the case of non-serious violations in particular the investor may avoid penalties by responding to a warning.
  • The Investment Law provides for investors to avail themselves of alternative dispute resolution mechanisms including arbitration and mediation.

The details of how the provisions of the Investment Law will be implemented (e.g., which activities will continue to be restricted for foreign investment, how the new registration process will work, what incentives will be offered) will need to await the issuance of the Implementing Rules and the actual practices followed under the new law. We will be providing further analysis in due course. Clearly, however, the Investment Law is a significant and positive step towards further developing Saudi's investment framework. Should you require assistance regarding any investment related matters, please feel free to contact us.

Contact Information
Zahi Younes
Partner at BakerMcKenzie
Riyadh
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zahi.younes@bakermckenzie.com
Tamim AlKhudhayri
Partner at BakerMcKenzie
Riyadh
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tamim.alkhudhayri@bakermckenzie.com
Hala Redwan
Associate at BakerMcKenzie
Riyadh
hala.redwan@bakermckenzie.com
Bushra Ismail
Associate at BakerMcKenzie
Riyadh
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bushra.ismail@bakermckenzie.com

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