Article 18 of the Saudi Privatization Law
المادة 18 من نظام التخصيص
With written approval from the contracting authority, the private party may take financing and mortgage its own project assets, but may never sell or mortgage State-owned assets.
Official text (Arabic)
This article has not been amended since the law was issued.
1- يجوز للطرف الخاص بعد الحصول على موافقة مكتوبة من الجهة التنفيذية ما يأتي:
أ- إبرام عقود تمويل للأعمال والخدمات محل مشروع التخصيص مع جهة مصرفية، أو تمويلية، على أن يتحمل -بشكل منفرد- المسؤولية عن جميع الالتزامات والمنازعات الناشئة عن التمويل، ما لم تتفق الجهة التنفيذية والطرف الخاص -بعد موافقة الوزارة- على غير ذلك.
ب- رهن أصل يملكه في مشروع التخصيص؛ لغرض الحصول على تمويل للأعمال والخدمات محل المشروع، وفي جميع الأحوال لا يجوز للطرف الخاص بيع أو رهن أصل مملوك للدولة.
2- للجهة التنفيذية أو الوزارة -بعد موافقة الجهة المختصة- إبرام اتفاقيات مباشرة مع جهة أخرى ذات علاقة بمشروع التخصيص أو تقديم تعهدات لها تحدد الحقوق التي تتمتع بها تلك الجهات، والالتزامات التي عليها.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 18 explained in plain English
Privatization projects usually need large bank financing, and this article regulates it:
First: what the private party may do with written approval from the contracting authority:
- Financing contracts: with a bank or financing entity for the works and services of the project. The private party bears sole responsibility for all financing obligations and disputes, unless the contracting authority and the private party agree otherwise, after the approval of the Ministry of Finance.
- Mortgage: mortgaging an asset it owns in the project to obtain financing for the project's works and services.
Second: what is absolutely prohibited. In all cases, the private party may not sell or mortgage an asset owned by the State.
Third: direct agreements. The contracting authority or the Ministry of Finance, after the approval of the competent authority, may enter into direct agreements with another party connected to the project, such as lenders, or give it undertakings that define its rights and obligations.
In practice, the financing bank deals with the private party, but it can obtain direct undertakings from the government that reassure it. Anyone arranging financing for a privatization project needs a lawyer who specializes in banking and finance.
Practical example
A project company building a hospital under a partnership arrangement in Riyadh needs a loan from a local bank. With written approval from the contracting authority, it can sign the financing contract and mortgage the equipment it owns, but it may not mortgage the State-owned land.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 18 of the Saudi Privatization Law
Can the private party borrow to finance a privatization project?
Yes, with written approval from the contracting authority. It bears sole responsibility for the financing unless otherwise agreed after the Ministry's approval.
Can State-owned land be mortgaged to finance the project?
No. In all cases the private party may not sell or mortgage an asset owned by the State.
Can the government give undertakings directly to lenders?
Yes. The contracting authority or the Ministry, after the approval of the competent authority, may enter into direct agreements with the relevant parties or give them undertakings.
More articles on Concluding and Financing a Privatization Contract
- Article 16
Privatization contracts are concluded in the government's name, with the executing entity representing it, and only with a private party. A body with public legal personality may not contract with the government as a private party.
1- تُبرم العقود الخاضعة لأحكام النظام باسم الحكومة، وتُعدّ الجهة التنفيذية مُمثلًا للحكومة في كل ما يرتبط بالعقد وأي عقد تابع، ما لم ينص قرار الموافقة على توقيع
- Article 17
No government entity may conclude a privatization contract without the competent authority's approval, and a contract concluded in breach is void unless the competent authority ratifies it.
لا يجوز لأي جهة حكومية إبرام عقد تخصيص دون الحصول على موافقة الجهة المختصة، ويقع باطلًا كل عقد تم إبرامه بالمخالفة لذلك، ما لم تجزه الجهة المختصة.
- Article 19
At the private party's request and with the competent authority's approval, the contracting authority issues a certificate confirming that the competent authority approved the contract and that it and its documents are subject to the Law.
تُقدّم الجهة التنفيذية -بموافقة الجهة المختصة- بناءً على طلب الطرف الخاص شهادة له تتضمن ما يأتي: 1- أن الجهة المختصة وافقت على العقد، أو العقد التابع. 2- أن الع
- Article 25
A partnership contract may not be assigned without written approval from the contracting authority, while subcontracting is allowed and the private party remains directly responsible.
1- لا يجوز للطرف الخاص التنازل كليًّا أو جزئيًّا عن عقد الشراكة بين القطاعين العام والخاص -أو العقد التابع- للغير إلّا بعد الحصول على موافقة مكتوبة من الجهة الت
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.