With the aim of raising the level of the legal profession and developing it on a modern basis, as well as improving the investment and business environment in the Kingdom, in addition to ending the random practice of dealing with foreign law firms, which has negative effects on legal services provided in the Kingdom of Saudi Arabia. A few days ago, the Saudi government issued implementing regulation to regulate the license of foreign law firms that seek to provide their legal services in the Kingdom officially.
This regulation comes in after the amendment of the Saudi legal profession law, which allowed foreign law firms – according to specific conditions – to conduct their business in the Kingdom of Saudi Arabia, whereby chapter five of the amended Saudi legal system was singled out for this.
Background!
For decades, the way foreign law firms provide their legal services to their clients in Saudi Arabia has relied on so-called “association/affiliation/cooperation” agreements.
These relationships were fraught with risks from multiple points of view, the most important of which are: These offices avoid licensing requirements and evade paying taxes while conducting their business in the Kingdom. Exposing the Saudi lawyer or company to undue legal and commercial risks.
On the other hand, these agreements often confuse clients dealing with offices linked to partnership, affiliation, or cooperation agreements about the reality of the party they contract with so that it is not clear – in most cases – whether it is the Saudi office or the foreign office. Also, this type of agreement did not encourage foreign law firms to invest in the legal services sector in Saudi Arabia because control was exercised only contractually, and the foreign law firm could not invest in assets for its own benefit based on those agreements.
On the third hand, although these agreements specified the scope of the relationship between the Saudi office and the foreign office in detail that deals with all financial and organizational matters, in most cases they concealed ambiguity about the reality of those relations on the ground, as some foreign offices exploited the national offices as a branch of it in the Kingdom of Saudi Arabia, while some other foreign offices have resorted to leaving the relationship loose to allow for the integration of the work of the national and foreign offices in everything related to the providing of legal services.
Does the situation change?!
With a formally regulated framework in place to enable reputable foreign law firms to provide their legal services in the KSA, there is no doubt that the situation will change for the better, both for national and foreign law firms. Indeed, it can be said that there is a promising opportunity for foreign law firms to invest in assets and achieve profits from providing legal services inside Saudi Arabia in a legal and orderly manner.
The implementing regulation issued by Resolution No. 186 on 25/1/1444 allowed foreign law firms that have a distinguished international reputation in practicing the legal profession for more than ten years and have a previous international presence in economically advanced countries, to choose between two options to provide their services in KSA, which is establishing a “professional services company” with a Saudi lawyer/law firm, or opening a “branch” for the mother company in the KSA.
The regulation also gave Saudi lawyers who were associated with a foreign law firm with any “association/affiliation/cooperation” agreements a specific deadline to terminate these agreements, or restructure them to meet the new requirements. Which leads to avoiding the problems that existed before the issuance of that regulation.
Conditions for licensing foreign law firms in Saudi Arabia!
In addition to the condition that the foreign law firm enjoys a distinguished international reputation in practicing the legal profession for more than ten years and that it has a previous international presence in economically advanced countries, the implementing regulation for licensing foreign law firms stipulated several essential requirements that foreign law firms must observe, including on For example, but not limited to, the residence of partners, the restrictions imposed on referring work outside the Kingdom, the training and development of Saudi lawyers, and the presence of appropriate administrative support on the ground.
Whereas Article forty-five of the Saudi Lawyer Law stipulates that “the following shall be required for licensing a foreign law firm to practice the legal profession in the Kingdom:
– have a distinguished international reputation in the field of practicing the legal profession according to the relevant international competitive indicators and reports.
– It must have been established for a period of no less than (ten) years.
– have representation or partnerships in at least (three) different countries, or (five) regions within one country if the laws or regulations within that country allow for differences between regions in relation to the provisions regulating the practice of the legal profession.
– name at least two partners who represent it in the Kingdom, provided that the office is committed to residing them in the Kingdom for a period of no less than (one hundred and eighty) days per year.
– Pay the license fee.
In addition to the above, the implementing regulations stipulated that must no final judgment in a crime against honor or trust, or a final decision in a serious professional violation had been issued against the foreign law firm which applied for the license, unless at least five years had passed since the completion of the execution of the judgment or decision before submitting an application for obtaining the license.
Licensing procedures!
The license application shall be submitted electronically, accompanied by the following documents:
– Authorizing his legal representative to submit an application for a license to practice the profession in the Kingdom.
– Licensing documents of the foreign law firm at the head office, and licensing documents in other branches.
– A license to practice the profession for the partner who represents the office in the Kingdom, and evidence of his partnership and previous experience.
– An acknowledgment that no final judgment or decision has been issued against the foreign law firm or against the partner it represents.
– Obtaining a license from the competent authority to grant licenses to foreign investment in the KSA.
On the other hand, it is not permissible for a foreign law firm to practice the profession before it is registered with the membership of the Saudi Bar Association, and a headquarters is taken to practice the profession.
The duration of the license for a foreign law firm to practice law in Saudi Arabia, in accordance with the previous conditions and procedures, is five years, renewable for another period or periods, and the renewal application must be submitted before its expiry by a period of not less than 90 days from the date of its expiry.
Obligations, Advantages, and rights!
The The Saudi legal system allowed foreign law firms licensed to provide their legal services in Saudi Arabia with several advantages, but it distinguished between law firms established in the form of a professional services company and those that established a branch in Saudi Arabia.
Where the system permits a foreign law firm licensed to practice the legal profession in the Kingdom, which takes the form mentioned in paragraph (1) of Article (50) of the system, i.e. in the form of a “professional services company”; To practice all work related to the practice of the legal profession, taking into account the limitation of pleading on behalf of others before the courts and the Board of Grievances, and the committees formed according to the regulations, orders, and decisions to consider cases within their jurisdiction to the Saudi lawyer registered in the lawyers’ roll.
As for the foreign law firm licensed to practice the legal profession in the Kingdom, which takes the form mentioned in Paragraph (2) of Article (50) of this Law, that is, which has established a branch in the Kingdom; The business that he may practice inside the Kingdom is limited to the following:
– Consultations related to international law.
– Consultations related to non-Saudi regulations which are provided through a lawyer licensed to provide legal advice related to them.
– Arbitration, mediation, and conciliation services, in accordance with the provisions regulating this.
– Consultations are provided for specific or specialized projects or for studies in the field of legislation.
On the other hand, the system obligated licensed foreign law firms with several obligations in accordance with Article 52 thereof, and these obligations are:
– The percentage of the number of Saudi employees in the office engaged in work of a regular nature shall not be less than the Saudization percentages specified for law firms and Saudi professional companies.
– Develop an annual work plan for the transfer of knowledge and training to the Saudi lawyer who is registered in the list of practicing lawyers, provided that it includes as a minimum:
* Providing twenty hours of training annually to each employee in the office who carries out legal work.
* Adoption of a policy for seconding Saudi workers to the main headquarters of the foreign office or its branches.
* Execute a program to train university graduates and recent graduates in jobs of a legal nature.
* Implementation of a program to prepare Saudi workers for career development in technical and administrative tracks.
* Contribute to the establishment or sponsorship of conferences, seminars, and scientific and professional events in the Kingdom.
– The actual involvement of Saudi workers in the work of the office units and departments and in its projects in the Kingdom.
– The value of the consultancy works referred outside the Kingdom in one year shall not exceed 30% of the total value of the consultancy office’s work related to Saudi regulations.
– Insurance for workers against professional liability.
Finally..
ALF Law Firm is pleased to announce its readiness to cooperate – as stated in the new implementing regulation – with a reputable international law firm that aims to open new horizons in the Saudi legal market.
