lexis middle east law alert - september/ october 2014

PROFILE OILFIELD SERVICESRobert Drolet of KIPCO

PROFILE HEALTHA V Thomas of Saudi German Hospitals Group

CONTRACT WATCHForfeiture clauses

September / October 2014 lexismiddleeastlaw.ae

A ROUND-UP OF LEGAL, FINANCE AND TAX DEVELOPMENTS ACROSS THE MIDDLE EAST

MOVING ON UPConstruction changes in the Emirates

Published in conjunction with the Association of Corporate Counsel Middle East

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Franklin Breckenridge

Ziad Zarka

Tamer Nassar

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| Lexis Middle East Law Alert | September / October 2014 | lexismiddleeastlaw.ae 1

GOING GLOBAL

The Middle East's legal landscape is increasingly dynamic and complex,

so it's important our group remains an effective resource for in-house

counsels and provides them with the best help to manage these issues.

Fortunately, we have a strong, vibrant professional community as was

seen at the Corporate Counsel Middle East Awards this year, where Lucas Sork

of Mastercard picked up the award for Legal Counsel of the year and Tamar

Nassar the award for General Counsel. Al Ansari also received the award for

Middle East law fi rm of the year and the prize for international law fi rm went to

Clifford Chance.

However, you may also have noticed a change to our magazine's front cover

in this issue. We have a new logo. The reason for this is in May, the Corporate

Counsel Middle East became part of the Association of Corporate Counsel

(ACC), forming the ACC Middle East. This is in part because the ACC has

recognised the growing strategic importance of the Middle East to the global

economy. However the CCME's board also realised the growing importance

of global understanding, particularly in areas like anti-bribery and compliance.

Former Corporate Counsel Middle East members who are now ACC Middle

East members, will therefore have access to ACC global resources. They will

also be able to collaborate with an international base of over 33,000 in-house

counsels in 85 countries, representing various industries. New and existing

ACC members share a focus on cross-border business and will now be able to

capitalise on more frequent educational and networking events. The new group

will provide training on corporate law, compliance and ethics, governance,

arbitration and litigation and business practices across the region. The ACC

Middle East will also be able to offer its members access to enhanced online

resources. The board of the ACC Middle East has changed simultaneously with

Mona Madi and Khalid Khan resigning their seats and Afshan Ahktar, Sana Belaid

and Robert Drolet accepting seats on the board. Change is afoot and we hope

all our members will benefi t from our new global reach.

Elias Hayek - Chairman & President of the ACC Middle East

FEATURE: MOVING ON UP p2Construction changes in the Emirates

FEATURE: FINANCIAL TIMES...THEY ARE A CHANGING p10Financial regulation developments in Qatar and the UAE

FEATURE: SO FAR, SO GOOD p14Recent arbitration developments in Saudi Arabia

LEGAL ROUND-UP p6...including the new UAE visa rules

TAX AND FINANCE ROUND-UP p8...including the lifting of trading restrictions in Egypt

IN-HOUSE PROFILERobert Drolet > KIPCO p17A Senior Vice President for Legal talks about disclosure

AV Thomas > Saudi German Hospitals Group p19A Corporate Finance Director talks about health regulation

MOVERS AND SHAKERS p21Round-up of the big moves across the region

CONTRACT WATCH p24Forfeiture clauses

CON

TEN

TS

Sana Belaid

Franklin Breckenridgenklin Breckenridge

Annneliese Reinhold

Ziad Zarka

Afshan Akhtar

Tamer Nassar

Robert Drolet

Elias Hayek

http://www.lexismiddleeastlaw.ae

https://twitter.com/lexismiddleeast

mailto:[email protected]




LEGAL FOCUS

lexismiddleeastlaw.ae | September / October 2014 | Lexis Middle East Law Alert |22

WHAT'S HAPPENING AND WHY?

“T he building and construction industry

is worth millions of Dollars to each of

the GCC economies and at present the

sector is experiencing renewed growth.

In part this is due to GCC Government diversifi cation

initiatives which are ultimately intended to reduce the

region's dependence on oil revenues."

"The awarding of the 2022 FIFA World Cup to Qatar

and the 2020 Expo to Dubai have also had a positive

impact on construction spending across the region, as

each of these countries gears up for the predicted infl ux

of tourists and investors,” Charlotte Holmes explains.

“This increased global visibility has also increased

international scrutiny and led to calls for changes in

how the construction industry is regulated. As well as

demands for improvements in building construction

standards, there's also a growing emphasis on enhancing

health and safety, and environmental practices in the

region and promoting sustainable development.”

REGIONAL DIFFERENCES“The UAE has been at the forefront of these legislative

developments and has adopted building standards

along international models to address areas like quality

and sustainability," Holmes adds.

"Saudi Arabia is also following closely behind by

implementing regulations designed to improve its

own building standards. For example the Kingdom

recently announced a Decree giving all companies

five years to meet new air, water and noise pollution

standards, in line with Regulations approved in

2008. In addition, along with Kuwait, Saudi Arabia

is demonstrating a strong commitment to green

building initiatives. However, there remains plenty of

room for improvement.”

ABU DHABI - MANDATORY CHANGE“Since 2009, the Abu Dhabi Government has been

developing a set of new regulations to govern the

construction of buildings in the Emirate. These are

There have been changes in construction codes across the region

but the most dramatic ones are in the Emirates. Charlotte Holmes,

Associate at Pinsent Masons examines what’s happening in Abu Dhabi,

Dubai and elsewhere.

LEGAL FOCUS


designed to raise construction

standards. On 1 October 2013,

these developments culminated

in the adoption of a set of

international best-practice Codes,

which have been adapted for

the specifi c requirements of the

local environment. These Codes

include for example, construction

methods which address the effects of the severe climate

conditions encountered in this part of the world. Each

Code sets out the minimum safety requirements for

buildings and avoids the need for companies to spend

time researching codes developed abroad. The intention

is to unify construction practices across the Emirate

to create safer, greener buildings, which are more cost

effective and durable. Initially, their implementation was

voluntarily. However, from 1 October 2014, compliance

with the Codes will be mandatory for all Government

projects in the Emirate,” Holmes says.

“These new building Codes are based on the

International Family of Codes (I-Codes) published

by the International Code Council. They consist of

six separate Codes covering construction, energy

conservation, fuel gas, mechanics, sewage disposal and

property maintenance. These include the Abu Dhabi

International Building Code, International Mechanical

Code, International Energy Conservation Code,

International Fuel Gas Code, International Property

Maintenance Codes and Private Sewage Disposal

Code. Crucially, the Codes allow for penalties and/or

fi nes to be levied for non-compliance. The Abu Dhabi

International Building Code (ADIBC) 2013, is described

as being designed to 'safeguard the public health, safety

and general welfare of the occupants of new and existing

buildings and structures.' It covers means of exiting from

a building, sanitation, adequate lighting and ventilation,

accessibility, energy conservation and life safety in

regards to new and existing buildings and systems. ”

IMPLEMENTATION“It's understood that the Government and major

developers started to use the I-Codes during their

development stage, when the Codes were being

adapted to and for the local environment," Holmes adds.

RELATED LEGISLATIONAr cle 6 of Qatar Law No. 6/2014A real estate developer register will be established in the Department to register persons licensed to prac ce real estate development works. TheMinister will issue a Decision regarding its regula on and specify its data.

(Source: Lexis Middle East Law)

©istock/ clearandtransparent

LEGAL FOCUS


"In terms of new buildings, there

was an expectation for Government

entities to adopt the new Codes

as soon as they came into force,

notwithstanding the fact their initial

implementation was voluntary.

Although, compliance will be

mandatory for all Government

projects from 1 October 2014, the

new Codes will not be retroactively

applied to existing buildings unless

improvements are proposed.

However, any alterations or

additions must comply with the new

Codes."

"Projects that

submit complete permit

applications with the

required supporting

documents before the date

for mandatory compliance,

are eligible to complete

construction under the

old Codes. However, those

projects that submit permit

applications, with the required

supporting documents after the

date for mandatory compliance

will have to comply with the new

Codes.”

DUBAI DEVELOPMENTS“Over in Dubai, construction

companies are getting to grips

with the new Dubai Municipality

Green Building Codes. As in Abu

Dhabi, implementation of the new

specifi cations was completed in

stages, with the Government sector

taking the lead in conforming to the

new regulations, which then took

mandatory effect across the market on 1 January

2014. These new Codes are also designed to improve

the energy effi ciency and carbon footprint of

buildings, demonstrating the Emirate's commitment

to sustainable building solutions. For example, the

Codes contain rules aimed at addressing energy

conservation while keeping buildings cool during the

harsh summer weather," Holmes continues.

"To achieve this, all new building's heating,

ventilating and air conditioning equipment

and systems must comply with minimum

standards of energy efficiency. The standards

require construction projects to meet 79 new

specifications designed to increase energy

efficiency and reduce a buildings' carbon

footprints, e.g. additional wall and roof insulation

requirements, which can reduce energy

consumption by up to 30%.”

WHAT'S NEXT?“As yet, no deadline has been set for when private

companies will have to adhere to the new Codes in

Abu Dhabi and so compliance with the new Codes

remains voluntary for private projects. However,

these Codes set out best practice guidelines, which

have been specifi cally developed to meet the unique

requirements of the Abu Dhabi construction industry.

It would therefore be prudent for the private sector

to start taking steps to implement the Codes in any

event, as they are likely to be made compulsory in due

course," Holmes explains.

"Given the likely cost implications of adherence

to more stringent building standards, mandatory

compliance backed by sanctions is the most

effective way to ensure the Codes

are observed across all sectors of the

industry.”

GCC-WIDE CODE“The recent recovery in the building

construction markets and promising

outlook for future growth, has led to

discussions among the six GCC countries

to agree on a unifi ed building Code which

would have application GCC-wide. At this early stage,

it is intended the Code would act as a set of guidelines

based on international standards, with a focus on

safety practices and sustainable infrastructure.

There is some suggestion it will be based on the Saudi

Arabian building code and ISO norms, but no draft has

yet been circulated,” Holmes notes.

“It has been agreed a set of Codes will be

published to take effect towards the end of 2015.

Although initially, compliance would be voluntary.

It remains to be seen whether this timeframe is

feasible. Calls for a standardised set of Codes

which would apply across the Gulf have been made

before but have not come to fruition."

"However, if the intention is for the Codes to

apply to projects projected to be completed in

time for Expo 2020 and the Qatari World Cup 2022,

Governments will need to move fast as a number of

those projects are already at tender or construction

stage. While it is not immediately clear how the

standardised GCC regulations are intended to sit

against the legislative environment of individual

countries, this does demonstrate an increasing

awareness amongst GCC members of the strategic

importance of issues like construction safety and

environmental and sustainability planning."

"A unified building Code could set a benchmark

for the construction industry in the region, which

would potentially increase investor confidence

in the area as a whole, and also potentially create

further opportunities for growth in the building

and construction markets of the GCC, which

would of course be a good thing,” Charlotte

Holmes concludes.

RELATED STORIES

Qatar: Building Law AmendedLNB News 09/06/2014 50Qatar's Emir Tamim binHamad Al Thani has issueda law (Qatar Law No. 8/2014) amending Qatar Law No. 4/1985. Under theamendments, buildings cannot be built, extended, altered, demolished, or maintainedwithout permission from therelevant municipality. Fines for viola ons range from 250,000 to 500,000 Riyals per squaremetre.

GCC: Building Codes Delayed Un l 2015LNB News 11/06/2014 92Dra unifi ed building codes for all Gulf Coopera on Council (GCC) countriesplanned for the end of 2014will now be introduced in 2015. Technical studies havenot yet been completed, delaying the codes un l the end of 2015. There will be up to 11 codes, includingelectrical, mechanical, and structural codes. The codes will be customised as perlocal requirements of each country and will comply withall relevant interna onalstandards.

Charlotte HolmesCh l tt H lAssociate

Pinsent Masons

LEGAL ROUND-UP


LEGAL ROUND-UPCOVERING RECENT KEY LEGAL DEVELOPMENTS – REGION-WIDE

from 75% of the fi nes. In addition, whehere a . In addition, wh

business owned by a national, wantwants to business owned by a national, wan

abble to do so cancel a licence they will be a

inng to pay suchfor 500 AED rather than havin

unnt.fi nes regardless of the amoun

SAUDI ARABIA

EXPATRIATE LEVY EXEMPTION

ee Council of Ministers has The

ounceunced entities with nine orunannou

ewer staff will be exempt fropt from paying the wer staff will be exempt ffewer st

expatriate levy for up to four foreioreignexpatriate levy for up to four fore

nanationals.na

Such small entities will also be exemptmptSuch small entities will also be exempS

fromom paying levies for foreign employees from

married to Saudi nationals or GCC nationals.

The annual foreign national levy which was

launched in 2012 is 200 Riyals per month.

MATERNITY RIGHTS Businesses in Saudi Arabia which

violate the maternity rights of

workers will be fi ned between 2,000 and

5,000 Riyals, following an announcement by

the Kingdom's Labour Ministry.

Under the Kingdom’s Labour Law,

ffemale workers are entitled to fully-paid

matematernity leave if they have spent three

years or or more working for the same

business.

After bebetween one and three years

working for thehe same business, they are

entitled to paaid maternity leave at half the

rate. Women n are also entitled to an hour a

day for breasttfeeding once they return from

their maternity lty leave.

UAE

NEW VISA SYSTEMTechnical and service preparations

for the implementation of a new

visa and fees system have been completed

in the UAE. Under the system, a new set of

entry permits and visas will be issued.

These will include multiple entry permits

for visits or work, the activation of study

visas and entry permits for medical care

and attending conferences. The new

approach has been scheduled to take

effect from 1 August 2014.

ANTI-TERROR LAWA draft anti-terror law has been

approved by UAE’s Federal

Nationnal Council. Under this draft law,

anyone convicted of terrorist offences

can bee jailed for life or fi ned up to 100

millionn AED. The draft law also establishes

terrorist capital offences, which can be

triggerred as a result of a victim's death,

followiing attacks on a head of state or

their faamily or a representative or offi cer

of a staate, or also in cases of coerced

recruittment of individuals into a terrorist

organissation or hijacking.

ORIGINAL CONTRACT COPIES

Employers and foreign nationals will

be able to obtain original paper

versions of Labour Ministry Labour ns of Labour Ministry Labour

Contracts on request from selected

Tas'heel Centres. The hope is that this will

help with the dependent sponsorship

process as Immigration Offi cers may

require an attested labour contract when

considering dependent sponsorship cases.

ABU DHABI

DANA WIN ARBITRATIONAbu Dhabi based Dana oil have

won the right to claim some

outstanding payments from the Kurdish

Government at the London Court of

International Arbitration. The Tribunal

ordered the Kurdish Government to

restore its previous regular payments until

the case is concluded.

DUBAI

TRAVEL CHECKSOffi cials at the Dubai Courts havehave

instructed offi cials at border cer check

points to stop individuals who have beeen

ordered to pay money in civil proceedings ingsings

from travelling.

The aim is to ensure court orders ders

are executed properly. If an individuaviduaal

has been ordered to make a paymeaymeent to

another individual and has failed to do led to do so, o d

they will not be able to leave the Emirate. thee Emirate.

Staff at border check points, includs, inccluding

bai International Airport, will be Dubai Int ort, will bell bee able to

h people from leaving anstop such people from leaaving annd take

k tthem back to the court.

SCHOOL TRANSPORT LAW ecutive DecisionAn Exe n regulating tive Decisio

transport in Duschool tr Dubai has been nsport in D

ion sets out theissued. The Decision ut the licences, n sets o

which school bfi nes and standards w buses h

should meet.

technicalIt also sets out the t

ty measures for specifi cations and safety

ansport.vehicles used in school tran

SHARJAH

FINE EXEMPTIONThe Sharjah Economic

ment has Development Department

not renew announced nationals who do n

their commercial licenses will be exempttheir commercial licenses wi

from paying fi nes or late fees. Department r late

Chairman, Sultan Alsawidi stated they will

exempt nationals with expired licenses

UAE Offi cial Gazette No. 562-566 – These Gazettes include Cabinet Decision No. 15/2014 on the

implementation of the UAE Mandatory Standard.

Saudi Arabian Offi cial Gazette No. 4513-4527 – These Gazettes include Saudi Arabia Cabinet

Decision No. 342/1435 on controls around beauty treatment for women.

Oman Offi cial Gazette No. 1055-1064 – These Gazettes include Oman Decision No. 392/2014 on

a ban on the increase in prices of certain goods.

Kuwait Offi cial Gazette No. 1180-1193, 1195 – These Gazettes include Kuwait Law No. 42/2014

promulgating the environmental protection law.

Qatar Offi cial Gazette No. 10-12 – These Gazettes include Qatar Law No. 7/2014 on regulating

trademarks in the GCC.

(Source: Lexis Middle East Law Offi cial Gazette Index)

LEGAL ROUND-UP

| Lexis Middle East Law Alert Lexis | September / October 2014 | lexismiddleeastlaw.ae 77

OMAN

COMMERCIAL AGENCY CHANGE

which amends the commercial

agagency law came into force on 22 July 2014.ag

CChanges include a removal of the Ministry

oof Commerce and Industry's power to ban o

the import of a foreign principal's goods. In

addition, commercial agents will no longer

have a statutory right to claim damages for

commission earned from the sale of a

foreforeign principals' goods by another agent.

visiosions in the Oman Agency law on the Provisi

c rc renewal of commercial agency automatic

s s have also been removed.agreements

CONTRACTOR CHANGESssistant Generasistant General Director of The Assis

n’s Trade General l Directorate,Oman

hmoud Alhitally has said a MinisisterialMahmmoud Alhi

Decision (Oman Ministerial Decisionon No. sion (OmanDecision (O

regarding the regulation of fegard174/2014) regardin

elp improve the sectotor. contractors will hel

s to commercial The Charter applies to c

an Sultani Decree No. companies under Oman S

Decree No.3/1974 and Oman Sultani Dec

gistry Law) and 4/1974 (the Commercial Regis

dividuals froms fromprevents companies and indiv du

es other than her thdoing any contracting activities ot

sthrough the company which has

thishisspecifi cally been established for th

rededpurpose and only after it has registered

properly with the Commercial Registry.

KUWAIT

ILLEGAL WORKERSA senior offi cial in Kuwait’s Interior

Ministry has announced workers

found to be in the country illegally will not

now automatically be deported but will

instead be given the opportunity to validate

their status.

ey will be able to pay thewill be able to pay theThis means they will be able to

ne ane and transfer their visa toappropriate fi ne a

y cacan stay in Kuwait. This fi ne is ensure they c

now 600 DinDinars instead of 730.now 600 D

The mThe move seems to suggest anhe m

outright amnesty for illegal residents

to leave the country without facing

penalties has been shelved. The

e issuingGovernment has also frozen the issuin

early nextof new work visas until early n

ublic Authority for year, when a new Pub

r is expected to be established.Manpower is

BAHRAIN

VISA POLICY REVISITED Bahrain is expected to increase the

number of countries eligible for a

visa-on-arrival by 64 in early 2015. Reports

suggest the Bahrain Economic

Development Board may revisit the policy

in order to attract more foreign investment

to the country and help facilitate trade. A

visa-on-arrival will allow an initial one

month's stay, which can be extended for up

to three months. New countries eligible

under the scheme are expected to include

India and Pakistan. These additions would

bring the number of eligible countries to

more than 100.

CHANGES FOR HOTELS Bahrain's Trade and Industry

Chamber has asked the Ministry of

Culture to give hotels with bars and

entertainment more time to close them

down. This follows legal changes in Bahrain

Law No. 5/2014 which prohibited three star

hotels from selling alcohol or hosting

sinsingers in their discos or theatres. The

hotels however are facing diffi cls however are facing diffi culties as

many had signed contracts with signed contracts with service ts w

providers and may now have to ppay have

cancellation fees.

QATAR

LABOUR REFORMS s a Measures aimed at improving the

eatment ot of foreign workers have treatment

thehe Qatari government. been approved by th

eqquired to set up bank Companies will be re

rsrs and pay their wages accounts for worker

inn seven days, or face a electronically within

ees are also banned from es are also banned from penalty. Employee

oors between 11.00am and ors between 11.00am anworking outdoors

0pm from mid-June to late August. The pm from mid-June to late Augus3.00pm fro

Government will also launch an electronicGovernment will also launch an electrG

ding complaint system and is building

up to 150,000 accommodation to house up

no date has yet been set workers. However, no date

for the implementation of these reforms.for the implementaf

EGYPT

TRAFFIC LAW AMENDED Amendments to the 1973 Traffi c

Law have been issued, following

an increase in road injuries and fatalities in

UAE: The Economy Ministry has asked

car show rooms to provide customers

with an Arabic-English booklet containing

advice on the car sales process...

Saudi Arabia: A Decree has been issued

establishing specialist executive courts

in a number of Saudi cities. Executive

legal departments will now be promoted

to specialist executive courts...

Dubai: The Power Demand Agency has

been set up to manage the Emirate's

power demands. Its first task will be

retrofitting Government buildings...

Dubai: From September the Dubai

hotel classification scheme will be

modified bringing classifications

for new hotels in the Emirate in line

with international standards...

Kuwait: Agreements have been

signed with Iran on six areas including

security co-operation and aviation...

Qatar: A joint freetrade zone

agreement has been signed with

Iran. The zone is expected to be

fully operational by July 2015...

Qatar: A consultation on the

e-Participation policy has been started

by the Supreme Council of Information

and Communication Technology.

It ends on 15 September 2014...

GCC: Draft GCC regulations on the

operation of express mail, parcel and

shipping providers have been approved

by the GCC member state ministers...

Jordan: Following a Cabinet Decision,

the Land and Survey Department is

reviewing the way land is valued. A

technical commission and supreme

commission have been formed...

Jordan: The Minister of Justice has

announced a legal commission will

be reviewing the Penal Code with

the aim of increasing penalties for

sexual harassment offences...

Jordan: Amendments to the draft

religious sects law have been made

to clarify that Jews and Christians

are not covered by the law...

the country. This is the fi rst amendment

to the Traffi c Law since 2000. As a result

of the reforms, the Egyptian Prime

Minister can now ban certain types of

vehicle from the road at specifi ed times.

In addition, anyone who litters the road,

creates noise, or whose vehicle produces

exhaust fumes which go beyond

acceptable levels can be fi ned.

TAX AND FINANCE ROUND-UP


TAX AND FINANCE ROUND-UPCOVERING RECENT KEY TAX AND FINANCE DEVELOPMENTS – REGION-WIDE

QATAR

FOREIGN EXEMPTION CANCELLED

ncil has The Advisory Coun

x aamendmentscancelled draft tax

emptmpted foreignwhich would have exemp

d foreiforeign investors withindividuals and fore

ains ans and income derived fromcapital gains

ari Stocck Market investments, Qatari Sri Stoc

including caash dividends, interest frominincluding ca

asury billury bills and debentures,sury bbonds, treasu

rom tax. The original proporoposals were m tax. The original propfrom ta

binet net inapproved by the Qatari Cabine

February. A 10% income tax is levied ed on February. A 10% income tax is leviedFe

reigners on their share of annual profi tofi ts eigners on their share of annual profi fore

earned through part ownership of Qatari arned through part ownership of Qatari ear

commercial and industrial companies.

TAX RULES AMENDED Qatar’s Financial Centre

Authority (QFCA) has amended

its tax regime to benefi t Qatari-owned

entities. As a result of the changes,

entities can now elect for a zero tax rate to

apply to their operations in the Centre.

The revisions also update the Regulations

and Rules to refl ect legislative changes

eelsewhere in the Centre, in particular to

ensuensure alignment with new rules on

Special Pal Purpose Companies, Holding

Companieies and Single Family Offi ces.

These channges aim to help Qatari-owned

entities invesest overseas by introducing

advantageouous changes to the taxation of

structures esstablished in the Centre.

Structures suuch as Holding Companies

could previoususly only be set up abroad.

SAUDI ARABIA

CONSUMER FINANCE REGULATIONS

The Saudi Arabian Monetnetary

Agency (SAMA) has updateed the

consumer fi nance regulations for the fi rstst for the fi rs

time in nine years. The aim is to improvevemprove

consumer protection rights, as well as

provide enhanced transparency and

disclosure standards. The regulations ss set

minimum requirements on the

information to be included in consumer r

fi nance contracts, and require contracts s

UAE

STOCK EXCHANGE SUPERVISION

The supervision of the UAE’s

Stock Exchange will be tightened,

the Securities and Commodities

Authority has announced.

The move follows the turmoil around

Arabtec, which led to around US $30

billion being wiped off the value of the

country’s market.

A joint technical committee will be

established with the Central Bank andlished with th

the Emirates’ Exchanges to ensure themirates’ Exchanges to ensure the

reliabillity and integrity of share trading,

as weell as preventing any stock price

manippulation. Bank lending regulations

will alsso be reviewed and amended, if

deemeed necessary.

BROKERS’ REGULATION APPROVED

The UAE’s Securities and

Commodities Authority has

approvved a new brokers’ regulation. The

regulattion classifi es brokerage fi rms into

those wwhich only engage in trading, with

clearance and settlement operations

conducted through clearance members,

and fi rms which engage in trading,

clearannce and settlement operations.

Thhe new regulation also states no

compaany can engage in broker activities

unless approved by the Authority. There approved by the Authority. There

is also a requirement for such approvals

to be renewed annually. In addition to the

new regulation, the 2008 Margin Trading

Regulation and the 2001 Regulation

on trading, clearance, settlements,

ownership transfer and securities custody

have been amended.

PENSIONERS' ASSOCIATIONThe UAE Social Affairs Ministry has

issued a Ministerial Decision

establishing a new Emirates' Association

for Pensioners, which will be based in

Sharjah. The Association will be

responsible for reviewing pensioners'

needs, improving pensioners' services and

setting up a database to document the

qualifi cations and expertise of pensioners.

INSURANCE GUIDELINES

The UAE’s Insurance Authority writy will

shortly issue new technical,

fi nancial and investment guidelines ffor

the country’s insurance sector. The

changes are aimed at bringing the market market t

in line with best international practices ctices

and protecting the interests of all partall parrties

involved. A law will also be issued toed tod to

counter money laundering and terrorisnd ter orist ror

fi nancing through insurance servicservicces.

INTERIM LENDING FACILITY n Interim Margin LendinAn IInterim Margin Lending Facility

been approved by thas bbeen approvedd by the UAE’s

deration. The facilityBanks' Federation. The facilityy will

ernight funding for banks provide over bannight funding for banks

ovide eligible secwhich can pro ecurities and de eligible se

s collateral. Eliinstruments as c ligible assets ollateral. E

s, sukuk and sewill include bonds, and securities sukuk a

ral Governmenissued by the Federa ent or

ual Emirates, aauthorities in individua as

porations basedwell as banks and corp ed

in the country.

y foreign Securities issued by f

rporates and Governments, banks, corp

l also be supranational agencies will a

hese must accepted as collateral, but th

m rating carry a minimum A rating, from ra

ersion agencies. A Sharia compliant versi

n the of the facility for Islamic banks in

nd will be UAE is also being finalised and wi

launched shortly.

DUBAI

DFSA BOARD RESTRUCTURED

The board of the Dubai Financial

Services Authority (DFSA) will be

restructured following a Decision issued

by HRH Sheik Maktoum Bin Mohamed

Bin Rashid Al Maktoum. Saeb Eigner

remains chairman, a position he has

held since 2011. The Board of Directors

now includes Fadel Abdulbaqi Al Ali,

Abdul Wahid Al Ulama, Apurv Bagri,

Robert L. Clarke, Lord Currie of

Marylebone, Charles Flint QC, Robert

Owen, and Dr. J. Andrew Spindler.The

Decision also sets a three-year

renewable membership period.

TAX AND FINANCE ROUND-UP

| Lexis Middle East Law Alert Lexis | September / October 2014 | lexismiddleeastlaw.ae 99

act to be accompanied by a brief contra

summary in clear language.

Additional changes mean consumers

will be entitled to pay off their loans early

without having fi nes or penalties imposed.

Financial institutions must implement the

nenew regulations by 16 September 2014.n

BOURSE OPENED TO FOREIGNERS

Saudi Arabia's Stock Market will

be opened to direct foreign

inveinvestment by June 2015, Saudi Arabia's

pital tal Market Authority (CMA) has Capita

eded, following approval by the announce

neet.Saudi cabin

utthority has said it will publish The Aut

atiotions for opening out the draft regulatio

rt of a cont of a consultation.market as par

INCOME TAX CHANGES Saudi Arabia’s Finance MiMinister Saudi A S

s issued a Ministerial Dececision s issuehas issue

ngdom’s income taxax amending the King

diate effect. Under thehregime with immediate

holding tax new measures, withhold

interest derivedexemptions will apply on in

nd paid to a from interbank deposits and

es where thosee thnon-resident bank in cases whe

p to 90 days.90 dadeposits are received for up to

tified by ed by An annual statement certif

ency ency the Saudi Arabian Monetary Agen

toto(SAMA) should also be submitted to

dthe resident borrower bank and should

list the identity of the correspondent

foreign banks, their addresses, the loan

maturity period and the interest amount

paid. In terms of transfer pricing rules,

the new measures indicate the rules to

determine the arm’s length value will be

released by the Department of Zakat

and Income Tax.

OMAN

CHANGE TO TAX CERTIFICATE ISSUE

MiMinisterial Decision introducingA M

nenew measures on the issue of tax

certifi cates has been issued. Under the

terms of this change applicants for a tax

certifi cate will have to indicate who is

requesting it and why.

cates will beAs a result tax certifi cates

al basis and will be valid issued on a personal

e entity and specifi ed purposes.just for the en

Previously tax certifi cates were issued

on a more general basis. In addition,

authorities will charge fi ve Riyals for

issuing a certifi cate.

KUWAIT

TRANSPARENCY COMMISSION

A transparency framework for

investors will be developed by a

new commission established by Kuwait’s

Capital Market Authority. Once

implemented, all companies managing

shares will be required to reveal investors’

names to the bourse’s auditing and

monitoring departments. Under the

cucurrent system, they can use a reference

number if they wish. The changber if they wish. The changes

implement a Decision requestint a Decision requesting que

information about all investors iinvolved in vest

shares dealings in the Bourse. This he Bou

information has to be provided by to be provprov

October 2014.4.

BAHRAIN

BAILOUT AGREEDra a Council has The Shoura

1185 million Dinar approved a 1

, ttwo years after the bailout for Gulf Air,

atted. The carrier money was allocat

oney following a Royal ney following a Royal received the mon

12. However, the payment 2. However, the paymeDecree in 2012.

not approved until a narrow vote in ot approved until a narrow vowas not ap

Parliament this year. If the Decree had Parliament this year. If the Decree hP

uld have been rejected the airline would

money.been forced to return the m

JORDAN

DEBTOR TREATMENTThe Jordanian Government is

announcing it is fi nalising

amendments to the Judicial Rules

Implementation.

These would prohibit the sale of

houses or their shares indebtors' ho

unless the house or househouses, un

as been mortgaged or pawned share ha

specific debt is as a result of and the spe

on. In addition, farmers' landthis actio

e protected from being sold bywould be

ction.public auc

LEBANON

ETHICAL APPROACHw guidelines covering ethical New

t practice for insurancebest p

been issued by the brokers have be

nce Brokers'Lebanese Insuran

elines followFederation. The guidelin

l rules. They set applicable internationa

es of brokers andout the rights and duties of

tionships in alladdress professional relat

relevant sectors.

EGYPT

TRADING RESTRICTIONS LIFTED

imposed on trading following the

Egyptian Bourse's reopening in March

2011 will be cancelled from 7 August 2014.2011

e measures were imposed following the The

25 January revolution.25

A Price Discovery Session will be

resumed, allowing investors to receive

and send offers to help set share prices

before offi cial trading starts. Price limits

of listed shares during trading will rise

from fi ve to 10% for bigger companies

but will remain fi ve per cent for small and

medium stocks on the Nile Bourse.

NEW AIRPORT TAXA $25 airport departure tax has

been implemented and will be

imposed on international fl ights leaving

Cairo airport.

The tax will be collected via airline

ticket costs. Travellers on domestic fl ights

will pay a reduced rate of $4.

UAE: The USA and the UAE have signed a temporary agreement on the Intergovernmental Agree-

ment Implementing the Foreign Account Tax Compliance Act (FATCA). Financial institutions in

the UAE will be treated as having an agreement in effect till the end of 2014.

Bahrain: The Protocol to the income tax treaty between Bahrain and China has been approved

by the Kingdom's Parliament.

REGULATORY FOCCUS


Global changes in the fi nancial services sector are impacting the GCC.

Amjad Hussain of K&L Gates and Mazen Boustany of Baker & McKenzie

Habib Al Mulla examine recent fi nancial service reforms in Qatar and the UAE.

WHAT’S HAPPENING IN THE UAE?

“T he UAE is keen to improve the

competitiveness ranking of its

fi nancial legislative framework and

is currently working with bodies

like the World Bank, the International Finance

Corporation (IFC) and other major consultants to

amend its banking laws to achieve this. As a result,

the UAE Finance Ministry has been leading the charge

on banking law reform and has embarked on an

ambitious legislative programme in four major areas,”

Mazen Boustany says.

“The fi rst key area is the overhaul of the bankruptcy

law. The current law is very comprehensive, and has

around 255 articles but it has almost never been tested

in the courts and there are only two judicial precedents

which can be referred to when it comes to insolvency.

The second key area is the ‘twin-peaks law’. This would

establish a prudential regulator (i.e. the Central Bank)

which will be concerned with, and focus on systemic

and prudential risks, without being distracted by the

conduct of fi nancial institutions' business. As a result

of this change that area will be left to another agency

called the Emirates Financial Services Authority (EFSA).”

LEGAL CHANGES“There will also be an overhaul of a number of other

laws, like the Central Bank Law (Federal Law No.

8/1980) in order to refl ect the Central Bank's new role,"

Boustany explains.

"In addition, other changes will include those to

the Emirates Securities and Commodities Authority

(ESCA law) or Federal Law No. 4/2000 which will need

to be amended to refl ect EFSA's new role as Conduct

of Business regulator of fi nancial institutions. The

Insurance Law (Federal Law No. 6/2007) will also

need to be repealed, as insurance companies will

be placed under the Central Bank umbrella and

REGULATORY FOCUS


insurance brokers will be placed under EFSA going

forward. On top of that, the current Islamic banking

law will need to be repealed as the two regulators will

issue regulations on Islamic banking, each according

to its own jurisdiction. Finally, the UAE will need

to standardise its Islamic Finance interpretation

by having a centralised Sharia board, which will

work with the various Islamic fi nancial institutions'

Sharia boards to standardise and harmonise the

interpretation and various Sharia products offered

by them. This model of fi nancial regulation is similar

to those currently applied in the most advanced

fi nancial jurisdictions, such as the UK, France, the

Netherlands and Australia," Boustany adds.

“One other change will be that a pledge of

movables law will be introduced. The current system

of possessory pledge by the lender is not satisfactory

for lenders, who can be reluctant to lend on the basis

of equipment and movables. This has a detrimental

impact on UAE Small and Medium Enterprises (SMEs)

(who make up 80% of UAE companies) and the whole

economy. To solve the problem, the International

Finance Corporation is rolling out a law on the pledge of

movables and has been working with the UAE’s Finance

Ministry. This new law will also be rolled out more

widely and Jordan and Lebanon are two of the other

jurisdictions also planning to adopt it. It will create a

non-possessory pledge, a fl oating charge and a registry

where pledge movables assets will be registered

to inform any future lender or potential buyer the

movables are charged. Finally, the Finance Ministry

is also working on drafting a new fi nancial leasing law

which will create a new category of fi nancial institution

in the form of leasing companies, regulated by the

Central Bank. Islamic Finance Banks will benefi t most

from this new law, since Islamic Finance is asset based

fi nancing and Islamic banks may own assets to lease

them. Again this law has been tailored to help SMEs

which is good,” Boustany concludes.

RELATED LEGISLATIONAr cle 4, Qatar Law No. 13/2012The Central Bank will have fi nancial and administra ve independence,as well as all regulatory and supervisory powers necessary to execute its func ons and achieve its objec ves in line with the law. It will also conduct its opera ons with third par es in line with the commercial and banking rules and customs.

(Source: Lexis Middle East Law)

©istock/ monkeybusinessimages

REGULATORY FOCUS


QATAR DEVELOPMENTS“Meanwhile, in Qatar regulators

have recently announced plans

to establish a deposit insurance

framework, which they aim to

implement by 2016. This will also

include a Sharia-compliant scheme,"

Amjad Hussain states.

"While Government support

for domestic banks is considered

implicit in many cash-rich Gulf

countries, including Qatar, explicit

deposit insurance is rare in the

region. This is because many regional

Governments haven’t had to

consider the impact of

bank defaults in the past.

Local banks have instead

tended to be supported

by Governments and have

assumed this support would be suffi cient.

However, this scheme has been conceived

as part of a strategic plan for Qatar’s

fi nancial sector developed by the Finance

Ministry, the Central Bank (QCB) and the

Financial Markets Authority (QFMA), which

aims to bring Qatar in line with international

best practice, similar to those in other

high-income jurisdictions. Although details

of the scheme have not yet been issued, it

will reportedly initially be set up under the

QCB and is intended to provide a safety net

to promote fi nancial stability. Under the

Sharia-compliant version, any expenses

and investments made by the scheme must comply

with Sharia principles, for example, the prohibition

on interest and pure monetary speculation. This

development seems to be a fi rst for the region,

although this cannot be said conclusively, as some

GCC Central Banks like to keep these things private.

Unfortunately, no further details are currently

available,” Hussain adds.

“The QCB also plans to introduce a regulatory

framework for local credit rating agencies, which would

be licensed in the near future, as part of its plans to

further develop the domestic loan market. This is an

issue which has been discussed for some time across

the GCC. However, following the recent downturn,

many banks have become more sensitive about credit

checks and this has been picked up by regulators

across the region,” Hussain states.

“The regulatory framework in Qatar has

developed over a number of years of trial and error

and the authorities here do not tend to adopt foreign

regulations without considering the local impact.

They also often act proactively to local issues need

regulating,” Hussain adds.

“Another area of change is the Qatar Exchange’s

recently announced plans to launch two exchange-

traded funds (ETFs) over the next six months. One of

the ETFs will be based on Government fi xed income

risk from an Asian borrower and the second is likely to

be an ETF based on a representative Qatar-country

index. The authorities have issued some guidance

notes for issuers and further investment funds

regulations which are expected later in the year,”

Hussain states.

“The QFMA’s financial reforms are a response

to the significant changes in the global regulatory

framework in recent years because of the global

financial crisis. In order to keep up with these

developments, the QCB and the QFMA reforms

aim to ensure Qatari financial institutions

remain compliant with what is considered

to be 'international best practice' set

by influential international financial

trendsetters (like the Basel Committee,

the European Central Bank, the Federal

Reserve and the Bank of England).”

“Whilst the QCB is the main institution

charged with overseeing the fi nancial services

sector and introducing these reforms, it is

being done with other institutions like the

QFMA and the Finance Ministry."

"As with other jurisdictions, compliance with

Basel III has driven Qatari fi nancial institutions

to de-leverage, improve the quality of their loan

portfolios and to raise Tier I capital."

"However, the jury is still out on the

impact of the merger and acquisition rules

in Qatar as there has been virtually no M&A

activity in the Qatari fi nancial sector to test

the impact of these changes. Until these

regulations are tested it will be diffi cult to see how they

will be applied in practice,” Hussain notes.

WHAT’S NEXT FOR QATAR?“Initially, fi nancial institutions and fi nancial services

companies had to face a period of adjustment to the

regulatory pressures introduced by the new QCB

and QFMA reforms. This did contribute to a period of

introspection in the Qatari domestic market.”

“However, by adopting these reforms Qatari

fi nancial institutions are becoming well-placed to

participate in international fi nancial transactions.

Cross-border deal volumes between fi nancial

institutions are expected to rise and there have

been recent indications, such as Masraf Al Rayan's

acquisition of the Islamic Bank of Britain that this is

really happening. The QCB has also notably signed an

agreement with the Bank of China to enable the QCB to

purchase Chinese government bonds,” Hussain says.

“Qatar’s fi nancial services sector is also likely to

witness a boom due to the Government’s spending

programme. In addition, banks are likely to be

interested in foreign opportunities with a view to

putting their capital and balance sheet to maximum

use,” Hussain concludes.

RELATED STORYBahrain: Margin Trading ApprovedLNB News 11/06/2014 133Regula ons allowing margin trading have been approvedby the Bahrain Bourse. TheBahrain Bourse has also set up a framework for market makers in a bid to boost liquidity. Margin trading willstart in September 2014. TheBourse has also approvedtrading of op ons, exchange-traded funds and real estateinvestment trusts.

Mazen BoustanyPartner

Baker & McKenzie Habib Al Mulla

Amjad Hussainj d iPartner

K&L Gates LLP

REGULATORY FOCUS


WHAT’S BEEN HAPPENING?

“A s markets across the Middle East region have developed,

there has been a surge in the use of arbitration, as an

alternative form of dispute resolution, particularly

where international parties are involved. However,

historically, Saudi Arabia has lagged behind some of its neighbours, in

terms of embracing arbitration as an alternative to court proceedings.

Fortunately, this position now appears to be changing, and there

have even been a number of recent arbitration-friendly Government

initiatives implemented in the Kingdom,” Michael Kerr says.

“These efforts began in 2012 when a new Arbitration Law, based

on international models was issued. The Arbitration Law (Saudi Arabia

Royal Decree No. M34/1433) removed a number of restrictions which

had previously been in place in Saudi Arabia, including those in the

areas of arbitrator nationality, governing law and the language of

arbitrations. The Law also precludes the Saudi courts from examining

the merits of an award which had been a barrier in the past to carrying

out arbitrations there,” Kerr explains.

SO FAR, SO GOODFollowing the recent

establishment of the Saudi

Centre for Commercial

Arbitration, Michael Kerr and

Beau McLaren examine how

the new Centre differs from

others in the region and the

changes it might make to

the arbitration landscape.

Lexis Middle East Law -

Your Trusted Advisor for the Region

[email protected]

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Some databases list over 10,000 laws for the UAE – but not all are in force.

Do you know which ones are?

We do.With Lexis Middle East Law, you are shown the current not historic legal position, along with the latest

laws, cases, journals and news all at your fingertips. Plus working in partnership with the Corporate Counsel

Middle East (CCME) we provide commentary from regional experts, who know and understand what’s

happening on the ground.

Find out moreCall: +971 (0) 50 6210324Email: [email protected] visitOr visit www.lexismiddleeastlaw.ae

Updated daily. In English and Arabic.




REGULATORY FOCUS


“The Arbitration Law (Saudi

Arabia Royal Decree No.

M34/1433) was then followed

in 2013 by a new Enforcement

Law. This expressly provides

for the enforcement of both

international and domestic

fi nal arbitral awards. There are

also wider remedies against

stubborn debtors. In addition,

the Enforcement Law enables

the enforcement of

awards to be handled

by an Enforcement

Judge rather than

the Board of Grievances in the previous

process. This was traditionally seen as

another obstacle to arbitration award

enforcement in the Kingdom,” Kerr adds.

THE BIG OVERHAUL“In April 2014, a major change happened

and the Kingdom took another signifi cant

step towards overhauling its arbitration

regime, when the Council of Ministers

issued a Resolution establishing the Saudi

Commercial Arbitration Centre. This

centre is the fi rst of its kind in the Kingdom

and will operate under the umbrella of the

Council of Chambers of Commerce and

Industry. It will be governed by a board

of directors, who will be appointed by

the Council of Minsters, together with the Governor

of the General Investment Authority, the Minister of

Trade and Industry and the Minister of Justice. It will

also represent the Kingdom internationally in the area

of commercial arbitration, together with the Justice

Ministry and other relevant authorities.”

HOW IS THE CENTRE DIFFERENT?“The Saudi Commercial Arbitration Centre stands out

from its regional counterparts in two key ways. The fi rst

is the Council of Ministers envisages funding will be

provided for parties wishing to arbitrate their disputes

there, which is not something other arbitration centres

do. While it remains unclear at this stage what the

criteria will be for obtaining this funding , it is likely, given

the high costs often associated with arbitration, the

prospect of funded arbitration will make the new Saudi

Centre more attractive and more accessible than

other such centres in the region,” McLaren says.

“Secondly, the Council of Minister's resolution

also makes it possible for additional branches of the

new Centre to be set up, both within and outside the

Kingdom. It is unclear at the moment whether these

will be stand-alone branches or joint initiatives (along

the lines of the DIFC-LCIA Arbitration Centre in Dubai,

which is a joint initiative between the London Court

of International Arbitration and Dubai International

Financial Centre). There have even been some reports

Saudi Arabia is planning to establish a Saudi-British

arbitration centre in the UK, where cases would be

decided under English law, with a panel including former

English judges. However, it is not clear whether any

such centre would fall under the Saudi Commercial

Arbitration Centre's umbrella. That said, the potential to

administer arbitrations outside the Kingdom may be of

interest and comfort to international parties, particularly

against the backdrop of the new enforcement regime in

Saudi Arabia,” McLaren adds.

CLARIFICATIONS NEEDED?“Although the signs so far are positive, there

is still a lot of work to be done before Saudi

and its new Centre is able to rival the main

regional arbitration centres. It also remains

to be seen how the Centre (or indeed the

Arbitration and Enforcement Laws) will

operate in practice. A great deal will depend

on how the Centre is set up, its remit and the

rules it adopts. One thing which is particularly

important is that it adopts a set of user-

friendly rules offering certainty and fl exibility

in line with international best practice.

Hopefully, the new Centre will follow

other regional institutions in appointing

experienced arbitration practitioners as

members or of its board of directors. The

last important point is it will need to be make

clear how arbitration under the Centre's

rules will fi t into the existing legal regime.

For example, although the Centre enjoys the support

of the Saudi Government (represented by the Trade

and Justice Ministries and the General Investment

Authority), which is important in any state-dominated

economy, current Saudi Arabian procurement laws

generally require disputes involving these entities to be

referred to the local courts."

"As a result it is still unclear whether the many

state-owned or Government entities will be able to

submit to arbitration under the new Centre’s rules.

Another area which needs to be clarifi ed is the way

the new regime will operate within the confi nes of

Saudi public policy, for example on the appointment

of female or non-Muslim arbitrators."

"As a result, it is still too early to gauge the

success of these recent arbitration initiatives in

Saudi, but the establishment of the Centre and the

promulgation of the Arbitration and Enforcement

Laws (which follow international best practice) can

only be seen as positive steps in a jurisdiction that has,

traditionally, appeared hostile towards arbitration.

It will be interesting to see how these initiatives are

implemented in practice, as there has yet to be an

attempt to endorse an arbitral award enforced in

the Kingdom under the Enforcement Law. Still, one

thing is certain however, the future looks brighter for

arbitration in Saudi Arabia,” Kerr concludes.

RELATED STORYDIFC: Enforcing JudgmentsConsulta on LaunchedLNB News 16/07/2014 24The DIFC Courts launched a month-long consulta on on allowing par eswho opt into their jurisdic on toalso refer their fi nal judgments for enforcement through the DIFC-LCIAArbitra on Centre. The consulta onended on 6 August 2014.

Michael KerrPartner

Dentons

Michael Kerr

Beau McLarenSenior Associate

Dentons

Beau McLaren

IN-HOUSE PROFILE


IN-HOUSE PROFILE SENIOR VICE PRESIDENT, LEGAL – OILFIELD SERVICES

Regulation...Devil's in the DetailRobert Drolet, Senior Vice President for Kuwait Projects Company (Holding) and

Kuwait Representative for the Board of the Association of Corporate Counsel,

talks about the challenge of overregulation in Kuwait and the wider region.

ABOUT YOUR BUSINESS AND YOUI’m French-Canadian and attended a range of

educational institutions, including Quebec’s Laval

University, Osgoode Hall Law School in Toronto and

Trinity College in Oxford. I also trained in the Advanced

Executive Programme at Kellogg Business School,

which is part of the Chicago’s Northwestern University.

I'm also dual qualifi ed - as a member of the Québec

Bar and a Solicitor (in England & Wales).

Before moving to the region and joining the Kuwait

Projects Company (KIPCO) in 2006 as Senior Vice

President for Technology & Media and General Counsel,

I led and advised on turnarounds, M&A transactions and

strategic alliances, as Interim Manager with a European

internet and telecoms operator, having stepping down as

Chief Executive Offi cer for Continental Europe at Cable

& Wireless plc in 2004. Prior to that I have held a number

of roles, including acting as Vice President, Legal of a

Canadian conglomerate, Stikeman Elliott in Montreal,

serving as Law Clerk to Justices Pigeon and Lamer of the

Supreme Court of Canada and being General Counsel

at both Bell Cablemedia (a UK cable company affi liated

with Bell Canada) and Bell Canada International. In fact

there I led a team negotiating investments and joint

ventures in South America, South East Asia, China

and India. I’m responsible for supervising, developing

and optimising KIPCO’s communications and media

portfolio, and act as lead internal legal counsel on major

fi nancing and M&A transactions. These have included

the restructuring of our internet business, in partnership

with United Network to Qtel (now rebranded Ooredoo).

Having worked in North America, Europe and the Middle

East what fascinates me is how well working in Quebec's

civil law system prepared me for working in the Middle

East, as many of the basic tenets of the legal systems

are the same. The co-existence with the common law in

commercial fi elds is also similar. This has helped me to

understand the subtleties of the region's legal systems

better than pure common lawyers, even in terms of

simple things like reading the various GCC Civil Codes

and the wider legislative libraries. I've also been struck

by how various countries in the region seem to adopt

similar solutions and how regional standards evolve. This

is also helpful to companies operating across several

national boundaries. My company, KIPCO, which is

headquartered in Kuwait City was founded in 1975 as

Kuwait Investment Projects Company. In March 2014

we had consolidated assets of USD $32 billion and

signifi cant ownership interests in a portfolio of over

60 companies across 24 countries, including Kuwait,

Bahrain, Saudi Arabia, the UAE, Algeria, Egypt and

Tunisia. Our main business sectors are fi nancial services,

media, real estate and manufacturing. However, through

our core companies, subsidiaries and affi liates, we also

have interests in the education and medical sectors.

These include Burgan Bank, Gulf Insurance Company,

Takaud Savings & Pensions Company and OSN, the

premier Pay TV operator in the region.

REGULATORY CHALLENGES AND OPPORTUNITIESThere are regulatory areas, including the application

of Kuwait's restructuring and insolvency legislative

frameworks and its Civil Code which need updating

or better implementation, e.g. when it comes to liens

and pledges over movables. However, there have

been other areas where regulation has improved

immensely. Recent examples, have included the

establishment of the Capital Market Authority and

the evolution of a subsequent regulatory framework,

the new companies law and implementing regulations

and the upcoming establishment of Kuwait's fi rst-

ever Telecommunications Regulatory Authority via

Kuwait Law No. 37/2014. Whilst all the changes are

welcome, they have produced some unintended

consequences. For example, the insider trading and

disclosure requirements required by the Capital Market

Authority Law can require overlapping paperwork from

individuals and companies, so you could be mistaken

in believing the lines between Government and private

enterprise are being blurred.

t

©is

tock

/ G

ala_

Kan

IN-HOUSE PROFILE


An interesting legal question also arises with this high

level of notifi cation and the number of notices which

must be given before and after any trade, however

small. Given the level of disclosure required if a company

does something and it later goes wrong or they are held

accountable, perhaps they could turn round and say the

regulators or authorities knew exactly what they were

doing and they could or should have stopped them?

There have also been recent amendments to Kuwait's

Build, Operate and Transfer (BOT) Law which I think

have discouraged private investment and there are

reports the law might be further amended to encourage

investment again. The amendments also highlight a

more common theme in the region. Unlike elsewhere

in the world where you can do something unless it is

expressly forbidden, the general feel of the regulations

in the region is you can only do something if expressly

told you can. The tendering process in the region is

another example of this. International companies are

used to following a tender process and then when

they are successful, having a free hand to deliver the

contract for that project, and a reasonable dialogue

over extra work required or changes in circumstances.

I have heard from many, this is not so in the region. Too

much risk is therefore being placed on contractors,

prices are higher than they should be or quality bidders

simply withdraw from the process. None of this

benefi ts those involved. In all these areas it is important

the regulators have the right information and resources

- but they also allow the private sector to do what they

do best. The region has immense resources and large

needs. It would be a shame to waste the opportunity to

accelerate development by reining in the private sector

more than is necessary.

PRACTITIONER PERSPECTIVE

Alex Saleh, Head of Al Tamimi & Company’s Kuwait Offi ce considers how disclosure obligations on companies have evolved in recent years.

Kuwait has recently made signifi cant

progress in mandating disclosure

requirements through several

statutory and regulatory provisions.

With the enactment of Kuwait Law No.

25/2012 promulgating the Companies

Law, the Executive Regulations to this

Law No. 25/2012 and the internal instructions issued by the

Capital Markets Authority, there are three broad, interrelated

provisions which are prominent in the statutory framework for

disclosure requirements. These are corporate governance,

minority shareholder rights and illegal insider trading. The

most recent comprehensive addition to the framework

is the mechanism and timing of disclosure of ‘substantial

information’. When it comes to liability, the 2012 law states

board members, including the chairman, are personally or

jointly liable to the company, shareholders and third parties for

all acts of cheating, abuse of power and for each violation of

the law or company memorandum, as well as mismanagement.

The law also states all shareholders can fi le a derivative action

on behalf of the company.

All companies registered in Kuwait before the Law

was issued must comply with it by 12 September 2014

and all entities subject to the Authority must implement

the corporate governance mandate by 30 June 2016.

From its inception, the statutory framework for disclosure

requirements was characterised by a strong corporate

governance system which allows fi rms to manage the

disclosure requirements. As accounting irregularities in a

number of companies have been mainly attributed to the

non-implementation by management of sound practices in

the disclosure and transparency fi elds, quality disclosure and

transparency is considered one of the signifi cant foundations

and rules of corporate governance. So under the Executive

Regulations, implementation is represented through several

rules and principles. These state amongst other things, the

board of directors must lay down quality disclosure and

transparency policies and regulations and the precise timing

for disclosure of substantial information. They also regulate the

disclosures of board of directors and executive management

members. The company has to disclose in a precise and

detailed way remuneration offered to members of the board

of directors and executive management, whether these are

cash amounts, benefi ts or advantages. By implementing a

sound corporate governance regime, companies can meet

the disclosure requirements and ensure they strike the right

balance between the disclosure of substantial information and

withholding company secrets.

Moreover Article 227 of the Law stipulates that members

of publicly listed companies may not disclose company

secrets they know because they are part of the management

of the company, to the shareholders in other meetings, other

than the general assembly meetings or to third parties, or they

will be removed and held accountable to compensate for the

damages resulting from such a violation.

The Law, Executive Regulations and the Authority’s own

internal instructions defi ne what will be considered substantial

information. With the guidelines in place, companies can gauge

whether the information to be disclosed would be classifi ed

as substantial information – which requires disclosure under

certain circumstances – or whether it is a company secret

which does not fall within the scope of these disclosure

requirements. Ultimately, however, a company has a fi duciary

duty to its shareholders, stakeholders, and other interested

parties. Therefore, a breach of the duty would result in

sanctions and punishments under Kuwait law.

Alex SalehPartner

Al Tamimi & Company

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IN-HOUSE PROFILE


IN-HOUSE PROFILE CORPORATE FINANCE DIRECTOR – HEALTH

Creating a healthy businessA V Thomas, Corporate Finance Director at Saudi German Hospitals

Group talks about how changes like the introduction of compulsory

health insurance are impacting the GCC’s healthcare sector.

ABOUT YOUR BUSINESS AND YOUI come from India and have a degree in Commerce

and am a Fellow Member of the Institute of Chartered

Accountants of India. Before becoming Corporate

Finance Director at SGH Group, I was Financial

Controller at Lakeshore Hospital and Research Centre

in Kochi, India. When I fi rst joined, SGH Group only

had two hospitals but we now have eight across the

region. We are the largest private healthcare company

in the Middle East & North Africa and are considered

a healthcare developer and provider. Our business

has existed since the early 1940s, when the Batterjee

family brought medicine to Saudi Arabia. However,

our fi rst fl agship hospital began in Jeddah in 1988 with

support from the German Universities. Our business

follows German healthcare standards, as many Saudis

used to travel to Germany for treatment.

We currently have over 6,000 employees and

are growing at an annual rate of 16%. Over 1,500 staff

work in our associate company, International Hospital

Construction Ltd which enables us to build our own

hospitals. We fi nance our developments with our own

equity and with the support of local Government,

Development Banks, Government Funds, International

Finance Corporation (the private sector arm of World

Bank), Islamic Development Fund, Arab Fund and some

corporate shareholders. We also have a presence in

the UAE and Yemen and are planning to open our fi rst

hospital in Egypt in 2015. We run a medical college and

have been trying to recruit more nationals.

My job includes reviewing the feasibility of new

hospitals, group expansion and monitoring operating

results. I also regularly attend meetings with corporate

stakeholders and oversee fi nancial reporting. Our

business uses a combination of local and international

accounting standards. In Dubai, UAE and Yemen we

use the International Financial Reporting Standards

and in Egypt and Saudi Arabia, we use appropriate

local standards (the Saudi Organisation for Certifi ed

Public Accountants in Saudi Arabia and the Egyptian

Accounting Standards in Egypt), which broadly match

with the International Financial Reporting Standards.

International fi nancing organisations like International

Finance Corporation (IFC) prefer International

Financial Reporting Standards to be applied when

dealing with them, so we adhere to this. Currency

rates can fl uctuate in both Egypt and Yemen, but our

accounting software handles this.

ABOUT YOUR SECTORHealthcare across the GCC is heavily regulated, with

regulations covering everything from healthcare

facilities, radiation, staffi ng, mortality rates, and various

healthcare standards. All healthcare professionals,

including doctors, pharmacists, nurses and technicians

must be cleared by the appropriate national regulators

before their employment.

Healthcare institutions have to be licensed with

appropriate regulators, e.g. the Ministry of Health

in Saudi Arabia and the Dubai Health Authority

or Dubai Healthcare City in Dubai. However, the

industry has enormous potential and continues to

gain momentum. Governments across the GCC

are currently implementing mandatory medical

insurance and as a result Saudi Arabia, Abu Dhabi,

Qatar and now Dubai have all introduced mandatory

health insurance schemes for expatriates. This could

potentially lead to a two tier health care system, so

plans are underway to review the health care provision

for nationals. An ageing population and increases in

lifestyle diseases, like heart disease and diabetes in

the region are also creating demand.

However, there are barriers as it can take two

to three years on average to build a hospital, and at

least three years to break even. So our fi rm is looking

to consolidate our position and is exploring growth

options via mergers and acquisitions.

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IN-HOUSE PROFILE


PRACTITIONER PERSPECTIVE

Ben Gillespie and Oliver Stevens from the Corporate/M&A team, of Addleshaw Goddard (Middle East) LLP explore regulatory developments and trends in the GCC’s healthcare sector.

KEY CONCERNSOver the past few years, health

regulators across the GCC have

been focusing on drafting clearer

regulations and standards to enable

them to be applied more consistently both between and

within GCC member states.

UAE DEVELOPMENTSIn the UAE it has been suggested that health regulatory bodies

should be made independent of the Government and its

institutions so standards are applied equally to the public and

private sector.

There are concerns that too many regulatory bodies

and institutions have been created, both at the Federal and

Municipal level, with overlapping responsibilities and an

unclear division of powers.

Speaking at this year’s Hospital Build and Infrastructure

Middle East Exhibition and Congress, Dr Ramadan Ibrahim

Mohd, Director at the Health Regulation Department at the

Dubai Health Authority acknowledged these concerns and

stated that the UAE Government is currently considering

unifying and simplifying licensing procedures for both

healthcare facilities and professionals across all Emirates and

regulatory bodies.

As the pressure on the public healthcare systems in

GCC member states has increased, most Governments

have recognised the need to create an effective regulatory

framework which can provide a suitable environment for

increased private sector investment.

Health Authority – Abu Dhabi (HAAD) has stated that one of

the key reasons for attempting to better regulate the healthcare

sector is to encourage more private sector investment.

HAAD believes providing clarity on the regulatory

structure and governance of the healthcare sector would

provide a more certain and stable environment which would

help attract the private sector.

REGIONAL DEVELOPMENTSSaudi Arabia and Abu Dhabi have been working to strengthen

their relationships with international healthcare providers in

order to enhance the quality and range of services on offer.

According to the investment bank, Alpen Capital,

successful public private partnerships are estimated to save

Governments as much as 25% on healthcare costs.

The Government of Dubai established Dubai Healthcare

City in an attempt to attract international healthcare

providers by allowing 100% foreign ownership structures.

According to Dr Ramadan Ibrahim Mohd, the UAE Government

is currently considering allowing 100% foreign ownership

of healthcare facilities 'onshore' in Dubai (outside the free

zones), which would be a signifi cant development.

IMPLEMENTATIONIn one form or another, in the past decade most GCC

countries have passed laws requiring the purchase by

employers of healthcare insurance covering their expatriate

workers.

The introduction of these laws aim to shift some of the

fi nancial healthcare burden from the public to the private

sector.

The method of implementation of mandatory healthcare

insurance laws has varied greatly across the GCC.

In Saudi Arabia and Dubai, an open market approach has

been adopted allowing private insurers to participate in the

provision of the basic health insurance package.

In Qatar, the basic package for the lowest paid workers will

be provided by a national health insurance company, closing

off this segment of the market to the private sector.

Similarly, in Abu Dhabi, a state-backed insurance company

is providing subsidised benefi ts packages for low-income

workers.

REGIONAL OPPORTUNITIES AND HEALTH TOURISM DEVELOPMENTSAcross the GCC, attention is turning to the potential

opportunities that might be created from an increase in

medical tourism.

Oman and Dubai have both recently announced plans

to attract more medical tourists to take advantage of their

respective healthcare facilities.

Oman is planning to build a major healthcare facility at the

International Medical City in Salalah in an attempt to make it

one of the region's front runners in medical tourism.

The Dubai Health Authority has forecast up to 500,000

medical tourists a year will visit the Emirate by 2020 and

spend about US$ 710 million (compared to 107,000 medical

tourists generating an income of approximately US$ 177

million in 2012).

New laws and regulations in Dubai will provide a special

medical tourist visa (the length of which will depend on the

desired treatment) and packages will include the cost of

treatment, fl ights, accommodation and even leisure activities

for the patient and their family.

Alongside this initiative, the Dubai Health Authority has

announced other plans to rate hospitals from one to fi ve

stars, in a similar way that hotels are rated, depending on the

quality and standard of services being offered.

Ben GillespiePartner

Addleshaw Goddard

At

KO

ARBITRARY CHANGEDLA Piper has announced two new

appointments in its Middle East Litigation

and Arbitration team to support the

increased level of instruction it is receiving

in these practice areas, particularly in the

UAE and Qatar.

Chris Wilcock joins as Legal Director from Hill

International, bringing with him more than 20 years’ experience

of working in the construction sector, including three years

in the Middle East. Wilcock is a former student of Leeds

Metropolitan University and Guildford College of Law.

He is joined by Sharif Hamadeh, an English qualifi ed

barrister who has moved from Clyde & Co, where his practice

focused on arbitration and commercial dispute resolution.

Hamadeh has nearly fi ve years' experience of working in the

Middle East.

Both men will be based in DLA Piper’s Dubai offi ce but will

work across the whole Middle East region.

Their appointments bring the total DLA Piper team to

over 40 in number, making it the largest dispute resolution

team in the region.

MOVERS AND SHAKERS


MOVERS AND SHAKERSA ROUND-UP OF THE TOP APPOINTMENTS AND PROMOTIONS

MOVING FROM IRAQ King & Spalding have

rehired fi nance lawyer

Zaid Al-Farisi as a

partner at its Riyadh

and Dubai offi ces from

Confl uent Law Group

in Iraq, where he was

managing partner. In the past his work has

included human rights and rule of law

projects in Iraq and Afghanistan.

He studied at the University of

Chicago and his current practice

focuses on banking and fi nance work,

representing lenders and borrowers.

BLAKES STRENGTHENS MIDDLE EAST TEAMGraham McLeod, a

Canadian lawyer who

has practiced law in

Toronto since 1999, is

to join the Al-Khobar

and Bahrain-based

regional team, of Cassels & Graydon

LLP (Blakes). McLeod who previously

worked for Blakes in Toronto has

developed a legal practice focused

on infrastructure, commercial and

procurement transactions with a

particular emphasis on the development

and implementation of public-private

partnership (PPP) and alternative

fi nancing and procurement projects.

His past projects have involved a

range of sectors including healthcare,

water and waste, transportation and

information technology systems.

CORPORATE PARTNER JOINS LATHAM & WATKINSLeading equity capital markets and M&A

partner, Sami Al-Louzi has joined Latham

& Watkins in Riyadh

and Dubai. He will be a

partner in the Corporate

Department. Al-Louzi’s

practice focuses

primarily on equity

capital markets in Saudi Arabia and other

markets in the Middle East and also on

cross-border mergers and acquisitions.

With over 17 years of experience in

the region, he has earned a reputation

as one of the leading capital markets

practitioners in Saudi Arabia and

elsewhere in the Middle East.

He has also advised on a number of

high profi le mergers and acquisitions

and privatisation matters in Saudi Arabia,

Jordan and the UAE.

In association with JLegal

ACCME ACTIVITIES

RECENT EVENTSDubai

7 July 2014

I ar in associa on with Eversheds.The Ramadan Majlis @ the Ritz-Carlton provided a magical se ng for a sumptuous I ar. The many membersthat a ended this event were treated to elegant food and live music while enjoying the company of friends andcolleagues.

Dubai

17 June 2014

Protecting Your Company fromCyber Crime in association withSimmons & Simmons. This breakfastbriefing provided members with a mixof commercial and legal advice on the cyber security risks that companies face. It also covered measures that can be implemented to managethese risks

Doha, Qatar16 June 2014

Key Considera ons in Entering Into anInterna onal Joint Venture. This well-a ended breakfast seminar covered arange of areas, including those arisingunder Qatari law, in managing the risk of a joint venture.

Doha, Qatar

21 May 2014

ACCME Member & Sponsor AnnualSocial. A good evening was had bymembers and sponsors at the La Spiga atthe W Hotel. Guests enjoyed interna onalcanapes and drinks courtesy of Lexis Nexisand the ACCME, while networking withcolleagues and sponsors.

FUTURE EVENTS

To fi nd out more about planned events, please see h p://www.acc.com/chapters/middleeast/index.cfm?eventID=all or contact the Associa on of Corporate Counsel Middle East Group at [email protected]

Associa on of Corporate Counsel Middle East Social

http://www.acc.com/


MOVERS AND SHAKERS


He will be a member of the fi rm’s Riyadh

and Dubai offi ces and previously worked

for Vinson & Elkins.

NEW MANAGING PARTNER FOR DELOITTE BAHRAINZahi Zeini has been appointed the new

Managing Partner for

Deloitte’s Bahrain offi ce.

Zeini is an audit and

advisory partner with

more than 20 years’

experience in the Middle

East. He took up his new

role, heading the offi ce

on 1 August 2014. Roger Nasr, the outgoingrr

Bahrain managing partner, has taken on

the regional role of Risk and Reputation

leadership, and has become a member of

the Deloitte Middle East Management Team.

Elsewhere the fi rm has made four other

promotions. These include Dubai-based

Hamid Khan who has 13 years' Corporate

Finance Advisory experience and is a debt

advisory specialist. Khan who recently led

and advised on the landmark refi nancing

of GEMS Education and IMG World

of Adventures has become Managing

Director - Corporate Finance Advisory at

Deloitte Corporate Finance Ltd, UAE. The

second promotion is Rick Barker, Directorrr

in the Forensic Practice, who joined

Deloitte in 2012, bringing with him over 10

years of computer crime expertise, and

has since established a full suite of forensic

technology services, including computer

forensics, electronic discovery and data

analytics. The next new Managing Director is

Abu-Dhabi based Munish

Mohendroo who has over

15 years of professional

valuations and business

modelling experience and

is a tangible asset valuation

specialist. Finally Ralph

Stobwasser who joined

Deloitte in 2012 to develop

the Business Intelligence

Service offering in the

forensic practice, to

support the local and

international clients in

the Middle East has been

made a Managing Director.

EVERSHEDS APPOINTS NEW MANAGING PARTNERDani Kabbani has been

appointed Managing

Partner at Eversheds'

offi ce in Qatar.

He has replaced Chris Jobson, who has

retired from the partnership. Kabbani has

been practising law in Qatar for 17 years and

has experience working with Government

bodies, including sovereign wealth

funds. He previously worked in practice

for Simmons & Simmons in Doha and

in-house for Qatar Petroleum and Doha

Bank. He has a Certifi cate of Specialisation

in International Law and Legal Studies.

Kabbani also has extensive experience

working with fi nancial institutions on a

wide range of commercial and corporate

matters, including joint ventures, mergers,

acquisitions and IPOs. He advises oil and

gas, and construction companies on

project and fi nance related agreements, as

well as assisting joint venture companies.

BIRD & BIRD PROMOTIONTelecoms, media and technology specialist

Kelly Tymburski has become a partner

at Bird & Bird's UAE offi ces. Kelly is a dual

qualifi ed lawyer in both

Ontario, Canada , England

and Wales.

She has been working

in the region since 2007

and previously was with

Pinsent Masons. A key part of her work will be

spearheading the fi rm's push into the Middle

Eastern and African telecoms markets.

BAHRAIN MOVEAl Tamimi & Company, the largest law fi rm yy

in the Middle East, has opened another

new offi ce, this time in Bahrain. The new

offi ce will be led by Foutoun Hajjar, anrr

English-qualifi ed Solicitor and Barrister

with 22 years of professional experience

who has spent the last nine years working

in Bahrain in both private practice and

in-house positions. Previously Hajjar was

Head of Legal and Compliance, Middle East

for RSA .The opening of the Bahrain offi ce

now means Al Tamimi has a permanent

operational presence in all six GCC

countries and 14 offi ces, located in eight

countries in the region. The new offi ce will

be in the Bahrain Financial Harbour.

MORE FOCUS ON ISLAMIC FINANCECharles Russell LLP, who have offi ces in

Bahrain and Qatar have announced two

new key hires as part of their global growth

agenda to respond to client demand for

Islamic Finance. Wesam Alshafei joins the

fi rm’s Bahrain Offi ce as a Legal Consultant

and will provide clients with expertise in

Banking and Islamic Finance, with a core

focus on Islamic banking, mergers and

acquisitions, project fi nance, regulatory

compliance and commercial and

employment related matters. Before joining

Charles Russell, Wesam spent sixyears at

Zubi & Partners in Bahrain. The second

new addition to the Charles Russell team is

Ashley Freeman who previously worked for

Bahrain’s Central Bank and has been hired

to head up the fi rm's Financial Services

team's Islamic Finance practice. Ashley

has extensive global banking and fi nancial

services experience, encompassing

strategic, transactional and regulatory

matters in both Islamic and conventional

industries and bond and sukuk issues. In

addition, to Islamic Finance the fi rm also

specialises in dispute resolution, intellectual

property, corporate and commercial

and banking law and private wealth

management.

SEND US YOUR NEWSIf you have news of an appointment or promo on within the legal or fi nancial professions you would like to see reported in Lexis Middle East Law, please send details to: daniel.emme [email protected]

OTHER CHANGES

Bird & Bird: Has entered into a coopera on agreementwith Istanbul-based law fi rm BTS & Partners. The move follows signifi cant client demand for legal services in the country, par cularly in the technology and mediasectors, where BTS & Partners is an acknowledgedmarket leader.Baker & McKenzie Habib Al Mulla: Has increased its UAE presence with a new DIFC offi ce which opened in July and is an extension of the fi rm's current Dubai offi ce in Business Bay. The fi rm will con nue to be managed to Dr Habib Al Mulla and Borys Dackiw the co-managing partners.Dentons: Has added two partners to its Doha offi ce by promo ng corporate and commercial expert Zaher Nammour to its partnership, and also reloca ng construc on specialist Andy Jones from Milton Keynesas head of the dispute resolu on and construc on team.


OPPORTUNITIESACROSS THE MIDDLE EAST

LONDON LONDON, UAE, SINGAPORE, HONG KONG, MELBOURNE, SYDNEY & NEW ZEALAND

6 Snow Hill, London EC1A 2AY www.jlegal.com Find us on

For more information please contact Jeremy Small at [email protected] call +44(0)20 7002 7663. For more opportunities visit our website at www.jlegal.com

Junior Real Estate Lawyer2 years + PQE Dubai (REM-PM-2777)This large international law firm is looking for a junior bilingualassociate in its Dubai Real Estate team. Candidates should have agenuine interest in real estate, development and construction andhave at least a year’s experience in such from a top tier UK/US lawfirm. Candidates with experience of regionally used structures suchas strata titling and master communities would be preferred andArabic language skills are a must.

Construction Associate, International Law Firm1 to 5 years + PQE, Abu Dhabi (MXY-PM-2684)This highly-regarded international law firm is seeking a junior-to-midlevel construction associate (1- 5PQE) to bolster its busy practice in AbuDhabi. The firm is considered a top-tier practice and boasts a long-standing relationship with an enviable roster of market-leading clients.Accordingly, this opportunity will bring exposure to a diverse and excitingrange of instructions emanating from across the Middle East and beyond.

Senior Legal Counsel4 years + PQE, Bahrain (IJR-IM-2674)Our client is a leading telecommunications provider in the Middle East.The company has expanded steadily in the last decade and they havebuilt an impressive legal department to support that growth. Thecompany is now looking for a Senior Legal Counsel to take a leading rolein the drafting and negotiation of their commercial contracts. Applicantsmust be UK, Australian or NZ qualified and have at least 4 years + PQE inthe telecommunications industry.yy Experience of working in the Gulfregion would be preferred, but is not essential.

Construction Associate, International Law Firm5 years + PQE, Dubai (MXY-PM-2778)YYThis large international law firm is considered amongst the strongest for construction work in the region and boasts a highly experiencedteam widely recognised for its local industry knowledge. Applicantswill hold at least 5 years of quality construction-focused PQE gainedfrom a top 30 firm. Although the position will involve a mixed dietof contentious and non-contentious work, applicants with a contentious focus are likely to be considered stronger.

Corporate Associate, Major International Law Firm 4 years + PQE, Riyadh (MXY-PM-2749)An exceptional opportunity has arisen to join the thriving team of a major international law firm in Saudi Arabia. Based in Riyadh,applicants will hold a minimum of 4 years + PQE gained in a teamrecognised globally for its strength in corporate work. Applicants can expect a reasonably broad diet of work; there is likely to be a notable focus on M&A, securitisations and regulatory matters.

Non-Contentious Construction Associate 3 years + PQE, Abu Dhabi (MXY-PM-2466)This well established and highly regarded global law firm is currentlyrecruiting for a non-contentious construction associate to join their toptier team in Abu Dhabi. The ideal candidate will be 3 years + PQE andhave excellent training and solid construction experience from ahighly regarded UK or international law firm. The team advises onthe procurement of a wide range of assets across all major industrysectors, with a particular focus on oil & gas and major infrastructureprojects throughout the Middle East.

EXPAND

YOUR HORIZONS


http://www.jlegal.com

http://www.jlegal.com


CONTRACT WATCH

Forfeiture clauses

'F orfeiture' or 'liquidated

damages' clauses feature

in many commercial

agreements, and more

commonly in joint venture contracts

in the oil and gas exploration and

construction sectors. They are

common in GCC contracts but the

approach differs to common law

jurisdictions. Most construction

contracts contain a provision for

liquidated damages to be paid in

the event of specifi c breaches

by a contractor, which cause a

delayed completion date. However,

while courts in some common law

jurisdictions, like the UK, will generally

uphold a liquidated damages clause

provided it doesn’t constitute

a penalty, the enforceability of

liquidated damages under UAE law is

different. This may be because state

courts use different terminology. They

have described liquidated damages

in a number of ways including 'delay

fi nes', 'penalty clauses' or 'consensual

compensation'.

Using forfeiture clauses has

advantages. In construction contracts,

for example, they seek to benefi t both

parties by limiting the contractor’s

liability as they are assured they are

only liable to pay out a fi xed sum

for a specifi c breach. They can also

save costs where it's diffi cult and

expensive for a company to show,

prove or quantify, the actual damage

sustained. To ensure enforcement

by the courts, parties must ensure

any clause is a genuine pre-estimate

of the loss which may be sustained

as opposed to a mere penalty which

is designed to punish the defaulting

party. The contract should also refer

to a defi nite date from which damages

can run and a party must make sure

they have not waived their contractual

right to claim liquidated damages.

Parties should also properly assess

the damage which may arise, like

potential loss of revenue, fi nancing

fees, replacement rental, moving

costs, holdover penalties or loss in

productivity, to ensure liquidated

damages are proportionate to the

damage. However, one important

thing to note is the position in the UK

or US, is different in this area. There

is a longstanding rule that UK courts

will be reluctant to go against the

parties’ agreement where the terms

have been negotiated and agreed. So

provided a party has made a genuine

pre-estimate and the liquidated

damages directly relate to the loss, the

court will enforce it. If, however, the

damages are seen to be a penalty or

are 'extravagant' or 'unconscionable',

in common law jurisdictions the clause

will not be enforced.

However, under Article 390 of

Federal Law No. 5/1985, parties can

agree and fi x the amount of damage.

It therefore appears a contractor

may be able to plead they are not

obliged to pay liquidated damages

if they dispute the level of loss

incurred by the company. Article

390(2) of Federal Law No. 5/1985 also

allows the court to vary the parties’

agreement to refl ect the actual loss

suffered. Meanwhile, in the DIFC,

the courts recognise and enforce

liquidated damages provisions in

agreements whether or not they

are applying DIFC law or a different

governing law, when they adjudicate

on a dispute in line with DIFC Law No.

6/2004 and DIFC Law No. 7/2005.

Despite the legislative differences,

the DIFC courts adopt a broadly

similar approach to the UAE courts

and will try and whittle a specifi ed,

pre-agreed sum down to a reasonable

amount, where it is grossly excessive

or manifestly disproportionate to

the actual resulting harm. In Oman,

it is Article 267 of Oman Sultani

Decree No. 29/2013 which has

important implications for liquidated

damages. Its general thrust clearly

confi rms the generally accepted

position - the Omani courts may

award liquidated damages if there

is an adequate provision in the

main agreement, provided they

represent a reasonable forecast of

the damages actually suffered by

a party. The courts may also seek

to re-open liquidated damages

provisions and vary damages so

they are commensurate with what

has actually been sustained. A

similar approach is taken in Saudi

Arabia where the courts don’t award

damages for loss of profi ts or those

related to indirect or consequential

losses. When Saudi courts adjudicate

on a liquidated damages clause which

seeks to compensate a contracting

party excessively, they are unlikely

to uphold this provision even if it has

been contractually agreed. In Qatar,

under Article 265 of Qatar Law No.

22/2004, the parties may agree

the level of liquidated damages in

advance. The law draws no distinction

between penalties and liquidated

damages, so the parties can agree on

the levy of penalties, should a breach

arise. Despite this, however the Qatari

courts are known to revisit, scrutinise

and even alter liquidated damages

clauses to ensure unjust enrichment

is prevented.

Contributor

Mamoon AshrafAssociateBin Shabib & Associates

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Lexis Middle East Law -

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Some databases list over 10,000 laws for the UAE – but not all are in force.

Do you know which ones are?

We do.With Lexis Middle East Law, you are shown the current not historic legal position, along with the latest

laws, cases, journals and news all at your fingertips. Plus working in partnership with the Corporate Counsel

Middle East (CCME) we provide commentary from regional experts, who know and understand what’s

happening on the ground.

Find out moreCall: +971 (0) 50 6210324Email: [email protected] visitOr visit www.lexismiddleeastlaw.ae

Updated daily. In English and Arabic.




lexis middle east law alert - september/ october 2014

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