ARTICLES & UPDATES

Ministerial Resolution No. 2 of 2026 has recently been issued concerning the rules and procedures governing the recovery and repossession of plots subject to the supervision of the Public Authority for Industry (“PAI”).

The legislative framework regulating industrial plots under PAI supervision has undergone gradual legal and administrative development over more than a quarter century. During this period, the State transitioned from a phase focused on regulating the use and allocation of plots and encouraging industrial investment to a stricter regulatory phase aimed at combating the misuse of state land, unauthorized subleasing, and the trading of industrial plots.

Initially, the objective was to provide land for the purpose of promoting industrial investment. Licensing systems were designed to ensure that the use of allocated plots remained linked to genuine industrial activity and actual operational purposes.

From the outset, the relevant laws and regulations established and reaffirmed that the beneficiary’s right over an allocated plot does not amount to absolute ownership. This reflects a principle embedded in civil law, namely that usufruct rights differ from ownership rights. A beneficiary may enjoy the right to use a property without owning it, as is the case with state-owned plots and properties leased from their owners for residential or other lawful purposes.

Earlier administrative systems and regulations were relatively flexible, with greater emphasis placed on developing the industrial sector rather than imposing sanctions or withdrawing plots. However, with the expansion of industrial, service, and craft areas, the State gradually moved toward allocating plots according to their specific purpose and imposing stricter conditions on utilization, assignment, and subleasing arrangements. Nevertheless, the regulations at that time did not impose an absolute prohibition on leasing or subleasing; rather, they sought to regulate it. Most decisions required prior approval from the Authority, prohibited changing the approved activity, and ensured compliance with the original purpose for which the plot had been granted.

At a later stage, a significant shift became evident with the express and structured recognition of subleasing arrangements, subject to regulatory conditions and approval from the relevant competent authorities. This legislative development was important because it recognized a practical reality already existing in the market. It effectively shifted subleasing from the sphere of regulatory violations into the sphere of administrative regulation, reflecting the administration’s approach at that time, which focused on regulating utilization rather than entirely prohibiting alternative forms of use.

Beginning in 2025–2026, the government adopted a stricter approach toward leased plots, whether industrial, service-related, or agricultural. Authorities announced the recovery of numerous plots, revocation of licenses, and closure of facilities due to unauthorized leasing arrangements, use of plots in a manner inconsistent with their designated purpose, encroachment upon state property, and lack of serious operational activity.

This approach was driven by several considerations, including protecting state land, combating speculative trading in plots, reallocating plots to serious investors, and strengthening oversight over actual industrial activities.

A major turning point came with Ministerial Resolution No. 2 of 2026, which introduced unified rules governing recovery procedures, regulatory mechanisms, evacuation procedures, and repossession measures.

The Resolution identifies nine principal grounds for the recovery of industrial plots, including leasing to third parties, granting usufruct rights or transferring rights over plots without approval from the competent authority, using plots contrary to their designated purpose, cessation of production activities, violations of environmental and safety requirements, and obtaining industrial project rights or plot allocations through false or misleading information or other unlawful means.

The Resolution also introduced a mechanism allowing affected parties to challenge recovery decisions within a specified period and clarified administrative eviction procedures, together with escalating penalties for delays in surrendering plots.

However, a practical legal issue arises in the implementation of the new Resolution. Previous regulations permitted and regulated leasing arrangements subject to specific conditions and administrative approval. In contrast, the new Resolution now treats leasing as a direct ground for recovery in many situations. This raises concerns regarding existing legal positions and the extent of the administrative authority’s power to disturb established legal rights and expectations based upon previous regulations and administrative decisions, particularly where the Authority had approved such arrangements, was aware of them, and continued collecting fees and renewing licenses.

The transition from a policy focused on encouraging industrial investment and development to one emphasizing governance, compliance, and protection of state property should be implemented in a balanced manner. While combating unlawful exploitation remains a legitimate objective, equal consideration should be given to preserving legal certainty for investors and protecting existing legal positions, particularly in cases where buildings have been constructed, factories established, and machinery and equipment acquired in good faith and in reliance upon regulations and administrative decisions that were valid and effective at the relevant time.

This article was recently published in Arabic in Al-Jarida newspaper. You can view the original newspaper clipping here  https://www.aljarida.com/article/132137

Lawyer / AbdulRazzaq Abdullah E-mail: azq@arazzaqlaw.com