SAUDI ARABIA Law and Practice Contributed by: Alex Saleh, Asad Ahmad, Khaled al-Khashab and Shahad Al-Humaidani, GLA & Company
including finance, staff and tangible and intangible assets, in order to conduct, on a lasting basis, its business activities within the area provided for in the joint venture agree - ment. • It must be intended to operate for a suf - ficiently long period to bring about a lasting change in the structure of the undertakings concerned (the resources of the joint venture will be indicative of this). • It will ordinarily have sufficient autonomy from its parent undertakings, in terms of its opera - tional decision-making, to be considered a “full-function joint venture”. A joint venture may begin its life as a non-full- function joint venture and subsequently become a “full-function joint venture”. It will, at that time, be considered as a new economic concentration requiring notification. This change in the nature of the joint venture can include the following. • The joint venture’s activities are enlarged during its lifetime, such as commencement of commercial sales to third parties in an open market. • Enlargement of the joint venture, such as through acquisition by the joint venture of the whole or part of another undertaking from the parent undertakings. • The parent undertakings transfer significant additional assets, contracts, know-how or other rights to the joint venture, where this transfer will constitute or enable an extension of the joint venture’s activities, products or geographical markets that were not the object of the original joint venture. • A change in the organisational structure of the joint venture. Additionally, the Guidelines add an important qualification for joint ventures established for
developing new products/markets (particularly those contributing to foreign investment attrac - tion, industry localisation or knowledge transfer) may qualify for an exemption from notification provided that they meet specific criteria relating to the transaction’s nature, including the follow - ing. • The joint venture relates to the manufacture of a product that is not currently produced in Saudi Arabia or when the product is manu - factured in Saudi Arabia but can only be distributed to a limited part of Saudi Arabia for technical reasons inherent in the nature of the product. • The joint venture consists of partners who are not, individually or together, current or poten - tial competitors of a product. Changes in the nature of the joint venture are considered to have taken place upon the shareholder(s) or the joint venture’s management taking the relevant decision that led to the joint venture becoming a “full-function joint venture” or from when the relevant activity commenced. 2.11 Power of Authorities to Investigate a Transaction The GAC has no authority to investigate a transaction that does not meet the jurisdictional thresholds expressed under the KSA Competi - tion Law and the Executive Regulations. 2.12 Requirement for Clearance Before Implementation The KSA Competition Law states that the under - takings participating in the economic concentra - tion or transaction may not complete the trans - action unless notified by the GAC of its approval in writing or if 90 days have elapsed since the review period by the GAC commenced and it has not provided an approval or rejection.
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