The Kingdom of Saudi Arabia has continued to witness dramatic cultural and legal changes in recent years. The Ministry of Health and the Saudi Arabian General Investment Authority (SAGIA) have made various announcements in relation to opening almost all areas of healthcare to foreign investors.

Saudi Arabia is a critical sector for any party investing in the Middle East, partly because it is the largest economy in the Middle East and while oil wealth has brought new opportunities it has led to a growing occurrence of lifestyle diseases, such as diabetes and heart disease.2 Although Saudi Arabia is working hard on a campaign to encourage daily exercise and is expected to impose tougher standards on imported food in relation to sugar and salt, it is not believed these lifestyle diseases will dramatically change in the short term. Saudi Arabia is challenged by a population demanding the latest technology and is establishing new medical colleges and partnering with international players. For example, Saudi Aramco Medical Services teamed up with Johns Hopkins to form Johns Hopkins Aramco Healthcare. Abu Dhabi-based NMC Healthcare recently announced a joint venture with a governmental entity to own and operate numerous healthcare facilities in Saudi Arabia. A new healthcare city is currently being developed in Riyadh. Also, foreign private equity groups and operators such as Investcorp, NBK Capital, Gulf Capital, TVM Healthcare, Audacia, KIMS Healthcare, BlueApple and others have recently announced healthcare investments or intentions to invest in the Kingdom. The Ministry of Health has previously awarded significant contracts to Diaverum and DaVita to operate dialysis clinics in Saudi Arabia. The Ministry of Health has retained a number of the world's leading consultants to explore implementing public–private partnerships and privatisations in the healthcare sector. Some of the world's most complicated medical procedures, including organ transplants, separation of conjoined twins and neurosurgery, are often performed in the hospitals of Saudi Arabia.

The Ministry of Health is the regulator for most of the healthcare sector in Saudi Arabia. The Ministry of Defence, including the National Guard, maintains its own standards, but we understand this is expected to change soon and this responsibility will fall within the purview of the Ministry of Health.

The government of Saudi Arabia has established certain regulatory reforms to encourage investment in the healthcare sector by the private sector. The healthcare sector is undergoing constant change because of its high importance for Saudi Arabian nationals, and certain agencies have overlapping responsibilities, as described below. Moreover, as part of Saudi Arabia's well-publicised Vision 2030, it is transforming its public sector and exploring privatising certain aspects of its healthcare sector. Saudi Arabian Airlines recently announced it has awarded a contract to a preferred bidder to privatise its Jeddah-based medical centre, but implementation appears to be awaiting finalisation of Saudi Arabia's privatisation programme. Currently, there are a number of foreign investment restrictions, but a number of liberalisations are expected shortly.



The Council of Cooperative Health Insurance previously made it mandatory for all business owners to have medical insurance cover for their workers from the date of their arrival, and to hand them insurance cards within 10 days of their arrival in Saudi Arabia. According to the council's relatively new regulations, the insurance coverage becomes invalid only in the event of the beneficiary's death, cancellation or expiry of his or her insurance documents, or if he or she leaves Saudi Arabia on an exit-only visa. Married workers' medical insurance should cover pregnancy and childbirth. Article 7 of the Cooperative Health Insurance System also requires owners of private hospitals to provide medical insurance to their foreign workers.

The first stage of this compulsory insurance was introduced in 2006 and covered all workplaces with more than 500 people. This was followed by the next stage, introduced in the second half of 2007, which mandated all workplaces with fewer than 500 employees to also adopt the policy. Now, all companies with fewer than 500 employees that are renewing business licences must provide proof that expatriate medical insurance is available for all staff. This policy was a major shift in the Saudi market, although the main players in the industry – pharmaceutical companies, insurers and healthcare providers – are still at odds as to who benefits the most in the new landscape.

Eventually, all Saudi citizens will need to be covered by medical insurance, as the free medical healthcare programme is under stress from a large population with lifestyle diseases in an age of dwindling public resources. In preparation of the privatisation of public hospitals, Saudi Arabia is looking to create a form of insurance for those in the public sector.

The introduction of mandatory health insurance for expatriates, and insurance reform in general, has certainly shaken up the healthcare market in Saudi Arabia, providing a great amount of potential for pharmaceutical companies, laboratories, insurers and healthcare providers.

All Saudi Arabian insurance companies are required to be listed companies in Saudi Arabia. There are a number of insurance companies that are partly owned by foreign parties such as BUPA, Munich RE and AXA.


Privately owned healthcare institutions, which offer treatment, diagnostic, laboratory, rehabilitation and nursing services (private healthcare institutions), are classified under the relevant regulations as one of the following:

  1. hospitals that are equipped to diagnose, treat and admit patients on an inpatient basis;
  2. general health centres prepared to diagnose and treat patients that offer at least three medical specialisations;
  3. specialised healthcare centres that focus on one medical speciality or more;
  4. physician office (clinics) prepared for treatment and diagnosis of patients;
  5. radiology centres for diagnostic imaging and radiology treatment;
  6. medical laboratories;
  7. same-day surgical facilities (i.e., ambulatory surgery centres) that are licensed to admit patients for minor and medium surgeries, provided that patients are discharged on the same day of admission;
  8. supporting medical services facilities that provide complementary medical and technical services and include: physical therapy centres, vision, nutrition centres, artificial limbs, or any other facilities that are classified as a supporting medical facility by the Ministry of Health; or
  9. medical transport services that include transport and first aid for patients before admission to hospitals in accordance with the standards and requirements of the Saudi Red Crescent Society.

The premises of all private healthcare institutions must be compliant with the medical and technical requirements historically designated by the Ministry of Health and must be equipped with the necessary medical equipment and furniture. In addition, a private healthcare institution must have appropriate systems for medical waste disposal, prevention of infection and medical records filing.

There is a wide range of both medical clinics and hospitals in Saudi Arabia. It is normally possible to obtain direct access to hospitals without the need for a referral.

There are strict data privacy laws that do not permit the storage of patient information outside Saudi Arabia without the written permission of the patient concerned.

There are some unusual approvals that may be required by a woman's husband or guardian prior to undertaking certain medical procedures. For example, a woman is required to obtain written permission from her husband or guardian prior to undertaking a hysterectomy, unless it is required in a life-threatening situation.

For certain procedures, it is common for Saudi Arabian nationals to obtain government approval and funding from the Ministry of Health for treatment outside Saudi Arabia. The United States and Germany are two of the most common destinations for treatment of Saudi Arabian nationals.


Medical staff, including doctors and pharmacists, must be properly licensed by the Ministry of Health and the General Directorate of Health Affairs in accordance with the Healthcare Profession Practice Regulations, including any regulations or circulars published by the Saudi Commission for Health Specialties, which is the regulatory body responsible for licensing doctors.

In respect of employment, please note the following:

  1. each hospital must appoint a locally qualified doctor of Saudi nationality as a medical manager for the hospital (exceptions might be given for hospitals located in rural and remote areas);
  2. each hospital must appoint a pharmacist of Saudi nationality as a manager of the hospital's internal pharmacy on a full-time basis;
  3. the pharmacist officer responsible for drugs in the hospital's internal pharmacy, who is subject to surveillance, shall be a full-time pharmacist assistant of Saudi nationality. The internal pharmacy manager might hold this position; and
  4. each hospital must appoint an administrative manager of Saudi nationality, holding a university degree, to manage the hospital on a full-time basis.


The area of liability is still under development in Saudi Arabia. Saudi law consists of two types: the shariah or Islamic law (God-made law); and the government regulations, ministerial decrees and implementation rules (man-made law). Although the government regulations, decrees and rules are deemed to be subservient to the shariah,3 in practice, the two types of law are sometimes in conflict. Further, as there is no recognised system of legal precedent in Saudi Arabia, the ability to resolve any conflict between the shariah and the government regulations remains problematic. In court cases, both types of law are usually applied and the courts' rulings may be supported by principles or regulations of either type – or a combination of the two. This makes it exceedingly difficult to predict with any degree of certainty the outcome of certain types of legal cases, including liability for medical negligence. The facts of the particular case, therefore, are perhaps more relevant to the dispute than would ordinarily be the case in Western jurisdictions.

Despite the generally unpredictable nature of the Saudi civil justice system, several important principles are nonetheless helpful in analysing claims in Saudi litigation or arbitration. A fundamental principle in Hanbali shariah4 is that a contract between two parties constitutes the law between those parties – except to the extent it violates the shariah or public policy.

The shariah also contains many equity principles similar to those found in the common law of England and the United States. This includes a presumption of good faith in contract matters. It also includes the concepts of unjust enrichment and the voiding of contracts owing to incapacity, fraud and duress. The shariah, however, lacks many of the equitable remedies found in the common law, such as injunctive relief, which is exercised only in rare circumstances.

The shariah concept of damages is also important in determining potential liability in a commercial dispute. Under the shariah, only direct, proven damages are recoverable in cases involving tort or breach of contract. Thus, incidental and consequential damages will not be recognised. In addition, lost profits are generally not recoverable on the ground that they are speculative; only God could know what would, in fact, occur in any given situation. Thus, some of the consequential damages in a lawsuit in a Western jurisdiction may not be applicable in Saudi Arabia.

In general, there is the concept of 'blood money'. We note that under Saudi Arabian law, the maximum civil liability for wrongful death is 120,000 riyals for an adult Muslim male. This is established by General Organisation of Social Insurance, which provides workers' compensation coverage to employees.

In Saudi Arabia, the concept of blood money exists with respect to homicide, in which a crime victim's family may demand a sum of money for sparing the life of the killer. This may arise in a situation in which an employee of a medical institution was found to have intentionally killed a person (rather than the death being deemed an accident). This would, of course, involve the Saudi Arabian criminal justice system. As a general rule, corporate criminal responsibility does not exist in Saudi Arabia, particularly for crimes such as homicide. The individuals responsible for the homicide rather than the corporation would be held accountable. We understand there are instances of medical professionals being held criminally liable for being grossly negligent where the negligence resulted in a death.


Currently, Saudi law treats foreign-owned entities in a manner that dramatically differs from local and Gulf Cooperation Council (GCC)-owned entities. Foreign-owned entities are entities that have any non-GCC foreign shareholders, even if the entities are incorporated in the GCC. Examples of some differences are demanding additional procedural steps during formation, restricting the activities of the foreign entity, demanding higher share capital to conduct business in certain sectors and imposing a higher income tax than local or GCC-owned entities. Foreigners and foreign-owned entities are taxed at 20 per cent of profit versus zakat at 2.5 per cent.

When Saudi Arabia joined the World Trade Organization (WTO) in December 2005, the Saudi government agreed to open to foreign investment several areas that were previously closed. Pursuant to Royal Decree No. M/54 dated 21/09/1426H, the documentation in relation to Saudi Arabia's accession to the WTO was approved. In terms of the WTO, medical services are generally open. Technically, SAGIA maintains that the only restrictions in terms of foreign investment in the healthcare sector are 'services provided by midwives and nurses, physical therapy services and quasi-medical services internationally classified at CPC 93191', which are on the Negative List. In accordance with the WTO, the ownership of entities engaged in medical care was meant to be open if the foreign entity entered into a joint venture with a properly licensed Saudi party.

In addition to the above-mentioned restrictions in accordance with the Negative List, the Ministry of Health (MoH) and Saudi Food and Drug Authority (SFDA) have their own set of rules and restrictions. The Council of Ministers Resolution No. 683151 dated 10/03/1436 H (1 January 2015 G) is the most current version of the Regulations for Private Healthcare Institutions (the Private Healthcare Regulations). The Private Healthcare Regulations provide that essentially all areas of healthcare, other than hospitals, are reserved for Saudi Arabian nationals. In the recent past, the MoH has generally granted licences to foreigners if the foreign-owned hospital has at least 30 beds and this reflects an increasing willingness by the MoH to allow exceptions to the previously stricter requirements; for example, NMC Healthcare was recently permitted to own various hospitals with fewer than 100 beds. The hospital medical director must be a qualified Saudi physician. The head of the pharmacy must also be a Saudi Arabian pharmacist. Further, the application for private hospitals requires that the Administrative Director be a Saudi Arabian national. Note that a hospital with even 1 per cent foreign ownership is required to obtain a SAGIA licence and falls under the Private Healthcare Regulations. We understand that SAGIA and the MoH may soon announce a more formalised relaxation allowing for partial or complete foreign investment on a case-by-case basis where certain minimum foreign investment guidelines are met. Saudi Arabia is also actively working towards 'corporatising' government healthcare assets and preparing these to be privatised.

In addition, the MoH has recently published an update to the Private Healthcare Institutions Regulations that explicitly permits non-GCC nationals to own companies that operate (i.e., not own) polyclinics, clinics, radiology centres, etc., provided that the operating company meets a number of requirements and has otherwise been approved by the MoH. Non-GCC nationals can also own entities providing ancillary services such as waste management, IT support and sterilisation services. Consistent with Saudi Arabia's desire to encourage in-country manufacturing, parties manufacturing medical devices and pharmaceutical products (and directly selling such manufactured medical devices and pharmaceutical products) can also be non-GCC national owned, though they will have to comply with SAGIA's requirements to receive a foreign investment licence for manufacturing.

The foreign investment status of healthcare sectors is outlined below; note that those sectors not currently open to investment are expected to be opened and may be open to investment subject to special permission from SAGIA and the MoH on a case-by-case basis.

i Private clinics or centres

Owners of private clinics or centres must be 100 per cent Saudi parties. These include dialysis clinics, radiology clinics and polyclinics.

ii Dental clinics

Owners of dental clinics must be 100 per cent Saudi parties. We understand individual non-Saudi GCC national dentists may also potentially be licensed to own and operate dental clinics.

iii Foreign ownership in other healthcare-related arenas

Non-Saudis are allowed to have 100 per cent ownership in managing and operating companies engaged in medical maintenance, non-medical maintenance, hygiene, sterilisation, security, IT services, leasing of medical equipment, medical waste management and monitoring clinical trials.

iv Medical device manufacturers

Foreign investment in medical device manufacturing is generally permitted. Approvals are required from the SFDA.

v Pharmaceutical manufacturers

Pharmaceutical manufacturers are regulated by the Institutions Pharmaceuticals Regulations, under which foreigners can establish manufacturing plants (pharmaceuticals and medical devices) in Saudi Arabia, with 100 per cent ownership under an industrial licence. Approvals are required from the SFDA.

vi Pharmacies

Only Saudi Arabian nationals are permitted to own pharmacies and pharmaceutical establishments in Saudi Arabia, which must be at least partly owned by a Saudi Arabian pharmacist. The regulations set out certain conditions that pharmacy owners must satisfy. These include:

  1. being licensed by the MoH to practise as a pharmacist;
  2. employing a Saudi national as a manager; and
  3. meeting the specifications for a pharmacy that were historically set out by the MoH.

The regulations also limit the number of pharmacies that can be owned by one individual or company to no more than 30 pharmacies.

vii Laboratories

As per the Law on Private Laboratories issued pursuant to Council of Ministers Decision No. 29 dated 25/01/1423H (7 April 2002 G), which provides that licensing may be granted for laboratories on condition that: (1) the applicant for the licence is 100 per cent Saudi, (2) the applicant undertakes to assign a Saudi to be the laboratory technical manager, and (3) the applicant undertakes to provide necessary academically qualified specialists and use proper equipment and instruments.

viii Foreign ownership of property

A non-Saudi entity may not own real estate in Saudi Arabia before it establishes a commercial presence in the country. The ownership rules applicable to GCC nationals are regulated in Saudi Arabia by the Ownership of Real Estate by GCC Nationals Regulations; non-Saudi non-GCC nationals' ownership of real estate is regulated by the Regulation on the Ownership and Investment of Real Estate by Non-Saudis.

Additionally, property ownership by a company that is wholly or partially owned by non-Saudi nationals within the boundaries of the designated holy cities of Mecca and Medina is not permitted.

Finally, individual foreigners who hold residency permits in Saudi Arabia are permitted to acquire a residential property for their personal accommodation upon the approval of the Saudi Arabian Ministry of Interior.

ix Barriers to market access

There are a number of barriers to market access by foreign investors in the healthcare and pharmaceutical sector in Saudi Arabia. Chief among them are the following:

  1. Price controls: Pharmaceutical products can be sold only after their prices have been approved and undergone registration requirements. Such, however, also applies to 100 per cent Saudi-owned entities.
  2. Tendering procedures: The two principal buyers of pharmaceutical products in Saudi Arabia are the SFDA and the General Directorate of Healthcare Affairs (SGH). GCC member countries, including Saudi Arabia, practise collective purchasing of pharmaceuticals, vaccines and other healthcare products through the SGH tender – this process allows GCC countries to buy in bulk and benefit from significant cost savings from multinational drug-makers. Companies that wish to participate in the SGH tender must have already registered products in at least three GCC member states or be directly registered with the Gulf General Committee for Drug Registration.
  3. Certain aspects of agency and commercial law: Unless a product is produced in Saudi Arabia, all foreign companies must sell their products through licensed distributors or agents in Saudi Arabia.

x Temporary commercial registration

We are aware that the MoH is permitted to waive, in part or in whole, its restriction on ownership and provision of services. If the MoH believes an area of healthcare is underserved, it can award a government contract. The foreign entity can then obtain a temporary commercial registration (TCR). For example, because of the high rates of diabetes and need for dialysis care, the MoH awarded substantial contracts separately to DaVita and Diaverum. We understand both contracts will be retendered in the near future, creating opportunities for new foreign parties to participate in this sector. Both entities have 100 per cent foreign-owned TCR branches to provides dialysis care to MoH patients. We also understand another foreign company was permitted to establish a laboratory in partnership with the Saudi Arabian National Guard by establishing a TCR.

xi Potential exceptions

Foreign investors should consider alternative, enforceable structures to access the healthcare sector. For example, to date some foreigners have accessed the Saudi Arabian healthcare sector by investing in certain healthcare investment funds established pursuant to the Investment Funds Regulations of the Saudi Arabian Capital Market Authority (CMA) . These funds have invested in sectors as diverse as pharmacies, clinics and small, medium-sized and large hospitals. In addition, we are aware that the MoH and the CMA has, to date, not objected to investors who meet the qualified foreign financial institutions' requirements for acquiring listed securities of entities operating in the healthcare sector.

xii New joint venture structures

Foreign investors often prefer to undertake a joint venture with a local partner but are uncomfortable with Saudi Arabian law. Foreign investors are increasingly using the new Abu Dhabi Global Market (ADGM) jurisdiction to incorporate an English law special purpose vehicle (SPV) and then have the SPV own the operating company in Saudi Arabia. It is now possible to deem the ADGM SPV a Saudi Arabian tax resident, making it attractive to Saudi Arabian parties, who pay lower tax than foreign parties, while giving foreign parties English law certainty for their joint ventures in Saudi Arabia. Other parties are using CMA funds and ADGM/Dubai International Financial Centre funds as joint venture vehicles and currently these provide significant tax advantages to the foreign party.


The MoH and the Saudi Central Board for Accreditation of Healthcare Institutions (CBAHI) are the primary parties involved in the commissioning of a new hospital.

The registration process and procedural steps for obtaining a sector-specific regulatory licence to set up a hospital in Saudi Arabia can be divided into three key steps: (1) obtaining MoH's preliminary approval; (2) obtaining the approval of the Ministry of Commerce and Investment (MoCI); and (3) obtaining final approval from the General Directorate of Health Affairs and the CBAHI. Pharmaceutical companies are also required to obtain licences from the MoH and the MoCI and approval by SAGIA will also be required if the company is partly foreign owned.

Investors must first obtain a preliminary approval from the MoH. At this stage, the MoH requires information about the applicant investors, including, in the case of corporate investors, the constitutive documents (i.e., the commercial registration and articles of association) of each applicant. The MoH also requires information describing in brief the investment plan (including number of hospitals and beds, proposed project sites, construction plan, management structure, expertise of the involved parties and the implementation plans). The MoH will review the application and may request further documents or clarifications. This process will normally take one to two weeks from the date of submitting the required documents.

After successfully obtaining the MoH's initial approval, the corporate entity must be incorporated in Saudi Arabia to conduct the intended licensed activities (e.g., developing and operating hospitals). At this stage, the investors must obtain the necessary approvals from the MoCI.

After incorporation of the appropriate investment vehicle, the MoH will request copies of the constitutive documents of the investment vehicle (i.e., articles of association and the commercial registration) and a land-ownership deed for the project site. The MOH will then refer the application to the relevant General Directorate of Health Affairs (GDHA).

Construction plans and other sketches for each hospital must be submitted to the relevant GDHA for approval. Construction work cannot commence before obtaining the approvals from the Projects and Maintenance Department at the MoH, the relevant municipality and the Civil Defence. A technical study must be submitted to the Civil Defence certifying the compliance of sites with the related technical specifications and requirements. This study must be prepared by an engineering consultancy office, accredited by the Civil Defence and specialising in safety and fire protection. The Civil Defence Regulations set out the required specifications in respect of project sites, structures and equipment. The hospital will also be expected to enter into a contract with a specialised licensed entity for the safe disposal of medical waste and obtain a report from a specialised licensed entity evidencing (1) the installation of radiation safety measures and other necessary measures for the hospital radiotherapy departments; (2) compliance with specifications and standards; and (3) the availability of radiation protection measures and measures for early detection of radiation leakage. Upon completion of the construction work, the relevant MoH committee will inspect the hospital buildings and preparatory work and issue an inspection report within two weeks of the date of the application, and the applicant will be provided with a reference letter to the Ministry of Labour to apply for recruitment visas. The MoH will issue the final approvals after the necessary number of staff have been recruited and after the hospital has obtained the necessary professional licences and approvals for professionals hired in Saudi Arabia. A hospital is required to recruit a certain number of resident doctors, specialists, consultants, pharmacists, technicians, nurses and medical staff, based on its size.

Investors are often surprised by the number of regulators involved with the licensing of a business operating in the healthcare sector. In addition, parties acquiring hospitals or clinics have found that the hospitals or clinics (particularly if more than 10 to 15 years old) sometimes have outstanding issues or reports from the local Civil Defence, municipality or health department, and are operating on temporary licences. Healthcare facilities that do not comply with the latest regulations could face costly and lengthy processes to bring their facilities into compliance.

Quite often these issues arise when facilities were constructed before purpose-built healthcare facilities were the norm. At one point it was not unusual for parties to operate out of converted villas and other facilities that were not purpose-built to service the healthcare sector. It should come as no surprise that many older medium-sized or regional medical centres also started life as something other than a hospital and, over time, were slowly expanded. Often, these facilities will not fully comply with the latest rules issued by the relevant health regulator, Civil Defence or municipality relating to ingress or egress, fire safety, ventilation, width of hallways, number and size of elevators, size of patient rooms, waiting rooms, sanitation and waste disposal requirements for each medical facility. We have seen various acquisitions halted once a potential buyer understands the significant cost of making the necessary changes if a new owner will not be grandfathered under a previous exception.

If an investor is considering a first-time acquisition in the regional healthcare sector, it is often advisable to appoint an expert consultant to evaluate the condition of the target facility and to determine whether any expenditure on upgrading the facility will be necessary for compliance with regulatory requirements, so that this can be taken into consideration as the opportunity is assessed.


We continue to see a tremendous interest in telemedicine, particularly in the field of dermatology. There has been a focus on this area as the Saudi public continues to desire best-in-class services.

We continue to see tremendous interest by medical providers and private equity houses focusing on Saudi Arabia. Ashmore recently raised a significant fund to invest in hospitals in Saudi Arabia. A number of hospitals, dental clinics, etc. are expanding through raising new funds or through initial public offerings.

Following the recent steps to liberalise the healthcare sector, we expect to see growing foreign investment in medical centres, radiology clinics and other types of medical facilities throughout Saudi Arabia.

Furthermore, Saudi Arabia has been looking to increase foreign investment in large hospitals. There are also a number of privatisations expected in this sector.


Saudi Arabia is currently liberalising its regulations to encourage more foreign participation in the healthcare sector in Saudi Arabia. There continues to be tremendous opportunities for investment in this sector and we expect this will only accelerate with the expected announcement by the government of medical centres and hospitals that are to be partially or wholly privatised.


1 Nabil A Issa is a partner at King & Spalding LLP, which operates in cooperation with the Law Office of Mohammed AlAmmar.

2 See Correspondents, Saudi Arabia's Healthcare Market Witnessing Exponential Growth, Khaleej Times, 35, 27 August 2009.

3 The Basic Law of 1992 declared the Holy Koran and the sunnah (traditions and sayings) of the Prophet Mohammed to be the Kingdom's Constitution.

4 The Hanbali school of Islamic jurisprudence is one of the four major schools, together with the Maliki, Hanafi and Shafi'i schools. The Hanbali is the predominant school in Saudi Arabia.