Investment project planning and protection are crucial components of successful business ventures, particularly in the Kingdom of Saudi Arabia (KSA), As one of the fastest-growing economies in the Middle East, Saudi Arabia offers a dynamic environment for investors, driven by the ambitious Vision 2030 program, This initiative seeks to diversify the economy, reduce dependence on oil, and create a thriving, sustainable future for the Kingdom.

In this context, understanding the intricacies of planning and safeguarding investments is paramount, also This article explores the key strategies and legal frameworks that investors need to consider to ensure their projects are well-planned and protected in Saudi Arabia, providing a comprehensive guide for navigating this promising yet complex market.

Investment Treaty Planning

what is investment treaty? As part of the Saudi Government’s “Vision 2030” plan to reduce the country’s long-term reliance on oil, the Kingdom of Saudi Arabia (KSA) is actively developing alternative domestic sectors, including retail, manufacturing, construction, energy, finance, mining, hospitality, and tourism, To achieve this ambitious transformation, the KSA aims to increase foreign direct investment twenty-fold to approximately $100 billion a year by 2030, also This includes reforming the foreign investment landscape by permitting 100% foreign ownership in specific sectors and streamlining the business approval process.

Companies investing overseas often structure or restructure their operations to benefit from protections under bilateral, multilateral, or regional investment protection treaties, These treaties govern a state’s treatment of investments made by individuals or companies from another state, also They not only require host countries to provide extensive legal protections for foreign investments, often surpassing those available under local law, but also offer investors powerful rights of action and procedural remedies against host governments that fail to meet their obligations.

To fully leverage the benefits provided by the KSA’s investment treaties, companies should carefully consider the optimal structuring of their projects as early as possible, also This proactive approach ensures that investments are not only strategically planned but also adequately protected, enabling businesses to thrive in Saudi Arabia’s evolving economic landscape.

Saudi Investment Protection Treaties

Saudi Arabia is part of a comprehensive network of bilateral investment treaties (BITs), multilateral investment treaties (MITs), and regional investment treaties, which provide robust legal protections for foreign investors.

Bilateral Investment Treaties: Saudi Arabia has entered into BITs with numerous countries, including:

• Japan
• Uzbekistan
• Czech Republic
• Belarus
• Ukraine
• Sweden
• Turkey
• Singapore
• Spain
• Switzerland
• Azerbaijan
• Indonesia
• Republic of Korea
• Austria
• BLEU (Belgium-Luxembourg Economic Union)
• Malaysia
• Germany
• Italy
• China
• France
• Philippines

If your company is incorporated in one of these countries and you are looking to invest in Saudi Arabia or tender for work as an international contractor, it is crucial to seek advice on maximizing your legal protections.

Additionally, Saudi Arabia has signed treaties with Iraq, Jordan, and the Philippines, although these are not yet in force.

You May Also Read: Investment Opportunities & Requirements In Saudi Arabia

Key Protections Under BITs

 While each BIT is individually negotiated and its specific terms may differ, they typically include the following substantive protections:

• Protection Against Expropriation/Nationalization: Ensures compensation and due process.
• Fair and Equitable Treatment: Guarantees a fair treatment environment.
• Full Protection and Security: Provides physical protection of investments.
• Non-Discrimination: Ensures no unfair treatment compared to other foreign investors.
• National Treatment: Offers the same treatment as given to nationals of the host state.
• Most Favoured Nation Treatment: Provides treatment no less favorable than that given to nationals of any other country not party to the BIT.
• Guarantee of Repatriation: Allows for the repatriation of investments and returns.
• Commitment to Observing Obligations: The host state commits to honoring all obligations related to the investor, whether under the treaty, a contract, or otherwise.

Importantly, BITs also offer procedural protection to foreign investors. In the event the host state fails to meet its obligations, investors typically have the right to resolve disputes through international arbitration, rather than relying on the host state’s courts.

Multilateral and Regional Investment Treaties

MITs and regional investment treaties function similarly to BITs but involve multiple states. Saudi Arabia is a member of several MITs and regional investment treaties, including:

• The Arab League Investment Agreement (1970)
• The GCC Economic Agreement (1981)
• The OIC Investment Agreement (1981)
• The EC-GCC Cooperation Agreement (1988)
• The GCC-Singapore FTA (2008)
• The GCC-EFTA FTA (2009)

These treaties provide a framework for investment protection and facilitate a more secure and predictable environment for foreign investments in Saudi Arabia, ensuring that investors can navigate the complexities of the market with greater confidence.

You May Also Read: Best Commercial Lawyers in Saudi Arabia

Investment principles and policies in Saudi Arabia

Saudi Arabia’s principles and policies are designed to create a dynamic and diverse economy that attracts both domestic and foreign investments, Guided by the overarching Vision 2030 initiative, the Kingdom aims to reduce its reliance on oil by fostering growth in various other sectors.

 Here are the key principles and policies shaping the investment plan in saudi arabia landscape:

1. A guarantee between non-Saudi and non-Saudi investors, and between non-Saudi investors.
2. Ensuring protection for all investments, as required by UK data.
3. Sustaining investments and dealing with investors in a clear manner.
4. Providing incentives when investing, except for the full requirement when rewarding, also Providing a list of investment incentives and granting them according to general, clear, and non-discriminatory criteria.
5. Saudi and non-Saudi members of the Board of Directors and employees are also bound by the regulations related to all members of the Board of Directors in accordance with the national regulations and policies and international agreements to which Saudi Arabia has joined.
6. Facilitating entry procedures for non-Saudi employees, including technicians, administrators, and their families, A dedicated arrangement in the Kingdom to facilitate use in relation to foreign investments in accordance with the Kingdom’s regulations and international obligations.
7. Transfer and localization of science and technology arising from investment in particular, in accordance with the Kingdom’s international obligations

How to Qualify for Investment Treaty Protection

Qualifying for protection under Saudi Arabia’s investment treaties hinges on meeting the specific terms of each treaty, also Investors must demonstrate that they are a qualifying “investor” with a qualifying “investment” made in Saudi Arabia.

Qualifying as an “Investor”: The definition of an “investor” is usually broad, encompassing both companies and individuals with the nationality of the home state, A company’s nationality is often determined by its place of incorporation, However, some more restrictive treaties may require that companies conduct sufficient business activities in the home state to qualify.

Qualifying as an “Investment”: Treaties generally define “investments” in broad terms, covering any kind of asset that an investor owns or controls, directly or indirectly. This can include shares, moveable and immoveable property rights, intellectual property rights, debt instruments, and claims to money.

To minimize potential jurisdictional challenges from the host state if a dispute arises, a careful and early assessment is crucial.

You May Also Read: 25% Localization of Engineering Professions in Saudi Arabia

Advantages of investing in Saudi Arabia

As we mentioned previously, the Kingdom of Saudi Arabia has become one of the most important countries attracting local and foreign investments for the following reasons:

• The Saudi government is increasingly seeking customer facilities for investment.
• The impact of limited liability companies on investment in Saudi Arabia without being bound by a small capital requirement.
• The Saudi government obliges investors who invest Saudi citizens in their projects, for a sufficient period, for the Human Resources Development Fund to pay a portion of their projects.
• Adjustment adjustment and purchasing power in the Saudi market.
• Eliminate restrictions on the Saudi economy, which is highly encouraging to economists.
• Investing in natural investments in the winter of 2018 and sources rich in natural energy, such as natural resources such as petroleum and petroleum.
• Establishing clear laws and regulations for the International Finance Corporation, which investors must understand.
• Providing adequate protection for investors increases in the absence of any diversification, thanks to the fair governance that the Kingdom enjoys.
• The Saudi government is keen to develop the Internet of Things numbers for the country, which attracts the largest possible number of investments.

Maximizing Investment Treaty Protection in Saudi Arabia

To fully leverage Saudi Arabia’s investment treaties, investors should strategically structure their investments to benefit from a BIT, MIT, or regional investment treaty, This often involves channeling investments through a company in an investment treaty-friendly jurisdiction, either through a group entity in that territory or a special purpose vehicle.

Timing Is Critical: The timing of a restructuring is critical, also Investment tribunals generally consider restructuring a project solely to benefit from investment treaty protection after a dispute has arisen as inadmissible.

Therefore, it is advisable for investors to consider investment treaty planning at the very outset of their projects, If this is not possible, investors should review what treaty protection may be available at any time before a dispute arises, also This proactive approach ensures that investments are not only strategically planned but also adequately protected, enabling businesses to thrive in Saudi Arabia‘s evolving economic landscape.

Ways to invest in Saudi Arabia

For Saudis and growing investors, there are many investment methods in the Kingdom of Saudi Arabia, the most notable of which are the following:

1- Banking investments

Saudi banks have a group of savings and deposit accounts that can be invested in, the most prominent of which are: Riyad Bank, Saudi Investment Bank, Banque Saudi Fransi, First Saudi, and Arab National Bank.

2- Real estate investments

The real estate investment market is reasonably available, because real estate is an asset that is completely after its price, and the Kingdom of Saudi Arabia has witnessed reasonable activity in this field in recent years, due to the Saudi government’s lack of interest in the field of housing.

There are many real estate investment assets in the Kingdom, also They have diversified into buying real estate or real estate and then selling it after a period, or building real estate on real estate owned by investors and then selling it, or buying a real estate property and then selling it.

3- Investment funds

Investment is the goal that aims to collect capital from investors, and managers specialize in managing it to realize investment funds regulations for investors, also Saudi banks include a group of investment insurances that he pays, but he did so well and reviewed the special performance reports over recent years before putting his money into any of them.

4- Investing in gold

Therefore, investing in gold is one of the most prominent investment methods in Saudi Arabia, as it has led to the production of gold from any investment investment by providing significant returns or an increase in times of pressure in the market, or providing or improving performance for preservation.

Many investors take advantage of gold prices from time to time, buying it when they sell it, and selling it when its prices begin to rise.

5- Investing in the future

These are financial assets that will benefit from the loan of a sum of money to a government agency or institution, and they will benefit from it by obtaining the value of what he paid for the added material and a percentage of profits that is not determined in advance.

You May Also Read: New Saudi law to boost private sector participation in 16 key areas

What is investment planning?

Investment planning is about investing your savings in assets that generate growth and income consistent with your financial plan, Your investment portfolio should be diversified, The diversified portfolio includes non-traditional investments in alternative assets from different categories, sectors and geographical regions that respond differently in different market conditions to optimize returns against risks.

Requirements for upcoming investment projects in Saudi Arabia

Saudi Arabia, under its Vision 2030 initiative, has outlined specific requirements and guidelines for upcoming investment projects, also These requirements are designed to ensure that investments align with the Kingdom’s economic diversification goals and provide substantial benefits to both investors and the local economy and Here are the key requirements for investment projects in Saudi Arabia:

• Each company must have a trade name in Arabic or another language, and it may be the chosen name, or a distinctive name, or one or more names of several variations, or any of them with double or previous verbs, or a strong one, provided that it does not violate the names and regulations, Other laws and laws of the United Kingdom.
• Every company established in accordance with the provisions of the law shall have an incorporation, just like the magazine company, the simplified magazine company, the limited liability company owned by one head, Each of them shall have an bylaws, and the company’s articles of incorporation or bylaws must include the provisions, conditions, and data required by the law in a manner consistent with Formation of the company and The company’s incorporation or articles of association must be in Arabic, and may be read by translation into another language.
• You must be a partner or a partner in the business or in kind, or both, with regard to what is between the magazine and the simplified shareholding companies, and you must be a partner in the business in exchange for a percentage in the amount of which the company decides to determine, and his share must be what he has of the student or a subscription, The cash shares and the in-kind shares alone constitute the company’s capital.
• They sent an application to establish the company and register it in the commercial registry, accompanied by the articles of incorporation or the articles of association and the data and documents necessary to form the company. The commercial registry in the request contains the necessary data and documents in accordance with the provisions of the system.
• The company carries out its purposes after being registered with the commercial registry and obtaining the necessary licenses for this from the collective associations, if any.
•  Obtaining the personal company into consideration after its presence in the commercial registry, however, your company is within the period during which the personal trust has the required capacity to establish it, provided that it obtains the tax classification.

Requirements to establish foreign investment projects in Saudi Arabia

Therefore, no one else can invest abroad, and the following are required to establish foreign investment projects in Saudi Arabia:

• Foreign investments take place in the Kingdom of Saudi Arabia, where the company is owned by a local investment and a foreign investor, or an institution wholly owned by a foreign investment, and this form is limited to seeking a limited liability company, a joint stock company, a branch of a foreign company, or any legal form that emerges, Board of Directors of the General Governing Authority.
• Obtaining a license from the Saudi Ministry of Investment, whether eligible to obtain a visa or invest foreign capital in any investment activity.
• The activity required to invest in must not be among the list of activities excluded from foreign investment and their related provisions in the Special Services Guide of the Ministry of Investment in 2022.
• The technical specifications of the product and its production method must be according to Saudi, Gulf or international specifications.
• The applicant must not have had a law or judicial ruling issued against him due to law violations of the provisions of the foreign investment system in Saudi Arabia.
• He did not commit a mistake in the financial or commercial laws, whether inside or outside the Kingdom.
• We are committed to seeking justice with conditions, controls, declarations, and legitimate undertakings through a judicial application form for investment.
• Verifying the investment goals and objectives of the Ministry of Investment in Saudi Arabia.
• A request form for requesting a registration request electronically through the official website of the Ministry of Justice, fulfilling the required documents either in Arabic or having them translated into Arabic from an accredited office in Saudi Arabia.

Investment treaty planning is a crucial step for protecting your projects in Saudi Arabia. With the Kingdom’s ambitious Vision 2030 driving economic diversification and attracting foreign investments, understanding and leveraging investment treaties can provide significant legal protections and strategic advantages, By structuring your investments to benefit from bilateral and multilateral treaties, you can safeguard your interests, ensure fair treatment, and access international arbitration in case of disputes. 

Early and informed planning not only mitigates risks but also positions your projects for long-term success in one of the world’s most dynamic and rapidly evolving markets, As Saudi Arabia continues to open its doors to global investors, being proactive in your investment strategy will be key to navigating and thriving in this promising landscape.