Law firms are racing to establish a foothold in Saudi Arabia as the oil-rich kingdom looks to diversify its economy in line with Vision 2030.
Saudi Arabia has reformed its rules to allow foreign law firms to operate independently in the Kingdom, with proposals to possibly allow them to establish a direct presence in the near future.
These are clear signs the Kingdom is committed to attracting foreign investment and keeping high-value legal work within its borders. At the same time, it is recognised that in doing so foreign law firms must show a level of commitment on the ground and invest in local talent.
Already the likes of Kirkland & Ellis, Latham & Watkins, Clifford Chance, and Linklaters are operating independently in the Kingdom after obtaining licences from the Ministry of Justice.
What’s more, Saudi Arabia has introduced a Regional Headquarters (RHQ) programme encouraging businesses to move their headquarters there if they wish to pitch for government work and receive benefits such as tax relief. Again, a handful of foreign law firms already have.
They must also comply with local requirements:
They must operate as a branch office or as a joint venture with local lawyers, and the latter owning at least 25% of the partnership. Additionally, two partners from the firm must live in Saudi Arabia for a minimum of 180 days a year, while 70% of the firm’s lawyers must be Saudi nationals under the government’s Saudization scheme (a rise from the previous requirement of 50%).
Local work must not be passed to foreign offices. Further, at least 70% of fees generated by the office must stay within the country, and no more than 30% of advisory work can be exported to lawyers working outside of Saudi Arabia. Finally, they must renew their licence every five years.
Saudization targets in particular have led to talent wars between firms, driving salaries in some cases up to 20% higher than in nearby Dubai. One managing partner at a local firm in Saudi Arabia said associate salaries are currently on par with those in New York, with the additional benefit of no income tax.
Tax-free income is just one of the many reasons why foreign lawyers would consider relocating to the Kingdom, along with year-round sunshine, growing international school and healthcare systems, and the quality of work in the region’s biggest economy.
Saudi Arabia’s vision for diversifying the economy is spurring expansion in sectors from finance to technology to renewable energy. Entities such as NEOM and the Public Investment Fund (PIF) are driving big-money projects and investment in the Kingdom.
Foreign law firms are finding new homes in the King Abdullah Financial District, otherwise known as KAFD, the Kingdom’s burgeoning financial centre. KAFD’s Tadawul Tower hosts the Saudi Arabia stock exchange, major banks and financial institutions, and is being eyed by several law firms.
All in all, Saudi Arabia presents a land of opportunity for global law firms willing to navigate the evolving regulatory landscape. While compliance with Saudization targets and other requirements is essential, the potential rewards, including access to a lucrative market, position the Kingdom as a key hub for the global legal profession.
