In-house life: David Kultgen Saudi Arabian Oil Company (Saudi Aramco)

David Kultgen has practised in-house in Saudi Arabia on and off since the 1970s, almost immediately following his graduation from law school in the US. A veteran in-houser at oil giant Saudi Aramco, he has recently overseen a huge transformation and expansion of the company’s legal function.

After joining the old Aramco [the Arabian American Oil Company] in New York after graduation from law school in 1973, I lived in Saudi Arabia from 1974 to 1980, London from 1980 to 1982, Houston from 1982 to 1989 and then back to the Kingdom just before the First Gulf War. The experience has been a professionally and personally rewarding one.

Over 90% of the Saudi government’s revenues come directly or indirectly from taxes and royalties on Saudi Aramco’s oil and gas production, plus cash distributions (dividends) from the company. The full impact of the drop in oil prices remains to be seen and will depend on the time it takes for them to return to something approaching mid-2014 levels. Saudi Aramco revenues have been halved since last summer as a result.

A particularly useful way to understand what’s happening broadly within the company is to carefully read business planning and budgeting documents. Get deeply into some of that material, at least at the business line level, for the principal businesses of the company. And ask questions – reach out and say, ‘I don’t understand why you’re saying this, or what this involves’. That helps in providing effective, informed and commercially-oriented legal services – in identifying issues and finding solutions. I’ve found that willingness to do so is appreciated at an executive management level, and builds trust as well as knowledge.

The legal system in Saudi Arabia is light years more developed and sophisticated than it was in the 1970s, before there was a stock market, when the Kingdom lacked basic laws and regulations in a number of important areas, laws to protect intellectual property, to guide basic corporate governance, and there were no anti-bribery or competition laws. Giving legal advice was more a question of how to get things done than what the law was.

But having said that, the body of law is still not as sophisticated or well-developed as it could be, although it covers most of the basics of day-to-day commercial and corporate life. The Kingdom has tried to cut down on the amount of bureaucracy and red tape that has to be navigated to establish a business or an office in the Kingdom but there are still frustrations and difficulties in just setting up a business and getting the right licenses and permits and so forth.

GCs looking to operate in the region should:

  • do their homework;
  • talk with those in their industry sector who are established here or have transacted business in the region and learn from their experiences and mistakes;
  • engage the best, most experienced law firm with boots on the ground and a deep understanding of how to get things done while avoiding legal and ethical pitfalls;
  • make sure their business people understand where the ‘minefields’ are and help them avoid them;
  • understand when a local ‘partner’ is necessary and/or will add value, and when they won’t;
  • look for local legal talent to include in the local operations – remember it won’t be easy and will likely be quite expensive but worth the investment if you get good people.