25 ASIAN LEGAL BUSINESS CHINA • 亚洲法律杂志-中国版 WWW.LEGALBUSINESSONLINE.COM/CHINA cooperation between the two countries in multiple areas has also been at historical highs. According to Lin, Chinese investors usually invest in five areas in Saudi Arabia. “The first is oil and natural gas; the second is infrastructure construction; the third is real estate, with Chinese investment playing an important role in the Saudi property market.” “The fourth is science and technology where Chinese investors mainly invest in AI, cloud computing, big data, Internet of Things, etc.; and the fifth is education where Chinese investors have made huge investment in language training, overseas education, etc.” “Chinese investment covers a wide range of fields in Saudi Arabia, and is growing year by year. In terms of industry, both sides are eager to leverage each other’s advantages. The main focus of Chinese enterprises is on obtaining energy and infrastructure profits, while that of Saudi Arabia is to access more Chinese technology and human resources. The near future will be the honeymoon period of the partnership between China and Saudi Arabia, and there will be great growth potential going forward,” adds Lin. UNIQUE LEGAL, SOCIAL ISSUES However, Chinese investors also face challenges when venturing to Saudi Arabia. Speaking of the legal risks that require special attention, Lin says that investors should first learn about the basic information and concepts of Saudi law. “The Saudi legal system is based on Islamic law which is derived from the Qur’an and the Sunnah of the Islamic prophet Muhammad. Saudi royal decrees are another major source of law, but they are called ‘regulation’ rather than ‘law’ to indicate they are subordinate to Shariah law. Such regulations complement Shariah law in areas such as labor, commercial and company law,” says Lin. “Other forms of regulations include Royal Orders, Council of Ministers Resolutions, Ministerial Resolutions and Ministerial Circulars, all of which are subordinate to Shariah law. At the same time, traditional tribal laws and customs are equally important. The Shariah court system constitutes the basic judicial system in Saudi Arabia and has general jurisdiction over most civil and criminal cases.” Specifically, Lin says that the legal risks of investing in Saudi Arabia mainly exist in compliance, politics, social culture and finance. “First, the Saudi government imposes many restrictions and reviews on foreign investment. So it is necessary to understand and abide by Saudi laws and regulations, especially provisions on foreign shareholding percentages and national security; second, the Saudi region suffers certain risks of political stability, which requires investors to pay attention to changes and policy adjustments in the Saudi political landscape, as well as the measures the government may take in relation to investment.” “Third, Saudi Arabia is a conservative country with a profound Islamic culture. Investors should respect local social and cultural habits to avoid legal risks caused by cultural differences. Finally, Saudi Arabia has special economic conditions, and prices there can fluctuate greatly. Investors therefore must watch changes in the global economy and the Saudi economy, as well as fluctuations in the exchange rate of riyal, the local currency.” Therefore, Lin advises investors to gain a comprehensive understanding of local laws, culture, social environment, religious customs, etc. before investing in Saudi Arabia, carefully assess risks, conduct feasibility studies of investment projects, and work with local lawyers to effectively manage risks. The various particularities of the Saudi legal system and social conditions also raise higher requirements on Chinese firms and lawyers that serve Saudi investment needs. To Lin, working closely with Saudi firms and lawyers, and building long-term, smooth communications to understand each other’s work habits, ensure that lawyers can provide clients with high-quality services. FIRST-MOVER ADVANTAGE Apart from its commercial market, Saudi Arabia has also liberalized its legal services market. Earlier this year, Saudi Arabia promulgated a new law to encourage foreign firms to set up shop there. According to Lin, a small number of full-service cross-border firms have set up presence in Saudi Arabia. Clifford Chance, Herbert Smith Freehills and Latham & Watkins became the first batch of international firms to be licensed to practice in Saudi Arabia this March. He also says that before the market liberalization, many foreign firms also operated through long-term strategic cooperation with boutique Saudi firms. According to media reports, Saudi Arabia hopes to take advantage of the investment boom to retain large deals locally and create more opportunities for Saudi lawyers. However, to establish a Saudi office, a foreign firm must follow a slew of requirements. Examples FOREIGN INVESTMENT: MIDDLE EAST “Chinese investment covers a wide range of fields in Saudi Arabia, and is growing year by year. In terms of industry, both sides are eager to leverage each other’s advantages. The main focus of Chinese enterprises is on obtaining energy and infrastructure profits, while that of Saudi Arabia is to access more Chinese technology and human resources. The near future will be the honeymoon period of the partnership between China and Saudi Arabia, and there will be great growth potential going forward.” — Lin Wei, P.C. Woo & Zhonglun W.D. LLP
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