{"id":1286,"date":"2026-02-18T05:29:25","date_gmt":"2026-02-18T05:29:25","guid":{"rendered":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/how-sovereign-wealth-funds-are-reshaping-european-ma-a-legal-perspective-2-2-2-2-2\/"},"modified":"2026-02-24T09:20:06","modified_gmt":"2026-02-24T09:20:06","slug":"how-sovereign-wealth-funds-are-reshaping-european-ma-a-legal-perspective-2-2-2-2-2","status":"publish","type":"post","link":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/how-sovereign-wealth-funds-are-reshaping-european-ma-a-legal-perspective-2-2-2-2-2\/","title":{"rendered":"Cross-Border Due Diligence Between Europe and the Arab World: A Practitioner\u2019s Checklist"},"content":{"rendered":"\n

Essential considerations for legal teams conducting due diligence on EU-Arab transactions.<\/em><\/em><\/em><\/em><\/em><\/p>\n\n\n\n

Due diligence in cross-border mergers and acquisitions between European and Arab parties has grown substantially more complex over the past decade. Middle East M&A value surged 52 per cent to reach 29 billion US dollars in 2024, with sovereign wealth funds and government-related entities driving much of this activity. As deal volumes grow and transaction structures become more sophisticated, legal teams on both sides need a disciplined approach to identifying and managing risks that are unique to the EU-Arab corridor.<\/p>\n\n\n\n

Understanding the Regulatory Landscape<\/h2>\n\n\n\n

The first challenge in any EU-Arab due diligence exercise is mapping the applicable regulatory framework. Each GCC jurisdiction maintains its own laws governing foreign ownership, competition, taxation, and employment. Saudi Arabia, for example, imposes restrictions on foreign ownership in certain sectors, requiring careful transaction structuring. The UAE has liberalised foreign ownership rules significantly, but restrictions remain in sectors designated as having strategic importance.<\/p>\n\n\n\n

On the European side, most EU member states now operate foreign direct investment screening mechanisms that apply heightened scrutiny to acquisitions by state-owned or state-linked entities, which includes GCC sovereign wealth funds. Legal teams must assess early in the process whether the transaction will trigger FDI screening and build appropriate timelines into the deal timetable.<\/p>\n\n\n\n

Sharia Law Considerations<\/h2>\n\n\n\n

Cultural and legal frameworks rooted in Sharia law influence M&A activities across the Arab world. Sharia principles govern various business operations, including financing, contractual agreements, and inheritance rules that may affect corporate ownership structures. Investors must ensure that transaction structures and agreements align with these principles to avoid legal disputes and potential regulatory challenge.<\/p>\n\n\n\n

For European acquirers, this means that standard transaction documentation may require adaptation. Representations and warranties around compliance, corporate authority, and contractual capacity should account for Sharia-related restrictions that may not be immediately apparent from reviewing corporate registers or articles of association alone.<\/p>\n\n\n\n

Anti-Corruption and Sanctions Screening<\/h2>\n\n\n\n

Anti-corruption due diligence takes on additional significance in cross-border transactions involving the Gulf region. While GCC countries have made substantial progress in strengthening anti-corruption frameworks, the intersection of state-linked commercial activity, large infrastructure projects, and concentrated ownership structures creates elevated compliance risks.<\/p>\n\n\n\n

Sanctions screening is equally critical. European companies must verify that the target, its shareholders, directors, and key business partners are not subject to EU, US, or United Nations sanctions. The complexity of GCC corporate structures, which may involve multiple layers of holding companies, free zone entities, and government-linked investment vehicles, requires detailed beneficial ownership analysis that goes beyond surface-level corporate records.<\/p>\n\n\n\n

Financial and Tax Due Diligence<\/h2>\n\n\n\n

The availability, accuracy, and reliability of financial information can vary significantly across GCC jurisdictions. While publicly listed companies and entities within financial free zones such as the DIFC and ADGM generally adhere to International Financial Reporting Standards, privately held companies may apply local accounting standards or provide less detailed financial disclosures.<\/p>\n\n\n\n

Tax due diligence presents particular complexity. The introduction of corporate income tax in the UAE from June 2023 at a rate of nine per cent, Saudi Arabia\u2019s Zakat and corporate income tax regime, and the varying application of value-added tax across the GCC all require careful analysis. Where a target operates across multiple GCC jurisdictions, a risk-weighted approach to tax due diligence is often necessary, focusing on the jurisdictions with the greatest exposure.<\/p>\n\n\n\n

Labour and Employment Considerations<\/h2>\n\n\n\n

GCC employment law differs fundamentally from European labour law in several respects. Nationalisation programmes, known as Saudisation in Saudi Arabia and Emiratisation in the UAE, impose quotas on the percentage of national employees that companies must maintain. Non-compliance can result in penalties, restrictions on obtaining work permits, and limitations on government contracting eligibility.<\/p>\n\n\n\n

Due diligence should assess the target\u2019s compliance with nationalisation requirements, the status of employee work permits and visas, the terms of employment contracts including any provisions governed by local labour law that cannot be contracted out of, and potential liabilities arising from end-of-service gratuity obligations.<\/p>\n\n\n\n

Geopolitical Risk Assessment<\/h2>\n\n\n\n

Geopolitical considerations add a layer of complexity that is often underweighted in conventional due diligence frameworks. Regional tensions, sanctions regimes, and political developments can affect transaction certainty, financing availability, and the ongoing commercial viability of the target\u2019s business. Legal teams should incorporate a structured geopolitical risk assessment that considers the target\u2019s exposure to jurisdictions subject to international sanctions, its dependence on cross-border supply chains that may be disrupted by regional events, and any government or quasi-government relationships that may create political risk exposure.<\/p>\n\n\n\n

Building the Checklist<\/h2>\n\n\n\n

Effective cross-border due diligence between Europe and the Arab world requires a checklist that goes beyond the standard corporate, financial, and legal workstreams. It must incorporate jurisdiction-specific regulatory analysis, Sharia law considerations, enhanced anti-corruption and sanctions screening, nationalisation compliance, and geopolitical risk assessment. Legal teams that approach EU-Arab due diligence with this expanded framework will be better positioned to identify risks early and structure transactions that withstand scrutiny from both European and Arab regulators.<\/p>\n\n\n\n

The EU-Arab Legal Summit\u2019s panel on cross-border M&A will provide practitioners with an opportunity to discuss due diligence best practices with experienced deal counsel from both regions.<\/p>\n\n\n\n

The EU-Arab Legal Summit takes place on 4 June 2026 in The Hague, Netherlands. For more information, visit our website or contact the organising team.<\/em><\/em><\/em><\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

When Saudi Arabia\u2019s Public Investment Fund led a consortium to acquire a major European logistics platform in late 2025, the deal required clearance from not one but three distinct regulatory regimes before it could close.<\/p>\n","protected":false},"author":1,"featured_media":1396,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[27],"tags":[29,31],"class_list":["post-1286","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-governance-en","tag-cross-border-legal-analysis-en","tag-eu-arab-legal-summit-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/wp-json\/wp\/v2\/posts\/1286","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/wp-json\/wp\/v2\/comments?post=1286"}],"version-history":[{"count":15,"href":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/wp-json\/wp\/v2\/posts\/1286\/revisions"}],"predecessor-version":[{"id":1406,"href":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/wp-json\/wp\/v2\/posts\/1286\/revisions\/1406"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/wp-json\/wp\/v2\/media\/1396"}],"wp:attachment":[{"href":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/wp-json\/wp\/v2\/media?parent=1286"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/wp-json\/wp\/v2\/categories?post=1286"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.matsio.com\/matsio\/euarablegal.com\/wp-json\/wp\/v2\/tags?post=1286"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}