Treaties and Trade Agreements affecting FDI project
The United States and Saudi Arabia have a few key agreements that directly affect any foreign direct investment taking place with the kingdom. Of primary importance in this regard would be the US-Saudi TIFA (Trade and Investment Framework Agreement) which came into effect in July 2003 and the more current GCC-US Framework Agreement which came into effect in September 2012(Investmentpolicyhub.unctad.org, 2015). These agreements are the impetus opening the way for foreign direct investment opportunities within the kingdom. With regard to the construction of luxury hotels in Saudi Arabia the kingdom has SAGIA (Saudi Arabian General Investment Agency) which acts as a facilitator of licenses and as a liaison for foreign companies (Sagia.gov.sa, 2015).
The kingdom of Saudi Arabia is ruled ostensibly by Sharia law, but for the purpose of commercial enterprises a specialized statutory tribunal holds sway. Since Union Diamond Construction LLC is engaged in hotel construction, a number of particular tribunals may hear any dispute that may arise from operations. Labor courts used to have their own special tribunal, but these issues are now heard in the Sharia courts, and banking disputes are heard by the Committee for Banking Disputes (Saudilegal.com, 2015).
Arbitration has become a more common practice to settle disputes. The new arbitration regulation (Royal decree M/34) of April 2012 has made written agreements to arbitrate binding. It also agrees to uphold the rules of other international organizations and their procedures if they are agreed upon in the contract meaning “Saudi Arabian courts must decline to hear cases which are subject to an agreement to arbitrate, provided the motion for dismissal is filed before other substantive or procedural arguments are raised before the court” (Saudilegal.com, 2015). Most importantly the regulation allows for certain grievances to be heard in foreign courts and not be subject to Saudi laws or judgments.
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