The Development and Function of Labor Law in Saudi Arabia

114 Pages·2015·0.59 MB·English

by  Jordan Balcer

Florida State University Libraries
Electronic Theses, Treatises and Dissertations The Graduate School
2014
Controlling Influence: The Development
and Function of Labor Law in Saudi Arabia
Jordan Balcer
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FLORIDA STATE UNIVERSITY
COLLEGE OF SOCIAL SCIENCES AND PUBLIC POLICY

CONTROLLING INFLUENCE:
THE DEVELOPMENT AND FUNCTION OF LABOR LAW IN SAUDI ARABIA

By
JORDAN BALCER

A Thesis submitted to the
Program in International Affairs
in partial fulfillment of the
requirements for the degree of
Master of Arts

Degree Awarded:
Fall Semester, 2014
Jordan Balcer defended this thesis on November 13, 2014.
The members of the supervisory committee were:

Will Hanley
Professor Directing Thesis

Adam Gaiser
Committee Member

Paul Beaumont
Committee Member

The Graduate School has verified and approved the above-named committee members, and
certifies that the thesis has been approved in accordance with university requirements.

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Dedicated to my father, whose perpetual encouragement has enabled me to confidently
achieve my goals.

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ACKNOLEDGEMENTS
This project began as an exploration of American influence in the Saudi Arabian oil
industry and has since evolved into its current form as an examination of the law that governs
labor in the oil industry. The research needed to complete this thesis seemed daunting at first
glance, but the support and encouragement from friends and professors made it quite enjoyable
and fulfilling. Many people helped make this project possible and I am deeply appreciative of
them.
I owe a debt of gratitude to a number of people for their help in completing this project.
My thesis chair Dr. Will Hanley, whose guidance and patience enabled me to hone my research
ability as well as his efforts to push me to produce my best piece of scholarship. Learning under
his tutelage has one of the most beneficial experiences in my collegiate career. Dr. Adam Gaiser
for his constant sage advice in my collegiate career that prompted me to study in Oman in
addition to his help in understanding certain aspects of Sharia. Finally Dr. Peter Garretson,
whose advice and confidence in me throughout the years served as encouragement to pursue my
interest in the Middle East. The greatest amount of support came from my father, who always
helped me to strive to complete my best work.
I also extend my gratitude toward my professors and friends who have affected my work
in a positive way at Florida State University, Dr. Paul Beaumont, Dr. Na’ama Nagar and Mr.
Austin Wickstrum as well as many others at this excellent institution. The staff at the Noor
Majan Training Institute including friends that I lived with in Ibri, Oman and my great friends in
Egypt who helped greatly in bolstering my ability in the Arabic Language that allowed me to
translate many documents essential to this thesis.
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TABLE OF CONTENTS
List of Tables………………………………………….……………………………...…..vi
Abstract……………………………………………….……………………………….....vii
Introduction…………………………………………….………………………………….1
1. Conditions That Led to Codified Labor Law…..…...………………………………..13
2. Codified Labor Law and Saudization…………..……………..……………………..53
3. Evolution of Labor Law in the Present…...……..……..…………………………….85
Conclusion………………………………………………………..……………………...99
References…....................................................................................................................102
Biographical Sketch…………………………………………………………………….106

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LIST OF TABLES
Table 3.1 Nitaqat………………………………………………………………………93
Table 3.2 Labor Statistics…………………...………………………..………………..98

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ABSTRACT
Saudi Arabia has long been held as one of the largest oil producers in the world with a
vast amount of wealth. The country’s meteoric rise to their current status can be attributed to the
development of its oil fields by an American company that gained virtual control over the
economy of a fledgling nation. This situation prompted the country to establish a codified Labor
Law, which gradually gave control back to the State. In this project the 1969 Labor and
Workmen Code will be examined as well as the factors that caused its creation and prompted its
continued evolution to its current form.
This thesis explores the factors to why it was necessary for the Saudi Arabian
Government to create a codified labor law and abandon Sharia (Islamic Law) in commercial
matters, in addition to how the state currently uses the law to keep a firm grasp on its natural
resources. The lessons learned from the American-led ARAMCO period (1938-1980) were
included in the law, thus creating a turning point in Saud Arabian history that allowed the
government to reclaim control of its economy.
Many sources will be used in this thesis but the most substantial is the Labor and
Workmen Law because it contains specific provisions that were enacted to curb American
influence. Translated sources from the Saudi Ministry of Labor are also used to highlight the
current form of the law as well as many secondary sources bolster the argument that the Saudi
Arabian Government established a Labor Code that would ensure a reduction of American
hegemony while also making the state the sole influence in labor and commercial matters.
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INTRODUCTION
Following the First World War, oil was discovered in Saudi Arabia which led to a
concession agreement with Standard Oil of California that enabled the company to establish
hegemony over the economy on account of a lack of legal code that could police the activities of
Standard Oil of California. The underdeveloped Labor Law in Saudi Arabia allowed Standard
Oil of California and its successor the Arabian American Oil Company (ARAMCO) to act with
impunity for nearly thirty five years until King Faisal in 1969 established the Labor and
Workmen Code. It was used to combat the influence of ARAMCO and restore control of not
only the natural resources, but also to give control of the economy to the Saudi Government. The
Labor Law as well as practices learned from ARAMCO management were then used to change
the labor dynamic in the country by limiting the rights of guest workers and establishing Saudi
exceptionalism. The goal of this thesis is to answer the questions of what were the factors that
prompted a change to codified law and how did the Saudi Government use it to protect their
economy? A key concept that is very evident in this story of Saudi development as a nation is
protectionism. This concept is focused on more in the second half of the thesis on account of the
Labor Law being the tool used in utilizing protectionist policies that were essentially outlined in
the Labor Law.
Law in the Arabian Peninsula since the spread of Islam has mostly been practiced under
the umbrella of Sharia until the Saudi Arabian Government enacted the Labor and Workmen
Code of 1969, which for the first time in the Kingdom’s history law became codified and
independent from the Sharia Courts. In a country where the official legal code is based on the
Hanbali interpretation of Sharia the establishment of a codified system not based on Sharia
contends to be a secular progressive development, in a country that lies in the cradle of Islam.
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There were early attempts to codify the Labor Law by the warrior King Abdul Aziz Ibn Saud but
these attempts were stymied by a hostile Ulema (religious clerics), who did not want to see their
judicial independence eroded by a codified system that would inhibit their right to exercise
ijtihad (independent reasoning). Change to the legal system became a necessity however, due to
the existence of the Arabian American Oil Company and their influence on the Saudi economy.
The Government of Saudi Arabia was unable to claim that the company was violating
any of its laws due to a lack of codified laws and a lack of precedence in their situation. This
meant that Qadis (judges) were unable to deliver a ruling against the company in the aspect of
labor practices. The regrettable concession agreement which was signed by King Abdul Aziz Ibn
Saud was enforced under Islamic contract law, thus justifying his ambition to form a separate
court system that would handle commercial issues.
The concession era of Saudi Arabia is important because it presents the problems that led
to the creation of the Labor Law. Before codification the Saudi legal system was ill-equipped to
handle the influx of foreigners into the Kingdom. An analysis and overview of this era with a
substantial focus on the activities of ARAMCO while virtually controlling the Saudi economy.
The business apparatus created by ARAMCO would eventually be imitated by the government
of Saudi Arabia following codification of the Labor Law. After the Labor Law was enacted a
trend of protectionism was adhered to by the government of Saudi Arabia that were in response
to the years of foreign economic control by ARAMCO. Saudization, which is an unofficial term
that relates to the gradual replacement of foreign workers with qualified Saudi workmen is the
paramount protectionist policy that was included in the Labor Law in order to reduce the
influence of ARAMCO.
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