Executive Summary

In line with Vision 2030, Saudi Arabia has undergone transformative legal reforms aimed at boosting private sector participation and enhancing investor confidence. Over the past five years, the Kingdom has introduced several new laws—and significantly updated existing ones—to foster a more transparent, efficient, and investor-friendly legal environment.

These changes are significant given that Saudi courts historically relied heavily on Sharia principles. While comprehensive, such reliance often led to uncertainty in interpretation, making it challenging for investors and legal advisors to predict outcomes in transactions and disputes. Today, codifying laws across civil, commercial, and procedural domains marks a turning point that modernizes the business landscape while remaining faithful to Sharia foundations.

This article highlights five significant legal developments that every investor—Saudi or foreign—should be aware of, as they directly impact day-to-day business operations, governance, contractual negotiations, dispute resolution, and workforce management.

1. Civil Transactions Law (Issued: 29/11/1444H – 18/06/2023)

This landmark legislation codifies foundational rules of civil and commercial obligations. With over 700 provisions, it introduces clarity and predictability into contract enforcement, legal rights, and obligations.

Investor Takeaways:

• Codifies how contracts are formed, including verbal agreements.
• Clarifies statutes of limitations and time-barred actions.
• Provides legal grounds for contract rescission, invalidation, and compensation.
• Supports informed decision-making by in-house counsel and stakeholders.

The law aligns with international norms while preserving the essence of Sharia. For investors, it mitigates legal ambiguity and supports more secure commercial dealings.

2. Law of Evidence (Issued: 26/05/1443H – 30/12/2021)

The new Law of Evidence introduces a unified evidentiary framework for civil and commercial litigation.

Key Enhancements:

• Recognition of digital and electronic evidence.
• Standardization of evidentiary procedures.
• Flexibility for parties to agree on evidentiary rules in contracts.
• Guidance on confession, witness testimony, presumptions, and expert opinion.

This law is vital in both the pre-contractual stage and during dispute resolution. Understanding evidentiary burdens and procedural deadlines can significantly reduce litigation risk and strengthen legal positioning.

3. Arbitration Law (Issued: 24/05/1433- 16/04/2012 - Updated: 26/01/1447H- 02/07/2025)

Saudi Arabia continues to modernize its dispute resolution mechanisms to align with global standards.

Investor Benefits:

• Freedom to choose applicable law and dispute resolution forum.
• Flexibility in appointing arbitrators or mediators, including non-Saudis.
• Increased enforceability of local and international arbitral awards.

These reforms provide faster, confidential, and more commercially sensitive dispute resolution pathways—making Saudi Arabia a more appealing jurisdiction for cross-border investors.

4. Companies Law (Issued: 01/12/1443H – 30/06/2022)

The new Companies Law enhances governance frameworks for all business entities, from LLCs to JSCs.

Key Legal Highlights:

• Defines roles and powers of shareholders, managers, and boards.
• Clarifies profit distribution, restructuring, and liability management.
• Requires proper authority to take action to avoid invalidity of contracts.
• Stresses the importance of authorizations (e.g., PoAs and AoA clauses) in corporate disputes.

For investors and executives, knowledge of this law is essential for corporate structuring, protecting shareholder rights, and avoiding unintended personal liability.

5. Labour Law (Issued: 23/08/1426H – 27/09/2005 -Updated: 08/02/1444H – 28/02/2023)

Labour Law reforms continue to play a central role in Saudi Arabia’s goal to build a sustainable private sector.

Investor Relevance:

• Protects employee rights (timely pay, end-of-service benefits, etc.).
• Supports employer interests in confidentiality, non-compete clauses, and data privacy.
• Clarifies contractual obligations and employer liabilities.

Understanding the balance this law strikes between protecting employees and enabling employer efficiency is crucial to building a compliant and competitive workforce.

Saudi Arabia's legal reforms reflect a broader strategy to attract sustainable, high-value investment while supporting transparency, dispute predictability, and governance excellence. From contract formation to company management and dispute resolution, these laws empower investors to engage in the Saudi market with greater confidence and clarity.

For Investors, Legal Consultants, and Decision-Makers:

• Stay proactive in learning these laws.
• Incorporate legal awareness into operational and strategic planning.
• Consult with legal advisors early in your investment lifecycle to minimize exposure and maximize opportunities.

Disclaimer: This content is not legal advice. No liability is assumed. For legal consultation, please contact us.