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Month: August 2021

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Employment

Nitaqat Scheme Update

Ministry of Labor
Employment
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Nitaqat Scheme Update

Overview

Relying on Knowledge Pioneers Law Firm’s sharp focus on most recent legal updates, we are pleased to share with our esteemed clients and business network this highly important business-related legislative amendment. Corporate Practice and Compliance Practice Departments at Pioneers who are pleased to hereby present you highlights and hints on the recent legal update pertaining to Saudi Nationalization Scheme; i.e. Nitaqat Scheme (“Nitaqat”) supported by practical examples, expected issues, and productive solutions.

On 29/3/1441H, corresponding to Oct. 26th, 2019, H.H. Ahmed Bin Salman, ex officio as the Minister of Labor And Social Development issued a ministerial decree number (63717) (the “Decree”). Yet, before addressing complex legal consequences, we would rather checklist a few concepts and basics, right as follows:

What is Nitaqat (نطاقات), a.k.a. Saudi Nationalization Scheme?

officially known as the Saudi nationalization scheme, or Saudization is the most recent policy of the Kingdom of Saudi Arabia implemented by its Ministry of Labor and Social Development, whereby Saudi companies and enterprises are required to fill up their workforce with Saudi nationals up to certain levels.

As part of the Saudi Vision 2030’s reforms, announced in 2016, reducing the number of unemployed Saudi nationals is a key element of the plan. Previously the private sector was largely dominated by expatriate workers from Pakistan, India, the Philippines, and Arab countries such as Lebanon or Egypt.

In its beginning, Nitaqat categorized companies that undertake projects, especially public ones, in Saudi Arabia into three (3) zones; green, yellow, and red.

Under certain standards and requirements, every single company shall be located and might be relocated in a zone where such a company shall be subject to certain consequences. It is noteworthy that the yellow and red zones are specified for companies that have failed to achieve the required Saudization percentage. They are also known as the “unsafe Nitaqat” and such firms are denied full access to the ministry’s services.

Who is involved?

At large, all companies incorporated and organized by Saudi laws are subject to the Decree. However, it mainly confronts companies currently located in Nitaqat yellow zone who will be relocated into the red zone and hold responsibilities for such relocation unless they have positively reacted in a manner compliant with the Decree.

In other words, the ministry’s services are restricted to firms that are in Green Zone and above and that contribute effectively to employing Saudis.

Why is it so important?

This decision aims to stimulate firms in this zone to move to the Green Zone and above, leading to raising their Saudization percentage.

Conclusions

The Ministerial Decree has clearly drawn the road map in this arena of Vision 2030. It was issued in the continuity of the already existing Saudization major plan where the regime extensively strives to provide more job opportunities to Saudi young men and women.

In conclusion, we highly recommend our business network members to take all necessary action to comply with the Ministerial Decree on or before Jan. 26, 2020 corresponding to 01/06/1441H.

Our Corporate Compliance team regularly advises on laws and regulations impacting the business flow and law-compliance issues in the corporate sector.

For further information, please do not hesitate to Contact Us.

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Construction Insurance

Saudi Central Bank: Construction Insurance is MANDATORY

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Saudi Central Bank: Construction Insurance is MANDATORY

Based on the powers granted to the Arab Monetary Agency –then, and Saudi Central Bank for now– to monitor cooperative insurance companies, it issued its Decree No. 441/187 on 5/8/1441 AH, which has bound contractors in non-governmental sector projects to ensure against hidden defects that might appear in constructions. Such insurance shall remain effective for a period of not less than ten (10) years, starting from the date of project final delivery.

Saudi Central Bank

What is a hidden defect?

To clarify, a hidden defect is any defect that arises in the construction work or its protective elements that may weaken or destabilize the construction due to errors, faults, deficiencies in design, implementation, quality of materials used, or a failure in soil inspection or whatsoever defects pertaining to human involvement.

Therefore, and pursuant to the provisions of this Decree, each non-governmental Employer/Owner will have to engage their contractor(s) through (Baladiبلدي ) service where Employer will have to attach a valid insurance document against hidden defects that might appear in the project(s) involved for a period of no less than ten (10) years starting from the date of project final delivery. Afterward, the Certificate of Occupancy will be issued. For Certificate of Occupancy, the following requirements must be met:

1. Payment of insurance premiums owed to the insurance company.

2. The insurance company to receive “Safety Confirmation Certificate”.

3. The insurance company renders a clear representation of the policy validity.

CONCLUSION

As of Decree date, an effective insurance policy against hidden defects has become a prerequisite for all types of projects and new constructions in the non-governmental sector to obtain a certificate of occupancy with the aim of preserving the material rights of the beneficiaries of those buildings.

 

In case of any inquiries regarding any of the above, we hope that you will not hesitate to Contact Us.

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Commercial Internet Litigation

Commercial Lawsuit is Now TIME-LIMITED

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Commercial Lawsuit is Now TIME-LIMITED

OVERVIEW

The recently-enacted Commercial Court Law issued under Royal Decree No. (M/93) dated 15/08/1441 AH stipulated prescription of financial rights, i.e. the loss of the right to file a commercial lawsuit due to the plaintiff’s delay in filing it. Article 24 stipulates that The following: (As long as there is no special provision for it, the lawsuits that are considered by the court will not be heard after five years have passed from the date on which the claimed right was established unless the defendant acknowledges the right or the plaintiff presents an excuse acceptable to the court).

Coupled with Article (36) of the implementing regulations of the system, which stipulates the following: (If the claimed right arises before the law comes into force, then the period stipulated in Article 14 of the system shall be calculated from the date on which the system comes into effect) as Article (37) of the same regulation stipulates The following: (In the absence of a special text, the period stipulated in Article Twenty-Four of the Law shall take effect from the day on which the debt becomes due for payment).

Since the aforementioned system was published in the official gazette “Umm Al-Qura” on 24/08/1441 H, the implementation of a statute and its implementation will take place after sixty days have passed from the date of the aforementioned publication, ie on the date (24/10/1441 AH); Therefore, the deadline for accepting commercial lawsuits filed by the plaintiff falling within the jurisdiction of commercial courts and arising before the date (10/24/1436 AH) is (on 10/24/1441 AH).

It is necessary for every creditor plaintiff to pay attention and to observe the period of non-hearing of the lawsuit in the consideration of the commercial judiciary, which starts from the date of maturity of the commercial debt until the date of the entry into force of the above-mentioned law.

CONCLUSION

Royal Decree has drawn the road map very clear for Government Agencies that require consultation services to engage experienced Saudi nationals, consultancy offices, and national companies.

This has come in parallel to the Saudization major plan where Government Agencies have been held responsible for reconsideration of their position before the Saudi People since national companies were thereby prioritized.

We do not believe that current contracts conducted by a government agency with a non-Saudi company or office that provides consultancy service might encounter instantaneous termination, even if a given contract entitled the agency to do so. Yet, we highly anticipate that those contracts might not be renewed regardless of the need of the government agency for such service.

If you are a non-Saudi company, branch, or office, and, in the meantime a consultancy service provider of a government agency, or planning to be one, you are highly recommended to look for a Saudi Partner who may enhance your vision and represent your business before the government agency.

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Litigation

Changes on Implementing Regulations of Execution Law

Financial Crime
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Changes on Implementing Regulations of Execution Law

OVERVIEW

His Excellency the Minister of Justice Circular No. (13/T/8013) was issued on 4/6/1441 AH amending the executive regulations of Execution Law, and the most important amendments are:

First: Removing suspension of the debtor’s electronic services.

Second: Giving the debtor a period of three months before passing a judgment of his imprisonment (obligatory) only if the debt amount or the total debt amounts reach (one million riyals) or more.

Third: The debtor may be released at any time if there are indications that he is serious about settling his financial situation.

Fourth: The limitation of the period of executive detention to a period of three (3) months, renewable according to the judge’s decision after his interrogation.

Fifth: It is not permissible to detain the debtor in the following cases:

If the age of the debtor is (sixty) years or more.

Or if the debtor has minor children and his husband is dead or imprisoned for any reason.

COMMENTS

Because of the aforementioned clarification of the content of the recent amendments to the executive regulations of the implementation system, we recommend and advise our clients to take utmost caution within conducting all dealings with others, especially in financial transactions. We also recommend investigating the accuracy and requesting all supporting documents from others parties to prove their financial capacity, whether they are a natural or legal person. As these documents differ according to the difference between dealing with others.

Based on an extensive study conducted by our lawyers and consultants of the new legal frameworks, we advise our esteemed clients, and before concluding any financial transaction, to examine, verify following documents of other party(s) to your future contracts, for example, but not limited to:

  • Valid ID or CR
  • Valid Contact Details; e.g. mobile number & email
  • Bank statement of the account through which the transaction will be conducted
  • National address
  • Work address
  • Tax number
  • Social Insurance Certificate
  • Qiwa (Saudization) Certificate
  • Zakat Certificate
  • Company's balance sheets of the last three (3) years OR the financial status if it is an establishment.

In addition to the above, we would like to share with you the advice of a number of our consultants to take more than one guarantor or sponsors for the person with whom you intend to enter into a financial transaction, if possible. This gives an additional protection layer to your interests and saves you the long term of litigation and debt collection process where you can collect that debt from a guarantor or sponsor of that original debtor if they fail or refrain from payment.

In case of any inquiries regarding any of the above, we hope that you will not hesitate to contact us immediately.

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Construction Real Estate

Idle Land Progam Phase II Kick-off

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Idle Land Program Phase II Kick-off

Phase II of Idle Lands Program has been launched in 17 new cities by the Ministry of Housing

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What is an Idle Land?

Idle lands are vacant or undeveloped plots designated for residential or commercial use and situated within the boundaries of a city as defined by the Saudi Shoura Council back in May 2013 within their regulation that enacted Idle Land Program that is applicable to all urban areas across the country.

What is Idle Land Program?

Idle Land Program charges an annual fee for non-governmental idle lands with sole or Joint ownership with a rate of 2.5% of the land’s actual market value. The Ministry of Housing will use the fee income on housing projects and infrastructure to supply housing solutions and products.

Idle Lands Program Objectives

  • Increasing modern estate supply achieves the balance between supply and demand.
  • Providing residential lots with affordable prices
  • Guaranteeing fair competition
  • Controlling monopoly practices

What is new about the Idle Lands Program?

In phase II, developed lands owned by one proprietor in an approved housing scheme exceeding 10,000 square meters in 17 additional cities, including 5 cities before the end of 2020 will also be liable to pay the fee.

The implementation of this program will start in five cities namely; Medina, Abha, Khamis Mushayt, Taif, and Jizan

  • Medina
  • Abha
  • Khamis Mushayt
  • Taif
  • Jizan
As per studies conducted by the program team, this program will be applied to the rest of the cities during this year 2021, and that it will include an increase in the supply of developed lands.

ILP phase II aims at lands belonging to a single owner in an approved scheme, with a total area of ​​more than 10 thousand square meters.

Saudi Ministry of Housing Tweet

The total of the lands subject to fees in the cities of Jeddah, Riyadh, Dammam, and Makkah has reached 411 million square meters, and the total payment issued by the program since the beginning of its implementation has reached about 5,500 payment orders.

 ,

The total of the lands subject to fees in the cities of Jeddah, Riyadh, Dammam, and Makkah has reached 411 million square meters, and the total payment issued by the program since the beginning of its implementation has reached about 5,500 payment orders.

 ,

Conclusions

Compliance

As a result, landlords subject to Idle Lands Programs are highly recommended to commence developing their idle lands as soon as possible. Otherwise, they are faced with ever-stricter legal requirements and increasing costs of compliance to hold ownership of idle lands.

Appeals

Once fined, a landlord may appeal in writing to a committee formed by a decision of the Minister of Housing, within 60 days from the date he was notified of the fine decision.

Penalties and fines

He shall be punished with an additional fine not exceeding the amount of the fee owed on his land, and this shall not prejudice his obligation to pay the due fee.

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Employment Employment Counseling Labor Entitlements

Labor Calculator

Labor EOSB Calculator
Labor EOSB Calculator
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Labor EOSB Calculator​

New Labor Benefits Calculator is LIVE in #Saudi_Arabia.

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What is EOSB?

End of Service Benefits (EOSB) is a major labor right, that an employer is committed to once an employment contract has come to an end. The employer is legally bound by the Saudi legislator to pay EOSB to the employee once the employment contract is over, regardless of the fact that the employment was a definite or indefinite term contract.

Therefore, Ministry of Justice (MOJ) launched the new service, “Labor Calculator” in order to facilitate how due labor rights can be calculated in accordance with labor law and its executive regulations.

Labor EOSB Calculator Objectives

  • Accelerating the pace of work and facilitating the judicial procedures handled by the labor courts
  • Shortening and automating the provisions of the Labor Law and its Executive Regulations with regard to labor rights and disputes
  • Ensuring the accuracy of the calculation outcomes related to labor rights

Labor EOSB Calculator Requirements

In the course of obtaining the most accurate outcomes of Labor Calculator, the user shall take into consideration the following data:

  • The start and end date of the employment contract
  • Basic wage
  • The amount of social insurance deduction - if any
  • The number of vacation days due after deducting the number of days consumed - if any
  • The number of overtime hours - if any

How to access Labor EOSB Calculator?

MOJ has managed to make the Labor Calculator easily accessible by all parties involved in an employment relationship that is subject to the Saudi Labor Law; either they are nationals or expatriates.

In order to access the Labor Calculator, the user should follow the steps below:

  1. Visit MOJ website: www.moj.gov.sa
  2. Search within “Electronic Services” tab for “Labor Calculator” service
  3. Click on “Go to the service page” button where the Labor Calculator is located at: https://portaleservices.moj.gov.sa/LaborCalculator/LaborCalculator.aspx
  4. Fill out the data set forth

What makes Labor EOSB so different?

The most important features that distinguish the Labor EOSB Calculator service from the traditional methods used in the past are:

  • List Item
  • Accessibility from anywhere and any time
  • Inclusion of the most important due labor rights
  • Legal elaboration and substantiation of the source and reference of each labor right
  • Piecing all legal requirements together in one single page

Conclusion

In conclusion, we believe the launch of the Labor Calculator is a huge leap in employment relationship management and labor dispute settlement in the Kingdom of Saudi Arabia.

Last but not least, in case further clarification or information is needed, please do not hesitate to contact us.

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Automation Construction Real Estate Technology

Nafith Platform Launch

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Nafith Platform Launch​

Phase II of Idle Lands Program has been launched in 17 new cities by the Ministry of Housing

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OVERVIEW

On Sunday, 8/26/1441H corresponding to 4/19/2020, Minister of Justice, Dr. Walid Al-Samaani, launched Nafith Platform that allows individuals and corporates to electronically create, save, and manage execution bonds in a safe and reliable environment.

Such inauguration took place with the participation of the ministers of commerce, housing, communications, and the governor of the Saudi Central Bank to ensure the most integration possible across Saudi concerned agencies.

The platform provides a digital bond service where the beneficiary/user can create, issue, and have bonds approved by counterpart users, follow up on their status, view their details around the clock, and have such bonds linked to and monitored by the Ministry of Justice and courts of execution to facilitate enforcement thereof.

Nafith Objectives

  • a secure digital protective environment on the bond market
  • preserves the rights of the parties
  • ensures the integrity of instruments
  • eliminates related violations and old obstacles
  • ensures the completion of the bond requirements
  • speeds up and eases down proceedings required for enforcing a bond by digitally linking with courts of enforcement
  • preserves bonds from damage and loss
  • reduces execution disputes, e.g. related to the allegation of forgery
  • stimulating repayment through early notification to the debtor before transferring the bond to the court.

Nafith comes as a part of Vision 2030 and the MoJ’s efforts for engaging the private sector under the National Transformation Program as well as an increased shift towards digital services and platforms.

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Employment Employment Counseling Employment Litigation Insurance Internet Labor Entitlements Litigation

Expansion of Labor Courts Jurisdiction

Joint Ventures
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Expansion of Labor Courts Jurisdiction

Overview

On this 06/09/1442H [17/4/2021], a resolution of the Supreme Council of Judiciary number (1747/T), that concluded the following:

First: The competence of the labor courts to hear cases related to a request to expand the scope of health insurance services for the insured; As stipulated in the employment contract or the internal regulation of the facility.

Second: The competence of the labor courts to hear cases related to a request for compensation for lack of health insurance.

In addition to the above, we would like to share the advice of Knowledge Pioneer Employment Practice consultants to take the necessary measures to maintain the application of the health insurance policy to esteemed facilities employees where health insurance should be expressly included in both current and future employment contracts and the internal regulations of the facility, if possible. Prompt updates of employment contracts will indeed protect facilities’ interests and avoid the long term of litigation and judicial obligation and, accordingly, reimbursing employees who are not covered by valid health insurance in the event of their resort to the judiciary.

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