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In line with Saudi Vision 2030 and the national investment strategy, the new Investment Law, enacted by Royal Decree No. M/19 on 11 August 2024, will come into effect on 1 February 2025. This legislation will replace the existing Foreign Investment Law and the 2014 Foreign Investment Regulations. A new set of Foreign Investment Implementing Regulations will also be introduced and take effect simultaneously.

The new Investment Law draws on foreign investment rules in countries with similar investment environments to Saudi Arabia, such as Singapore, Germany and the UAE, as well as G20 countries. It also incorporates international investment standards from organisations like the UN and the Gulf Cooperation Council. This reflects Saudi Arabia¡¯s commitment to creating a more open investment environment and enhancing its international appeal to foreign investors. This article highlights three key features of the new Investment Law.

The foreign investment licensing system has been abolished, and foreign investors now follow the same registration procedures as local investors. Under the current Foreign Investment Law, all foreign investors must obtain a Foreign Investment Licence issued by the Ministry of Investment of Saudi Arabia (MISA). These licences include industrial, trade, service and engineering consultancy licences.

Detailed information can be found on the official website of the MISA¡¯s investment guide. The specific requirements for the MISA licence vary depending on the business activities conducted by foreign investment entities in Saudi Arabia, as outlined in the periodically updated MISA Investment Manual.

The new Investment Law strengthens the protection of investor rights. The current Foreign Investment Law and regulations focus on the obligations of foreign investors under the MISA licence system but do not detail investor rights. Article 4 (1) of the new Investment Law explicitly lists seven rights for investors:

1. Saudi local investors and foreign investors are entitled to equal treatment under similar circumstances;
2. Investors should be treated fairly and justly;
3. The state cannot confiscate or expropriate an investor¡¯s assets without a final judicial decision. Assets can only be expropriated directly or indirectly for public interest, through legal procedures, and with fair compensation to the investor;
4. Investors have the right to freely and without delay transfer their funds into or out of Saudi Arabia. This includes, but is not limited to, transferring investment returns and profits through legal channels using any currency recognised by the Saudi Central Bank, and disposing of funds obtained from sales or liquidation through any legal means. Compared to the current Foreign Investment Law, the new law places greater emphasis on the freedom and timeliness of fund transfers;
5. Investors have the right to manage and dispose of their investments legally, and possess any assets necessary to conduct their business;
6. Investors¡¯ intellectual property and trade secrets are protected; and,
7. Competent authorities should facilitate administrative procedures for investors and provide necessary support and assistance.

Article 4(2) of the new Investment Law emphasises that competent authorities must uphold these investor rights when taking any measures for public interest, including fulfilling Saudi Arabia¡¯s international obligations, maintaining public order or protecting national security.

Implementing a tiered penalty system. The current Foreign Investment Regulations require the MISA to issue a written notice to any foreign investors in violation of the law. If the violation is not rectified, penalties include suspension of all or part of the investor¡¯s benefits and privileges, a fine of up to SAR500,000 (USD133,000) and cancellation of the MISA licence.

The new Investment Law categorises violations into major and minor offences, and reduces the maximum fine. For non-substantial violations of articles 7 and 8 (investment access provisions) of the new Investment Law, the MISA will notify investors to rectify their actions within the timeframe specified in the new implementing regulations.

Investors who fail to comply within the specified period, as well as those with substantial violations, may face penalties including warnings, fines up to SAR300,000 (with repeat offenders subject to doubled fines), and being deregistered as an investor. The new implementing regulations will detail procedures for identifying and recording major violations, and establish penalty standards based on violation frequency, severity of consequences and investment scale.

The new Investment Law also provides a clear legal basis for investment incentives, ensuring equal treatment for foreign and local investors, making Saudi Arabia¡¯s investment environment fairer and more transparent. This law simplifies investment procedures, offers policy incentives and protects investor rights, presenting new opportunities for Chinese enterprises investing in Saudi Arabia.

Wang Jihong is a senior counsel and Liu Ying is an equity partner at Zhong Lun Law Firm