February 5, 2019

Saudi Arabia allowing shipping agent licences to full foreign ownership

The government authorities of the Kingdom of Saudi Arabia (KSA) are collectively working on improving the investment environment, as part of the National Transformation Plan and Vision 2030. In this respect, the Saudi Arabian General Investment Authority (SAGIA) - the governing authority for foreign direct investments - has been working on developing the foreign investment regime aiming to ease some of the restrictions applied on foreign investments in the KSA.

As part of this, shipping agents will be able to operate independently on the back of the KSA's privatisation plans. Until recently, ship agency services could only be performed by a 100% owned KSA company or KSA national. Under the recent reforms, rather than working with a local investor, foreign shipping companies and ship agents now have the right to operate independently as ship agents (save for customs clearance and supplying fuel to ships) at Saudi Arabian ports. Following the recent letter issued in August 2018 by the Saudi Minister of Commerce and Investment, the Minister of Commerce has confirmed that shipping agency activities do not fall under the Saudi Agency Law and therefore it is not a prohibited activity for non-KSA owned companies. In doing so, this has opened the door for granting foreign investors a shipping agency license.

SAGIA has confirmed that they are welcoming foreign shipping companies and ship agents, and that there are no special requirements to conduct the activities of shipping agency other than the regular requirements for setting up a company in the KSA. This decision is certainly a positive step forward for the marine sector and for the KSA economy.

The foreign investment license will be valid for five years and can be renewed annually. In addition to the foreign investment license, investors will be required to obtain a shipping agency license from the Saudi Ports Authority (Mawani) after the full establishment of the company and before practicing the activities. Mawani and SAGIA are working together to implement this change and to implement the necessary procedures to regulate the investment of shipping agencies.

We understand from Mawani that the activities of shipping agencies would include vessel clearance and related activities, including, but not limited to, loading and unloading of cargos, booking of cargos, paying port dues, representing the shipping line and supplying supplies to ships. The only service that cannot be performed by foreign direct investment companies is customs clearance and the supply of fuel to ships.