Navigating Lawfare in the Kingdom of Saudi Arabia: Strategic Adaptation in a New Investment Era

In my article for this publication dated 20 August 2024, I touched upon the many multifaceted aspects of lawfare. In the dynamic landscape of international investment, the Kingdom of Saudi Arabia is at a pivotal moment of transformation. The introduction of the new Investment Law marks a significant stride towards creating a more level playing field for investors, aligning with the Kingdom’s broader vision of economic diversification and modernization under Vision 2030. However, to fully leverage this legal evolution, the Kingdom must strategically navigate its lawfare landscape—both in terms of existing Bilateral Investment Treaties (BITs) and future legal engagements. This article delves into foundational precepts of Saudi Arabia’s lawfare strategy, exploring how the Kingdom can harmonize its legal frameworks to reinforce its burgeoning economic stature.

Understanding Lawfare and Its Relevance

Lawfare—using legal systems and principles to achieve strategic goals, often in international relations—has become a crucial element in the global investment arena. For Saudi Arabia, a country undergoing rapid economic reform, a sophisticated lawfare strategy is essential to safeguard its interests and capitalize on new opportunities. The Kingdom’s lawfare strategy must be grounded in a deep understanding of its existing BITs, the potential benefits and pitfalls of these treaties, and the need for innovative legal frameworks that reflect its rising global stature.

The New Investment Law: A Foundation for Fairness

The new Investment Law represents a paradigm shift towards a more transparent and equitable investment environment in Saudi Arabia. By offering equal treatment to both domestic and foreign investors, the law aims to establish a competitive economic landscape, attract high-quality investments, and drive sustainable growth. This legal reform aligns with the Kingdom’s goal of enhancing its investment climate and reducing bureaucratic obstacles that have historically impeded foreign investment.

Nevertheless, while the new law is a significant advancement, it is essential for Saudi Arabia to scrutinize its existing BITs. Many of these treaties offer protections and benefits that exceed those provided under the new Investment Law. As such, a comprehensive review of these BITs is necessary to assess their continued relevance and impact on the Kingdom’s investment landscape.

The Necessity of Reviewing Existing BITs

Bilateral Investment Treaties (BITs) are agreements between two countries that outline the terms and conditions for private investment. These treaties typically provide protections such as non-discrimination, protection against expropriation, and dispute resolution mechanisms. However, the landscape of international investment law is continuously evolving, and some BITs may now offer outdated or excessive rights compared to current standards.

For Saudi Arabia, the review of existing BITs is crucial for several reasons:

1. Alignment with New Investment Law: Existing BITs might confer benefits that are more favourable than those in the new Investment Law. If these treaties provide more extensive rights or protections, they could create inconsistencies in the Kingdom’s investment framework. Reviewing and possibly renegotiating these treaties can help ensure that the Kingdom’s legal environment is cohesive and aligned with its current economic strategy.
2. Addressing Imbalanced Terms: Some BITs may contain terms that are unfavourable or imbalanced, such as provisions that favour foreign governing law or jurisdiction. These terms could limit the Kingdom’s ability to enforce its domestic laws and regulations effectively. Identifying and addressing such imbalances is essential to maintain sovereignty and control over its economic policies.
3. Strategic Adaptation: By evaluating existing BITs, Saudi Arabia can determine whether some treaties are “overkill”—offering excessive rights that may not be justified. This process allows the Kingdom to focus on more balanced agreements that align with its strategic interests and long-term vision.

The Case for “Creative Destruction” and New International Treaties

In addition to reviewing existing BITs, Saudi Arabia should consider proposing new international treaties that reflect its evolving economic and strategic interests. The concept of “creative destruction”—where outdated or redundant systems are replaced with innovative and agile paradigms—applies here. By discarding outdated legal frameworks and introducing new, forward-thinking treaties, the Kingdom can better protect its interests and project its rising power on the global stage.

New international treaties should be designed to:

1. Reflect Saudi Arabia’s Vision 2030: Treaties should align with the Kingdom’s long-term economic goals, supporting its diversification efforts and enhancing its position as a global economic player. This alignment will ensure that international agreements contribute positively to the Kingdom’s strategic objectives.
2. Enhance Strategic Leverage: By crafting treaties that offer balanced benefits and protections, Saudi Arabia can strengthen its negotiating position and assert its influence in international investment discussions.
3. Promote Innovation and Investment: New treaties should incentivize innovation and high-quality investments, fostering a conducive environment for economic growth and technological advancement.

Building Legal Capacity and Strategic Foresight

To effectively navigate the complexities of lawfare, Saudi Arabia must invest in legal training and capacity building for its governmental officials. Understanding and anticipating international legal developments will enable the Kingdom to make informed decisions and craft strategic responses to emerging challenges.

Key aspects of capacity building include:

1. Training Programs: Develop specialized training programs for officials to enhance their understanding of international investment law, dispute resolution mechanisms, and lawfare strategies.
2. Strategic Forecasting: Implement systems for monitoring and analyzing international legal trends to anticipate potential impacts on Saudi Arabia’s investment landscape.
3. Interdepartmental Collaboration: Encourage collaboration between different government departments and agencies to ensure a cohesive approach to international legal matters and investment strategies.

Establishing a Lawfare Institute

To centralize efforts and drive strategic innovation, Saudi Arabia should consider establishing a Lawfare Institute. This institution would play a crucial role in:

1. Reviewing Existing BITs: Conducting thorough assessments of current BITs to identify areas for renegotiation or termination.
2. Developing Strategic Tools: Creating tools and frameworks to address lawfare challenges and support the Kingdom’s legal and economic strategies.
3. Fostering Innovation: Encouraging the development of new international treaties and legal agreements that reflect the Kingdom’s evolving position and strategic interests.
4. Promoting Research and Dialogue: Facilitating research on emerging legal trends and fostering dialogue with international legal experts and stakeholders.

Conclusion

As Saudi Arabia advances its economic reforms and embraces new legal frameworks, a proactive and strategic lawfare approach is essential. By reviewing and adapting existing BITs, proposing innovative international treaties, and investing in legal capacity building, the Kingdom can navigate the complexities of international investment law effectively. Establishing a Lawfare Institute will further bolster these efforts, ensuring that Saudi Arabia remains at the forefront of global legal and economic developments. Through these initiatives, the Kingdom can safeguard its interests, project its rising power, and realize its vision of a diversified and prosperous future.

Hassan Aslam Shad is an international lawyer, a graduate of Harvard Law School, U.S.A. and a partner at Veritas Law, Saudi Arabia. Email: hassan.shad@veritasksa.law