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20



Foreign Investment in the Kingdom of Saudi Arabia


In April 2000, the Saudi Arabian General Investment Authority (“SAGIA”) was launched to oversee the foreign investments in the country. The main objective of SAGIA is to empower the differentiated investments for building a sustainable economy. SAGIA represents the first such regulatory authority that will serve as the face for foreign investors, by virtue of being a primary licensing authority for those potential investors seeking to start a new business in KSA. Investors are given licenses, governed and also regulated by the SAGIA, which aims at promoting the investment opportunities in KSA across the globe, with emphasis on the field like energy, transportation, education, health, life sciences, and innovative, knowledge-based industries. Moreover, SAGIA also has a prominent role in offering the required support and guidance for the investors. SAGIA was originally functioning as a regulatory agency, has now placed more focus towards promoting investments and assisting potential investors. The official website touts many ‘strategic benefits’ for investors in the kingdom including great access to a large consumer and industrial market, with a population of 30.7 million, a well-qualified workforce, a strong supply of land for industrial and commercial real estate as well as utilities at highly competitive prices. It also mentions a positive regulatory environment, followed by incentives in a highly favorable tax environment.

 

The investment environment in Saudi has been witnessing constant changes following the implementation of Vision 2030 and the ambitious National Transformation Plan (2020). SAGIA also has relaxed restrictions which are applicable to foreign investors for enhancing the overall investment environment. SAGIA is also devoting more focus on attracting the large foreign entities, which led to the creation of Instant License service wherein eligible investors can obtain their licenses for in an expeditious manner.

 

According to foreign direct investment laws, foreigners can now invest in all sectors of the economy, except specific activities which are on a negative list such as oil and mining sector, the military services and some of the other services, etc. There is no longer a requirement for the foreign investors to tie up with local partners in many sectors and they can also own property for company related activities. They can even repatriate their company funds and sponsor their foreign employees, based on certain criteria specified in the Nitaqat (Saudisation) programme. For facilitating investments in the Kingdom, SAGIA has also created an exclusive Investment Services Centre (ISC). The ISC will be deciding to either grant or refuse a license to investors within a couple of days of an application from an investor.

 

It has even opened the doors for foreign investors to completely own 100% of the share capital of their investments in KSA in many diverse business activities, while meeting certain set of criteria. The Kingdom has permitted large foreign investors to make direct investments in its stock market. The Saudi Council of Ministers has also eliminated a requirement where retail and wholesale businesses which are operating in the kingdom must be about 25 percent Saudi-owned, thereby allowing complete foreign ownership of such enterprises. Foreign investors can now move ahead to establish full-fledged engineering consultancy firms by owning till 100% of their entities. The government has also privatized state-owned entities in key sectors such as aviation, energy, education, and healthcare. In the year 2017, Saudi Arabia made an announcement which gives foreign investors complete access to NOMU, a capital market which was launched for small and medium-sized enterprises. The kingdom is expected to sell some of its stake in the state-owned oil company Saudi Aramco which is expected to gain a windfall of $100 billion, even as few reports have indicated that the offering might be delayed till 2019, as a result of the current low level of global oil prices.

 

The Saudi Council of Ministers (CoM) has given its approval recently for complete foreign investments in sectors such as transport, audio visual, recruitment, and real estate sectors. Foreign direct investments (FDI) is now allowed in all the business activities which are not restricted to those that have to be undertaken exclusively by the nationals of Gulf Cooperation Council or companies which are owned by them. The list of prohibited business activities for the FDIs are also called as the "Negative List" (the Negative List) which are identified as such category by SAGIA.

 

SAGIA has made its policies open for foreign investors who can now establish the following legal entities to do business in Saudi Arabia.

 

1. Limited Liability Company (LLC).

2. Joint Stock Company.

3. Limited Liability One-person Company.

4. Foreign Company Branch

 

Limited liability Company (LLC) is the most common form of the legal entity selected by foreign investors in the Kingdom of Saudi Arabia. Starting an LLC involves a multistep process. Incorporation of an LLC may take about one week right from the date of submission of the application to the Saudi Arabia General Investment Authority (SAGIA) (or due to any delay which is caused by government authorities) and The Ministry of Commerce and Investment (MOCI) then issues a commercial registration certificate before this LLC is fully registered in KSA.

 

Foreign investors can even select establishing a branch rather than an LLC to do business in the KS. A branch can function on behalf of the parent company (foreign registered company) and there is no need for any separate legal existence in the KSA Registration of a branch related to the issuance of foreign investment license by SAGIA as well as the commercial registration certificate by the MOCI whose general procedure is similar to that of an LLC. Incorporating a new branch may take anywhere between one to two weeks. The parent company of the concerned branch will be liable for the branch's activities that it undertakes in the country. The paid-up capital for any branch involves no limitation of liability when compared to an LLC.

 

Although no statutory minimum capital requirement has been set in practice, SAGIA still requires foreign LLCs to have a minimum working capital of SAR 500,000. In a certain set of activities, the specific minimum capital which has been prescribed by SAGIA is as follows:

 

  • Service/property investment project value about SAR 30 million

  • Service/property financing projects with a value of SAR 200 million with a 40% shareholding by Saudi

  • Service/transport: SAR 500,000

  • Contracting: None (but there is a need for revenue/asset value)

  • Commercial (with a Saudi partner): About SAR 7 million along with a minimum contribution from foreign shareholder to the tune of SAR 20 million

  • Commercial (100% foreign owned): SAR 30 million

  • Agriculture: SAR 25 million

 

SAGIA also scaled down the average time which is required for issuing investment licenses from an earlier time frame of 53 hours to less than 4 hours currently. The recent set of policy initiatives that have been undertaken by SAGIA to restructure the business processes, reduce the total number of documents required, as well as for training and qualifying the cadres has resulted in notable progress.

 

The restructured processes are related to aspects such as issuing, amending and renewing the overall investment licenses. Earlier, eight documents were mandatory for getting an investment license, and this has now been reduced to two, such as financial statements and commercial registers which will be attested by a Saudi embassy from the region or country where the company seeking the particular investment license is based.

 

The official website of the SAGIA provides information to investors regarding the facility to renew investment licenses by themselves. SAGIA is undertaking several business-friendly initiatives for gaining more foreign investments to the Kingdom like reducing the overall requirements and duration of the issuing licenses, increase in the period of licensing for the foreign investment for 5 years, and approval for instant licenses and also reducing the list which is official excluded from foreign investments, and activating the e-services portal to facilitate the investors. These efforts have resulted in an increase of foreign direct investment by about 127% till the end of 2018, compared to previous year, and inking of 30 agreements at the forum of the future investment, with an estimated investment of about SR250 billion.

 

A number of works related to massive leisure and infrastructure related projects in Saudi Arabia is proceeding towards completion, while many other proposals are in earlier stages in a market, where the future vision is directed at increased diversification of its overall income sources. The Kingdom of Saudi Arabia is clear in its objectives to transform our understanding of what is innovation, aviation recreation, and invention. This presents a prime opportunity for international companies to be part of lucrative contracts worth hundreds of millions of dollars.

 

We at Khalil Khazindar Law Firm can help your company with the solid grounds to establish your presence in the Kingdom. We can provide you with tailored legal advice as a foreign investor on all laws and regulations, in addition to more guidance and help with foreign company licensing, joint ventures, incorporations, mergers, acquisitions, and liquidations. With us, you can legally invest in Saudi Arabia with so much of ease and confidence.








19



Investment Opportunities in the Kingdom of Saudi Arabia


Saudi Arabia, a Kingdom in the Middle East has emerged as one among the world's most attractive destinations for foreign investment recently, while also becoming an essential factor in the overall global economy. Saudi Arabia has been continuously evolving as one of the most attractive and investment friendly places in the world for doing business. Currently, it is a moment where profound changes are taking place in this Kingdom, offering investors a rare chance to be part of the market which has been reinventing itself, by means of an ambitious vision and an unprecedented pace of transformation.


Under the leadership of Crown Prince Mohammad bin Salman, Saudi Arabia, has made many moves right from 2015 to diversify its economy and attract significant foreign investors. The Vision 2030 is an economic plan which was released in the year 2016. It lists its pillars to make Saudi Arabia a leading global investment powerhouse, with a specific aim of increasing foreign direct investments from the current level of 3.8 percent of the gross domestic product (GDP) to an international level of about 5.7 percent by the year 2030. The World Bank had estimated in the year 2016 that foreign direct investments were only about1.2 percent of the Saudi GDP.


Saudi Arabia in the future, as an investment powerhouse is expected to be one of the key players in the 2030 vision. With the country already leading as the powerhouse of the Middle East, its current to emerge as one among the top 10 most competitive nations in the world is expected to be achieved with strategic foreign investments. This competitiveness will naturally bring global investors from all over the world, into one of the most lucrative markets.


Moody’s Investor Service has also recently affirmed the Kingdom’s A1 rating, providing a stable outlook. It had raised Saudi’s forecasts for GDP growth during the period (2018-2019) to both 2.5 percent and 2.7 percent respectively, when compared to the previous expectations of about 1.3 percent and 1.5 percent reported in April 2018, for the same period. These are the revised numbers from Moody’s which has surpassed the forecasts that were announced by its government in the preliminary statement, of the 2019 budget announcements on September 30th, 2018.


Trade and Investment System has also in the meanwhile made good progress in about seven major indicators, related to trade and investments in the Global Competitiveness Report 2018 which was issued by the World Economic Forum. The indicators are companies adopting changing ideas, shareholder governance, small and medium enterprise (SME) financing, behaviors towards entrepreneurial risks, and growth of innovation-based companies, as well as multi-stakeholder collaborations, along with robust audit and accounting standards. This remarkable progress in the Global Competitiveness Report, 2018 resulted in best progress in six years of the Kingdom, with 67.5 points, ranking about 39 out of the 140 countries which have been registered.


The Country’s Ministry of Commerce and Investment, along with its Capital Market Authority (CMA), also made progress in terms of the shareholders' governance index. The Kingdom moved to the fifth rank in the world, with a ranking of 72, a rise from the 77th rank globally in 2017. It now ranks first in the Arab world and second among G20. This progress has been made possible due to the actions, which have been aimed at improvement and creation of the investment environment as well as growing attractiveness of the financial markets.


These numbers show how Saudi Arabia has been making efforts for diversifying its income resources for promoting a sustainable economy with the country making a transition away from too much dependence on oil. It even highlights Saudi Arabia’s eagerness in opening its investment doors to the international market. The ambitious Saudi Vision 2030 and the National Transformation Plan which was launched by the Government for the implementation of the Saudi Vision 2030 places a strong emphasis on more involvement by the private sector and increased foreign direct investment in Saudi Arabia.


Despite low global energy prices, the Saudi Arabian market continues to offer a wide range of business opportunities. By announcing Vision 2030 as its roadmap to diversify its economy, Saudi Arabia has taken bold steps to address its dependence on oil, and also begin to open the market about other business fields such as trade, renewable energy, manufacturing, education and engineering activities.


The Saudi Arabian General Investment Authority (“SAGIA”) was launched to oversee the foreign investments in the country. The primary objective of SAGIA is to empower the differentiated investments for building a sustainable economy. SAGIA represents the first such regulatory authority that will serve as the face for foreign investors, by virtue of being a primary licensing authority for those potential investors seeking to start a new business in Saudi Arabia. Investors are given licenses, governed and also regulated by the Saudi Arabian General Investment Authority (SAGIA), which aims at promoting the investment opportunities in Saudi Arabia across the globe, with emphasis on the field like energy, transportation, education, health, life sciences, and innovative, knowledge-based industries. The official website touts many ‘strategic benefits’ for investors in the kingdom including great access to a broad consumer and industrial market, with a population of 30.7 million, a well-qualified workforce, a stable supply of land for industrial and commercial real estate as well as utilities at highly competitive prices. It also mentions a favorable regulatory environment, followed by incentives in a highly favorable tax environment.



The investment environment in Saudi has been witnessing constant changes following the implementation of Vision 2030 and the ambitious National Transformation Plan (2020). SAGIA also has relaxed restrictions which apply to foreign investors for enhancing the overall investment environment. SAGIA is also devoting more focus on attracting the large foreign entities, which led to the creation of Instant License service wherein eligible investors can obtain their licenses for in an expeditious manner.


Several business-friendly initiatives are being undertaken by SAGIA for gaining more foreign investments to the Kingdom like reducing the overall requirements and duration of the issuing licenses, increase in the period of licensing for the foreign investment for 5 years, and approval for instant licenses and also reducing the list which is official excluded from foreign investments, and activating the e-services portal to facilitate the investors. These efforts have resulted in an increase of foreign direct investment by about 127% till the end of 2018, compared to previous year, and inking of 30 agreements at the forum of the future investment, with an estimated investment of about SR250 billion.


Foreign Direct Investments in Saudi Arabia increased by about 779 USD Million during the third quarter of the year 2018. Foreign Direct Investments in Saudi Arabia averaged about 4167.18 USD Million from the year 2006 to 2018. The Saudi Arabian General Investment Authority (SAGIA) report for Q3 of the year 2018 has indicated an increase in the overall number of licenses which have been offered to the foreign and local companies that are investing in Saudi Arabia by a figure of more than 90 percent when compared with the same period during 2017. Recent moves aimed at opening the workforce to women, improvement in women’s mobility by taking away the ban on women driving and reforms in the male guardianship system is also partly aimed towards improving the kingdom’s overall image among the foreign investors.


After Saudi Arabia became a full-fledged member of the WTO in the year 2005, the foreign investment environment in the Kingdom has seen substantial improvement. When seen from an investor's point of view, the strong points of the country are:

World’s largest oil reserves

Economic stability

1.) Vast local market with a high spending power (a population of over 27 million)

2.) Economic diversification strategies (Saudi Vision 2030)

3.) Strong infrastructure

4.) Consolidated finances

5.) Well planned and regulated the banking system

 

There are many investment opportunities especially in the key sectors of its central economy like the Oil sector, building, information and communication technologies, the automobile industry, as well as health, pharmaceutical industry, and defense etc. The leading potential sectors are franchising, tourism, electricity, banking, mines. The Supreme Economic Council had also launched a privatization programme in the year 2002 itself, that enabled privatization of the 20 state-owned companies. During the end of 2017, the government announced a new series of programs for privatization with an aim to raise the US $200 billion that is expected to be achieved through the sale of public companies in the field of health, education, milling, airports, and hydrocarbons. There are even plans to raise more than US$ 100 billion by selling 5% stake in the public oil behemoth Saudi Aramco on the world stock exchanges.


Earlier, the policy of Saudi Arabia was centered mostly on wooing the investors from abroad through glitzy trade shows and international visits.  But in recent years, the kingdom has been organizing various high-profile events to attract potential investors so that they can become familiar with the country and then explore vast business opportunities. Some of these events include the Formula E Grand Prix race in Ad Diriyah, a WWE wrestling event which was organized in Jeddah and also the recent hosting of Italian Super cup in Jeddah. These events are creating more interest for foreign investors to land in the country and experience Saudi Arabia in a completely different way and witness the transformation on ground level, as part of efforts in projecting Saudi Arabia also as a leading leisure destination.


Many works related to massive leisure and infrastructure related projects in Saudi Arabia is proceeding towards completion, while many other proposals are in earlier stages in a market, where the future vision is directed at increased diversification of its overall income sources.


Neom city is being created in Tabuk, in Saudi Arabia’s northwest corner. It is being built on a diverse terrain, which is sheltered by massive mountains and fresh air from nearly 450 km of the Red Sea’s coastline. Neom is expected to stretch eventually spanning the Egyptian and Jordanian borders, thus emerging as the first such mega private economic zone that spans three countries.


Qiddiya is named by the region in which it is situated. It is located about 40 kilometers from the center of Riyadh city and boasts of spectacular views of mountains, desert, and valleys. Jeddah’s airport has been expanded to handle an ever-increasing number of international flights.


One more under-construction mega project is in the Red Sea, where visitors can explore some of the kingdom’s hidden treasures. It also includes a nature reserve with a stunning diversity of flora and fauna, based the foothills of an old, dormant volcano.


Saudi Arabia’s General Entertainment Authority is expected to organize more than 5,000 festivals and concerts which is twice the number of the previous year and made announcements for pumping about $64 billion into the entertainment sector in the next decade.


The Riyadh Metro is a mega project which is expected to transform the lives of people living in the capital city. It is one of its kind infrastructure projects ever in the history of Riyadh. It also involves a rapid, urban rail and bus network along with first such high-speed electric trains between Makkah and Madinah which have already commenced operations.  The General Authority for Civil Aviation has inked contracts for development and services of a brand new Taif International Airport with a new group of companies. The airport is coming up on a massive area of 48 million-square-meter about 40 kilometers from the city of Taif and 117 kilometers from the holy city of Makkah. It will entail an investment of $800 million and is expected to commence operations by 2020.


A consortium of global companies is creating a brand-new business park called the Oasis of Technology. It has been created as a joint venture between the King Abdul Aziz City for Science and Technology and the well-known Morganti Group. The 35 million-square-meter area will be accommodating projects for manufacture and assembly of Antonov aircraft, solar panels and developing solar energy.  There is also a new Industrial City coming up, which is the first of its kind in Taif Province on an area of 11 million-square-meter, about 55 kilometers from the city center and nearly 29 kilometers from the airport. The first phase involving $32 million first phase is expected to attract light, medium and heavy industries along with a vocational training center. A new university is being built at Saysed National Park. There are other plans involving 16 separate projects, entailing an area of 16 million square meters, at a massive cost of $530 million.


Al Faysaliya, the city, located to the West of Mecca, is being created to house large residential units, mega entertainment centers, along with an airport and a seaport. The project covers a total area of 2,450 sq. Km and will be ready by 2050.  King Abdullah’s Economic City is the first city under Kingdom’s free ownership system which features a deep-sea water port, a sporting, and entertainment center, a 55 sq. Km logistics center, and more than 6000 residential estates. The King Abdullah Financial Center will be attracting banks and leading financial service companies, and it will be home to financial auditors and lawyers, bringing the Saudi financial market (Tadawul) and the Capital Market Authority at one location.


The Economic Knowledge City is considered the first city in the Kingdom of Saudi Arabia under the Saudi Smart Cities development program. Located in Madinah, it will focus on companies specializing in intellectual property, key knowledge-based industries, hospitality, medicine, tourism, and multimedia. The Prince Abdulaziz Bin Musa’d Economic City, will be a 156 sq. Km multipurpose city located in Ha’l to the north of the Kingdom, which will see the development of an international airport, shopping centers, residences, hotels, and entertainment facilities.


The Kingdom of Saudi Arabia is clear in its objectives to transform our understanding of what is innovation, aviation recreation, and invention. This presents a prime opportunity for international companies to be part of lucrative contracts worth hundreds of millions of dollars.



We at Khalil Khazindar Law Firm can help your company with the solid grounds to establish your presence in the Kingdom. We can provide you with tailored legal advice as a foreign investor on all laws and regulations, in addition to more guidance and help with foreign company licensing, joint ventures, incorporations, mergers, acquisitions, and liquidations. With us, you can legally invest in Saudi Arabia with so much of ease and confidence.






07



New Labor Courts in Saudi Arabia to expedite settlement of labor disputes


Saudi Arabia launched its first labor court in October 2018 for the first time in history, as part of reforms in the legal system.

The objective of these new labor courts is to organize the labor market, protect the workers and boost direct and indirect investment. These labor courts are among the latest in the series of specialized courts that was launched by the Kingdom. The specialized courts have been created to new standards for the courts across the Islamic Kingdom.

In total, there are seven courts established in major cities like Riyadh, Dammam, Makkah, Jeddah, Madinah, Abha, as well as Buraidah. In addition to this, 27 circuit courts were also established in various provinces and the governorates while six appellate courts will be reviewing judgments which are issued by the lower courts. The judges of labor court have vast experience and were trained specially to handle the labor cases.

Earlier, the labor disputes were under the jurisdiction of the country’s Ministry of Labor and Social Development, while the Primary Commissions for the Settlement of Labor Disputes addressed the employee grievances which lacks real judicial powers. The new structure, which has been approved by the Saudi Supreme Judicial Council, makes way for the labor disputes now to be resolved inside the specialized labor courts, which fall under the Ministry of Justice.

According to Article 34 of the Law of Civil Procedures, that came to effect before the Shari’a courts, the labor courts exercise jurisdiction over any disputes related to wages, rights, employment contracts, labor injuries, and providing compensation to it. It also deals with disputes related to the imposition of disciplinary penalties by the employers on employee or the exemption thereof; lawsuits applied for executing the penalties created through the labor law; disputes which arise due to lay-off; complaints made by employers and employees whose objections are against any agreed resolution, and issued by any of the competent bodies in the General Organization for the Social Insurance, related to the subscription, registration, or compensation; disputes between employees subject to labor law provisions including the civil servants as well as disputes which arise due to the application of labor law and social insurance laws without any prejudice to the current competencies of other courts as well as the Grievance Board.

The new labor courts will have procedures that will be entirely digital for expediting the settlement of disputes since labor courts are integrated with all the government bodies which are relevant to the areas of law that considers. The concept of paperless-court reduced procedures which are bureaucratic and also reduced the period for judicial execution orders from two months earlier to 72 hours now.

According to this new system, the justice ministry categorized the labor cases into three categories like 1) Dispute between employee and employer 2) matters related to the domestic workers, and 3) complaints made by employees as well as employers against the decisions issued by the General Organization for Social Insurance (GOSI) related to the registration, subscription, and compensation.

In the first set of the category, employer or the employee should be filing a case with the concerned labor office to work for an amicable settlement according to the directives which has issued by the Council of Ministers. In case, there is no settlement within a period of 21 days; the labor offices should be reporting the status of the dispute in an electronic form to the labor court for proceeding with the necessary judicial procedures. It is important to note that the labor minister has recently approved the proposed amendments for rules and procedures regarding arriving at an amicable settlement of the labor disputes. This involves 26 articles and standard definitions of the terms, along with that of proper format for general rules, procedures for sessions, jurisdictions, and regulations for issuing the final verdicts because it is the Labor Ministry which grants the licenses for people while mediating labor disputes. The office of General Administration for Amicable Settlement of Disputes and the Ministry of Justice will coordinate to make arrangements involving the electronic transfer of cases to labor courts in a situation where the two parties are unable to arrive at an amicable settlement to this dispute.

The labor courts will not be accepting claims which are beyond 12 months old after terminating the contractual relationship which exists between the employer and employee. The courts will be considering such cases only if the claimant can  provide a valid excuse which is acceptable to the court regarding the delay that has occurred in filing the lawsuit beyond the12 month period or if the defendant doesn’t raise any objection to the legal right of the aggrieved party in filing a lawsuit at any period of time and the lawsuit has to be preceded by a complaint made to the labor office for taking up the necessary procedures for amicably settling the case between employee and the employer. In situations where the labor office fails in resolving the dispute, then it will consent for the concerned parties to approach the labor court.

These labor cases can also be filed collectively by many of the workers in the labor court provided the Supreme Judicial Council gives a ruling against such a move. Labor disputes turn into collective when it arises between the employer and then two or more of his employees. While this case is being considered, there is no right by the employer to modify or alter the terms and conditions of the particular contract.

In the category of domestic workers, the complaint of the domestic workers or by the employers will be referred to a separate committee for reconciliation within five days. In case there is a failure to settle, this committee will be pronouncing its decision within the next ten days. There are also provisions for appeal against the committee’s decision at the labor court through electronic means.

Regarding the complaints of workers and employers against the GOSI decisions involves three phases. Firstly, the employee or even the employer has to register the case with the relevant department concerned under GOSI. This is followed by clients who can now appeal the decision by the department to GOSI. If this appeal is overturned, then the employee or employer would be able to approach the labor court.

Labor courts and panels have commenced exercising their legal jurisdiction vigorously, as stressed in the Civil Procedure Law. The labor courts have notably issued rulings in absentia against those companies which have failed from attending the hearings despite being given electronic summons and the judgments which are now issued are final, and not subject to any contest or appeal.

Before the labor courts were established, the hearings were being postponed several times when the case defendants failed to appear. With new labor courts being established along with the introduction of electronic subpoena which specifies the time and also the place of the hearing, the case would be considered and taken up, even if the defendant doesn’t appear in court. The labor courts might be issuing their verdicts during the initial session itself especially if the plaintiffs show all the required documents since the courts were started to give the quick ruling on all labor disputes with an objective that the interests of the employees will be safeguarded.

The decision has identified about six minor types of cases which cannot be legally contested after the first instance court issues a judgment. For example, this includes cases with a financial claim of less than SR20,000, experience certificate request, or the documents of workers kept by the previous employers, and complaints made regarding the decisions of the commissions over domestic employment.

The labor courts will also be imposing fines against the companies and even establishments which delays the disbursal of employees’ salaries. The penalties represent double the amount that has to be duly paid to the employees. The amount will now be deposited in the Human Resources Development Fund (Hadaf) for supporting the employment of more Saudi citizens in the private sectors. The ministry hopes that the real threat of fines will substantially reduce the situations where employers delay payments of the salaries to their employees.

Labor courts across the Kingdom of Saudi Arabia have issued more than 1,860 verdicts in January 2019 alone according to statistics posted on the portal of Justice Ministry. It is also important to note that the recent verdicts given by labor courts reflect the protection of employee’s rights while taking into account verdicts like 1) instructing the owner of a medical center for paying the unpaid monthly wages to a nurse who has been on contract from a year. 2) awarding SR1 million in compensation for a Saudi employee after he was sacked from his job without reason, in addition to the unpaid salaries and terminating the end of service benefits. 3) forcing a company towards compensating a female Saudi employee who was removed without reason from her job. 4) ordering a government agency to increase the salaries of five Saudi employees retroactively based on the qualifications and the official salary scale of the agency. 5) ordering a foreign consulate to pay nearly half a million Saudi riyals to a Saudi citizen after it had arbitrarily dismissed from his service after four complete years of work.

The transfer of the labor courts to the Kingdom’s Ministry of Justice is only the latest episode in the workplace where the specialized justice system is being applied as stipulated in the Saudi Law of the Judiciary.  This strategy is to end the employees’ woes in general and then expatriates in particular as it expedites the quick delivery of justice while adhering to the relevant regulations and also effective judicial processes. It will be ending the protracted court proceedings while resolving labor disputes, even as the new courts would be ensuring the stability, as well as safety, and attractiveness of the local job market in tune with the goals of Saudi Vision 2030.

 

 

by Firoz Mohammed, Senior Associate - Khalil Khazindar Law Firm. Khalil Khazindar Law Firm can represent you with tailored legal advice on labor laws and regulations. Please contact us if you would like further information on these reforms or other important developments in the Kingdom of Saudi Arabia.