The Saudi legislative system witnessed significant social, legal and regulatory developments in 2021. A number of reforms focused on entertainment options for the Saudi population and further steps in facilitating the ability of women to participate in the workforce.
A number of new laws were passed that may impact Shariah compliant investors including in the following areas: privatization, healthcare, data protection, construction and waste management. One of the biggest developments was confirmation from the Saudi Capital Market Authority that foreign investors may now invest in funds that invest in the holy cities of Mecca and Medina.
Despite COVID-19 challenges, Saudi Arabia had a record year in terms of non-oil revenues, with a remarkable volume of mergers and acquistions (M&A) activity led by healthcare, petrochemicals, banking and finance. Saudi Arabia also completed the largest banking merger in April 2021, when SAMBA Financial Group merged with National Commercial Bank, forming the largest bank in Saudi Arabia, the Saudi National Bank, with US$239 billion in total assets. Additionally, there were nine public offerings on the main stock market and six in the secondary market.
The Kingdom also continued to invest through the Public Investment Fund in specific sectors, including entertainment and tourism, announcing ‘the Line’ and ‘OXAGON’ cities in Neom, as well as Six Flags Park in Qiddiya.
Review of 2021
The Kingdom issued many laws and regulations and recently announced the approval of the new Evidence Law. In the following, we highlight some of the laws that we think will be of particular interest to Islamic investors.
The National Center for Privatization issued the Privatization Law in March 2021. The Privatization Law structures the elements of the relationship between governmental entities and private parties in privatization projects. The Privatization Law targets local and foreign investment to optimize state-owned assets.
Personal Data Protection Law
Like many components of the international data protection laws such as the GDPR, the Personal Data Protection Law (PDPL) aims to minimize data usage and provides security over the data of subjects. The PDPL applies to the processing data including in relation to businesses and public entities in Saudi Arabia, as well as the data of Saudi nationals located outside the country. Strict penalties stipulated in the law include fines and imprisonment.
Contractors Classification Law
This law forbids government entities from dealing with unclassified contractors. The Ministry of Municipal and Rural Affairs and Housing (MOMRAH) is the issuing and supervising authority of contractor classification in coordination with the relevant authorities. Contractors are to be qualified based on their credit rating, technical and capabilities criteria.
The law allows contractors to form consortiums provided one of the parties is licensed with the classification required for such a project. Foreign contractors are subject to this law and may potentially be exempted by the Council of Ministers in certain circumstances.
Medical Devices Law
This law delegates the supervision and registration of medical devices to the Saudi Food and Drugs Authority. This law also further clarifies that nuclear and radiological devices must work in coordination with the Nuclear and Radiological Regulatory Authority. This law outlines penalties for violations and non-compliance.
Waste Management Law
Saudi Arabia has adapted a new waste management law and enabled MOMRAH to collect waste collection fees for a period of two years. This law regulates waste collection activities and the aftercare of waste disposal sites. This law clarifies the state ownership of the waste when placed in containers or other specified sites and prevents scavenging. This law entails imprisonment of up to 10 years and/or fines of up to SAR30 million (US$8 million) for disposing waste that forms a risk to public health or damages the environment.
Human Organ Donation Law
This law sets forth the licensing requirement, processing conditions for organ transplantation and obligations of the medical facilities. It authorizes the Saudi Center for Organ Transplantation to license and supervise the relevant medical facilities. This law provides certain protections for donors and compensation for the heirs. It also states the prohibitions in relation to organ transplantation. There are also certain inspection and procedural stipulations and penalties for such violations.
Preview of 2022
Entertainment, tourism, food and beverage, and culture appear to be the Kingdom’s prime focus despite the challenges posed by COVID-19. It is expected that the entertainment options will continue to be family-friendly and adhere to core Shariah principles as well as being the biggest market in the world for new entertainment and museum projects over the next few years. Supported by a healthy budget, the country is likely to further invest in new growth areas for the Kingdom.
Fintech and e-commerce are still some of the most resilient segments in gaining growth. The Saudi Arabian Competition Authority is increasingly becoming active and announced it blocked a deal in the food delivery space due to potential concentration. We also foresee extensive M&A and capital market activity, including IPOs, during 2022.
Despite the COVID-19 pandemic, Saudi Arabia saw considerable economic activity and carried further legal reforms in 2021 under the country’s Vision 2030 which endeavor to further optimize foreign investments. We expect the Kingdom to retain the growth momentum in 2022.
Nabil A Issa is a partner at King & Spalding. He can be contacted at [email protected]
Osama Zaid is an associate with the Law Office of Mohammed Al Ammar in Riyadh (in cooperation with King & Spalding). He can be contacted at [email protected]