Article 25 of the Saudi Privatization Law
المادة 25 من نظام التخصيص
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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 التنفيذية.
2- للطرف الخاص التعاقد من الباطن مع الغير؛ لتنفيذ أي عمل من الأعمال المرتبطة بمشروع الشراكة بين القطاعين العام والخاص، على ألّا يخل ذلك بالتزاماته بموجب النظام وعقد الشراكة، ويكون الطرف الخاص هو المسؤول المباشر في مواجهة الجهة التنفيذية ما لم ينص في العقد على غير ذلك.
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 25 explained in plain English
This article distinguishes between two matters that many people confuse: assigning the contract and subcontracting.
First: assignment.
- It means the private party transfers the contract, in whole or in part, to another party who takes its place.
- The rule: it is not permitted except after written approval from the contracting authority.
- It covers the partnership contract and the subsidiary contract.
Second: subcontracting.
- It means the private party uses another party to carry out some of the project's work while remaining a party to the contract.
- The rule: it is permitted, with no approval required by the text, provided it does not affect its obligations under the Law and the partnership contract.
- The private party remains directly responsible to the contracting authority, unless the contract provides otherwise.
In practice: if the project company subcontracts maintenance work and the subcontractor makes a mistake, the contracting authority holds the project company accountable, not the subcontractor. If the project company wants to leave and hand the contract to another company, that is an assignment that needs written approval. The contract may contain additional restrictions on subcontracting, so it should be reviewed. Anyone arranging this should consult a lawyer who specializes in commercial matters.
Practical example
A project company operates a hospital in Taif under a partnership arrangement and has subcontracted a cleaning company. If the cleaning company falls short, the project company is responsible to the contracting authority. If the project company wanted to transfer the whole contract to another company, it would need written approval.
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 25 of the Saudi Privatization Law
Can a partnership contract be assigned to another company?
The contract may not be assigned, in whole or in part, except after obtaining written approval from the contracting authority.
Is subcontracting allowed in a partnership project?
Yes, provided it does not affect the private party's obligations. The private party remains directly responsible to the contracting authority unless the contract provides otherwise.
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 18
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.
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، ع
- 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
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.