The Legal Environment and Its Impact on Attracting Foreign Investment

YUSSRI AWAD ABDALLA

doi:10.36948/ijfmr.2026.v08i05.88581

The Legal Environment and Its Impact on Attracting Foreign Investment

Author(s)	Dr. YUSSRI AWAD ABDALLA
Country	Saudi Arabia
Abstract	This study examines how the legal environment may shape the attractiveness of a host State to foreign investment from a doctrinal and comparative legal perspective. It addresses a gap in the literature created by the tendency to analyse investment legislation, treaty guarantees, institutional quality, and dispute settlement as separate subjects rather than as interacting components of one legal environment. The study therefore treats the legal environment as an integrated framework of legislation, institutions, governance, judicial protection, dispute resolution, and enforcement. The study analyses five assessment dimensions: legislative stability and legal certainty; investor protection; judicial, arbitral, and enforcement effectiveness; governance and transparency; and administrative and regulatory efficiency. The comparative method is functional rather than exhaustive. Saudi Arabia is used as the principal national reference, with the United Arab Emirates as a regional comparator and Singapore and England and Wales as international comparators. These jurisdictions are examined against selected national legislation, the 1958 New York Convention, the 1965 ICSID Convention, and relevant OECD, UNCTAD, and rule-of-law standards. The research adopts analytical, comparative, and inductive approaches. Legal rules and jurisprudential positions are evaluated by reference to clarity, predictability, protection of rights, institutional effectiveness, enforceability, transparency, and compatibility with international standards. Comparative 'best practices' are identified where legal or institutional approaches recur across the selected jurisdictions and are consistent with recognised international standards, rather than merely because they originate in a particular legal system. The legal analysis indicates that investment confidence is more likely to be supported where legal rules are clear and reasonably stable, rights are effectively protected, disputes can be resolved, and awards or judgments enforced within a reliable institutional framework, and administrative decision-making is transparent and reviewable. The study does not claim to establish an econometric causal effect on foreign direct investment flows; rather, it identifies doctrinal and institutional mechanisms through which the legal environment can reduce legal uncertainty and support investment decision-making. The study's original contribution is an integrated comparative framework linking the quality of the legal environment to legal certainty and regulatory risk, investor confidence, investment decision-making, and the broader capacity to attract foreign investment. On that basis, it proposes a prioritised reform agenda for Arab States that preserves the State's regulatory authority while strengthening legal certainty, effective justice, governance, digital administration, and alignment with international investment standards.
Published In	Volume 8, Issue 5, September-October 2026
Published On	2026-09-27
DOI	https://doi.org/10.36948/ijfmr.2026.v08i05.88581

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The Legal Environment and Its Impact on Attracting Foreign Investment

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