By Fayçal Ibrahim, Louise Monteil, Eliza Wéber, and Justine Peries.

Introduction

France, committed to carbon neutrality by 2050 in line with the Paris Agreement, emerges as a robust green energy ally for Saudi Arabia. To achieve its “Net-Zero” goal, France plans to use carbon sinks – including forests – and storage technologies _^[1]. Recognizing the urgency of the matter, France’s Multiannual Energy Plan (MEP) aims to reduce greenhouse gas emissions by 40% by 2030,_^[2] being assisted by a €54 billion plan “France 2030,” which invests in innovative solutions where France excels, to become the leader in green hydrogen and renewable energy by 2030 _^[3]. 

In comparison, Saudi Arabia targets net zero emissions by 2060, emphasising its role as a leading global exporter of hydrogen and low-emission electricity _^[4]. Although the 2060 deadline might not seem as urgent, the Kingdom ambitiously aims to source 50% of its power from renewables by 2030 _^[5]. Thus, the question arises: how are France and KSA collaborating on green energy development despite different goals and timelines, and what could be the legal and socio-economic challenges of their partnership?

Long-term strategic cooperation between the two governments

France and KSA formalised their energy cooperation with a Memorandum of Understanding (MoU) in February 2023 ^_[6]. This agreement outlines a comprehensive roadmap for joint hydrogen cooperation and renewable-derived electricity efforts, focusing on three key pillars. Firstly, advancing technology development related to hydrogen and renewable electricity across production, transportation, and conversion demand centres. Secondly, fostering business cooperation, crucial for the private sectors of both nations to unlock business and hydrogen trade. The last pillar involves establishing policies and regulations for hydrogen development through a mutually recognised certification framework with life-cycle emission assessments ^_[6]. 

This recent MoU might appear new, but Riyadh and Paris have a longstanding history of green energy collaboration. In 2011, the French government under Nicolas Sarkozy signed a civil nuclear cooperation agreement with Saudi Arabia to promote France’s nuclear industry amidst significant global competition. It included strong cooperation in training, nuclear waste management, and R&D _^[8]. In 2015, France and Saudi Arabia signed another significant agreement in Paris to explore the construction of nuclear reactors _^[7]. This underscores their commitment to decarbonize their economies and simultaneously enhance their industrial sectors._^[8]  

Projects taking place on Saudi soil

Saudi Arabia’s ambition in becoming one of the global leading exporters of green hydrogen and electricity at a competitive cost pushed the Kingdom to sign multiple deals with major companies, including French ones.

To begin, TotalEnergies, Toyota Tsusho and Altaaqa have set up a joint venture in Saudi Arabia, 40%-owned by TotalEnergies, to finance the construction of a solar power plant in the country to the tune of $100 million _^[9]. In this example, it is a brownfield investment–a cost-effective method that uses pre-existing production facilities to launch a new production activity– by a French company in Saudi Arabia.

Another important partnership is between Alstom and Saudi Arabia Railways (SAR), in order to develop a tailored passenger hydrogen train, allowing KSA in October 2023, to become the first country to introduce one _^[10].

All other deals have been made over Memorandums of Understanding (MoUs), which in fact are non-binding. In this regard, the Public Investment Fund signed an MoU with French electricity provider ENGIE in order to advance Saudi Arabian green hydrogen programmes for export purposes ^_[11].  Furthermore, Aramco announced its collaboration with leading French companies, signing five non-binding agreements in 2021 to explore manufacturing of hydrogen vehicles in Saudi Arabia and advance local business opportunities ^_[12].  

Finally, in the same year, the Saudi Nesma & Partners signed a MoU with France’s Bouygues Travaux Publics, which in turn partnered with EDF to collaborate on “future European Pressurised Reactors (EPR)-technology-based nuclear power plant projects in Saudi Arabia” _^[13]. The EPR designed in France is an important asset for Saudi Arabia as it is considered environmentally friendly and “the most powerful reactor in the world” _^[14]. 

France: an ambitious yet constrained business partner

Despite a shared vision, legal obstacles could impede Franco-Saudi cooperation. The French Law on Corporate Duty of Vigilance stipulates that French companies, including those based abroad with over 10,000 employees, must establish vigilance plans_^[15]. This involves identifying and preventing environmental risks and human rights violations throughout the supply chain. While KSA’s General System of the Environment addresses under Art 10 _^[16] such environmental considerations, ensuring compliance with human rights, and assessing persons’ safeties could threaten French energy cooperation in KSA.

Legal framework: KSA holds an advantage over France

Saudi law, consisting of Sharia and civil law, primarily governs the legal framework of these projects as they take place within the Kingdom. The 2022 New Companies Law enhances flexibility in company management by lifting restrictions on manager quantity limits and updating dispute resolution methods, thereby circumventing obstacles previously faced by domestic and foreign investors _^[17]. Nonetheless, initiating projects or enterprises in KSA remains a costly and long-winded procedure. Investors must pay fees for licences, commercial registrations, and government enlistments, as well as incur additional costs and delays from translating documents into Arabic._^[18] This legal framework not only disadvantages foreign companies, but also favours KSA by mandating Saudi partnership quotas and requiring internships and training for Saudi students within these firms. _^[19] It is important to note that current initiatives must also comply with each country’s environmental laws. While experts observe that Saudi Arabia prioritises green “pro-export” projects over green domestic projects, KSA is explicitly less stringent in its climate commitments than France. However, France’s construction of new nuclear plants in KSA contradicts with the commitments made by other European nations, thereby positioning it in a challenging position in relation to the collective European vision and regulatory framework._^[20]

Cultural and social hurdles to cooperation

France and Saudi Arabia’s collaboration faces a substantial social obstacle due to disparate labour laws. France, with a 35-hour workweek and robust labour code, emphasises worker rights and social welfare protection _^[21].  Conversely, Saudi Arabia merges Islamic principles with modern labour regulations, entailing a 48-hour standard workweek and employer-friendly termination processes _^[22]. Limited collective bargaining and strict domestic laws on trade unions pose negotiation challenges. Additionally, a language barrier arises as KSA mandates Arabic-only employment contracts, hindering communication with foreign employers _^[23]. The challenges ahead involve navigating these cultural and legal disparities to ensure fair and equitable treatment of workers while accommodating diverse societal norms and expectations.

Conclusion

In conclusion, the partnership between France and KSA in green energy cooperation with a Memorandum of Understanding presents a long-term opportunity for fostering business cooperation in the three pillars mentioned previously at a competitive level. However, challenges could arise on various legal aspects because of differing compliance with human rights, labour laws and cultural disparities between the two countries. Will the parties involved move beyond their initial non-binding memorandums of understanding to formalise agreements and move projects forward, or will these initiatives remain postponed for the foreseeable future? 

…Only time will tell…

Edited by Justine Peries.

References

[1] Le Hir, Boris, et al. “The Value for Climate Action.” France Stratégie, 2019, http://www.strategie.gouv.fr/english-articles/value-climate-action. Accessed 03 Dec. 2023.

[2] Ministry of Ecology, sustainable development and energy. “Multiannual Energy Plan.” Ecologie.Gouv.Fr, http://www.ecologie.gouv.fr/sites/default/files/Synth%C3%A8se_EN_PPE.pdf. Accessed 02 Dec. 2023.

[3] Ministère de l’économie des finances et de la souveraineté industrielle et numérique. France 2030 : Un Plan d’investissement Pour La France – Economie.Gouv.Fr, Oct. 2023, www.economie.gouv.fr/france-2030.

[4] Foley, Steve. “France and Saudi Arabia to Cooperate on Hydrogen and Electricity Development from Renewable Resources.” Net Zero Professional, 17 July 2023, netzeroprofessional.com/france-and-saudi-arabia-to-cooperate-on-hydrogen-and-electricity-development-from-renewable-resources/.

[5] “Reducing Carbon Emissions: Saudi Green Initiative Target.” Saudi & Middle East Green Initiatives, http://www.greeninitiatives.gov.sa/about-sgi/sgi-targets/reduce-carbon-emissions/.

[6] “Communiqué conjoint entre la France et l’Arabie saoudite, à l’occasion du déplacement d’Agnès Pannier-Runacher en Arabie saoudite le 8 juillet 2023.” Ministère de la Transition écologique, 13 July 2023, https://www.ecologie.gouv.fr/communique-conjoint-entre-france-et-larabie-saoudite-loccasion-du-deplacement-dagnes-pannier. Accessed 3 December 2023.

[7] “France to study reactor construction in Saudi Arabia.” World Nuclear News, 26 June 2015, https://www.world-nuclear-news.org/NP-France-to-study-reactor-construction-in-Saudi-Arabia-2606154.html. Accessed 3 December 2023.

[8] “Nucléaire civil : accord entre la France et l’Arabie saoudite.” Libération, 22 February 2011, https://www.liberation.fr/futurs/2011/02/22/nucleaire-civil-accord-entre-la-france-et-l-arabie-saoudite_716713/. Accessed 3 December 2023.

[9] “Solar Energy in Saudi Arabia Attracts Japanese, French Investments.” Asharq Al-Awsat, 29 June 2023, https://english.aawsat.com/business/4407291-solar-energy-saudi-arabia-attracts-japanese-french-investments. Accessed 03 12 2023.

[10] Khalil, Mohamed. “Saudi Arabia Railways (SAR) partners with Alstom to showcase the world’s first passenger hydrogen train in the Kingdom of Saudi Arabia.” Alstom, 9 October 2023, https://www.alstom.com/press-releases-news/2023/10/saudi-arabia-railways-sar-partners-alstom-showcase-worlds-first-passenger-hydrogen-train-kingdom-saudi-arabia. Accessed 3 December 2023.

[11] “PIF, ENGIE sign MoU to develop green hydrogen projects in Saudi Arabia.” Arab News, 13 July 2023, https://www.arabnews.com/node/2337211/business-economy. Accessed 3 December 2023.

[12] “Aramco announces collaboration with French companies.” Aramco, 4 December 2021, https://www.aramco.com/en/news-media/news/2021/aramco-announces-collaboration-with-french-companies. Accessed 3 December 2023.

[13] “Local and French company sign agreement for Saudi nuclear project.” Energy & Utilities, 9 December 2021, https://energy-utilities.com/local-and-french-company-sign-agreement-for-saudi-news115619.html. Accessed 3 December 2023

[14] “The EPR Reactors in France, the Reactors of the Future ?” Surfeo, 16 Feb. 2022, surfeo.eu/the-epr-and-its-technical-innovations-the-reactor-of-tomorrow-in-france/. Accessed 18 Dec. 2023.

[15] “Loi 2017-399 Du 27 Mars 2017 Relative Au Devoir de Vigilance Des Sociétés Mères et Des Entreprises Donneuses d’ordre.” RESPECT, respect.international/loi-2017-399-du-27-mars-2017-relative-au-devoir-de-vigilance-des-societes-meres-et-des-entreprises-donneuses-dordre/.

[16] General Environmental Regulations and Rules for Implementation – ELAW, Oct. 2001, www.elaw.org/system/files/attachments/publicresource/saudiarabia.General%20Environmental%20Regulations.pdf.

[17] Abboud, Jean. “The new Companies law in the Kingdom of Saudi Arabia: What to expect.” BSA Middle East Law Firm, 2022, https://bsabh.com/knowledge-hub/regulatory-and-legal-updates/the-new-companies-law-in-the-kingdom-of-saudi-arabia-what-to-expect.

[18] PwC. “Doing Business in the Kingdom of Saudi Arabia 2024: A Tax and Legal Guide.” PwC, 2023, p. 21. https://www.pwc.com/m1/en/tax/documents/doing-business-guides/dbisa.pdf. Accessed 3 December 2023.

[19] Deloitte and Touche & Co. “Doing Business Guide Understanding the Kingdom of Saudi Arabia’s Tax Position.” Deloitte, 2022. https://www2.deloitte.com/content/dam/Deloitte/xe/Documents/tax/me_doing-business-guide-ksa.pdf. Accessed 3 December 2023.

[20] European Parliament. “EU Energy Partnerships: Saudi Arabia.” BRIEFING: Energy Cooperation with Non-EU Countries, 2023. https://www.europarl.europa.eu/RegData/etudes/BRIE/2023/753942/EPRS_BRI(2023)753942_EN.pdf..

[21]Smith-Vidal, S. et al. (2022) Labour & Employment 2022 – morganlewis.com. Available at: https://www.morganlewis.com/%22/-/media/files/special-topics/gtdt/2022/getting-the-deal-through-2022-esg-considerations-for-responsible-global-employers.pdf (Accessed: 02 December 2023). 

[22]Saudi Arabia Employment & Labour Law – Addleshaw goddard (2021) country comparative guides 2021. Available at: https://www.addleshawgoddard.com/globalassets/insights/employment/saudi-arabia-employment-labour-law.pdf (Accessed: 02 December 2023). 

[23] Laws Labor and Workmen Law (no date) The Embassy of The Kingdom of Saudi Arabia. Available at: https://www.saudiembassy.net/labor-and-workmen-law#:~:text=Article%2077%3A,each%20of%20the%20two%20parties. (Accessed: 02 December 2023). 

[Cover image] Untitled photo by Lara Jameson, licensed under CC.