The relationship between a foreign contractor and his Saudi Agent was regulated by Royal Decree No. M/2 of 21 Muharram 1398 H. (January 1978). This regulation applies to both, the Saudi agent and the foreign contractor who is contracting with the government of Saudi Arabia. It also applies to all contracts and agreements to which the foreign contractor and the government of Saudi Arabia are signatories.

Some of the salient features of this regulation are:

• A foreign contractor who does not have a Saudi partner, should have a Saudi services agent.
• The agent should be a Saudi national residing in the Kingdom of Saudi Arabia and should be registered in the Commercial Register of the Ministry of Commerce authorizing him to act as an agent.
• The relations between a Saudi agent and a foreign contractor should be governed by an Agency Agreement defining the obligations of both parties.
• A foreign contractor is required to pay the Saudi agent fees in return for the services he renders to the contractor. Such fees as determined by an agreement between both parties should not exceed 5 percent of the cost of the contract executed by the foreign contractor.
• A foreign contractor performing different types of work may have more than one Saudi agent so as to match each type of work.

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