Research on the New Trends and Compliance of Saudi Arabia's 2024

Investment Law

Sihan Chen

School of Arabic Studies, Beijing Foreign Studies University, Beijing, China

Keywords: Saudi Arabia, Investment, Law, Compliance, 2024 Saudi Investment Law.

Abstract: This paper analyzes saudi arabia's economic and legal background to examine the changes and developments

in saudi arabia's 2024 investment law and analyses how the new law promotes foreign confidence by

eliminating the unequal status of foreign and local investors, simplifying the registration process, and lifting

the ban on foreign investment in makkah and madinah. The new law clarifies investor rights, establishes a

transparent complaints-handling mechanism, and encourages dispute resolution through international

arbitration. In addition, while the new law has brought about positive changes, there are still potential

operational problems and uncertainty about the recognition of foreign judgments. The article notes that the

saudi reforms aim to promote economic transformation through investment diversification and enhance

competitiveness with global investors. The article also provides legal and compliance advice to investors to

help them better manage risk and pursue opportunities in saudi arabia, especially in medina and mecca.

1 GENERAL INSTRUCTIONS

The global economic landscape has been marked by

rapid changes and intensifying international capital

competition in recent years (Niu et al., 2022). Against

this backdrop, the Middle East, as a key energy hub

and an emerging market, is witnessing unprecedented

development opportunities. As a leading nation in the

region, Saudi Arabia has long relied on oil revenues

to drive its economic growth (Alzubair, 2021).Saudi

Arabia has undergone significant economic and legal

transformations as part of its ambitious Vision 2030

initiative (Grand & Wolff, 2022).The country has

been striving to diversify its economy beyond oil

dependency, foster private sector growth, and attract

foreign direct investment (FDI), which is of

fundamental importance in the roadmap drawn up by

Saudi Arabia through the Kingdom's Vision 2030

(Council of Economic and Development Affairs,

2016) .

In line with these goals, the Ministry of Investment

of Saudi Arabia introduced the latest 2024 Investment

Law, a major legislative overhaul to create a more

transparent, efficient, and competitive investment

environment. The new law replaces the previous

Foreign Investment Law issued in 2000 and aims to

provide equal treatment for domestic and foreign

investors while improving regulatory clarity and

investment protections (Ministry of Investment for

Saudi Arabia, 2024).

The research objectives are: firstly, to

systematically map out the background and new

trends introduced by the 2024 Investment Law and

analyze its role in enhancing the investment

environment, optimizing legal governance, and

promoting economic diversification; secondly, to

explore the opportunities and challenges that overseas

investors face under the new regulatory framework.

Ultimately, this study seeks to contribute both

theoretical insights and legal suggestions that will

support foreign investors in Saudi Arabia.

The significance of studying the new trends and

compliance issues of the 2024 Investment Law is both

theoretical and practical. Theoretically, the reform

offers a fresh case study in the modernization of

international investment law and in enhancing global

competitive standards. Practically, understanding the

law's impact on overseas investors and exploring its

compliance requirements can aid both policymakers

and market participants in adapting to the evolving

Saudi landscape, thereby fostering multifaceted

cooperation in legal, economic, and cultural domains.

Chen, S.

Research on the New Trends and Compliance of Saudi Arabia’s 2024 Investment Law.

DOI: 10.5220/0014294000004859

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 1st International Conference on Politics, Law, and Social Science (ICPLSS 2025), pages 75-80

ISBN: 978-989-758-785-6

This research focuses on several key areas: Using

the characteristics revealed by Saudi overseas

investment data and domestic economic data to

analyze the background of Saudi investment law,

which includes the distinctive features and desperate

need of the new law in terms of optimizing the

investment environment, increasing transparency,

and safeguarding investor rights. A special emphasis

is placed on examining how the new law affects

overseas investors—addressing issues such as

simplifying approval processes, broader investment

scopes, and changes in investors' rights—with the aim

of offering targeted policy recommendations. This

research aims to compare the old and the latest Saudi

Investment law by explaining the social background

of this amendment and the impact of the new law on

foreign investors, eventually providing updated,

feasible compliance advice to foreign investors in

Saudi Arabia.

2 THE BACKGROUND OF SAUDI

ARABIA'S 2024 INVESTMENT

LAW

2.1 The General Background of Saudi

Arabia's Investment Law Status

Quo

Saudi Arabia's economic prosperity and geopolitical

influence in the Gulf region largely depend on its oil

resources. The oil industry remains the backbone of

the country's economy and the primary source of its

wealth, with oil revenues making up 90% of export

earnings and 42% of the GDP (Alotaibi et al., 2024).

However, political and economic instability has

strained Saudi Arabia's public finances over the past

decade. These developments have heightened the

need for structural reforms to reduce reliance on oil

resources. However, ambitious projects like Neom,

nicknamed “the Saudi Silicon Valley,” require

massive financial support (Algumzi, 2022). With

public finances under pressure, Saudi Arabia has

acknowledged the importance of attracting FDI.

Multiple data sources indicate that the Kingdom's

efforts to improve its business environment, optimize

its legal framework, and promote economic

diversification have begun to attract an increasing

amount of FDI to its market.

Another serious structural problem is the steep

increase in public debt. According to IMF data, Saudi

Arabia's public debt has increased from 1.5% of the

GDP in 2014 to 26.2% of the GDP (World Bank

Group, 2024), thanks to massive public projects such

as Neom and high-speed railway projects between

Jeddah, Mecca, and Medina (Aljehani, 2023). In

recent years, the global financial market environment

has tightened, interest rates have risen, and the cost of

international financing for Saudi Arabia has also

risen. Government debt growth means that more

interest costs need to be paid, and attracting foreign

investment into the country can effectively alleviate

this pressure.

In 2000, the previous Investment Law was

published, aiming to standardize FDI. The

implementation effect was positive yet still needed

improvement. In 2016, the Saudi government

published its ambitious Vision 2030, which

mentioned “Investing for long-term” in the “A

Thriving Economy” section. As part of the

commitment of the Saudi government, it promised to

raise the country's FDI from 3.8% to the international

level of 5.7% of GDP. In the legal section, the Saudi

government also promised to “laws and regulations

thoroughly, remove obstacles, facilitate access to

funding.” (Council of Economic and Development

Affairs, 2016) However, according to the latest data

from the Saudi Ministry of Investment and the World

Bank, Saudi Arabia's FDI net inflows (% of GDP)

were 1.2% in 2023, with SAR 85,513,118,000. This

is much lower than what was promised in its 2030

Vision (Council of Economic and Development

Affairs, 2016) (Ministry of Investment for Saudi

Arabia, 2024).

In addition, in Saudi Arabia's effort to liberalize its

market to complete the shift from the state-owned oil

industries to private sectors, in its Vision 2030, Saudi

Arabia has outlined an ambitious plan to increase the

private sector's contribution to GDP from 48% to

65% (Council of Economic and Development Affairs,

2016).

It is worth noting that Saudi Arabia is also known

for its distinctive Shariah law, whose main sources

include the Qur'an and the traditions of the Prophet

Muhammad (Sunnah). In addition, scholarly

consensus (Ijma) and analogical reasoning (Qiyas)

are also considered sources of law. This has likewise

influenced the direction and specific measures taken

in legislating and reforming the law. On March 1,

1992, Saudi Arabia enacted the Basic Law of

Governance, which formally established the primacy

of Shariah. Article 7 of the law states, “The authority

to rule the Kingdom of Saudi Arabia derives from the

ICPLSS 2025 - International Conference on Politics, Law, and Social Science

Qur'an and the Sunnah, both of which take

precedence over this law and all other laws of the

country.” Under the system of foreign investment law

discussed in this paper, the specific influence of

Islamic law is reflected in the fact that both the old

and new versions of the investment law refer to the

fact that the areas available for foreign investment

must be determined by the Council of Ministers, and

that foreigners are not permitted to invest in specific

areas. This is in line with the spirit of article 14 of the

Basic Law: All God's bestowed wealth, be it

underground, on the surface, or in national territorial

waters, on the land or maritime domains under the

State's control, all such resources shall be the property

of the State as defined by the Law. The Law shall set

forth the means for exploiting, protecting, and

developing such resources for the benefit, security,

and economy of the State. 2. The Saudi Basic Law

also guarantees the sanctity of personal assets. The

Saudi Basic Law also guarantees the inviolability of

personal property: “The State shall guarantee private

property and its inviolability. No one shall be

deprived of his property except for the public interest,

provided that the owner is fairly compensated.” This

provides the most basic guarantee for foreign

investment (Agil, 2013).

2.2 The Main Obstacles Currently

Faced by Foreign Investors in

Saudi Arabia

The implementation of the 2000 Foreign Investment

has failed to significantly improve the attractiveness

of FDI. Many foreign investors are unsure whether

they can participate in joint ventures and are unclear

about their rights and obligations in such ventures.

For example, the law requires foreign companies to

obtain a license before entering into a joint venture

agreement, and the granting of a license is dependent

on the company's expertise, but ‘expertise' is not

specified, leaving the approval process entirely in the

hands of the Foreign Investment Committee (Royal

Decree No M/1., 2000).

In addition, foreign investors face problems such

as the possibility of expropriation of foreign firms'

assets by the Government without compensation or

the transfer of invested capital, which may be affected

by changes in law and policy (Royal Decree No M/1.,

2000). Saudi regulators tend to favour local firms,

which puts foreign companies at a competitive

disadvantage. The code also restricts foreign

investors from entering into joint ventures with local

firms in key sectors such as energy, health care,

insurance, and communications, which remain under

State control.

3 THE NEW TREND OF SAUDI

2024 INVESTMENT LAW

Unlike the 2000 Foreign Investment Law, the new

investment law applies to both local and foreign

investors, which means that now, both foreign and

local investors enjoy equal rights and legal status

(Ministry of Investment for Saudi Arabia, 2024). This

significantly increased foreign investors' confidence

in FDI and continues to show Saudi Arabia's ambition

and willingness to adopt foreign capital. This will

help create a competitive environment among

investors of different backgrounds and sizes, thereby

diversifying Saudi Arabia's existing investment and

experience and providing better quality services to

beneficiaries at competitive prices through

competition.

In addition, one of the main changes in the new

investment law is the elimination of investment

licenses. This is crucial to the simplification of the

Investment Process. According to article 2 of the old

foreign investment law (Royal Decree No M/1.,

2000): Without prejudice to the provisions of the laws

and agreements, the authority shall issue a license for

foreign capital investment in any investment activity

in the Kingdom, whether permanent or temporary.

This requires all foreign investors to go to the

Ministry of Investment for Saudi Arabia (MISA) to

obtain an investment license before investing, but

under the new investment law, A foreign investor

shall register with the Ministry prior to engaging in

any investment, as specified in the regulations. This

is symbolic of the fact that foreign investors no longer

need to go through the cumbersome process of

obtaining a foreign investment license, while Saudi

government agencies are required to set up platforms

and provide necessary information to investors to

help them register quickly. What sets this law apart

from the Foreign Investment Law is the establishment

of a comprehensive service center. This center plays

a crucial role by highlighting its importance and the

responsibilities it holds, which are focused on

improving services for investors. It also aims to

provide continuous innovative solutions to enhance

and develop these services, ensuring their

effectiveness (Ministry of Investment for Saudi

Research on the New Trends and Compliance of Saudi Arabia’s 2024 Investment Law

Arabia, 2024).

One of the most significant reforms of this

amendment of law is the lift of restrictions of foreign

investment in the two holy cities-Mecca and

Medinah(Capital Market Authority for Saudi Arabia.,

2025).Both the old and the new laws granted the

Supreme Economic Council the power to issue a list

of activities excluded from foreign investment, which

usually included investment in the medical field, the

military, and the two holy cities. Before 2025, to

protect the Islamic creed and the sanctity of holy sites,

foreign investors were prohibited from conducting

investment activities in the areas of Mecca and

Medina. Additionally, they cannot own real estate in

these cities. Yet, since January 27, 2025, foreign

investors are officially allowed to invest in publicly

traded companies that own real estate in Mecca and

Medina. Mecca and Medina are the two most

frequently visited cities and hubs for Muslim pilgrims

in Saudi Arabia, with more than 1.4 million visitors

in Mecca alone in 2024 (Pintér, 2014). This reform

not only opens up a giant market and a golden

opportunity for FDI but also the Saudi government's

willingness and determination to lift up traditional

legal obstacles to embrace foreign investment.

The new law also clarified investors' rights and

violations. Investors' right is ensured through the

establishment of a clear and transparent process for

handling complaints (Ministry of Investment for

Saudi Arabia., 2024). Local and foreign investor

rights are aligned with international investment

standards and policies. Investors have the freedom to

conduct their activities and transfer capital without

unnecessary delays. The law also places a strong

emphasis on safeguarding intellectual property and

confidential business information. Additionally,

provisions are made to address both direct and

indirect investment protections. The new law also

followed the principle of gradual application of

penalty by setting specific standards for penalties.

These changes significantly filled the vacancies left

by the previous investment law and prevented

unequal status between foreign investors and

government agencies by clarifying the investors' right

and penalty standards, which again solidified foreign

investors' confidence. It also encourages the use of

international arbitration, specialized commercial

courts, and other channels to resolve disputes in a

timely manner. Foreign capital may not be

expropriated or nationalized without due process of

law, and if necessary, in the public interest,

reasonable, prompt, and fair compensation must be

provided. This effectively solved one of the main

obstacles faced by investors under the regulation of

the 2000 Investment Law.

In general, the new law simplifies the redundant

registering procedure, claims the equal right and

status between local and foreign investors, lifting

traditional and religious obstacles on FDI on the

promising real estate industry in the two holy cities

and give clear definition of investors' rights and

penalty system to enhance foreign investors'

confidence and shows Saudi Arabia's ambition in

attracting FDI and providing a reliable legal

environment for it.

4 COMPLIANCE ADVICE FOR

FOREIGN INVESTORS IN

SAUDI ARABIA

4.1 Risk Management

Although the new law has been announced, the scope

of restrictions on some sensitive industries have yet

to implement the final landing of the rules; investors

need to pay attention to the follow-up ‘Negative List',

whether the full disclosure, as well as the operability

of the approval process (Capital Market Authority for

Saudi Arabia., 2025). The unified registration

mechanism requires the effective cooperation of

multiple departments, and if local governments or

industry authorities have not yet adapted to the

requirements of the new law, foreign investors may

still face obstacles at the operational level. Although

the new law encourages foreign investors to resolve

disputes through arbitration, the jurisprudence of

local Saudi courts on certain foreign-related disputes

and the efficiency of enforcement remains to be seen.

Foreign investors should pay attention to dispute

resolution clauses at the contract signing stage. Saudi

Arabia has stated that it does not accept the

jurisdiction of International Centre for Settlement of

Investment Disputes (ICSID) over disputes related to

its natural resources, public policy, or sovereign acts,

as per a provision in the ICSID Convention

(International Centre for Settlement of Investment

Disputes., 2020).In international law, issues

involving a state's governmental functions typically

fall under domestic law, but in practice,

distinguishing between governmental actions and

commercial activities can be challenging (Alshahrani

& Subedi, 2022). Furthermore, although Saudi

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Arabia is a party to the New York Convention on the

Recognition and Enforcement of Foreign Arbitral

Awards, it utilizes a "safe harbor" clause in the

Convention to reject foreign judgements or awards

that are deemed to violate public policy (Roy, 1994).

Additionally, the Riyadh Convention stipulates that

any award contradicting Islamic Shariah law or public

order will not be recognized. This creates uncertainty

for investors, as it is not clear under what

circumstances a Saudi court may lawfully refuse to

recognize foreign awards.

4.2 Possible Investing Opportunities

The liberalization of the ban on foreigners investing

in Makkah and Medina within the framework of the

new Saudi Investment Law has led to a significant

increase in investment opportunities in these two

cities. The two holy cities are known for their large

mobile populations and tourism, and investors can

focus more on the real estate and hotel and

entertainment sectors in the holy cities.

5 CONCLUSION

Hence, the research illustrated the background of

Saudi Arabia's investment law and explained how the

economic status, religious traditions, and Saudi

Vision 2030 affect the introduction of the new law.

The research analyzed Saudi Arabia's incentives for

getting rid of oil industry reliance, reducing public

debt, and fulfilling its ambitious promises in its

Vision 2030.By comparing the old and the new law,

the research elaborates on how the new law fixes the

problems of unequal status between local and foreign

investors, over-complicated registration and

expropriation of foreign capital, etc. With regards to

providing compliance advice to possible firms willing

to invest in Saudi Arabia, the research also pointed

out that the details of the law are still yet to be

confirmed and the risks of arbitration award not being

recognized by the Saudi government still widely

exist. There are numerous investing opportunities in

Mecca and Medinah. Generally, the new amendment

of the Saudi Investment law displayed Saudi Arabia's

determination to embrace FDI by providing a

trustworthy investing environment and legal

framework, which includes a precise definition, faster

registration procedure, and transparent monitoring

mechanism. More implications will be seen after the

law is finalized.

However, the study has limitations. By the time the

study was completed, the specific provisions of some

of the sub-laws under the investment law framework

had not been published to provide investors with the

most up-to-date compliance advice.

Existing studies have focused on the background

of the introduction of the investment law, the specific

changes, and the impact on investors. As mentioned

in this paper, the lifting of the ban on investment in

Mecca and Medina is a very important change. The

religious and historical specificities of these two cities

have long held a mystique for the non-Muslim world.

There must be a deeper reason behind this lifting of

the investment ban. The history of Shariah law and its

religious origins under this subject have much more

to offer.

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