Lexis Middle East Law Alert - November/ December 2014

PROFILE ENTERTAINMENTAndrew Cooke of FLASH Entertainment FZ LLC

PROFILE ENGINEERINGNidal M Karyouti of Edgo

CONTRACT WATCHDispute resolution clauses

November / December 2014 lexismiddleeastlaw.com

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

KNUCKLING DOWN WITH INSOLVENCY

Insolvency law reform in the UAE

Published in conjunction with the Association of Corporate Counsel Middle East

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| Lexis Middle East Law Alert | November / December 2014 | lexismiddleeastlaw.com 1

ANTI-CORRUPTION

A n international survey published about a year ago by Transparency International on Anti-Corruption in different jurisdictions made difficult reading for those of us in the Middle East - with Libya, Iraq and Syria ranked in the bottom 10 for compliance. In fact, of the 177

states surveyed the highest ranked Middle Eastern country was the UAE at 26, followed by Qatar at 28. That doesn't mean however attempts aren't being made to prevent corruption in the region. Many MENA countries have signed up to the UN Convention Against Corruption. There have also been reports of cultural changes in countries like Saudi Arabia, where big companies increasingly expect their suppliers to have anti-corruption policies in place and change is being driven by companies themselves. Large multinationals also have to comply with international legislation like the UK's Anti-Bribery Act or US Foreign Corrupt Practices Act (FCPA) and regional branches and subsidiaries must also take robust action on this. In fact, they can find by default, working in a global market they are already expected to have very strict policies. However, the position can be more complicated for smaller companies who don't operate internationally or who have less organisational support from colleagues elsewhere. It's not surprising therefore, this is an area that continues to tax Corporate Counsels, particularly those operating in higher risk jurisdictions or without branches in countries where there are detailed regulations. So where do you find help? The ACCME and Norton Rose Fulbright hosted anti-bribery workshops in Dubai and Doha on 21 and 23 October and will hold further events to provide focussed training in specific areas. When we linked up with the ACC to form the ACCME, our aim was to put practical training at the heart of what we do and these workshops have provided support in this challenging area. ACCME members also have access to a special menu on Lexis Middle East Law which includes regional news and useful practical guidance on a range of areas including Anti-Corruption. To find out more contact [email protected].

Elias Hayek - Chairman & President of the Corporate Counsel Middle East Group

FEATURE: KNUCKLING DOWN WITH INSOLVENCY p2Insolvency law reform in the UAE

FEATURE: SHOW ME THE MONEY p10Anti-money laundering developments in the UAE and elsewhere

FEATURE: SHIP-SHAPE p14Commercial maritime law reform in Bahrain

LEGAL ROUND-UP p6...including a new draft UAE railway law

TAX AND FINANCE ROUND-UP p8...including new foreign ownership rules in Saudi Arabia

IN-HOUSE PROFILEAndrew Cooke > FLASH Entertainment FZ LLC p17A General Counsel talks about the benefits and drawbacks of social media

Nidal M Karyouti > Edgo p19A Chief Financial Officer talks about build, own, transfer projects

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

CONTRACT WATCH p24Effective dispute resolution

CON

TEN

TS

Sana Belaid

Franklin Breckenridge

Anneliese Reinhold

Ziad Zarka

Tamer Nassar

Robert Drolet

Elias Hayek

Afshan Akhtar

LAW FOCUS

LAW FOCUS

lexismiddleeastlaw.com | November / December 2014 | Lexis Middle East Law Alert |22

With delays in insolvency reform in the UAE, companies are just having to get on with it. James Farn, Partner at Hadef & Partners looks at what's actually happening on the ground and how it may change.


“C ontrary to popular belief, the existing UAE bankruptcy laws are generally well-structured. However, as they have been little used, there is a

relative lack of precedent or authority available to practitioners on how they work, and little guidance on how certain provisions may be interpreted by the courts. Up until now, the overwhelming preference has therefore been for parties, particularly in complex insolvencies involving corporate groups with several classes of creditors, to opt for a consensual solution to restructuring thorough work-outs and standstill arrangements with creditors, rather than pursuing a court-driven process over which both debtors and creditors believe they may have little control,” James Farn explains.

“Current insolvency provisions are limited to formal bankruptcy proceedings (where the bankrupt has their assets realised and distributed) and limited composition procedures, called ‘judicial composition’ and ‘protective composition’. These procedures are all court-driven and largely dependent on the oversight (and ultimate sanction) of a court judge. They also only apply to ‘traders’ operating in the UAE generally, including the free zones, subject to certain exceptions. For example, the DIFC, has its own separate suite of insolvency laws and procedures and certain other free zones have their own legislation dealing with insolvency or winding-up of companies or establishments licensed to operate there, which

are normally limited to voluntary or creditors’ winding-up. In addition, commercial banks and insurance companies have their own their own special liquidation regimes. A special insolvency tribunal was also established by Decree to deal with Dubai World and its subsidiaries' well publicised financial difficulties, but this was very much an exception to the insolvency provisions and procedures which apply to traders generally in the UAE.”

IN PRACTICE“There are limited provisions in the Civil Code (Federal Law No. 5/1985) which impose restriction orders on a bankrupt individual or anyone else not deemed to be a trader, and therefore carrying on commercial business. For traders themselves, there is no current informal ‘out-of-court’ insolvency procedure to help their existing business survive or restructure their liabilities if they get into financial difficulties. However, in practical terms, many of the larger corporate restructurings are routinely done through informal ‘work-out’ or ‘standstill’ arrangements,” Farn says.

“While the emphasis under existing Federal insolvency legislation is to maximise recovery for creditors, the UAE has, comparatively speaking, lower recovery rates and higher costs for creditors compared with other leading insolvency jurisdictions. There are a number of reasons for this, e.g. current requirements for entry into insolvency proceedings under existing bankruptcy legislation are relatively

LAW FOCUS


high, including document-intensive filing procedures with the court and there's a relative lack of precedent or case authority which the courts can readily refer to. The UAE courts also have discretion to defer a bankruptcy declaration if it is in the ‘best interests of the national economy'. In addition, creditors have arguably been less willing to consider initiating formal bankruptcy proceedings, particularly against Government-related entities operating in strategic sectors of the economy where there are financial difficulty. As a result, 'forum-shopping’ has sometimes been considered to seek protection from creditors or possibly, benefit from an insolvency procedure more likely to provide a favorable judgment or outcome, than in the debtor’s ‘home’ UAE jurisdiction."

"In contrast, DIFC insolvency laws provide for company voluntary arrangements, company receiverships and both voluntary and involuntary winding-up procedures, all based on English legal principles and procedures, with which many international creditors and their advisors are familiar."

"Although the DIFC Courts’ jurisdiction were widened in 2011 to allow contractual parties (regardless of their connections to the DIFC), to elect in writing for the DIFC Courts to have jurisdiction over any civil or commercial disputes arising from contract, neither the legislation itself nor subsequent case law has yet ruled the DIFC Court’s jurisdiction may be extended to the application of the DIFC’s own insolvency processes if the insolvent company or trader is not themself an entity

established under relevant DIFC laws. As a result, access to the DIFC Insolvency Laws and related insolvency procedures for traders not licensed to carry on business within the DIFC are limited to applying a ‘migration’ (or continuation) process. However, this has never, to our knowledge been used, not least because it’s perceived to be difficult to implement. Although a Scheme of Arrangement may be possible under the jurisdiction of the English courts, if a sufficient connection with England and Wales can be shown,” Farn adds.

“Up until now, many large-scale restructurings in the UAE have centered around Government-related entities (GREs). A large proportion of Emirati debt remains tied up in GRE’s which account for a significant proportion of national GDP and economic activity. Many of these debts are due to mature this year and in the coming years. So second phase financial restructurings may start to become more common in the UAE if any of the initial restructuring proves not to be entirely successful,” Farn warns.


RELATED LEGISLATIONArticle 96, Kuwait Decree No. 425/2013The partners may not dissolve or liquidate the company unless they have notified their clients at least three months before the commencement of dissolution and liquidation procedures. The register prepared for this purpose at the competent authority for supervising the profession will only be annotated with the dissolution or liquidation decision after the announcement.

(Source: Lexis Middle East Law)

LAW FOCUS


DRAFT LEGISLATION“In a bid to tackle these various deficiencies in the UAE’s insolvency law regime, a draft Federal bankruptcy law was drafted about two years ago. It is currently being shaped into a draft law for consideration by the Council of Ministers, following an extensive consultation with many stakeholders at Federal and local Emirate level. The existing bankruptcy provisions (which are in Volume 5 of the Commercial Transactions Law (Federal Law No. 18/1993)) are to be repealed and replaced by the new law.The proposed law will apply to any entity established in line with the UAE Commercial Companies Law (Federal Law No. 8/1984) (subject to some minor exceptions and anyone engaging in a business activity for profit. These will include (but not necessarily be limited to) a ‘trader’ (currently recognised under Federal Law No. 8/1984) and others trading for profit, e.g. professional persons. The conditions necessary to begin

relevant insolvency procedures will be extended and draw on provisions in existing French and German insolvency laws, making it easier for debtors who may be in financial difficulties (but not yet necessarily be insolvent) to access insolvency procedures. Insolvency tests are extended to include both a cash-flow ('state of cessation of payments') test and a balance sheet (‘over-indebtedness’) test,” Farn says.

“The insolvency regime for traders and others carrying on business activities for profit is also extended to include new corporate ‘rescue’ procedures. These will include a ‘financial reorganisation’ procedure, available to debtors in financial difficulties but who are not yet insolvent, and a debtor-led but Court-driven ‘protective composition’ procedure which protects debtors in financial difficulties, so they can reach a compromise with their creditors without formal insolvency proceedings. Formal insolvency procedures remain but are modified, allowing a two-stage process once debtors are declared insolvent. These include a ‘rescue’ procedure to help preserve the debtor’s business as a going concern (where it is viable through approval of a restructuring plan) and a formal liquidation process. A new insolvency regime was also initially drafted for individuals not trading for profit, but we believe this has been omitted from the formal draft which will be submitted and reviewed by the Council of Ministers. However it is still not known when the draft law will be approved and eventually promulgated.”

THE IMPACT“Hopefully, the Financial Reorganisation Procedure will be a viable alternative to the ‘consensual’ route where a composition or financial restructuring is possible. This new procedure (based on the French ‘mandat ad hoc‘ model), is designed to encourage a private, consensual settlement of debtors’ liabilities. It will be administered by a separate centralised Commission for financial restructuring, established by a Commission made up of representatives from various stakeholders like the Council of Ministers, the Central Bank and the Emirates Securities and Commodities Authority. It will have access to a panel of mediators with sufficient expertise to help debtors and their creditors reach a negotiated settlement for

the rescheduling of their debts. The Commission will appoint an expert (or representative) to supervise the conciliation process but will not have authority to intervene in the management of the debtor's business without the debtor’s prior approval. This may be cheaper and more cost-effective than the sometimes unwieldy requirement for a coordinating committee usually associated with a work-out arrangement. Crucially, there

is no court involvement in this (unlike the Protective Composition Procedure which will remain court-supervised and be subject to a judge's overall control and approval). The process will also be confidential. The Commission will also have power to determine its own internal rules and regulations. These haven’t been drafted but it is possible they may allow proceedings to be held in English - which could give more confidence to creditors and borrowers.The Protective Composition Procedure will include a full moratorium on legal process (including enforcement of security by secured creditors) where approved by the Court, ‘priority funding’ provisions which permit new financing and a limited form of ‘cramdown’ in the context of approving a restructuring plan under that procedure."

"With the exception of experts agreed upon by the parties and endorsed by the courts and those with a discrete area of expertise which the courts may call upon from time to time, court experts will need to be registered in a register maintained by the UAE Justice Ministry. As there are no specialist bankruptcy courts within the UAE (outside of the DIFC), certain bankruptcy procedures under the new draft law envisage the use of various experts chosen from the Commission panel for example, the use of an expert and mediator under the Financial Reorganisation Procedure and an expert and officeholder under the revised Protective Composition and formal bankruptcy procedures. The Justice Ministry is also taking steps to second more senior judges in the civil courts to foreign countries to gain a better understanding of commercial laws and procedures in other developed jurisdictions,” Farn concludes.

RELATED STORYKuwait: Draft Bankruptcy Law Facing Increased CriticismLNB News 17/06/2014 48The Fatwa and Legislation Department at Kuwait’s Justice Ministry has objected to the Bankruptcy Law currently being prepared with the International Bank's help. The Kuwaiti Cabinet asked the Bank to help them prepare three laws to enhance the bankruptcy, creditors and debtors laws. The drafts include a voluntary debt restructuring law, liquidation of commercial companies law and laws amending insurance regulation for transferable possessions. However, the Department criticised the draft laws citing the Bank's request to create a specialist commercial legal system as indicating the country lacked a proper legal system.

James FarnPartner

Hadef & Partners

LEGAL ROUND-UP


agencies. Divorcees who have custody of their children will be able to have family IDs and passports issued and register their children at Government institutions, including schools and social security offices. They will also be able to approve surgical procedures. However, family law is not the only place where changes are expected shortly in Saudi. As well as the changes to the family courts, new dedicated commercial courts, are currently expected to be in place by the end of the year. It is also expected that new criminal courts will be put in place, after this has happened.

SURGEONS’ WORK DAY LIMITED

Hospitals will be required to limit surgeons' working hours in the

Kingdom to no more than eight hours a day under proposed new laws. These proposals came after some private hospitals intensified surgical operation schedules, forcing doctors to work more than 18 hours per day. Some surgeons reportedly performed up to 20 operations a day, increasing the risk of medical error due to exhaustion. Where these new regulations are violated it is expected that penalties could be imposed on the hospital.

PENALTIES FOR CAR MANUFACTURERS

Saudi Arabia’s Commerce and Industry Ministry is considering

requiring car manufacturers in the

Decision No. 24/2013 detailing the specifics of the ban. Fines for non-compliance include 5000 and 10,000 AED for first and second warnings. If the violation is repeated for a third time, the premises will be temporarily closed.

NEW SERVICE INDEX Dubai’s Real Estate Regulatory Agency (RERA) has announced it

has launched the Emirate’s first Service Charge and Maintenance Index for freehold properties. It is aimed at making real estate costs in the Emirate more transparent. It will be regularly updated and has been divided into four main residential property categories: apartments, offices, shops and villas and the level of service and maintenance charges will be determined on a by Dirhams-per-square-foot basis.

SAUDI ARABIA

OPEN FAMILY COURTSNew courts focusing on family disputes are to be the first step in a

raft of legal reforms in the Saudi Arabia. The courts will focus on family disputes, including divorce, maintenance and child custody. They will be based in Riyadh, Makkah, Jeddah, Madinah and Dammam. In addition, divorcees in Saudi Arabia are to be given powers to settle their children's affairs. The Supreme Judicial Council has ordered family courts to give divorcees the right to finalise formalities involving their children at Government and private sector

UAE Official Gazette No. 567-569 – These Gazettes include Federal Decree Law No. 1/2014 on the establishment of the UAE Space Agency.

Saudi Arabian Official Gazette No. 4528-4536 – These Gazettes include Saudi Arabia Cabinet Decision No. 396/1435 allowing well-known foreign firms to enter Government tenders.

Oman Official Gazette No. 1065-1068 – These Gazettes include Oman Decision No. 1/2014 issuing the Financial Regulation for the National Records and Archives Authority.

Kuwait Official Gazette No. 1196-1202 – These Gazettes include Kuwait Law No. 116/2014 on public-private partnerships in the country.

Qatar Official Gazette No. 13, 14 – These Gazettes include Qatar Law No. 9/2014 (amending Qatar Law No. 13/2000) regulating the investment activities of non-Qataris.

(Source: Lexis Middle East Law Official Gazette Index)

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

UAE

RAILWAY LAW PROPOSALThe UAE Cabinet has approved a draft railway supervision law under

which a committee will be set up with representatives from the various transport authorities. The law follows the signing of an interim agreement between Abu Dhabi and Dubai to develop a coordinated approach to the regulation of railways. It has also been announced that Etihad Rail is to secure Government funding and award contracts to build the second phase of its rail network.

MEDICAL UNIFORM BANA Circular issued to all medical centres and institutes operating in

the UAE will prohibit medical staff from wearing their medical uniforms in public. The Health Ministry’s circular is aimed at encouraging good conduct between medical staff. There will be no fine imposed on those who do not follow the guidelines.

DUBAI

CORPORATE SOCIAL RESPONSIBILITY

Dubai’s Executive Council and Chamber of Commerce and

Industry have signed an agreement aimed at developing a general framework for corporate social responsibility. The framework aims to be used as a main reference point for companies who are registered with the Chamber of Commerce. In addition, the Chamber of Commerce has signed a Memorandum of Understanding with Dubai SME to initiate a programme to develop corporate social responsibility with smaller companies.

SMOKING BANThe Dubai Municipality has held meetings with restaurants and café

owners to reiterate there are no exemptions from the smoking ban imposed by the Federal Government in 2013. The Government issued Federal Law No. 15/2009 banning smoking in public areas and subsequently issued Cabinet

GAZETTE WATCH

LEGAL ROUND-UP


Kingdom to cover all financial costs of accidents caused as a result of a car malfunctioning. These costs would include compensation for injuries and death. The Ministry is considering a wide range of circumstances in which car manufacturers would have to pay compensation, including the costs of transporting faulty cars for repair or providing replacement vehicles.

QATAR

NEW CHARITIES LAWA new law regulating charities' activities has been issued, amidst

growing concerns in Qatar that donations could be reaching extremist organisations. The law is aimed at organisations considered to be charitable or political, as well as those which send or receive money abroad. Organisations violating the law could be shut down. Individuals breaching the legislation could also be jailed for up to three years and fined 100,000 Riyals.

CYBERCRIME LAWThe Emir has issued a new Cybercrime law. Under its terms ,

those found guilty of producing child pornography would be jailed for five years and fined 500,000 Riyals. In addition, those found guilty of managing a terrorist organisation or disseminating information which puts the State at risk would be jailed for three years and fined 500,000 Riyals. Penalties aimed at acting as a deterrent would also be imposed for copyright and trademark infringement.

WORKER SPONSORSHIP Changes to the sponsorship system for Egyptian workers in

Qatar are reportedly under consideration. The aim is to make it easier for Egyptian workers to move from one job to another in Qatar, without having to return to Egypt.

In addition, visas obtained by Egyptian workers in Qatar would be verifiable on the Qatari Interior Ministry website.

BAHRAIN

NEW TRAFFIC PENALTIES The Acting Director for Traffic Culture in Bahrain, Major Ussama

Bahar has announced new traffic offence penalties will be introduced.Motorists will be awarded 20 points annually which will be deducted when penalties occur. For example, drivers could be deducted two points if they are caught not wearing a seat belt, three points for refusing to produce identity documents and five for exceeding speed limits by more than 30%. Once all 20 points are lost, the driver would have their driving licence confiscated for three months.

KUWAIT

OFFSET SCHEME SUSPENDED

A programme which required foreign winners of big Kuwaiti

Government contracts to invest in the local economy has been put on ice, pending the introduction of new rules in this area.

According to Finance Minister, Anas al-Saleh, the scheme is being suspended in order to attract more overseas companies into Kuwait. The offset scheme, which was introduced in 1992, has been criticised for favouring multinational companies who are able to absorb offset costs through economies of scale. Anas al-Saleh has stated the scheme will now be revised and new, more 'moderate' rules implemented within about six months.

HEALTHCARE REGIME OVERHAUL

Kuwait’s Cabinet is to overhaul the country's foreign healthcare

regime. The aim is to improve the provision of healthcare domestically and tackle accusations that the system is being abused. Going forward, patients sent abroad for treatment would receive 75 Dinars a day instead of 100.

In addition, their first companion will receive 50 Dinars a day, instead of the 100 Dinars under the current scheme and any second person accompanying them would only receive payment for their flight.

It has also been stated that requirements for local investors opening medical facilities in the country will be eased.

UAE: The Energy Ministry will expand to in-clude five new directorates, following the im-plementation of Federal Law No. 23/2014...

Abu Dhabi: Residents have been asked to remove satellite dishes from building roofs to prevent the obstruction of emergency services and maintenance workers…

Dubai: The Health Department has issued a Circular to all schools there requesting they implement the Government’s healthy food guidelines…

Ajman: The speed limit on some internal roads has been reduced to 60mph...

Bahrain: The Cabinet has approved a memorandum establishing a Safety and Occupational Health Council…

Bahrain: The Government is launching a crackdown on fraudulent social media use and could impose regulations in the future…

Kuwait: Compulsory health checks will be carried out on new foreign labourers, and health professionals will be fined 500 Dinars if they fail to pick up contagious diseases…

Saudi Arabia: Companies who make or market energy drinks must now comply with new rules issued by the Food and Medicine Authority which prohibit all media marketing campaigns…

Saudi Arabia: The Labour Ministry is reportedly shelving plans to bring in a 40-hour working week for the private sector…

Egypt: The President is expected to issue an interim Presidential Decree on illegal buildings…

Jordan: Jordan's Parliament have ap-proved new renewable energy and energy rationalisation laws and now require final endorsement by the Cabinet…

REGULATORY ROUND-UP

EGYPT

LANDMARK RULING In a landmark ruling, Cairo’s Economic Court has ordered

a man to pay 30,000 Egyptian Pounds in compensation to his daughter for improper use of power of attorney. The ruling impacts the granting of power of attorney in cases related to credit facilities or scheduling of debts owed by companies. In this case, the man had used the power to renew credit facilities and schedule debt, which led to a total debt of 9,700,000 Egyptian Pounds.

TAX AND FINANCE ROUND-UP


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

effect and the authority will start accepting requests immediately. The Authority is looking to tighten its supervision of the market. However, this announcement comes ahead of the market being opened to foreign investment in early 2015.

DISUSED LAND TAXA plan to tax disused land in urban areas in Saudi Arabia has

reportedly been under discussion by the Supreme Economic Council. The move aims to tackle a chronic housing shortage in the Kingdom.

The Kingdom has been trying to deal with the situation, but a $67bn plan to build 500,000 homes has been slow to implement because of the difficulties in acquiring land. The Council will discuss the tax at its next meeting.

FOREIGN OWNERSHIP OF STOCKS

Foreign investors will reportedly be barred from owning more than

20% of stocks on the Saudi Arabian Stock Exchange. Foreign funds will also be prevented from owning more than 10% of stocks and would require minimum assets of US $1bn.

In addition, foreign investors would not be allowed to own shares in certain real estate developers with operations in Mecca and Medina. Individual or retail investors would also be prevented from owning shares in Saudi companies, except through funds. Foreigners are currently limited to indirect investment through swaps and exchange-traded funds in Saudi Arabia.

NEW SUKUK SCREENING METHOD

Financial institutions in Saudi Arabia have contributed to a new

Sukuk screening method, which aims to simplify the approval process.

Although, the Islamic finance industry is worth US $1.7tr worldwide, it has been impacted by weaknesses including a lack of a clear consensus on permissible

UAE

NEW SUKUK REGULATIONS New Sukuk regulations have been introduced by the Securities and

Commodities Authority. They aim to speed up approval times and remove credit rating requirements. Under the regulations, bond issuers will no longer have to provide quarterly reports. However, instead, they will have to provide audited annual financial statements no later than 180 days after the end of the financial year. The regulations also introduce a Debt Securities issue Programme to allow the fast tracking of Sukuk issues by experienced issuers. Government entities and those companies wholly owned by Government are excluded from the regulations.

PRIVATE COMPANIES MARKET

A financial market exclusively for the trading of shares in private

companies is set to launch in the UAE within the next few months, with the approval of Sheikh Mohammed bin Rashid Al Maktoum. As a result of the change, private joint stock companies from across region will be able to list on the second market. However details of how trading on the market will work have yet to be revealed. The move follows steps taken by the US NASDAQ, which also opened a private company marketplace earlier this year.

DUBAI

KOREAN SECURITIES AGREEMENT

Dubai’s financial market has signed a cooperation agreement

with Korea’s Securities Depository. As a result it hopes to strengthen capital markets collaboration, including information exchange, and service development.

It is also hoped operational links will be improved and there will be enhancement of depository and settlement systems following the change.

CORPORATE GOVERNANCE REVIEW

The Dubai Financial Services Authority (DFSA) has published

its corporate governance review findings. It is the first full-scale examination of corporate governance in the Dubai International Financial Centre (DIFC) and the first time the DFSA has issued a follow-up report. The review focused on twelve core areas, including management structures and practices, systems and controls, internal audit and management information flows. The DFSA generally found a good level of compliance by firms with their statutory obligations. However, the practices of many of the firms reviewed fell short when they were implementing their own policies.

RULE CHANGES TO LURE FOREIGN INVESTORS

The Dubai Financial Services Authority (DFSA) has changed its

rules in a bid to attract foreign hedge and private equity funds. The rule changes came into effect on 21 August 2014. Under these, a new class of funds, Qualified Investor Funds (QIFs), is created. These can only be offered through private placements and can have no more than 50 investors. Minimum subscriptions must be US $500,000. However, QIFs can be domiciled in the Dubai International Financial Centre (DIFC) and will face less stringent regulation than they would on-shore. For example, they will only have to file annual reports, and will be exempted from some investment restrictions.

SAUDI ARABIA

TRADING IN SUSPENDED FIRMS’ SHARES

Shares in companies who have been delisted or suspended from

the Kingdom’s Stock Exchange can now be traded, following an announcement by Saudi Arabia's Capital Markets Authority (CMA). Rules have been issued to this

TAX AND FINANCE ROUND-UP


products and the fact Sharia boards of individual banks and investment firms can issue conflicting rulings. The new screening method has been developed with San Francisco-based Ideal Ratings. It provides screening services to fund managers and compilers of indexes, and reviews and categorises Sukuk to allow Islamic banks to adhere to their own guidelines more efficiently, reducing due diligence time and costs.

FOREIGN FIRM RULES RELAXED

Foreign companies will be able to operate in key sectors in the

Kingdom without being subject to rating procedures. It follows approval by the Council of Ministers of steps to ease existing procedures. Under the plans, international companies would be able to participate in infrastructure projects in key sectors, including energy, information technology and construction. The Municipal and Rural Affairs Ministry has been authorised to draw up a list of international companies to work on projects in the country. The Saudi Arabian General Investment Authority will then register the companies, which will be subject to specific rules and qualification criteria.

They will also be granted a temporary classification certificate to implement Government projects.

KUWAIT

CAPITAL MARKETS LAW REVIEW

Kuwait's Trade and Industry Minister, Abdel Muhsin al-Madaj,

has issued a Ministerial Decision which will enable a team of specialists to review Kuwait Law No 7/2010 establishing the Capital Markets Authority.

The team, headed by Dr Meshaal Jaber al-Ahmad al-Sabah will propose amendments to the law, study their impact and work with the relevant authorities.

It will also prepare responses to enquiries and observations from members of relevant National Assembly committees. It is expected the new team will initially work for three months, but its term may be renewed.

BAHRAIN

TRADE LAW AMENDMENTS

Draft legislation to overhaul Bahrain's trade laws has been approved by the Cabinet. The aim is to expedite dispute resolution by encouraging arbitration, prevent conflict of law issues in contentious cases and attract foreign investors. Draft laws aimed at encouraging and protecting market competition have also been discussed.

SUSPICIOUS FINANCIAL TRANSACTIONS

There has been a 50% increase in suspicious financial transactions,

according to Bahrain’s Financial Intelligence Directorate. Bahrain was the first GCC country to introduce anti-money laundering and terrorist financing legislation and establish an Anti-Money Laundering Unit (now the Financial Intelligence Directorate), but 354 suspicious transactions were reported up to June 2014, compared with 237 in the second part of last year.

OMAN

INVESTMENT AND TAX AGREEMENTS RATIFIED

Oman Sultani Decree No 46/2014 ratifying the amended Arab

Capital Investment Agreement has been issued. The relevant authorities will deliver the ratification documents in line with the agreement’s provisions. The new Decree comes into force on its issued date and will be published in the Official Gazette.

FOREIGN INVESTMENT REVIEW

Oman’s Trade and Industry Ministry and International Bank

have finalised an agreement to review the legal procedures for registering foreign investment. The agreement is aimed at improving the investment environment and enhancing Oman’s competitiveness. It includes technical consultations and a review of the legal framework regarding registering foreign investment and other procedures.

QATAR

VENTURE MARKET OPENING

Qatar’s venture stock market will begin operating by early 2015,

according to the CEO of the country’s Bourse. The Qatar Exchange Venture Market will list small and medium-sized enterprises (SMEs). So far, five SMEs have been approved, with several others currently in the process of gaining approval from the authorities.

EGYPT

INCOME TAX CHANGESFollowing the issue of Egypt Decree-Law No. 53/2014, which

took effect on 1 July 2014, amendments have been introduced to Egypt's corporate and personal income tax regulations.

In terms of corporate tax dividends paid by domestic companies to resident and non-resident legal entities will be subject to a 10% withholding tax. This rate reduces to 5% where the beneficiary holds more than 25% of the share capital of the paying company for a minimum of two years.

Dividends paid in the form of free shares are tax exempt. The personal income tax base has also been expanded to cover worldwide and Egyptian sources of income for individuals with a principal place of business in the country.

Kuwait: A reciprocal income tax exemption agreement with the US will come into force on 1 January 2015.Oman: A Decree ratifying a double taxation and income tax evasion agreement with Spain has been ratified.Saudi Arabia: Income tax treaties have been signed with Azerbaijan and Tajikistan.

TAX TREATY UPDATE

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Following recent amendments to the UAE’s Anti-money Laundering Law, Charles Laubach, Partner at Afridi & Angell Legal Consultants, examines the existing law and what has changed.

“I n the UAE the introduction of anti-money laundering legislation in 2002 significantly changed the legal and business landscape in the country. However a draft law

containing further measures which was passed in the Federal National Council in early May 2014 and is approaching enactment, will bring further changes. "

EARLIER LEGISLATION"Money laundering was formally criminalised under Federal Law No. 4/2002 but it had long been a crime to knowingly possess the proceeds of criminal activity, at least as regards criminal activity carried out in the UAE. In addition, many of the techniques used to conceal the origins of funds (like forging documents) were themselves criminalised as early as the 1980s under the UAE’s Penal Code (Federal Law No. 3/1987)," says Laubach. "Nevertheless, the 2002 law was a major

change. It defined money laundering as the handling of funds resulting from criminal acts committed elsewhere, indeed, anywhere in the world. It also formally criminalised it. Therefore, a person who had committed no crime in the UAE, could be subject to criminal prosecution. The 2002 law also imposed reporting obligations so parties must file a Suspicious Transaction Report (STR) with the Central Bank's Anti-Money Laundering and Suspicious Cases Unit (the AMLSCU) if they have a reason to believe a specific transaction involves funds of doubtful origin. These obligations applied throughout the UAE, including the free zones,” Laubach notes.

WHAT’S THE MOST SIGNIFICANT PROVISION?“Article 11 is probably the most significant provision in the old law. In this provision, agencies concerned with licensing and supervising financial institutions and

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other businesses are required to establish appropriate mechanisms to ensure compliance with the relevant rules. Under this general obligation, the UAE’s regulators have imposed detailed anti-money laundering compliance requirements on banks and other parties in the UAE. The most important steps have been taken by the Central Bank (on banks and other regulated financial institutions), the Insurance Authority, the Federal Economy Ministry (on auditors), the Emirates Securities and Commodities Authority (on publicly traded corporations) and the Dubai Financial Services Authority (on parties licensed in the DIFC)."

"The result is a high level of compliance in these specific sectors. For example, in the DIFC, a regulated entity must file an annual anti-money laundering report detailing the reporting entity’s anti-money laundering policies, which states in detail the steps the entity takes to verify the identities, sources of wealth and sources of its clients' funds and give details of the particulars of the suspicious transaction reports which were filed in the relevant year. This approach leaves very little scope for irregular transactions. However outside of these specific sectors, it is recognised that far fewer anti-money laundering safeguards are in

place. Nevertheless, throughout the UAE, the general impact of the Anti-money Laundering Law has been to discourage improper financial transactions, make the UAE a less hospitable location for suspect financial activity overall and increase the likelihood irregular financial practices will be disclosed and investigated.”

WHAT MIGHT CHANGE?“It is increasingly recognised prohibiting money laundering is part of an overall programme to force irregular financial transactions out of the region’s economies and so it plays an important part in economic growth and development. Progress has been achieved through consultation with the Financial Action Task Force (FATF), a multi-national Anti-money

RELATED LEGISLATIONArticle 3, Federal Law No. 4/2002 The financial facilities and other financial, commercial and economic facilities operating in the State will be criminally liable for money laundering should it be committed intentionally in the name or on behalf of someone and without prejudice to the administrative sanctions set out in the law. (Source: Lexis Middle East Law)

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Laundering agency. The draft law approved by the Federal National Council, if enacted, would substantially revise most of the existing Law. The changes would start from first principles, with a new definition of money laundering. The existing law criminalises the conversion, transfer or deposit of proceeds with intent to conceal or disguise the illicit origin of such proceeds. It also criminalises the concealment or disguising of the true nature of such money, source, location, disposition, movement, rights with respect to, or ownership of those proceeds and the acquisition, possession or use of proceeds, in cases where the proceeds are derived from seven specified offences. Those offences involve narcotics and psychotropic substances, kidnapping, sea piracy and terrorism, offences involving the violation of environmental laws, illicit dealings in firearms and ammunition, bribery, embezzlement, and damage to property, fraud, breach of trust and related offences, and any other offences under international conventions to which the UAE is a party,” Laubach explains.

“The new law would also expand this list of offences by criminalising the handling of any property which is directly or indirectly the outcome of the commission of any offence or felony. This means that the list of offences will be an 'open' list rather

than the existing 'closed' list. The offences would include the crime of financing terrorist or illegal organisations. In fact, the objective of preventing terrorist financing has been added to the title of the statute. In addition, the draft law states a money laundering offence is a stand-alone offence, separate and distinct from any other underlying offences. In addition, a person may be charged with and convicted of a money laundering offence even without a conviction for the underlying offence. The new law would also direct the authorities to provide protection to witnesses and accused people. Whilst the previous law required people entering or leaving the UAE to declare any currency they had which was above certain amounts established by the Central Bank, the new Law would require a declaration of currencies, negotiable instruments and precious metals and gems. The Central Bank would also still have power to promulgate the relevant rules which apply to financial institutions in the UAE, and the licensing authorities

retain the power to regulate and promulgate anti-money laundering compliance rules for entities other than financial institutions,” Laubach adds.

SAUDI AND QATAR“Across the Middle East and North Africa, anti-money laundering compliance is being advanced by the countries with the largest economies, the most active financial service sectors, and the greatest interaction with other major trading nations. In the UAE, a new law was developed after years of discussions with the FATF and incorporated their recommendations. Similar discussions with the FATF have taken place with the Governments of all of the region’s major economies and all the other GCC states have enacted Anti-money

Laundering legislation. In Saudi Arabia, for example, an Anti-money Laundering law and implementing regulations were promulgated under Saudi Arabia Royal Decree No. M39/1424. Anti-money Laundering legislation is also contained in Qatar Law No. 4/2010, as well as the country’s Criminal Procedure and Penal Codes (Qatar Law No. 23/2004 and Qatar Law No. 11/2004 respectively).

The FATF believe the Kingdom's anti-money laundering regime is strong overall, although some areas require clarification and improvement,” Laubach explains. "Outside the GCC, Egypt promulgated an Anti-money Laundering law in 2002 (Egypt Law No. 80/2002) and has recently amended it. Overall, Egypt is rated highly for Anti-money Laundering compliance by the FATF. Other countries in the region, including Iraq and Kuwait have been designated by the FATF as on the path to improving their Anti-money Laundering compliance. However, the FATF believes some of the Arab League countries, like Algeria, Syria and Yemen have not achieved high Anti-money Laundering compliance and have been uncooperative with their objectives," Laubach adds.

WHAT’S NEXT?“Moving forward, the objective of improved Anti-money Laundering compliance will be advanced not simply by strengthening the existing law and adding new penalties, but also by introducing a workable framework to achieve the legislation's purposes."

"The successful approach adopted by the UAE's Central Bank, Insurance Authority, Economy Ministry, Emirates Securities and Commodities Authority and Dubai Financial Services Authority could be followed in other sectors of the economy. The enabling provisions found in the Anti-money Laundering Law, authorise the relevant authorities in the UAE to issue resolutions to achieve Anti-money Laundering compliance. We may see other relevant authorities taking more steps in this area. As a result it is hoped the high level of compliance which is currently observed in limited sectors in this area will spread through the economy in general,” Laubach concludes.

RELATED STORIESSaudi Arabia: Suspicious Property Transactions to be InvestigatedLNB News 05/09/2014 99Saudi Arabia’s Permanent Anti-money Laundering Committee has announced it is examining suspicious property transactions across the Kingdom. The move follows an announcement by the Kingdom’s Justice Ministry that its real estate indexes pointed to a number of suspicious large property transactions which have seen property prices artificially inflated.

Egypt: 'No Money Laundering' in Suez Bond IssueLNB News 22/09/2014 134Reports of possible money laundering activities regarding the recently launched Suez bonds are unsubstantiated, Egypt’s Central Bank Governor Hisham Ramez has said. Ramez added the necessary steps were taken to ensure the integrity of the buyers. He added these were in line with international procedures, including formal purchase requests which provide detailed information about the buyers being used.

Saad Al DoseriAssociate

Al Tamimi & Company

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A new law has amended Bahrain's Maritime regime, Saad Al Doseri, Associate at Al Tamimi & Company's Bahrain office, looks at the practical changes.

SHIP-SHAPEWHAT’S HAPPENED?

“T his year a new Commercial Maritime Law, Bahrain Law No. 35/2014 was passed in the Kingdom changing six key provisions in Bahrain Legislative Decree

No. 23/1982,” Saad Al Doseri explains. "One of the key changes in Article 2 has been that the Transport Minister is now able, subject to Council of Minister's approval, to grant Bahraini nationality to vessels owned by non-Bahrainis, even if the vessel is not registered in one of the Kingdom's ports. Under the old law, Bahraini nationality was only granted to vessels owned by non-Bahrainis if the vessel was registered in one of the Kingdom's ports. There is

another area of change too. That is the new right given to dissenting owners, where co-ownership of vessels has been amended, to challenge the majority’s decision before the High Court before giving up their ownership shares in the vessel," says Al Doseri.

"Under amendments to Article 8, co-owners may now challenge the majority’s decision in the High Court within 15 days from the majority decision being issued. Under the old law, where there was a disagreement between a co-owner and the majority, dissenting owners could relinquish their shares in the vessel to the other co-owners, discharging them from obligations arising from the majority’s decision."

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"This amendment is significant because it gives an additional guarantee to co-owners by enabling an element of judicial control, to preserve the common interest of vessel owners. Previously, any decisions made, were conclusively determined by a simple majority co-owners. The new law, however, recognises the rights of minority owners," Al-Doseri explains.

CHANGES FOR DEBTORS"Under the amended Article 44 on powers of vessels owned by a debtor, other vessels owned by a debtor as well as the one directly related to the debt, can be attached through the Execution Court."

"However, other vessels cannot be attached where the debt is one of those in Article 43(m)-(o). For example, where they involve disputes over the vessel’s title, over joint ownership, possession or operation or disputes about rights of co-owners to amounts arising from the vessel's operation or maritime mortgage."

"So if there is a dispute over one or more of these three debts, creditors can only seek an interim attachment order over the vessel which relates to the debt. In contrast, under the old law, creditors claiming under any one of the fifteen debts specified in Article 43 – all of which were of a maritime nature, could seek an order for an interim attachment over a vessel but only a vessel to which the debt relates."

"The new law goes a step further and allows creditors to seek an interim attachment over the vessel to which the debt is related to or any other vessel owned by the debtor provided they owned it when the related debt happened and the debt was not one of the exemptions listed."

"The change to Article 117 has been made to ensure compensation owed to the owner of a vessel because of delays in return of the vessel for any reason attributable to a charterer, are paid. Previously, a vessel owner who suffered delays due to a charterer could charge them double the agreed rates for any overdue period but could not charge any other resulting damages."

"The new law gives vessel owners a further right to claim for any damages incurred because of the delay," Al Doseri adds.

OTHER CHANGES"The amendment to Article 187 enables the Minister to specify exemptions from the pilotage and guidance obligations. Bahrain Law No. 76/2006 On the Granting of Concessions for the Operation and Management of Salman Port and the Concessions for the Operation, Management And Development of Khalifa Bin Salman Port (or the Concession Agreement) granted the Port Operating Company a concession right and obligation to provide compulsory pilotage services to vessels of more than 60 meters. It also stated any exemption must be in line with the Concession Agreement. Therefore, the new amendment for specifying pilotage exemption cases should be in line with the Concession Agreement. Finally, under the amended Article 296, the Maritime Transport and Maritime Navigation Minister rather than the Finance and National Economy Minister can issue the necessary decisions to implement the Law’s provisions.”

MOST SIGNIFICANT CHANGE“The most important change is the Article 44 amendment enabling interim attachment orders over other vessels owned by debtors as it may have a negative impact on vessel owners. If vessel owners are

in debt and have more than one vessel docked in Bahrain, creditors may try issuing an interim attachment order on more than one vessel. In the past they would have only been able to do this to the indebted vessel."

"The amendments to Articles 117 and 187 are also significant. Article 117 now reflects the practical consequences of a delay which is not entirely within a vessel owner's control. For example if vessel owners are unable to

meet third party obligations because of a charterer's delay in returning the vessel. Under the new regime compensation awards are subject to the courts and will depend on the extent of the damages the vessel owner can prove he suffered as a direct result of the delay.”

PRACTICAL IMPACT“Although the new law does not entirely replace the existing Maritime Law, these amendments will have practical and commercial consequences. For example, vessel owners and lessees alike will have a wider choice of causes of action."

"It also underlines one of the Government's main strategic objectives to establish the Kingdom as a leading regional maritime centre. Hopefully, it will also encourage more reliable and balanced maritime services across all functions and amongst both vessel owners and charterers.Overall, these amendments should have a positive commercial impact both by addressing practical issues which may have arisen in the past and couldn't be dealt with because of the limited scope of the original law, as well as bringing certain provisions in line with international standards,” Doseri concludes.

RELATED STORYBahrain: Commercial Maritime Law AmendedLNB News 08/08/2014 33HM King Hamad bin Isa Al Khalifa has issued six laws, including a law amending the Kingdom’s Maritime Law. Laws amending the Kingdom's Council of Representatives bylaws, General Organisation for Social Insurance, political societies, extraction and sale of sea sand and a law criminalising and combating the smuggling of subsidised oil by-products have also been issued. (Source: Lexis Middle East Law)

Saad Al DoseriAssociate

Al Tamimi & Company

IN-HOUSE PROFILE


IN-HOUSE PROFILE GENERAL COUNSEL – ENTERTAINMENT

Opportunities and risksAndrew Cooke, General Counsel at FLASH Entertainment FZ LLC in Abu Dhabi’s twofour54 media free zone, talks about the rise and associated risks of social media use.

ABOUT YOUI grew up near Middlesbrough, in England, studied law at Birmingham University, and attended law school in Nottingham. I began my career as a Trainee Solicitor with Norton Rose in London. My primary motivation in joining an international firm was to work abroad – and in fact I spent one of my training seats in Prague.

I qualified as a litigator and transferred to the Middle East in 2007 to help establish Norton Rose's contentious practice in the region. However, after a secondment to one of the firm’s clients, I switched permanently to the corporate practice. I found myself traveling to a host of countries to advise on transactions including Hong Kong, Syria, Sri Lanka and Saudi Arabia.

Working across such a wide geographic area gave me a broad perspective on international transactional issues. At that time I focused particularly on the retail and telecoms sectors, and was able to develop expertise in licensing and other intellectual property matters.

I joined FLASH in 2011 as the company’s first in-house lawyer. I was part of the management team and became General Counsel about a year later. I was pleased to be shortlisted by Corporate Counsel Middle East for its General Counsel of the Year award in 2014 and that Flash's legal team was also nominated for Legal Department of the Year.

ABOUT FLASHFLASH was established in 2008 and is the Middle East’s foremost live entertainment company. Our core business is the staging of events. So as a legal team we have advised on hundreds of concerts involving local and international performers – including the Rolling Stones, Metallica, Rihanna, Justin Timberlake and the artists engaged to perform in our ‘Yasalam’ festival.

We also advise on sports events, including all aspects of the Mubadala World Tennis Championships (to which Andy Murray and Novak Djokovic will return in 2015), the FIFA Club World Cup, certain aspects of the FIFA U-17 World Cup, two UFC events and the World Brazilian Jiu-Jitsu Championships.

We've helped our commercial colleagues deliver the region’s first arena naming rights deals (for the du Arena and du Forum), and finalise joint ventures

and contractual relationships with companies in other areas of the value chain and other regional jurisdictions. We carry out all legal work associated with this core business inhouse.

GROWTHFLASH’s growth curve has followed that of other successful start-ups. We've had a period of extremely rapid expansion, which has gradually levelled off as we have reached a steady state of revenue and profitability. We have also begun to expand into the region, by participating in events in new countries and by developing Arabic-language content for touring and distribution.

We have also begun to expand into the region, by participating in events in new countries and by developing Arabic-language content for touring and distribution.

Our expansion will be gradual – in many of the markets we want to work in, the entertainment industry is undeveloped and we will contribute to its development.

We’re also aware that, for many reasons, the tastes of our UAE-based consumers are likely to differ from potential customers in our new target markets. So, we will only get a real sense of what those potential customers want by working on the ground with partner companies, and by gradually building those relationships and the profile of the events we carry out.

It’s a cliché, but this approach – to invest time in relationships and spend time talking with stakeholders – is the way business is done in this region.

And yet one of the toughest challenges we face as a licensee is licensors and prospective partners from outside the region can fail to appreciate the

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importance of building relationships, and the effort required to facilitate a true partnership here.

There are still licensors in the market who see licensing as a hierarchical transactional relationship – you give us the money, we sign off everything you do, and you will only hear from us when a royalty payment is due.

REGULATORY LANDSCAPESocial media offers tremendous benefits to a company like FLASH. Our customers are enthusiastic users of it. Our social media channels enable us to engage with event-goers in an informal, quick and cost-effective way.

We’ve also benefited from the ‘viral’ function of social media – the sharing, re-tweeting and liking of social media posts allow messages to be disseminated to customers and potential customers who may be difficult to reach through traditional promotional channels.

As a result of it, feedback on our events begins from the moment fans become aware of a show. People tweet about buying a ticket and their taxi ride to the concert.

They post a picture of their shwarma, take a snap

of the artist, and share it with other fans across the world. All of this is invaluable immediate feedback, provided you are set up to act upon it.

Of course, these many benefits also have a flipside. People are more likely to share negative than positive experiences.

There also seems to be a mismatch between the generations in this area - young people post their entire lives online, much to the horror of their parents, who cling to what their children consider outdated views on privacy and personal data.

This mismatch is repeated at the regulatory level, where common social media activities fall into a legal grey area or comprise a breach of applicable laws.

Social media presents a rising challenge, particularly to a business like FLASH which is visible, and whose brand is valued by reference to the quality of service and experience we provide.

As a result, we have welcomed the recent guidance issued by the UAE Telecommunications Regulatory Authority to social media users, because it brought the impact of (and risks arising from) existing laws to the attention of a wider audience, and helped to fuel the debate about how users, companies and employees should interact online.

PRACTITIONER PERSPECTIVE

Nick O'Connell, a Senior Associate in the Technology, Media & Telecommunications team at Al Tamimi & Company, examines how social media legislation differs across the GCC and how this legal area is evolving.

There is no specific ‘social media’ law per se in any of the GCC countries. Offences carried out by way of social media will

often be captured by provisions in laws not specifically aimed at social media, e.g. relevant Penal Code provisions, which make it an offence to defame someone, to infringe privacy and to make statements which might upset social order (including statements against the Rulers or those of a blasphemous nature).

The UAE has enacted specific legislation aimed at addressing ‘cyber crimes’, which can be broadly understood as crimes committed by way of computers or IT systems. This law commonly known as the Cyber Crimes Law, Federal Law No. 5/2012, (which updates an earlier 2006 law), addresses a wide range of offences. These range from hacking type activities through to on-line credit card fraud and use of computers to traffic people, drugs or antiquities. This law also provides for a number of offences which mirror those found in the UAE Penal Code, and these are likely to be particularly relevant in a social media context because the types of offences occurring on social media often involve defamation, breach of privacy, or content inconsistent with the UAE's social and cultural mores.

Penalties under the Cyber Crimes Law are significant, and include fines of varying amounts (eg. 100,000 AED to 1,000,000 AED are not uncommon) and/or imprisonment for varying periods (e.g. six months to two years or more is not uncommon). The court can also order the seizure and destruction of any equipment used to commit an offence under this law, and deport any foreigner convicted of any such offence. Other penalties may also be available. Other countries in the GCC have issued, or are planning to issue, laws specifically targeting cyber crimes, including offences committed by way of social media. For example, Saudi Arabia has its Anti-Cyber Crimes Law 2007, Oman has its Cyber Crime Law of 2011 and Qatar is currently considering a draft Cyber Crimes Law.

In the past, local media has reported a wide range of offences involving social media, many of which have involved defamation and infringement of privacy. These stories have tended to make the headlines because they have resulted in individuals being charged under the Cyber Crimes Law.

These stories have often involved ‘scandalous’ subject matter (e.g. the posting of compromising photographs by jilted lovers), which has helped increase media interest in this area of the law.

Nick O'ConnellSenior Associate

Al Tamimi & Company

IN-HOUSE PROFILE


IN-HOUSE PROFILE CHIEF FINANCIAL OFFICER – ENGINEERING

Building for the futureNidal M Karyouti, Group Chief Financial Officer at Edgo talks about the company’s involvement in the first government-backed build, own and transfer project.

ABOUT YOU AND YOUR BUSINESSI come from Jordan and have a BSc in accounting from Jordan University. I'm also a Certified Public Accountant and have a Master’s in Business Administration from Central Missouri State University. I started my career in Arthur Andersen’s Jordan office, before joining Edgo in 2005 as Group CFO and General Manager of their head office in Amman. I have also worked with Sprint, a leading US telecommunications company and with Jordan Telecom. I was also CFO and deputy general manager for SabaFon, Yemen’s largest GSM operator. Whilst in Jordan I was involved in the Initial Public Offering of the Government-owned Jordan Telecom in a USD 1.5 billion worth transaction and found it interesting to see how the competing stakeholder interests were balanced against each other, to maximise the transaction’s value. In Yemen, by contrast, I was involved in the first-ever Sharia-compliant credit guarantee agreement. This transaction like the Jordan Telecom one also needed competing interests of stakeholders to be balanced against each other. In addition, because of the Islamic Finance element, there were contractual implications. The key clauses which had to be removed from the agreement were the liquidated damages or penalty clause as interest by standard means cannot be incurred under Sharia law. It was also necessary to create a Special Purpose Vehicle (SPV) to carry on the 70 million US Dollar transaction as there were certain liabilities HSBC was not willing to assume. When I first started at Edgo, I was responsible for the Group’s financial operations and corporate support operations (including their IT, human resources, administrative and legal operations). I'm now responsible for their financial operations, areas including the company’s financial management and reporting, and the Head of Legal reports to me. I've also started to get more involved in operations, acquisitions and expansion, particularly helping with the setup of new businesses. Edgo is a family owned business, which was founded in 1956 as one of the first privately owned engineering companies in the region. Initially it focused on projects associated with the oil, gas, water and power industries but has diversified into construction, telecommunications, technology, real estate development and project financing. Its main

activities are oilfield services and logistic support and it has 33 bases including Egypt, Iraq, Jordan, Lebanon, Libya, Oman, Saudi Arabia, the UAE, Uganda, the UK and Yemen. Our business follows the International Financial Reporting Standards and complies with local regulations where applicable. As a multinational company we need to have our cash easily flowing and comply with the global regulatory framework. So one of our biggest challenges is banks’ overcautious implementation of risk management guidelines. In fact the amount of information and details required by them in order to process incoming or outgoing funds, even repetitive wire transfers, can be cumbersome and costly, particularly with flash points like Iraq, Libya and some African countries. Companies usually finance their expansion projects through non-recourse loans, secured by project assets and paid from the project cash flow. However, in some of the countries we work in, the banks do not consider project assets sufficient security for loans mainly because of the immaturity of the banking sector in those countries, technical, economic and political factors, and lack of a national legislation giving the banks the right level of comfort to apply project finance. For example, legislation is needed to eliminate obstacles creditors might face in assuming control of a project if debtors fail to comply with the loan terms.

KEY PROJECTSOne of my most interesting projects has been with Edgo and its consortium partners', (the UAE's Invest AD, Kuwait's Noor Financial, J&P in Cyprus and Greece), and Aeroport de Paris), work on the expansion of the Amman Queen Alia International Airport, along with the International Finance Corporation (IFC), the private sector arm of the World Bank Group. IFC has helped

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the Government structure the transaction, which is expected to mobilise over US$ 1 billion of private investment in Jordan's airport sector and bridge a critical infrastructure gap. As the first Government-backed build, own, transfer project in the region some interesting tax considerations have been raised. Like

all airports, Amman’s international airport is divided between airline and landing right operations and retail operations. Some of these are liable to pay tax, particularly VAT and others aren't. The differentiation has been challenging and we have had to advise and educate the relevant tax authorities.

PRACTITIONER PERSPECTIVE

Tim Armsby, Partner at Eversheds examines the benefits and drawbacks of public-private partnerships (PPPs) across the GCC and wider MENA Region.

REGULATORY OVERVIEWFrom a regulatory perspective, legislation on PPPs or concessions in the region has developed

primarily on a sectorial basis, with a particular bias towards energy projects (especially power and water) and transport (particularly ports). This is because power and water provision is a priority for most countries here and port projects, can often support private sector investment without Government subsidy or financial support. For example, most countries in the GCC and many in the wider MENA region have specific legislation dealing with the procurement and regulation of Independent Water and/or Power Plants (IW/PPs), e.g. Kuwait Law No. 7/2008 or Oman Sultani Decree No. 78/2004. However, few countries in the region have developed broader PPP procurement legislation although it is increasingly being considered because of difficulties in procuring projects under general state procurement legislation which is not generally aimed at long term contracts of this nature. Key examples are Egypt and Kuwait whose 2008 Build, Own, Transfer law has recently been amended. Jordan’s lower house has also recently endorsed a draft PPP law which was prepared with the World Bank, and Dubai has a draft PPP law under consideration.

BENEFITS AND DRAWBACKSA key aspect of build, own, transfer projects is most of the risk associated with designing, financing, constructing and operating the asset are passed onto the private sector, relieving the procurer (generally a state entity) from the need to fund capital expenditure. It provides cost certainty and enables private sector efficiency advantages to be used when delivering the service. In the power sector for, example, procurers contract to receive an agreed quantity of power over an agreed period (typically 20-25 years) in exchange for paying a tariff rather than having separate contracts for design, construction, maintenance and plant operation or a service contract (the traditional procurement route).

Aside from the positive risk allocation, other benefits include the high quality infrastructure which can result from cooperation between the public and private sectors, and that buildings are more likely to be better designed and built

under PPP arrangements than traditional procurement. However, the long term nature of these contracts generally means the procurement process is longer and more costly than traditional procurement, as are associated costs. Unlike the Government, equity and debt providers expect to make a return. However, standardisation of contracts in a sustained programme help with this.

BEST PRACTICEPPP advantages generally outweigh additional costs and complexity, but this must be modelled to ensure there is value for money before proceeding to procurement. Costs and risks of traditional procurement must be compared with the PPP procurement's potential costs and risks to ensure overall cost is good value. PPPs are not always deemed successful and if there is a failed project/procurement, or a PPP is deemed by the public to be overly favourable there can be issues for the sector for some time. However, often the reasons for failure can be avoided with correct preparation or market testing, assistance of qualified advisors, strong Government support and robust legislation or contract management.

INTERNATIONAL FINANCE CORPORATION’S ROLEThe International Finance Corporation (IFC) is the World Bank’s private sector arm. This may not require specific changes as such, but the IFC have detailed due diligence requirements and apply the highest social, environmental and corporate governance standards. This can impact on the project schedule (particularly on the preparation phase where due diligence process can take longer than with other transactions) but their involvement often attracts other investors and financial institutions, and there are other benefits from working with them, which can speed up later project development phases.

The IFC’s two principle arms are Advisory Services which works with Governments to assist in procuring projects and Investment Services which has a range of equity and debt options.

However, as part of the World Bank, they tend only to operate in developing countries but the MENA region is an important area for them. During the 2013 financial year, IFC committed nearly US $3 billion to the MENA and launched 34 advisory projects.

Tim ArmsbyPartner

Eversheds

Continued from previous page

CLYDE STRENGTHENS ISLAMIC FINANCE OFFERING

Clyde & Co has appointed Islamic Finance specialist, Adil Hussain, as a partner in its Abu Dhabi office. Hussain, who joins from law firm Herbert Smith Freehills, will act for local and regional banks on structuring and developing Islamic Finance products, as well as dealing

with transactional matters for corporates and banks. Hussain

has been previously involved in a number of significant Islamic Financing transactions in the Middle East and will be working closely with Clyde & Co’s finance and corporate practices.

The firm has also recently announced that it has hired Christopher Jobson as partner in their Abu Dhabi office. Jobson was formerly Eversheds' Middle East chairman. The firm now has seven partners in Abu Dhabi and has a total of 39 across the overall region.

MOVERS AND SHAKERS


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

ALEXANDER AIDS EXPANSIONAbdulaziz Al-Ajlan & Partners, Baker & McKenzie's associate firm, has appointed finance lawyer, Julie Alexander, to support and manage the

development of the firm’s new Saudi Arabian office.

She will be joined by Riyadh banking and finance partner, Basel Barakat, in developing the new office in Jeddah, which will become Baker & McKenzie's seventh in the region. Jeddah becomes the second Baker & McKenzie affiliate office in Saudi Arabia, following the launch of the Riyadh office in 1999. The firm, which has enjoyed a presence in Saudi Arabia since 1980, has 300 lawyers across the Middle East working from its offices located in Abu Dhabi, Bahrain, Cairo, Doha and Dubai.

WILSON APPOINTED IN DUBAIShane Wilson, a general structural finance lawyer, who specialises in project finance, has been appointed Partner in the Dubai office of Wragge Lawrence Graham & Co.

Wilson, who has been working in Dubai for almost eight years, joins the firm from Vinson & Elkins.

He previously worked for Norton Rose, having relocated to its Dubai office from London in 2007. His past work has covered a host of projects including those in the power, water, metal, infrastructure and petrochemicals sectors. His work in the region has included advising the sponsors in respect of the financing of the Ghubrah independent water project in Oman.

His new role will cover all six GCC countries, the wider Middle East and Africa. Wragge Lawrence Graham & Co's office in Dubai includes partners Tim Casben and James Foster, along with six lawyers.

LEGACY PATTON BOGGS ASSOCIATE FOR SQUIREKhalid Al-Thebity is to become the Managing Partner of the newly merged Squire Patton Boggs’ Riyadh office. Squire Sanders merged with Patton Boggs in June 2014.

The new firm will continue with four lawyers and one managing partner. They have chosen to work with Patton Boggs' associate firm, Khalid Al-Thebity, as their local representative.

Squire Sanders’ previous affiliate was Al-Enezee. The new Managing Partner's practice includes corporate, commercial and financial law, as well as real estate and Saudi-specific litigation and arbitration. His particular focus will be the energy, construction and real estate sectors.

DOUBLE STRENGTH FOR DELOITTE REAL ESTATEDeloitte Financial Advisory in the Middle East has appointed Bruce Allan as head the of its real estate valuation team.

Based in Dubai, Allan has over 25 years of experience, and his particular strengths are in healthcare, education, logistics and development appraisals focusing. The appointment follows the recent introduction

of UAE Valuer Registration, which aims to support a transparent and sustainable property market through the adoption of international standards and best practice.

In addition, Deloitte has also announced Nick Witty will become their Real Estate Advisory Director. Following a period in the UK, Witty has returned to Qatar to lead real estate advisory, assisting clients in identifying, appraising, valuing, funding and delivering real estate projects.

He will focus specifically on Bahrain, Kuwait, and Qatar, as well as building on Deloitte’s real estate advisory work in the wider GCC.

Witty has over 26 years’ real estate experience across disciplines including agency, facilities, property management, investment and valuation. He has spent over half this time in the Middle East, in both Jeddah and Doha.

In association with JLegal

OTHER FIRM NEWS

Simmons & Simmons: Hammad & Al-Mehdar, Simmons & Simmons Jeddah-based partner, has announced it is looking to launch an office in Riyadh by October 2014, pending regulatory approval. The office will focus on asset management and investment funds, energy and infrastructure, finance, life sciences and telecoms.Latham & Watkins: Has hired Sami Al-Louzi as a partner in its corporate department. Al-Louzi focuses on equity capital markets in Saudi Arabia and across the Middle East, as well as on cross-border mergers and acquisitions. He joins from Vinson & Elkins and will be based in Riyadh and Dubai.Eversheds: Has hired principal management consultant, Shery Ramezanian from the Dubai office of the Huron Consulting Group. Ramezanian specialises in risk and compliance solutions, records management, legal strategy, team structures and project management. She is also experienced in high-value transactions and deals.

MOVERS AND SHAKERS


OIL INTERESTS AT A&OAllen & Overy has announced the appointment of oil and gas specialist, Judith Kim, who will become a partner in their Dubai office.

She will join the Middle East and Africa Energy team. Judith has significant experience with energy transactions along

the entire oil and gas value chain, including particular expertise in upstream and midstream transactions. Judith previously worked for A&O as an associate in their

Dubai office. However, she joins Allen & Overy from Ashurst LLP, where she was a partner in their energy, resources and infrastructure department in the Middle East. Her work at Ashurst included energy and petrochemical project development and mergers and acquisitions. Before this, she was Senior Legal Counsel at Shell.

NEW ROLE FOR MODHAThe costs law firm, Kain Knight, has acquired Dubai-based costs and debt management company, SettleFirst, which specialises in advising insurance companies, banks and other institutions on debt recovery and collections.

The UK firm plans to develop SettleFirst’s existing income streams and to use the acquisition as a platform to provide its services to firms throughout the UAE and the rest of the GCC region. Mitesh Modha, Kain Knight’s Head of Technical and Special Projects, will manage SettleFirst in the short-term.

PILLSBURY GROWS IN ABU DHABIPillsbury Winthrop Shaw Pittman has hired Bird & Bird partner, Osama Abu-Dehays as partner in the firm’s corporate and securities practice. Abu-Dehays will be based in Abu Dhabi, where he will focus on the technology sector, while also building his energy, infrastructure and construction practice. Abu-Dehays joins Pillsbury after two years with Bird & Bird, where he led the firm’s technology team, advising clients on a wide range of matters, including broadcasting, intellectual property and litigation.

He began his career in private practice and also served as chief legal officer with TV network, Al-Jazeera. He has also worked for several high-profile media organisations, including Arab Media Group, MTV Arabia and Qatar Sports Investments.

Abu-Dehays is considered an expert in technology and media, acting as a consultant for regulatory and commercial

organisations. Abu-Dehays becomes the second partner based full-time in Pillsbury’s Abu Dhabi office, joining Stephen Jurgenson.

SEND US YOUR NEWSIf you have news of an appointment or promotion within the legal or financial professions you would like to see reported in Lexis Middle East Law, please send details to: [email protected]

ACCME ACTIVITIES

RECENT EVENTSQatar

23 October 2014

The ACCME, in association with Norton Rose Fulbright, hosted a roundtable workshop on local law considerations and best practices with respect to anti-bribery & corruption, the jurisdictional reach of FCPA and UK Bribery Act, investigations and enforcement actions as well as providing an overview of US Sanctions and anti-boycott regulations. The event was held at the W Hotel in West Bay after which attendees enjoyed lunch at the Spice Market.

Dubai

21 October 2014

The ACCME, Norton Rose Fulbright and Trace collaborated with senior compliance executives to provide practical anti-bribery compliance solutions and best practices. This interactive workshop addressed various topics on the jurisdictional reach of anti-bribery laws, due diligence and investigations. Speakers focussed on why and how anti-bribery laws (including the FCPA) affect local companies, as well as subsidiaries of international companies and an interactive discussion was held on compliance, best practices and emerging trends.

Bahrain

16 October 2014

The ACCME held its inaugural event in Bahrain at the Ritz-Carlton hotel in

Manama, in association with Baker & McKenzie. After an introduction on the ACCME and the benefits of membership, a panel discussion was held on the new rules introduced by the Central Bank of Bahrain on renumeration for licensed financial institutions.

Qatar

23 September 2014

Qatar legal update - Simmons & Simmons and the ACCME hosted a half day seminar at the W hotel, Doha, providing updates on legal developments both in Qatar and globally. It covered a range of topics from M&A to IP, IT and common contract issues while doing business in the region. In addition, breakout sessions were held to provide in-depth insight into topics of interest and there were many opportunities for members to network.

Dubai

3 September 2014

Antitrust and Competition Briefing held at the Ritz-Carlton, DIFC in association with Baker Botts. Brussels based Baker Botts partner Paul Lugard shared his insights and experiences with members. Lugard covered Competition Law Enforcement across the UAE, Saudi Arabia and abroad and the Do’s and Don’ts for businesses.

UPCOMING EVENTSFor upcoming events please visit http://www.acc.com/chapters/middleeast/index.cfm?eventID=all or email Tam at [email protected].

OPPORTUNITIESACROSS THE MIDDLE EAST

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

Boulevard Plaza Tower One, Downtown Dubai, United Arab Emirates www.jlegal.com Find us on

For more information please contact JLegal atPhone: +971 4 455 8419. Alternatively email [email protected]

Corporate/M&A Counsel, Corporate HQ5 years + experience, Riyadh (IJR-IM-2599)One of the world’s leading manufacturers of chemicals, plastics,fertilisers and metals, is seeking a highly qualified lawyer to join itslegal team. You will be joining a well-established, sophisticated andinternational legal department. Ideal candidates will be qualified in a common law jurisdiction, with excellent academic credentials,and have a minimum of 5 years’ experience with a major law firm.Previous experience in Saudi Arabia or the Gulf Region would be an advantage.

Senior Corporate Commercial Associate, International Law Firm5years + PQE, Oman (MXY-PM-2709)A great opportunity has arisen for a senior corporate commercial lawyerto join the busy team of this international law firm in Muscat.Undertaking a mixed diet of general Corporate M&A and commercialwork, ideal candidates will possess strong drafting skills and a solid trackrecord of undertaking similar work in a large, international law firmsetting. Furthermore, superb client-facing and business developmentskills are considered highly desirable for this position of responsibility.

Legal Counsel, Investment Company3 to 5 years PQE, Abu Dhabi (REM-IM-2965)This client is now looking for a UK law or commonwealth law qualifiedcorporate solicitor to join their small, established and experiencedlegal team in Abu Dhabi. Ideally, the successful candidate will have 3 to 5 years post-qualification experience gained from a well-regardedfirm, and preferably with some prior in-house experience. Experiencein a broad range of corporate transactions is essential, and exposure to funds and investment matters would be advantageous.

General Counselminimum 15 years PQE, Qatar (JRS-PM-3002)An exciting and rare opportunity has arisen within the well-establishedlegal team of a major investment company in Qatar. The role willencompass working closely with the business side of the organisationon major acquisitions and ventures on a global basis. The preferredcandidate will have a minimum of 15 years corporate experiencegained within a major international law firm or legal department.Regional experience and Arabic language skills would both bedesirable but are not essential.

Construction Associate, International Law Firm5 years + PQE, Dubai (MXY-PM-2778)This large international law is considered amongst the strongest forconstruction work in the region and boasts a highly experienced teamwidely recognised for its local industry knowledge. Applicants will holdat least 5 years of quality construction-focused PQE gained from a top30 firm. Although the position will involve a mixed diet of contentiousand non-contentious work, applicants holding a pronounced leaningin this direction are likely to be considered stronger.

Corporate Energy Partner, International Law FirmDubai (REM-PM-2989)Our client is a well-regarded international law firm with an existingcorporate offering seeking expansion. They are interested in bringingin a partner or an ambitious senior associate that operates within theenergy space. The firm has an especially strong presence across oil &gas, mining & metals, renewable energy and shipping. If you operatewithin this space and are considering a move this firm should bedefinitely be one to consider.

A BRIGHTER

FUTURE

LN FP A4 AD 03AW 24/10/14 12:05 Page 1


CONTRACT WATCH

Effective dispute resolution

Effective dispute resolution clauses must be binding, enforceable and enable parties to maintain ongoing

working relationships. The key is not 'one-size-fits-all' but taking time to consider what dispute resolution process is most suitable for the relationship. There are four key choices.

FORUMThis requires a choice between litigation, arbitration, mediation, conciliation, expert determination, negotiation or another form of alternative dispute resolution. This generally involves the competing priorities of speed, cost, enforceability and familiarity. Parties can adopt a multi-tiered dispute resolution process, e.g. negotiation followed by arbitration but in most Middle East jurisdictions, litigation is often the default option. If parties do not expressly choose an alternative forum and their implied intention is not easily ascertainable, they must generally resolve the dispute through court proceedings (unless they can agree on an alternative forum once a dispute arises). This may create some recognition and enforcement problems, particularly when trying to enforce foreign judgments in the region, because of the limited number of reciprocity treaties in place. For example, for corporate and commercial matters there is no formal recognition arrangement between Qatar and countries like

Australia, on court judgments, but there are on arbitral awards as both states are New York Convention signatories. So, those worried about enforcement tend to opt for arbitration over litigation when dealing with cross-border disputes. Arbitration is also common in the construction and banking sectors.

PLACEThe place should ideally be familiar and convenient to all and closely connected to the transaction, or travel can be time consuming and expensive, particularly with cross-border transactions. Although remote attendance is permitted in some cases. With arbitration, it is possible, but rare, for parties to opt to hear a dispute in a different 'place' to the 'seat' where the tribunal will be legally linked (and upon which enforcement of any award will be impacted by). However, this is worth considering when vast distances and time zones separate the parties.

SUBSTANTIVE LAWThis is the law on which the dispute's 'substance' or 'merits' are resolved. This is either nominated in the dispute resolution clause or a separate governing law clause. When selecting a suitable substantive law, you must check for any international conventions ratified by the country which alter the domestic law, like the United Nations Convention for the International Sale of Goods 1980 on domestic sales laws.

PROCEDURAL LAWWhen resolving substantive disputes, parties have a series of 'jurisdictional', 'procedural' or 'administrative' issues, which are often outside the substantive law's scope. There can be disputes about how the decision maker is selected (including their qualifications and timeframes for their appointment), what discovery or document disclosure will be permitted (if any), the language of proceedings and if the decision maker can allocate legal fees and costs between the parties. To limit time and money wasted resolving these, effective dispute resolution clauses must detail how they are resolved. As it is not practical for the parties to predict and set out their intentions for all these possible issues, the general choice is to resolve in line with procedures set out in a particular procedural law and/or set of procedural rules. For example the dispute resolution clause may expressly provide for any dispute to be resolved in line with the Arbitration Rules of the DIFC-LCIA Arbitration Centre and the relevant UAE Civil Code provisions. It's worth noting procedural law across each of the GCC countries is relatively similar, as it is based on Egyptian law and generally consists of two streams - one dealing with civil and procedural matters and the other with rules of evidence. However, while most procedural laws and/or internationally recognised procedural rules contain provisions dealing with these issues, parties should still expressly set out their intentions on any critical matters. Dispute resolution clauses may also expressly deal with issues like confidentiality obligations, availability of interim measures, proceeding length and enforcement (including rights of appeal). As a final point, the key thing is whatever choices are made by the parties, clarity is vital.

ContributorAndrew Kirk Solicitor Pinsent Masons LLP

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