Saudi Arabia: Construction In Saudi Arabia: Time And Cost Impacts Of Ministry Of Labour Crackdown

Last Updated: 21 May 2013
Article by Ben Cowling

The Ministry of Labour is currently targeting expatriates in Saudi Arabia that are working for businesses other than their visa sponsors. Construction contractors, both local and international, have traditionally employed large numbers of such workers and many are now trying to rectify the status of their workers before the current 3-month grace period expires. Failure to do so risks deportation for workers and fines for businesses. This article poses the question, who bears the risk of these events on individual construction projects – the contractor or the employer / client?

In response to the current Ministry of Labour actions, huge numbers of workers are said to be planning to leave the Kingdom (estimated to be between 50,000 and 500,000 expatriates).  This will have an inevitable impact on the construction projects that they were working on and the construction contractors they were working for.  In particular, rate of progress will be affected by the loss of productive workers that leave the Kingdom and perhaps an inability to replace those workers as quickly as is needed.  In addition, significant costs are likely to be incurred, such as increased direct costs due to lost productivity and from fees to rectify workers' visa status, along with increased indirect costs arising from prolongation.

This begs the question of whether contractors are entitled to additional time or cost by reason of these events.  Not surprisingly, the answer depends on the terms of the relevant construction contract.  While most contracts pertaining to Saudi construction projects are governed by the law of Saudi Arabia, the underlying law (Sharia) is unlikely to offer any relief to contractors over and above what the contract says.  Sharia (and in particular, the Hanbali school that the local courts usually implement) will enforce agreements in accordance with their terms, unless the agreement offends particular Sharia principles.  No such principle is obviously relevant here.

Turning then to some common forms of contract in use in Saudi Arabia, the (unamended) 1999 FIDIC Red Book provides that the contractor shall comply with all applicable laws.  Furthermore, it says that the contractor must comply with all labour laws relating to the employment, immigration and emigration of its staff.  On the other hand, this form of contract also says that the contract price shall be adjusted to take account of changes in law or in the official government interpretation of such laws.  The contractor is also entitled to an extension of time where unforeseeable shortages in the availability of personnel arise as a consequence of government actions.

As it happens, the current Ministry of Labour actions are not changes in law as such.  Rather, they reflect a change in approach to the enforcement of an existing law that prohibits the employment of workers sponsored by others.  Hence, in the context of the 1999 FIDIC Red Book, the question would seem to be whether the current Ministry of Labour actions amount to a change in the official government interpretation of such laws (giving rise to an additional cost entitlement) and / or to an unforeseeable shortage of personnel caused by government actions (giving rise to an additional time entitlement).

By contrast, a comparable Saudi Aramco standard form (i.e. the In-Kingdom Lump-Sum-Procure-Build contract) states that the contractor's personnel shall obtain the required visas and permits.  It also states that the contract price constitutes the entire compensation payable to the contractor for the work and excludes any compensation for all government-caused cost increases imposed at any time.  Saudi Aramco is also not liable to grant additional time or to pay compensation for standby time unless the cause of the standby is in its sole control, which is obviously not the case here.  Finally, the inability to obtain iqamas or visas or renewal of iqamas or visas for expatriate workers is specifically excluded from the list of "force majeure events" that would otherwise relieve the contractor from performing its obligations, in whole or in part.  In summary, in respect of this particular issue, the Saudi Aramco standard form is much less favourable to contractors than the 1999 FIDIC Red Book.

Accordingly, depending on the terms of the relevant contract, the current Ministry of Labour actions may be a grey area that both contractors and employers / clients need to be mindful of.  Both parties would be well-advised to look closely at the terms of what has been agreed and to act accordingly.  In particular, in order to protect their position:

  • contractors should issue whatever notifications are required under the contract terms before the relevant deadlines to protect their positions, lest any entitlement to additional time or cost is lost as a consequence of failing to do so; and
  • employers / clients should respond to any such notifications under the contract terms before the relevant deadlines, citing whatever grounds are available to them to resist such claims.

There is no question that the current Ministry of Labour actions are changing the face of the workforce in Saudi Arabia, as was no doubt intended.  There will be an evitable commercial impact on the construction industry in Saudi Arabia as it relies heavily on foreign workers to undertake works.  On individual construction projects, who bears the commercial impact of such actions depends to a large extent on how the parties agreed to allocate such risk in their contracts in the first place, with different forms of contract giving rise to different outcomes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Ben Cowling
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions