Article 4 of the Saudi Privatization Law
المادة 4 من نظام التخصيص
The Privatization Law applies to contracts of ministries, government bodies and government companies more than 50% owned that are set up to carry out a privatization project. It does not apply to earlier contracts unless amended, extended or renewed after it takes effect.
Official text (Arabic)
This article has not been amended since the law was issued.
تسري أحكام النظام على جميع العقود التي تجريها الوزارات والأجهزة الحكومية الأخرى، والشركات التي تؤسسها الحكومة، أو تتملك فيها وتصل نسبة ملكيتها فيها -بشكل مباشر أو غير مباشر- أكثر من (50 %) من رأس مالها، وتكون الغاية من تأسيسها أو التملك فيها تنفيذ مشروع تخصيص، فيما عدا العقود المبرمة قبل نفاذ النظام، ما لم تُعدّل، أو تُمدّد، أو تُجدّد؛ بعد نفاذه. وبالنسبة لمشاريع التخصيص الصادر في شأنها موافقة نظامية قبل نفاذ النظام ولم تبرم عقودها بعد، فتخضع للأحكام النظامية السارية وقت صدور الموافقة، ما لم يقرر مجلس إدارة المركز 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 4 explained in plain English
This article sets the scope of application of the Privatization Law in terms of bodies and of time:
First: the bodies subject to it. The Law applies to all contracts made by:
- Ministries and other government bodies.
- Companies the government establishes or acquires an interest in with more than 50% of their capital, directly or indirectly, provided that the purpose of establishing them or acquiring an interest in them is to carry out a privatization project.
Second: earlier contracts.
- Contracts concluded before the Law takes effect are not subject to it, unless they are amended, extended or renewed after it takes effect.
- Privatization projects for which a statutory approval was issued before the Law took effect and whose contracts have not yet been concluded are subject to the statutory provisions in force when the approval was issued, unless the Center's board of directors decides otherwise.
The practical effect: a company contracting with a government company in which the government owns 60% must check whether the government company was established or acquired for the purpose of carrying out a privatization project. Anyone who needs to assess whether their contract is subject to the Law should consult a lawyer who specializes in commercial matters and government contracts.
Practical example
A company in Jeddah concluded an operating contract with a government body before the Privatization Law took effect. After it took effect, the two parties agreed to extend the contract for another five years, and through this extension the contract becomes subject to the Law's provisions.
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 4 of the Saudi Privatization Law
Does the Privatization Law apply to government companies?
Yes, if the government owns more than 50% of them directly or indirectly and the purpose of establishing them or acquiring an interest in them is to carry out a privatization project.
Does the Law apply to contracts concluded before it took effect?
No, unless they are amended, extended or renewed after it takes effect.
What is the position of projects approved before the Law whose contracts have not been signed?
They are subject to the statutory provisions in force when the approval was issued, unless the Center's board of directors decides otherwise.
More articles on Scope and Aims of the Privatization Law
- Article 1
The article defines the terms of the Privatization Law, including privatization, public-private partnership, asset ownership transfer, private party, subsidiary contract and unsolicited offer.
يقصد بالألفاظ والعبارات الآتية -أينما وردت في هذا النظام- المعاني الموضّحة أمام كل منها ما لم يقتض السياق غير ذلك: النظام: نظام التخصيص. المجلس: مجلس الشؤون الا
- Article 3
The article sets the government's aims in privatization projects, including rationalizing spending, increasing revenues, raising service quality, encouraging the private sector, widening citizens' participation and creating jobs.
تسعى الحكومة من خلال مشاريع التخصيص إلى تحقيق الأهداف الآتية: 1- المساعدة في تحقيق الأهداف الاستراتيجية للجهات الحكومية، وترشيد الإنفاق العام، وزيادة إيرادات ال
- Article 9
On the recommendation of the Center's board of directors, the Council of Economic and Development Affairs may decide to treat or not treat any infrastructure or public service project as a privatization project.
للمجلس بناءً على توصية من مجلس إدارة المركز النظر في أي مشروع مرتبط بالبنية التحتية، أو الخدمات العامة؛ ليقرر اعتباره (أو عدم اعتباره) مشروعاً من مشاريع الشراكة
- Article 40
The Implementing Regulations set the rules for implementing the Privatization Law, including the project document, project priorities, selecting consultants, monitoring contracts, the effect of emergencies, and criteria for treating a project as privatization.
1- تحدد اللائحة التنفيذية الأحكام اللازمة لتنفيذ النظام بما في ذلك ما يأتي: أ- الأحكام المتعلقة بوثيقة مشروع التخصيص، وآلية التواصل بالقطاع الخاص. ب- الأسس اللا
- Article 45
The Privatization Law repeals any provisions that conflict with it and takes effect 120 days after its publication in the Official Gazette.
يلغي النظام كل ما يتعارض معه من أحكام، ويُعمل به بعد مضي (مائة وعشرين) يومًا من تاريخ نشره في الجريدة الرسمية.
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.