Selling to government and contracts in Saudi Arabia

01How government buys

Government purchasing runs through the Government Tenders and Procurement Law and the Etimad electronic platform. There is no central tender board.

• The law is Royal Decree M/128 of 16 July 2019.
• Each agency has its own contracting authority.
• Healthcare buying runs through NUPCO and defence buying through the General Authority for Military Industries.
• Aramco has its own rules.

02Supplier registration

A foreign supplier that is not registered by MISA needs a temporary registration from the Ministry of Commerce or uses a registered Saudi agent.

• MISA offers a temporary investment registration for government contracts. It needs the contract or award letter and ends when the contract ends.
• Registrations for government contracts carry a MISA fee payable within 30 days of notice.

03Regional headquarters rule

Since 1 January 2024, government bodies cannot contract with a foreign company that has a regional office elsewhere in the Middle East but no licensed Saudi regional headquarters (RHQ).

• The Council of Ministers approved the contracting rules on 27 December 2022 (3 Jumada al-Thani 1444H). They apply from 1 January 2024.
• The rule also covers the related parties of such a company. Related parties include agents, distributors and suppliers.
• MISA keeps the list of covered companies. The list is not public.
• Contracts of SAR 1 million or less are exempt.

04Routes open to covered companies and exemptions

A covered company contracts with government through four routes. A committee under the Ministry of Finance approves exemptions.

Allowed routes

• Direct purchases under SAR 1 million executed outside the Kingdom.
• Public tenders where the covered bid is the only technically acceptable one, or is technically best and at least 25% cheaper than the second best.
• Limited tenders where only one other qualified bidder exists.
• Direct contracting only where the item is exclusively available or in an emergency.

Exemptions

• Since February 2026 the exemption request is made through Etimad before the tender or direct negotiation starts. It cannot be made after the fact.
• Agencies send a justification report within 30 working days of signing a contract under an exemption.

05RHQ licence

An RHQ must employ at least 15 full-time staff within one year of issue, at least three of them at executive director or vice president level.

• The RHQ must start the mandatory RHQ activities within six months of issue. It must start at least three optional RHQ activities within one year of issue.
• An RHQ is a separate legal entity, either a company or a registered branch. It cannot earn revenue outside RHQ activities.
• The programme is for a multinational with presence in at least two other countries and active in the Middle East.
• RHQs receive unlimited employee visas.

06Local content

The Local Content and Government Procurement Authority (LCGPA) sets the local content rules. Bids that fail the requirements can be excluded.

• LCGPA keeps the Mandatory List of national products.
• National products not on the list receive a 10% price preference. Foreign products are treated as priced 10% higher in bid comparison.
• GCC-origin products receive up to a 10% price preference over non-GCC products.
• LCGPA's local content scoring has four pillars: local workforce, domestic procurement, capital spending in the Kingdom, and research and capability building.
• Some tenders set a minimum local content score, a binding target score or a weighting in the commercial score. A 40% certified score is one example of a minimum.
• The Local Content Certificate is valid for 19 months.
• The rules expect foreign suppliers to run training programmes for Saudi nationals.
• Breaches lead to financial penalties, contract bans and lower contractor classification.

07Commercial agents and distributors

Only Saudi nationals and wholly Saudi-owned companies can act as commercial agents or distributors.

• The Commercial Agencies Law (Royal Decree 11 of 20/02/1382H) and its implementing regulations cover agency and distribution.
• The agent or distributor must be registered. The agreement is entered in the Commercial Agencies Register at the Ministry of Commerce. The filing is made within three months of the agreement starting.
• An unregistered agreement is not necessarily void, but the distributor is weaker in evidence and practice.
• The law has no statutory termination regime and no statutory compensation. Termination alone gives no right to compensation.
• Damages can be claimed where breach and harm are proved. Courts weigh the length of the relationship and the market investment made. The contract and the Civil Transactions Law govern.
• Exclusivity is not set by statute. The contract states it and defines territory and channels.
• Cancelling the register entry can lag behind contractual termination and can need the outgoing distributor's cooperation.

08Contract law, language and currency

The Civil Transactions Law (Royal Decree M/191 of 29/11/1444H) is the first written civil code. It governs contract in general.

• Saudi courts work in Arabic. Foreign-language contracts need an Arabic translation.
• Filings with MISA and the Ministry of Commerce need certified Arabic translations.
• Judgments are in the currency of the contract. Where none is stated, the judgment is in riyals.

Currency

• The riyal is fixed at SAR 3.75 per US dollar by the central bank (SAMA). The peg has held since 1986.
• There is no limit on sending profits, debt service, capital or other investment funds abroad. Withholding tax still applies.
• Cash above USD 10,000 must be declared on entry or exit.
• Saudi Arabia accepts IMF Article VIII obligations for free current payments.

09Courts and enforcement

Commercial Courts hear disputes between businesses. The Board of Grievances hears disputes between private parties and government bodies.

• The Commercial Courts Law of 2020 governs the Commercial Courts.
• Foreign court judgments and arbitral awards are enforced through the Enforcement Courts under the Enforcement Law of 2012.
• Saudi Arabia is party to the 1983 Riyadh Arab Agreement for Judicial Cooperation and the GCC Convention for the Execution of Judgments. Judgments from the other member states are enforced under those two conventions.
• The Enforcement Courts review foreign awards and judgments for compliance with Sharia and public order.
• A 2018 bankruptcy law offers restructuring and liquidation under a licensed trustee.

10Arbitration

The Saudi Center for Commercial Arbitration (SCCA) uses UNCITRAL-based rules. Arbitral awards are enforced through the Enforcement Courts.

• The SCCA's 2023 rules created a court of 15 arbitrators and allow foreign counsel.
• UNCITRAL recognised the Saudi arbitration law as based on the 2006 Model Law in December 2017.
• Saudi Arabia ratified the New York Convention in 1994 and the Singapore Convention on Mediation in 2020.
• Saudi Arabia is an ICSID member but cannot be compelled to submit to ICSID without case-by-case consent.