Privatization Contracts and Their Legal Nature

Abstract

This research examines the legal classification and contractual alternatives for privatization methods in the Kingdom of Saudi Arabia, in light of the Privatization Law issued by Royal Decree No. (M/63) and its Implementing Regulation, to achieve the objectives of Saudi Vision 2030. The research aims to determine the governing legal nature of privatization contracts along their two main tracks: Public-Private Partnership (PPP) contracts and asset transfer contracts.

The study demonstrated that privatization contracts are administrative contracts par excellence, as they embody the elements of administrative contract theory. This is evidenced by the administration being an original party to them, their connection to public utilities and infrastructure, and their inclusion of exceptional conditions that grant the administration powers of supervision, amendment, and unilateral termination for the public interest, alongside safeguarding the financial rights of the contractor and guarantees for restoring financial equilibrium.

The study also concluded that the method of transferring asset ownership to government companies (where the estimated value of the asset is no less than 50 million Riyals) represents a conditional sale subject to the continuous provision of public service, rather than an absolute civil sale. Actual ownership effectively remains with the state through companies wholly owned by it (100%) to ensure the preservation of public funds and sovereignty. Furthermore, the study confirmed that the Board of Grievances holds original judicial jurisdiction over disputes arising from these contracts, with the option to resort to arbitration in accordance with approved regulatory controls.