Lexis Middle East Law Alert - March/April2022

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FEATURE ALL CHANGE

Dispute resolution changes in the UAE

PROFILE CONSTRUCTION

Sean Yates of China State Construction Engineering Corporation (Middle East) LLC

CONTRACT WATCH March / April 2022

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Protecting your commercial arrangements from sanctions

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

MIND THE DATA PROTECTION GAP Oman’s new Data Protection Law



THE DATA FOCUS

]Z MR˙v] S}H}o]vP The Lexis Middle East Law Alert magazine is produced by the Lexis Middle East Law online legal and business research service. To find out if you qualify to be added to our regular circulation go to: www.lexismiddleeast.com Follow us on Twitter: https://twitter.com/lexismiddleeast ADVISORY BOARD Zaid Mahayni (IT Services) Radwa Salah Elsaman (Technology) Fawaz M A Alawadhi (Consumer) Lorenzo Bruttomesso (Energy) Justin Dowding (Online Media) EDITORIAL

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Editora

Claire Melvin +44 (0) 20 7347 3521 claire.melvin@lexisnexis.co.uk Deputy Editor

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CONTENTS

Daniel Emmett-Gulliver +44 (0) 20 7347 3515 daniel.emmett-gulliver@lexisnexis.co.uk

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n recent months we have seen the impact of two significant COVID 19 trends on the region’s legislation. The first has been a desire to build back better in post pandemic steps to strengthen the economy. This has led governments across the region to carry out root and branch reviews of their current legislative frameworks, particularly legislation which impacts business - and we have seen a flurry of both brand new laws and significant amendments to existing laws being issued here in order to support that need to rebuild the economy. The second has been a realisation - as everything from education to litigation, healthcare to day to day business dealings went online just how important personal data is. Perhaps then it is not surprising that new data protection laws have appeared in those packages of brand new laws here. The UAE issued a new data protection law towards the end of last year and inhouse lawyers there are now eagerly awaiting for the supporting implementing regulations to that law to be issued in order to give them fuller details of what needs to be done in practice to meet those new obligations. Like the UAE in the past Oman did not have a single specialist data protection law. The issue was instead covered, to a limited extent, in laws dealing with other subjects. However, the Sultanate has decided to follow the UAE and kicked off the year by also issuing a new data protection law. This new law has definitely put meat on the bones of Oman’s legal framework on data protection but as was the case in the UAE, it does not give inhouse teams the full picture of the new requirements. As a result, in this issue we focus on not just the changes which have been confirmed on data protection in Oman but also where the gaps are. The points those who would now be classed as controllers or processors there should be considering before the new regulations and decisions in this area which will undoubtedly follow in the lead up to the enforcement deadline in February 2023. Claire Melvin - Editor

FEATURE: MIND THE DATA PROTECTION GAP

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Oman’s new Data Protection Law

FEATURE: ALL CHANGE

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FEATURE: CASE FOCUS

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Dispute resolution changes in the UAE Including a landmark VAT penalty case

LEGAL ROUND-UP

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LAW MONITOR

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Including a consultation on the DIFC Real Property law Including Regulations on Qatar National Product legislation

TAX AND FINANCE ROUND-UP

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Including UAE Corporation Tax

IN-HOUSE PROFILE

Sean Yates > Construction

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MOVERS AND SHAKERS

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ARBITRATION CORNER CONTRACT WATCH

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A General Counsel at China State Construction Engineering Corporation (Middle East) LLC discusses opportunities they have found in the GCC Round-up of the big moves across the region

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Protecting your commercial arrangements from sanctions | Lexis Middle East Law Alert | March / April 2022 | www.lexis.ae

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LAW FOCUS

MIND THE DATA PROTECTION GAP While data protection legislation in Oman has been generic to date, a new specific and standalone Data Protection Law has been approved. However, it leaves some big gaps, as Arsalan Tariq and Yasin Chowdhury of BSA Ahmad Bin Hezeem & Associates LLP explain.

“O

man has recently issued a Personal Data Protection Law, Oman Sultani Decree No. 6/2022 which will come into force on 13 February 2023,” Arsalan Tariq states. “It will also be supplemented by Implementing Regulations and Decisions which are expected to be issued soon by the Ministry of Transport, Communications and Information Technology.” “Like other jurisdictions in the GCC, Oman is keen to change its data protection legislation particularly following the COVID 19 pandemic which has led to a greater dependency on technology almost everywhere and subsequent increases in the collection and processing of personal data.” “The aim is to strike a balance and create a regime which offers better protection to individuals,” Tariq adds. “Previously, the data protection regime in Oman was found in some general provisions of the Penal Code (Oman Sultani Decree No. 7/2018) along with Chapter 7 of the Electronic Transactions Law (Oman Sultani Decree No. 969/2008) which covered the subject in a narrow way and has now been repealed.”

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“Therefore, Oman Sultani Decree No. 6/2022 has been enacted with a wide range of personal data protection related provisions which are intended to keep pace with personal data protection developments in the world.”

Arsalan Tariq Partner

WHAT’S CHANGED?

“When compared to the previous legal BSA Al Rashdi and position in Oman, Oman Sultani Decree No. Al Barwani 6/2022 has defined Personal Data far more widely,” states Yasin Chowdhury. “It now includes any data which makes a natural person identifiable, directly or indirectly, by reference to one or more identifiers, such as their name, civil number, electronic identifiers, data, or spatial data, or by reference to one or more factors which are related to genetic or physical identity, mental, psychological, social, cultural or economic Yasin features.” Chowdhury “There are also now provisions Associate including areas such as privacy and data BSA Al Rashdi and protection, data processing, data transfers Al Barwani and notification and record keeping requirements.” “The Ministry of Transport, Communications and Information Technology has also


LAW FOCUS

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now been authorised to enforce this law and impose administrative penalties on those who violate it, as well as other specific penalties for various violations of the law.” “Oman Sultani Decree No. 6/2022 has also laid down a personal data protection framework with a range of requirements including transparency, honesty and respect for human dignity,” states Chowdhury. “Putting privacy and human dignity at the centre of this statutory protection in particular is to be welcomed.” “However, one of the most significant developments of this law is that it categorically sets out the framework of who is responsible under it and the requirements for collecting and processing personal data,” Tariq adds. “The controller (which is the person who determines the objectives and means of processing personal data and either performs this processing themselves or entrusts it to someone else) and the processor (which is the person who processes personal data on behalf of the controller) now have specific responsibilities to personal data owners.“ “Under the Law, the controller is obliged to establish the controls and procedures which must be adhered to when processing personal data and must determine potential risks to the owner of personal data as a result of the processing and procedures and controls for

RELATED LEGISLATION Article 31 of Oman Sultani Decree No. 6/2022 The competent court within the scope of application of the provisions of this Law may, in addition to the fine, order the tools used in committing the crime be confiscated. ~S} PL˘]M]oE L`Z

transferring the personal data,” Chowdhury adds. “In addition, they must take technical and procedural steps to ensure the personal data is dealt with in line with the Law and will have to comply with any other controls or procedures which are specified by the Implementing Regulations.” “Oman Sultani Decree No. 6/2022 also categorically requires controllers to notify personal data owners in writing before they start processing any personal data,” Tariq adds. “These notifications should include data about the controller and the processor, contact information for the controller’s personal data protection officer, the purpose of processing of this personal data and its source, a comprehensive and accurate description of personal data processing and procedures, as well as the scope of personal data disclosure, and the rights of the personal data owner, which will include their right to access, correct, transfer and update the data,”

| Lexis Middle East Law Alert | March / April 2022 | www.lexis.ae

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LAW FOCUS RELATED STORY

Chowdhury explains.

A CLEAR POSITION?

“However, despite these greater levels of detail, there are still several areas where the law lacks detail and we will have to wait for the Implementing Regulations for further details,” Tariq adds. “For example, cloud computing and online data storage are now widely used by service providers. However, Oman Sultani Decree No. 6/2022 fails to explain how its provisions will be applied to guarantee personal data protection particularly in relation to data security, remote data storage and data retention.” “In addition, while Oman Sultani Decree No. 6/2022 sets out the rights of personal data owners to revoke their consent to the processing of their personal data, to request for it to be updated or corrected and or for it to be erased, we will have to wait till the Implementing Regulations are issued before the procedures personal data owners will need to follow in order to exercise these rights as granted under the Law, are clear.” “The Law has also given Ministry officials the power to enforce Oman Sultani Decree No. 6/2022’s provisions,” states Tariq. “However, here again we will have to wait until the Implementing Regulations are issued to find out how this judicial policing will be exercised by Ministry officials, and the checks and balances which will be put in place to avoid any arbitrary measures.” “In addition, Oman Sultani Decree No. 6/2022, requires the controller and processor of personal data to establish the internal controls and procedures which they will adhere to while processing that data. However, at present there is no information or detailed guidelines on what kind of policies and procedures controllers and processors should adopt and observe as a minimum.” “There are also some differences compared to other international personal data protection regimes,” Tariq continues. “For example, other international personal data protection regimes, often require detailed privacy notices to be given to personal data owners before their personal data is collected and processed and before processing their personal data. This Law has a privacy notice requirement but these notices are much narrower than those required in other jurisdictions which may specifically contain details of the grievance procedure which applies if there are any violations of the personal data protection legislation.” “It should also be noted that, although Oman

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Sultani Decree No. 6/2022 has provisions which cover data transfers outside Oman, it lacks the benchmark criteria controllers and processors need to fulfil before they decide whether to transfer any personal data outside Oman, and is similar to the previous provisions which were found in Chapter 7 of Oman Sultani Decree No. 969/2008. This is a serious deficiency given the current extent of data transfer.”

WHAT TO DO NOW?

“Oman Sultani Decree No. 6/2022 has imposed a well-defined set of obligations on entities which are covered by the Law,” states Tariq.” In their capacity as controllers and processors of personal data of the individuals, such entities will be required to adopt controls and put procedures in place internally based on the key personal data protection principles which are transparency, honesty and respect for human dignity.” “The controller will also have to prove written consent of the personal data owner has been provided, which in the case of a child, will mean the consent of their guardian and the controller must make sure that the data is processed in line with the controls and procedures under the Law,” Tariq explains. “When they are drawing up the required new internal controls and procedures entities (as either controllers or processors) they should make sure they have considered and understand the risks involved in processing that personal data and in transferring it from the perspective of the data owners. They will also need to adopt technical and procedural measures which follow the standards required under this new Law. Controllers and processors may also, if required by the Ministry, have to appoint an external auditor who will ensure the controls and procedures they have adopted internally are complaint with the Law and may have to submit that external auditor’s report to the Ministry,” Chowdhury states.

WHAT’S NEXT?

“Oman Sultani Decree No. 6/2022 will come into force on 13 February 2023, and the Ministry is expected to have drawn up its Implementing Regulations which will provide further details by then,” Tariq adds. “They may also issue other related decisions from time to time to enforce this Law.” “Once these Regulations are issued by the Ministry, there will be a new detailed personal data protection framework in Oman and hopefully too, further clarification on how this Law is to be enforced in practice. Controllers and processors can take advantage of the time between now and then to audit their processes to ensure they are compliant with the Law and to prepare and train employees on how to comply with this Law and understand the various risk and their own responsibilities when they are dealing with the personal data of individuals,” Tariq concludes.



LEGAL ROUND-UP LEGAL ROUND-UP

COVERING RECENT KEY LEGAL DEVELOPMENTS – REGION-WIDE UAE

CORPORATE GOVERNANCE The UAE Securities and Commodities Authority has issued a Decision amending the 2020 Corporate Governance Guide for Public Joint Stock Companies. As a result, one or more representatives of the shareholders who are nominated will be appointed by the company’s board of directors to attend meetings of the general assembly, vote on decisions on behalf of shareholders and determine their fees. Article 9(5) of the Guide will also now state that the statute determines the executive, non-executive, and independent members, provided at least a third of the members of the Board of Directors are non-executive independents who will need to have practical experience and necessary technical skills for the company. When selecting a company’s non-executive members it will be necessary to ensure these members are able to allocate sufficient time and attention to their board membership and that this membership does not constitute a conflict with their other interests.

LATE SALARY PENALTIES The UAE’s Human Resources and Emiratisation Ministry has issued a Decision which imposes additional penalties on employers who fail to pay employees’ salaries on time. Employers with 50 or more staff will be subject to field inspections by the Ministry if wages are not paid 17 days after the due date. Companies will receive official reminders to pay wages after the third and tenth day from the date they are owed. Where wages are not paid for over 17 days after they are due, no new work permits will be issued to smaller entities. Work permits will also not be issued to companies which are managed by the same breaching owner. The Public Prosecution will be notified if employers fail to pay wages for over 30 days after the due date.

DIFC

REAL PROPERTY PROPOSALS The DIFC has launched a consultation on amendments to its Real Property Law, DIFC Law No. 10/2018 which ends on 29

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March 2022. The amendments relate to Part 9 of the Law which covers mortgages and to default remedies for mortgagees. The key changes include the removal of a mortgagee’s right of foreclosure in its entirety. The proposals would also clarify a mortgagee’s rights and obligations in terms of the exercise of their statutory power of sale in the event of a default by a mortgagor. They also remove the reference to ‘under the principles of English common law and equity’ which is found in Article 29(b) of DIFC Law No. 10/2018.

SAUDI ARABIA

LANDLORD’S RIGHTS Saudi Arabia’s Municipal and Rural Affairs and Housing Ministry has confirmed landlords cannot cut off electricity, water and gas services to tenants in order to force them to pay their rent. Instead where a dispute arises between a landlord and tenant, they must either go to the judicial authorities or the Saudi Arabian Centre for Real Estate Arbitration. The Ministry has also clarified that a standard contract is binding between a landlord and tenant in terms of duration and amount, and can only be cancelled with the mutual agreement of the parties. Tenants must also pay the rent based on the amounts stated in the contract and issue a bond receipt. The Saudi Centre for Real Estate Arbitration (which also provides conciliation services) has also added that where a landlord has a complaint against one of their tenants, they can file that complaint and submit a request via the https://reac.sa arbitration platform.

FOREIGN LAW FIRMS A new Lawyers Regulation has set out mechanisms for licensing foreign law firms to practice in Saudi. The requirements include establishing a professional company with one or more Saudi nationals who must be listed in the practicing lawyers schedule in line with the Professional Companies Law. Alternatively, a foreign law firm can establish a branch in the Kingdom in line the Law’s provisions.

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The firm must have a good international reputation for practising law in international competitiveness reports and indexes and must have been established for at least 10 years. They must also have representation or partnerships in at least three different countries.

KUWAIT

WORKERS’ INSURANCE The Occupational Safety Centre at Kuwait’s Public Manpower Authority’s Occupational Safety Centre has announced it is carrying out a wide-ranging review of companies who are not complying with the conditions and laws on insuring workers against injuries or paying them compensation when accidents happen. It has been stated the Centre is now requiring companies to submit certain documents when renewing their files, including quarterly surveys which have to include signature authorisation, insurance policy details and a list of accidents and injuries (if there have been any). The aim of these reports is to verify the extent to which companies are providing genuine insurance for workers which will enable them to receive compensation and treatment if they are injured.

QATAR

FAST TRACK RECRUITMENT Qatar’s Labour Ministry has announced on Twitter that it has launched a fast-track service to allow new labour recruitment requests to be executed electronically. This will enable companies to obtain visa approval to bring their workers over from abroad within a few minutes, in line with specific criteria and requirements. However, only companies which comply with the Qatari Labour Law will be able to benefit from the new service.

SAFETY CONCERNS Qatar’s General Directorate of Civil Defence has launched an updated fire and life safety manual which is found in the Civil Defence Technical Requirements


LEGAL ROUND-UP Manual 2022. The manual includes details of all engineering requirements involving prevention systems in buildings. These guidelines will be enforceable.

OMAN

NEW FREEZONES Oman Sultani Decree No. 10/2022 has been issued on the establishment of a free zone at Muscat International Airport and the Sohar and Salalah airports. An Operating Party for these free zones will be selected from companies who report to the Oman Investment Authority. These companies will be able to seek the assistance of departments and companies specialising in development, marketing, management and operation of these free zones. Both the Operating Party and companies will be granted the incentives and privileges which are specified in the Law on Freezones (Oman Sultani Decree No. 56/2002).

REAL PROPERTY CHANGE Oman’s Housing and Urban Planning Minister has approved real estate ownership changes there. As a result, expatriates will be able to own properties in Oman outside Integrated Tourism Complexes. A Ministerial Decision to this effect has been issued. Foreign investors will be able to own properties worth over 250,000 Rials. However, there will be two tiers of ownership. In the first tier, investors who buy properties worth more than 500,000 Rials will be offered first-class residency. While in the second tier, those who buy properties worth between 250,000 and 500,00 Rials will be offered second-class residency. First-class residency will enable investors to buy residential, commercial, and industrial properties. While second-class residency will only allows investors to buy residential properties. Investor who wants to buy a house which costs less than 250,000 Rials, will be able to do so through the existing Integrated Tourism Complex project or usufruct scheme. There is also a list of governates and areas where foreigners will not be able to own properties.

BAHRAIN

US TRADE ZONE A new US Trade Zone has been officially opened in Bahrain and is based in the Salman Industrial City. The new zone has been established in line with a cooperation agreement between Bahrain and the US which was signed last year. It is intended that the new zone will become a regional manufacturing, logistics and distribution hub for US companies with a presence in Bahrain and the wider GCC. The zone is expected to become operational by 2025.

EGYPT

HOTEL INTERNET SPEEDS Egypt’s Tourism and Antiquities Minister has decided they will force hotels there to raise their minimum internet speeds. Five-star hotels will need to have a speed of 1 megabyte per room, and a total of no less than 100 megabytes, using optical fibres connected to the main Telecom Egypt network. The minimum speed for four-star hotels will be 100 Mbit/s for each facility with a capacity of 100 rooms, and an additional 0.25 Mbit/s for each additional room, using fibre-optic technology. The minimum speed for three-star hotels will be 50 Mbit/s for each facility with a 100 rooms capacity plus an additional 0.25 Mbit/s for each additional room, using optical fibre technology.

JORDAN

INSURANCE DISCLOSURES The Jordanian Central Bank has provided a mechanism for disclosing commissions and fees associated with insurance service provided to customers. Disclosures will be required including on determining the percentage of all commissions and fees associated with the insurance service, including bonuses or any amounts or any other compensation related to an insurance contract. The disclosure mechanism will be included within the terms of the insurance contract and the insurance contract schedule or the insurance premium calculation table.

REGULATORY ROUND-UP UAE: The Securities and Commodities Authority (SCA) will shortly issue a regulatory and supervisory framework for virtual assets issued for investment purpose... Qatar: Qatar’s Supreme Judiciary Council has announced citizens and residents can review travel ban orders online before leaving the country through the Metrash2 application or by calling via 55788372, 44597769 and 44597777... Saudi Arabia: All airlines operating in Saudi airports have been instructed by the General Authority of Civil Aviation to refund institutional isolation fees collected from passengers who booked tickets to travel to Saudi Kingdom before a Decision to scrap this requirement on 6 March 2022... Saudi Arabia: Individuals who buy waste from unlicensed agencies or destinations will be jailed two years or fined 10 million Riyals... UAE The region’s first copyright management association, Emirates Reprographic Rights Management Association has been established in the UAE to safeguard rights of to safeguard rights of authors and publishers... DIFC: An artificial intelligence and coding license has been launched which will allow companies to work at the DIFC Innovation Hub and their employees to apply for Golden Visas... Oman: Companies with more than 50 employees will need to appoint an Omani Supervisor who will be responsible for occupational health and safety work... Egypt: The House of Representatives has approved amendments to the Rent Law for non-residential purposes... Egypt: Under a new Fintech Law Egypt’s Financial Regulatory Authority is now the sole licensor and regulator of companies in this field... Bahrain: The King has approved Bahrain Law No. 7/2022 on the environment... Kuwait An amendment to the Oil and Gas Law is going to be proposed... Oman: The Consumer Protection Authority has approved amendments to the Implementing Regulations to the Consumer Protection Law... Oman: Muscat’s Stock Exchange has approved foreign ownership changes... Saudi Arabia: The Data and Artificial Intelligence Authority has published a data and artificial intelligence glossary of key technical terms...

| Lexis Middle East Law Alert | March / April 2022 | www.lexis.ae

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LAW MONITOR

RECENT LEGAL DEVELOPMENTS IN THE GCC SAUDI ARABIA - COSTS A new law on judicial costs came into force on 13 March 2022. It covers initial fees a plaintiff is obliged to pay to the relevant department when filing a lawsuit with the court. After its implemented, judicial costs will be imposed on lawsuits and requests to an amount not exceeding 5% of the value of the claim up to a maximum 1,000,000 Riyals. However, there will be exemptions for a number of different types of cases including lawsuits and requests which fall within the jurisdiction of the Board of Grievances, cases and requests arising from the application of Bankruptcy Law provisions and those involving deeds and related requests.

KUWAIT - INSURANCE The Executive Regulation on Kuwait Law No. 124/2019 on Insurance Regulation which was issued in 2021 came into force on 1 March 2022. This has led to a comprehensive new legal framework repealing legislation in this area which dated back to 1961. Executive Regulations aim to provide a comprehensive framework for licensing, conduct of business, and oversight of the insurance industry. The Regulations establish a new regulatory body, the Insurance Regulatory Unit (IRU) which will now supervise the insurance sector in Kuwait.

GAZETTE WATCH UAE Official Gazette Nos 719-723 – These Gazettes include Cabinet Decision No. 109/2021 amending Cabinet Decision No. 1/2020, on refunding VAT paid on goods and services related to the 2020 Dubai Exposition. Dubai Official Gazette Nos 554-562 – These Gazettes include Dubai Decision No. 8/2022 implementating the Health Insurance Law in Dubai Healthcare City. Abu Dhabi Official Gazette No 1 of 2022 – This Gazette includes Abu Dhabi Decision No. 3/2021 issuing the Implementing Regulation to the Integrated waste management law in the Emirate. Kuwait Official Gazette Nos 1571-1577 – These Gazettes include Kuwait Administrative Decision No. 34/2022 amending Article 37 of Kuwait Administrative Decision No. 27/2021 issuing the regulation including rules and procedures for granting a work permit. Oman Official Gazette Nos 1426-1434 – These Gazettes include Oman Decision No. 19/2022 issuing the Implementing Regulation on financing small and medium enterprises and craftsmen. Qatar Official Gazette Nos 1, 2 of 2022 – These Gazettes Include Qatar Ministerial Decision No. 2/2022 on the fulfillment of the requirements for combating money laundering and terrorist financing relating to commercial companies. Sharjah Official Gazette No 1 of 2022 – This Gazette includes Sharjah Executive Council Decision No. 9/2022 on the regulation of ownership and usufruct of real estate by companies and enterprises in Sharjah. Saudi Arabia Official Gazette Nos 4918-4924 – These Gazettes include Saudi Arabia Ministerial Decision No. 70273/1443 amending the Labour Law Implementing Regulation. (Source: Lexis Middle East Law Official Gazette Index)

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OMAN WASTE RULES Oman Decision No. 67/2022 issuing the Regulation for regulating the practice of collecting and trading scrap in Muscat has been issued and applies to businesses in the city. The Decision has repealed Oman Local Order No. 1/2009 and anything else which contradicts it. However existing licences which were issued before this new Decision was issued will remain valid until they expire. After this they will then need to be renewed in line with the provisions in this new Decision.


LAW MONITOR

BAHRAIN COMPANIES The Financial and Economic Affairs Committee of Bahrain’s Parliament has rejected proposed amendments to the Commercial Companies Law, Bahrain Decree Law No. 21/2001. The amendments which were proposed by the Shoura Council would have inserted new text specifying the maximum capital for foreign companies established in Bahrain of 350,000 Dinars. It was felt the draft proposed amendments contradicted the Bahrain’s strategy on attracting foreign investment.

FEATURED DEVELOPMENT Aurore Deeb of D&C Legal Services considers recently published Implementing Regulations to Qatar Law No. 2/2019 that deal with the impact of harmful international trade practices on Qatari national products. Qatar Ministerial Decision No. 14/2022 on the issuance of the Implementing Regulations to Qatar Law No. 2/2019 (which covers supporting the competitiveness of national products and combating practices harmful to them in international trade) has been recently issued. It outlines the procedures for convening the committee designed to support the competitiveness of Qatari national products, and the possible formation of sub-committees which will investigate related topics. When sufficient evidence of the existence of harmful international trade practices is available, the committee may, following Ministerial approval launch an investigation into these harmful practices, on its own or at the request of one of the Ministries which oversees Qatar’s various production sectors. The committee is required to prepare reports which include the information, clarifications, announcements and notifications they have issued, and whether the necessary Laws and the Regulations, required standards and restrictions. Special requirements and controls have also been incorporated into the legislation allowing interim and

final actions to be taken, and pricing commitments to be put in place, in response to damaging international trade practices. The legislation outlines the conditions and safeguards for enacting these interim and permanent measures, and pricing guarantees. The export price is calculated based on the price paid or to be paid for the product in question when it is offered for export from the exporting country to the domestic market. If it is discovered that a product, regardless of its source, is being imported into Qatar in increasing quantities, under conditions which are likely to cause serious harm to national facilities that produce similar or directly competitive products, or the product is potentially harmful, the Regulations allow preventive measures to be taken if a causal link is proven to exist between the harm and those imports. The delivery of the product can also be made subject to a prior control procedure. However, when a threat of considerable harm to national industry is recognised, it must be evident and impending, based on facts rather than a claim, guess, or remote possibility.

DIFC - DATA PROTECTION

QATAR - CONSUMER A Ministerial Decision, Qatar Ministerial Decision No. 3/2022 on the warning text and images which needs to be displayed on tobacco packaging. It also covers warning text on the packaging of tobacco derivatives and cigarettes.

An amending law, DIFC Law No. 2/2022 has been issued bringing in amendments to a number of DIFC Laws including the DIFC Data Protection Law, DIFC Law No. 5/2020. The DIFC Courts now have discretion to award costs against the Commissioner in proceedings where the Commissioner is the unsuccessful party and the Court is satisfied that the Commissioner has acted in bad faith or in excess of their statutory functions. The amendments also provide more detail on conditions for the legal accountability of controllers and data processors where the privacy of individuals may be affected by repeated attempts and requests to access their data.

| Lexis Middle East Law Alert | March / April 2022 | www.lexis.ae

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TAX AND FINANCE ROUND-UP TAX AND FINANCE ROUND-UP

COVERING RECENT KEY TAX AND FINANCE DEVELOPMENTS – REGION-WIDE UAE

CORPORATION TAX IS COMING The UAE has announced plans to impose a new 9% Federal Corporation Tax from 1 June 2023. This will be the first time Corporation Tax has been imposed in the country. The tax will be applied on the adjusted accounting net profits of a business above 375,000 AED. It will not be applicable on income from personal employment or investments that do not arise from a commercial activity. Firms which are involved in the extraction of natural resources will be exempt from this new levy. UAE firms will also be exempt from paying tax on capital gains and dividends received from their qualifying shareholdings. Businesses will also be able to credit foreign taxes paid against the amount of UAE corporation tax they are charged. Corporate tax incentives which are currently being offered to free zone businesses which comply with all regulatory requirements and do not conduct business with mainland UAE will continue to apply. In addition, the UAE will not impose withholding taxes on domestic and cross border payments, or subject foreign investors to corporation tax if they do not conduct business in the UAE.

REDETERMINATION OF PENALTIES Cabinet Decision No. 108/2021 which came into force on 1 January 2022 has extending the timeframe for taxpayers to benefit from the 70% redetermination (discount) on administrative penalties for violations of the tax laws to up until 31 December 2022. Cabinet Decision No.49/2021 provides details on this process. However, the deadline found in this law which was 28 June 2021 has now been extended.

VOLUNTARY DISCLOSURE The UAE Federal Tax Authority (FTA) has recently updated its

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Voluntary Disclosure guide which covers areas including when such disclosures are filed for VAT groups. Voluntary Disclosures are mandatory within 20 business days after an error has been made in a VAT or Excise Tax return which has resulted in the payable tax being 10,000 AED or more too low.

SAUDI ARABIA

REGISTRY SIMPLIFICATION Saudi Arabia’s Commerce Ministry has announced it is now possible to add various commercial activities in a single commercial registry for establishments in the same region. This will be able to be done instead of requiring a separate commercial registry for each of the activities. The Ministry has added companies will no longer have to issue independent commercial records for activities like the wholesale sale of perfumes, the manufacture of auto parts, the cultivation of ornamental plants and seedlings and other activities. All these activities can now be combined into one commercial register if the establishments are in the same region.

DIFC

CRYPTO TOKEN CONSULTATION The DFSA has launched a consultation which primarily deals with the regulation of crypto tokens. and will end on 6 May 2022. There has been a previous DFSA consultation on investment tokens. The Authority is looking to establish a regulatory regime which would cover those wishing to provide financial services activities involving crypto tokens. Key aims of any such framework could be to introduce appropriate investor protection requirements in this area and help facilitate the development of this market in a responsible and prudent manner.

www.lexis.ae | March / April 2022 | Lexis Middle East Law Alert |

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ADGM

CAPITAL MARKET CHANGES The Financial Services Regulatory Authority of Abu Dhabi’s Global Market has announced it has launched a consultation on proposals to boost its capital markets’ framework. It ends on 20 May 2022. Among other things, the Market is proposing to introduce a new regulatory framework for spot commodity trading. If approved, they would become the first international financial centre in the Middle East and North Africa region to offer a framework for the regulation of spot commodities and emission allowances. There are also proposed amendments on mining and petroleum listed entities and new regulatory requirements for benchmarking activities.

SAUDI ARABIA

RETT REGULATIONS The Zakat, Tax and Customs Authority (ZATCA) has announced proposed amendments to the Implementing Regulations (IR) of the Real Estate Transaction Tax (RETT) have been approved and took effect as of 18 February 2022. The Amendments were adopted in Saudi Arabia Ministerial Decision No. 1429/1443 and primarily involved RETT application exemptions in certain cases. For example, gifts of real estate are now exempt from RETT up to the third degree (rather than the second as was the case before). It is also necessary the beneficiary does not transfer to a person outside of the third degree within three years of the authentication of the gift. In addition, the exemption for contributions in kind to companies now excludes joint ventures. The transfer of real estate due to the execution of a will is also excluded from RETT going forward.

QATAR

CREDIT TO DEPOSIT RATIO CHANGE Islamic and conventional banks operating in Qatar have had to adjust the calculation of the credit to


TAX AND FINANCE ROUND-UP deposit ratio in line with regional and international standards and practices from 1 March 2022, following the issue of a Circular by the Qatari Central Bank. The Circular covers all Islamic banks and conventional banks which are licensed and operating in the country. The amendment aims to both support the stability of the financial and banking sector in Qatar and improve the efficiency of the operational and banking performance of these entities in light of credit risk challenges.

KUWAIT

EXCISE TAX UPDATE The Kuwaiti Government has announced it is looking at implementing excise tax there. It will cover tobacco and its derivatives, soft and sweetened drinks as well as expensive goods, like watches, jewellery, precious stones, luxury cars and yachts. It will apply to these goods instead of VAT. It will be levied at between 10 and 25%. Under the GCC agreement signed by Kuwait in November 2016, excise tax will have to be applied on tobacco products of all kinds and forms, energy drinks at 100% and soft drinks at 50%. VAT has to be imposed at 5% under the agreement.

GULF PAYMENT SYSTEM Kuwait’s Central Bank has announced that it has started implementing the Gulf payment system (also known as Aafaq) there. Under this system, money transfers in the local currencies of GCC countries and other currencies will be able to be made in a short time and at low costs for customers and dealers, within a safe and stable environment. During 2022, this system will cover all Gulf central banks. The Kuwaiti Central Bank has now started adding local banks to the system.

COMPANY AUDIT WARNING Kuwait’s Commerce and Industry Ministry has announced it is carrying out an audit of companies who have not submitted their financial statements for the last three years. These

TAX TREATY UPDATE Oman: Oman and Qatar have signed a Double Tax Treaty, which is the first Double Tax Treaty Oman has signed with another GCC country. Oman: A Double Tax Treaty has been signed between Oman and Slovakia.

companies could have their licenses suspended in line with Kuwait Law No. 1/2016. This could disrupt companies completing residency procedures for their workers and could freeze transactions which require Ministry authentication, such as certifying authorised bank signatures. The aim is to force these companies to submit their financial statements, in particular those who do not have a legal excuse for not having done so. Violations considered could include failing to extract board certificates or not recording amendments in the memorandum of association and articles of association. The Ministry is asking officials in relevant companies to provide them with reasons for their delay in providing the required financial data for more than one year.

and notifications and wisht hat 44 double tax treaties be covered by the MLI. The MLI has now been ratified by Bahrain Law No. 2/2022, To Approve the Multilateral Treaty of Implementing Tax Conventions Measures to Prevent Base Erosion and Profit shifting (MLI), which has also been issued in the official gazette. The MLI is an instrument which was developed by the OECD and aims to improve international tax co-operation and reduce base erosion and profit shifting (BEPS) risks in a synchronized and efficient manner. The convention offers a concrete and streamlined solution for governments to close loopholes in international tax treaties by including the results and conclusions from the BEPS project into bilateral treaties worldwide, without the need to renegotiate each treaty bilaterally.

OMAN

FIRST CROWDFUNDING PLATFORM The Oman Capital Market General Authority has issued a Decision approving the country’s first crowdfunding platform, Ethis Investment Platform LLC which is owned by the global Ethis Platform. The platform will offer crowdfunding activities in Oman via both equity-based and peer-to-peer financing. The platform is licensed in Malaysia and Indonesia as a Sharia compliant platform. The approval comes following an announcement by the Authority at the end of 2021 that the relevant legislative framework for crowdfunding-platforms had been approved.

JORDAN

NEW INCOME TAX E-SERVICE Jordan’s Income and Sales Tax Department has launched a new electronic service which will enable taxpayers to pay tax owed on profits which have been generated from selling shares electronically. This will mean taxpayers will not have to visit the department’s offices for these purposes. The service will enable the taxpayers to calculate amounts owed in line with Article 22/A of the Tax Returns, Records, Documents and Profit Shares Law, Article 22/A of Jordan Law No. 59/2015.

TURKEY

VAT ON ELECTRICITY

BAHRAIN

OECD MULTILATERAL INSTRUMENT In November 2020 Bahrain signed the OECD Multilateral Instrument (MLI) listing their provisional reservations

The Turkish Government has decided to reduce the VAT rate on electricity from 18% to 8%. The rate change will apply where electricity is used for either residential or agricultural irrigation purposes.

| Lexis Middle East Law Alert | March / April 2022 | www.lexis.ae

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LAW FOCUS

DISPUTE THE CHANGES A raft of new legislation has come into force bringing with it changes to UAE dispute resolution practices, in areas including labour and cheque disputes, and has altered the rules on remote hearings as Chatura Randeniya and Mevan Bandara of Afridi & Angell explain.

“2

022 has brought with it significant changes to UAE law, including the new Labour Law (Federal Decree-Law No. 33/2021) and its Implementing Regulations found in Cabinet Decision No. 1/2022. This and Federal Decree-Law No. 14/2020 which has decriminalised the issuing of bounced cheques, both came into force this year” states Chatura Randeniya.

DISPUTES WITH INDIVIDUAL EMPLOYEES

“Among the changes brought in by Cabinet Decision No. 1/2022 is a new procedure for resolving labour disputes,” states Randeniya. “In particular, different procedures now apply depending on whether the dispute is with an individual employee or a group of employees.” “When a dispute involves an individual employee, it must first be referred to the Ministry of Human Resources and Emiratisation (MOHRE),” states

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Randeniya. “This can be done by an employer, employee or an eligible beneficiary such as the heirs of a deceased employee. MOHRE then attempts to amicably settle the dispute.” “However, if a settlement is not reached within 14 days of the dispute being referred to the Ministry, they must then refer the matter to the Court of First Instance along with a memorandum setting out a summary of the dispute, the arguments made by both parties and the Ministry’s recommendation in the case,” Randeniya continues. “Once the matter is referred to court, it then proceeds in the ordinary way and appeals can also be potentially filed to the Court of Appeal and then the Court of Cassation, if the dispute satisfies the general threshold requirements for appeals.”

GROUP DISPUTES

“However, if the dispute involves a group of employees, a different approach applies and the employer or


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LAW FOCUS employees have to file a complaint to the Ministry within two weeks of the dispute arising,” states Randeniya. “In this case if the Ministry is unable to settle the dispute between the employer and the employees, or if a settlement reached under the auspices of the Ministry is subsequently breached, the dispute is then referred to the Collective Labour Disputes Committee or CLDC.”

COLLECTIVE LABOUR DISPUTES COMMITTEE “The CLDC is a new body which has been given specific responsibility for settling group labour disputes but it should be noted it has not yet been established,” states Randeniya. “Their decisions will be final and sealed with the executory formula seal by the competent court.” “Disputes with groups of employees will therefore not be heard by the UAE Courts any more until execution or enforcement is required.”

three months’ compensation where there is a retaliatory element to the termination.” “The old labour law stated that “In addition, after receiving a complaint on termination by the employer will be treated as a dispute involving a group of employees, being arbitrary if the cause of termination was Cabinet Decision No. 1/2022 also empowers not related to work. This term ‘not related to MOHRE to take a number of provisional work’ was often disputed,” Randeniya adds. Chatura measures in order to protect the interest of “However, Federal Decree-Law No. Randeniya employees,” Randeniya states. 33/2021 has amended the definition of what Partner “For example, the Ministry might is considered arbitrary or illegal termination. Afridi & Angell request the relevant authorities to impose The new law no longer contains a requirement a provisional seizure on the employer’s assets to for the reasons for termination to be ‘not related protect the employees’ rights.” to work’ in order to be illegal.” “They could also call on the bank “If there is no retaliation, the employee guarantee or insurance provided by the must instead argue termination was done employer to MOHRE allocated to the without notice or was done for other than a employees or take any other action or legitimate reason,” Randeniya adds. “This measures to ensure the employees’ arguably provides less scope than before for entitlements are paid,” Randeniya explains. Mevan Bandara recovery by a disgruntled employee.” “Another area where the new labour Senior Associate RETALIATORY TERMINATION legislation has made changes has been that Afridi & Angell “Termination is another area where there are it has clarified the test and the process for changes which will lead to disputes,” states Randeniya. enforcing non-compete clauses. Article 10 of Federal “Federal Decree-Law No. 33/2021 specifically Decree-Law No. 33/2021 and Article 12 of Cabinet recognises termination of an employment contract Decision No. 1/2022 state for a non-compete clause to because the employee has filed a serious complaint be valid, they should specify the geographical scope or instituted litigation which is found to be valid as of application and the non-competition period should constituting illegal termination. This suggests the not be more than two years. In addition, the nature of complaint or litigation must be upheld in order for the work must cause significant harm to the legitimate termination to be deemed illegal. An employee whose interests of the employer, and the non-compete clause contract was unlawfully terminated may obtain up to will be void if the employment contract is terminated by the employer in violation of any contractual or legal provision. In addition, under Cabinet Decision No. 1/2022, employees may be exempt from non-compete clauses if the contract is terminated during the Article 32(1) of Cabinet Decision No. 1/2022 probation period, or they or their new employer have I(] ] `vvuo}˙vooR`}l}P} paid compensation of no more than three months’ }(`}lvR (]o}'o]u]o˙URo]uv`]oo.o salary to the previous employer and the previous }uo]v`]R ].}v}ov} X employer has agreed in writing to accept it. When it ~S} PL˘]M]oE L`Z comes to disputes in this area Article 12 of Cabinet

PROVISIONAL STEPS AGAINST EMPLOYERS

RELATED LEGISLATION

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LAW FOCUS

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Decision No. 1/2022 also states if a dispute arises over the non-compete clause and it is not settled amicably, then the dispute should be referred to the Court and the burden of proof will lie with the employer.” “However, it is unclear at the moment whether a dispute involving a non-compete clause should first be referred to MOHRE in line with Article 31 of Cabinet Decision No. 1/2022, so a prudent approach would be to make the referral to the Ministry until further guidance is issued.”

BOUNCED CHEQUE DISPUTES

“On 2 January 2022, when Federal Decree-Law No. 14/2020 came into force, issuing a cheque which bounced due to insufficient funds ceased to be a criminal offence, which has had an impact on dispute resolution in this area too,” states Mevan Bandara. “Although it is important to note Federal Decree-Law No. 14/2020 does not decriminalise all cheque-related offences.” “For example, deliberately writing a cheque in a way which renders it unpayable, e.g. deliberately placing the wrong signature on it, closing an account or withdrawing all the funds from it before a cheque is presented or ordering a bank not to make payment of a cheque, except in the limited circumstances such as the loss of a cheque, are still punishable offences.” “In these cases, offenders will be fined at least 10% of the cheque’s value, with a minimum of 5,000 AED up to double the value of the cheque, and may also be jailed for at least six months,” Bandara adds. “Federal Decree-Law No. 14/2020 has also facilitated new civil remedies in this area by considering a cheque which is confirmed by the bank as having been dishonoured because of insufficient funds to be an executive instrument.” “This means, a party holding a bounced cheque of this type can now initiate proceedings directly before the execution division of the courts in order to obtain payment, seize the drawer’s assets and obtain a travel ban against the drawer.”

“This is much faster and cheaper than using ordinary proceedings so it should be helpful,” Bandara adds.

REMOTE HEARINGS

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“With remote hearings becoming more common, new rules regulating these types of hearings in the UAE Federal Courts have also been brought in by Ministerial Decision No. 90/2022, which came into force on 15 February 2022,” states Bandara. “Ministerial Decision No. 90/2022 requires lawyers to maintain professional conduct and decorum in order to uphold the integrity of the UAE Courts during remote attendance.” “This means they must respect the applicable rules and regulations, including timely submission of memoranda and evidence on the Courts’ portals and they must also refrain from disrupting ongoing proceedings,” Bandara adds. “In addition, before attending a remote hearing, lawyers must also ensure the equipment and utilities being used are operational and meet the required standards.” “It has also been stated that if a lawyer is unable to attend a remote hearing because of a technical problem, they will be required to submit an application to the judge with the details of the problem they faced and supporting evidence,” Bandara continues. “It should also be noted that if a Court finds a lawyer is responsible for disrupting a remote hearing, the Court will have the discretion to take administrative or criminal action as set out in Federal Law No. 23/1991.”

| Lexis Middle East Law Alert | March / April 2022 | www.lexis.ae

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CASE FOCUS

Case No .... UAE 22/2022 issued on 26 January 2022 Jurisdiction .... UAE Court .... Federal Supreme Court Recommended by .... Habib Al Mulla & Partners, a member firm of Baker & McKenzie International

WHAT HAPPENED?

A global e-commerce company filed a series of appeals against administrative penalties imposed by the Federal Tax Authority in connection with delayed VAT payments. The UAE Federal Supreme Court recently dismissed an appeal filed by the Authority to impose administrative fines and penalties against the company and ordered the Authority repay the penalties to the company. Both the Court of First Instance and Court of Appeal also rejected the Authority’s appeal against the decision of the Tax Disputes Resolution Committee and allowed the company to counter appeal against their decision. In doing so, both Courts held no penalties should be owed based on the court experts’ findings.

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WHAT WAS DECIDED?

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The Federal Supreme Court held that the administrative penalties had been imposed on the incorrect basis that the company had been late in paying the owed amount, as the delay had been mainly caused by from the Authority’s failure to share the correct transfer details for payments from abroad, as were published by the Authority at the relevant time. The company had taken all the necessary steps to communicate with the Authority and the Central Bank to address the issue. After a considerable time had passed, the matter was resolved and payment was received by the Authority. However, given the lengthy delay before the company was able to obtain the necessary details to make the payment, significant delay penalties were then imposed on them by the Authority. Therefore, the company decided to take all the necessary legal steps to challenge the levying of these administrative penalties. The Court considered the decisive factor in this case was the actual date for enabling the company to transfer the tax owed based on the details provided by the Authority. This was the date that the UAE

www.lexis.ae | March / April 2022 | Lexis Middle East Law Alert |

Central Bank had amended the details in order to correct the transfer details which had been provided by the Authority, as this then enabled the company to complete the transfer process. These facts were confirmed by the opinion given by the court appointed expert as mandated by the court.

WHY’S IT SIGNIFICANT?

This judgment sets a final and conclusive precedent that could be very relevant in several ongoing tax challenges, including in cases involving any other taxes. It establishes a clear principle on the appropriate conditions for the waiver of an administrative penalty. It also confirms the robustness of the UAE judiciary when it comes to adjudicating tax matters and upholding a taxpayer’s rights to challenge the Authority’s assessment of taxes and penalties. However, it is important when challenging the Authority’s assessment, that taxpayers adhere to the specific procedures which have been set down and timeline for re-calculations, reconsiderations and objections before the Tax Disputes Resolution Committee and the relevant UAE courts. Case No .... DIFC Case No. 085/2021 issued on 11 February 2022 Jurisdiction .... DIFC Court .... DIFC Court of First Instance Recommended by .... Outer Temple

WHAT HAPPENED?

An application was made by Trustees who had been appointed by the Abu Dhabi Court in some insolvency proceedings. The purpose of the application was to bring about a stay, or automatic suspension, of all claims in the DIFC Court involving all parties said to be involved in these Abu Dhabi insolvency proceedings. The application was based on the principle that the DIFC Court was bound to recognise or give effect to the Abu Dhabi insolvency proceedings and stay or pause DIFC proceedings until the Abu Dhabi insolvency procedures concluded. The legal basis for the application was the DIFC Insolvency Law (DIFC Law No. 1/2019) and principles of comity between Courts. Schedule 4 of


CASE FOCUS DIFC Law No. 1/2019 enacts a modified version of the UNCITRAL Model Law on Cross Border Insolvency. The claims proceedings in the DIFC involved largely, but not solely, claims by a number of banking syndicates for the repayment of loans. The claims were based on underlying loan agreements and a number of personal and corporate guarantees. The application by the Trustees to stay these proceedings was the latest in a series of attempts on their and the Defendants’ part to have the DIFC proceedings stayed.

WHAT WAS DECIDED?

However, the application was rejected for a number of legal and practical reasons. Firstly, the Abu Dhabi insolvency proceedings had been commenced by only one of the many parties (who was one of the personal guarantors) who were involved in the DIFC proceedings. The Judge held that DIFC Law No. 1/2019 and its provisions on recognition of foreign proceedings, applied only to companies and not to insolvency proceedings involving individuals. As the Abu Dhabi proceedings had been commenced by one individual debtor who was also the only person named as a debtor, they related to an individual and were therefore generally outside the scope of the DIFC Law No. 1/2019. Most but not all of the other defendants in the DIFC proceedings had also been named in the Abu Dhabi insolvency proceedings, but in the DIFC proceedings they were named as joined litigants but not debtors. Therefore, the DIFC Court of First Instance held there could be no basis on which the proceedings could be recognised for those defendants as the principle of recognition could only apply to debtors in the insolvency proceedings and not to any other litigant named in the proceedings. The Court also found the Trustees had only been appointed to attempt to develop a plan for restructuring the debtor’s business for consideration by creditors. Although the proceedings were capable of recognition within the meaning of DIFC Law No. 1/2019, the Trustees did not have the necessary powers to enable them to be recognised as foreign representatives in respect of the proceedings. In addition, the court found the evidence presented by the claimant was unsatisfactory, as it did not establish that the parties had their Centre of Main Interests or even an establishment in Abu Dhabi as required by DIFC Law No. 1/2019. The Court could see no good reason why a stay of proceedings could be of practical benefit to the Debtor or their estate. The proposal that any outstanding claims could be determined summarily by the Trustees, particularly as these involved allegations of forgery, without DIFC Court procedures was rejected as unworkable. The Court also criticised the Trustees for their conduct in bringing the application as they had been critical of the previous conduct of the defendants in the DIFC litigation. This weighed against the Trustees in so far as the Court had any discretion in deciding whether to stay the DIFC proceedings. Matters of

discretion arose irrespective of whether the proceeding was a foreign main proceeding or a foreign non-main proceeding because in both cases the DIFC Court had the power to lift or impose a stay. The Court held that the terms of DIFC Law No. 1/2019 meant attempts to effect recognition of foreign insolvency proceedings outside the framework of that Law would face formidable difficulties.

WHY’S IT SIGNIFICANT?

This case is one of the first clear opinions by the DIFC Court on the effect of Schedule 4 of DIFC Law No. 1/2019. It confirms the scope of application of the UNCITRAL Model Law in the DIFC which is that it only applies in relation to corporate insolvencies. The decision also highlights the importance of the DIFC Court’s discretion in deciding whether to offer recognition and assistance to non-DIFC proceedings, including in situations where they are the proceedings of a sister Court in the UAE. It was emphasised that DIFC Courts are likely to look carefully at the conduct of the parties and the practical benefit to the parties when exercising their discretion on whether or not a stay of DIFC proceedings should be granted or continued. Case No .... High Judicial Commission for the Unification of Conflicting Judicial Principles Request No. 1/2020 issued on 7 July 2021 Jurisdiction .... UAE Court .... High Judicial Commission for the Unification of Conflicting Judicial Principles Recommended by .... Wasel & Wasel The High Judicial Commission for the Unification of Conflicting Judicial Principles issued its first decision on 7 July 2021. It addressed the concept of absolute invalidity of contracts, the doctrine of apparent circumstances and the standard of good faith. The Commission held that the absolute invalidity of a contract does not affect those who have relied on the contract or contract successors, if those people or the successors have relied on apparent circumstances which have created an appearance of validity of the contract. It was also ruled that apparent circumstances which are considered to have granted a contract validity must be given the same weight as actual circumstances whose elements have invalidated that contract. In terms of the good faith, the Commission ruled that an act conducted between the agent of the apparent circumstances and any good faith actor is effective against the right holder as the apparent right holder. If the good faith actor fails in their duty of care towards investigating the actual circumstances and any apparent contradictions, they lose the protection of the doctrine of apparent circumstances. This Decision has been widely regarded as the UAE’s first stare decisis order or first case law binding precedent in the UAE enshrining a binding doctrine which is the first time this has happened in the country.

| Lexis Middle East Law Alert | March / April 2022 | www.lexis.ae

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LEGAL COUNSEL – CONSTRUCTION

Building a business Sean Yates, General Counsel for China State Construction Engineering Corporation (Middle East) LLC explains the opportunities his company has found in the region. ABOUT YOU

I studied at New College, Oxford, before taking the Common Professional Examination law conversion at the University of Westminster, then the Bar Vocational Course at the Inns of Court School of Law. Before coming to Dubai in 2006, (for what was initially meant to be just a year) I had been practising out of Chambers for a decade. I am currently undertaking a research degree at the University of Birmingham on the new international commercial courts and recently passed the Chartered Institute of Arbitrators’ exam to gain Fellowship status. Since coming to Dubai I have worked both in private practice as a legal consultant and as an inhouse lawyer.

A

I currently work as General Counsel for China State Construction Engineering Corporation (Middle East) LLC. It is a regional subsidiary of the China State Construction Engineering Corporation Ltd (CSCEC), whose shares are traded on the Shanghai Stock Exchange. We started operating in the region in 2003, and our first project was the Palm Jumeirah Garden Villas Project. We are one of the largest construction groups in the Middle East and have offices in Saudi Arabia, Kuwait, Bahrain and Qatar. Our regional headquarters are in Dubai. We have grown considerably since 2003 and our total contract values are now worth more than $7 billion. In addition, we have a turnover of around $4.34 billion. The business has several divisions covering general, civil, infrastructure and MEP capabilities. I oversee the legal function which includes eight qualified lawyers and a legal assistant. Unusually for a General Counsel, I represent my company in some of its arbitrations and I fully conduct these matters and run them inhouse. Reducing the gap between lawyers and the inner workings of the business often helps me to better understand the dispute and provide more relevant representation. It also allows our team members to be fully involved in and learn from participating in the arbitration process. It is part and parcel of the continuing professional development which is important to me and something I believe is an essential part of the inhouse legal career path. Last year, three of our team members were studying for part-time Masters degrees in Law alongside their other responsibilities.

A

YOUR CURRENT ROLE

YOUR INDUSTRY

There are many Chinese construction companies which have a presence in the Middle East, some of which are part of the immense China State Construction family and project-specific tie-ups between them are common. Many of these sister companies are keen to build on China State’s perceived achievements to date. I would also expect this to continue and increase, particularly through establishments in other GCC countries, which may act as a launchpad for opportunities in Saudi Arabia. The construction industry is well-regulated in the Middle East region. Making sure the most recent building codes and standards are being followed before tenders are put forward, is a full-time compliance job here. With challenging profit margins and the heavy cost of non-compliance, having a complete understanding of these codes and standards is vital, and there can be no departures from them. There are some differences when you are working for a Chinese state-owned entity. For example, there are extensive reporting obligations on all performance indicators, which have to be prepared in Chinese by the two Chinese speaking members of the legal team. As has been the case in many industries and businesses one of the key challenges over the last two

| Lexis Middle East Law Alert | March / April 2022 | www.lexis.ae

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IN-HOUSE PROFILE PRACTITIONER PERSPECTIVE Mark Raymont of Pinsent Masons LLP examines the opportunities available to Chinese companies like CSCEC Middle East (L.L.C) as the country plows ahead with its Belt and Road Initiative in the region, especially in the UAE. The Middle East has been embracing overseas construction companies and state-owned Partner entities for decades, and this has Pinsent Masons LLP been particularly true of Chinese companies, in part as a consequence of the Chinese Government’s Belt and Road Initiative. In February this year, China’s official news agency, Xinhua, reported Beijing’s plans to continue its cooperation in key sectors such as infrastructure facilities, energy and manufacturing. It is therefore likely the role of Chinese companies in large scale projects in the Middle East will continue to grow. This will build on the significant positions Chinese companies have already taken on high-profile projects. In the UAE, this includes Etihad Rail, Hassyan power plant and the Mohammed bin Rashid Solar Park which is one of the world’s largest renewable projects. Experience has shown that the ability of overseas companies to successfully build businesses in the UAE and wider Middle East is dependent on a number of key factors and this has been particularly true of Chinese companies and state-owned entities when investing and establishing a presence in the UAE. For example, identifying and adopting the correct corporate and legal structure is critical to ensuring Chinese businesses can establish an effective presence here. This often involves liaising with a number of institutions and bodies, both local and federal, depending on the nature of the venture and the legal structure. Law firms have worked closely with their clients to identify which structure best suits the individual company’s needs reflecting both its own commercial objectives and its existing ownership structure. While COVID restrictions have been easing up globally, China’s zero-Covid restrictions will likely continue to impact global supply chains and will clearly be an important consideration when servicing existing projects/contracts and setting up new operations in the Middle East. Any small disruption in the country of origin, and Chinese products/ equipment/manpower and expertise play a central role in many projects in the Middle East, will likely lead to ripple

Mark Raymont

years has been the COVID 19 pandemic’s effect on existing projects and the general market. Ongoing projects were disrupted and payments delayed. While in most cases things have now got back on track, following COVID the financial implications are still being worked out. Insolvencies and market exits of contractors at all levels also continue to take their toll.

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effects in the Middle East. The zero-COVID policy has impacted manufacturing and shipping operations globally because of China’s role as a major manufacturer, consumer and logistics hub of the global supply chain and given the reliance of Chinese companies engaged in Middle East projects on their home country supply chain, ensuring this operates smoothly will be of critical concern. Since 1994, there has been a Bilateral Investment Treaty (BIT) in force between China and the UAE. China has also entered into these types of agreements with various other Middle Eastern countries, including Qatar, Saudi Arabia, Oman, Egypt and Kuwait. These agreements typically provide foreign investors with various benefits, including the private right of action, which allows an investor to take a disagreement with the host government to international arbitration directly and can provide important protections for Chinese overseas projects, if the ownership arrangements are correctly structured. Under this agreement, foreign companies are also entitled to the same treatment as their domestic counterparts and other foreign companies. Foreign investors are entitled to either national or most favoured nation treatment (whichever is better), except for a few restricted and the carefully defined limitations listed in the treaties’ annexes or protocols. Additional wide guarantees of treatment for investors in conformity with international law are also included in these types of agreements. In addition, host governments often also guarantee fair and equitable treatment for investments, and full protection and security, and can promise not to make arbitrary or discriminatory decisions. These types of agreements also provide foreign investors with the right to transfer funds in and out of the host country without delay, using a market rate of exchange. This will include all transfers related to an investment including, proceeds from liquidation, repatriated profits and any additional financial investments following the initial investment.

However, with fewer competitors, there are also now increased opportunities to bid for new projects. Taking over partially completed projects can also appear superficially tempting, but they can also present different risk profiles in some cases which lawyers can only partially mitigate. This means the commercial viability of involvement in these cases requires an even more discerning approach from the legal department.


MOVERS AND SHAKERS

In association with

Marsden International MOVERS AND SHAKERS

A ROUND-UP OF THE TOP APPOINTMENTS AND PROMOTIONS CASABLANCA CALLING Al Tamimi & Company has announced they are opening a new office in Casablanca on 1 April 2022, meaning the firm will now have 17 offices based in 10 different countries in total. The new Casablanca office will be Al Tamimi’s third office in Africa, as they already have one in Cairo and one in Port Said in Egypt which was opened last year. As a result, Nesrine Roudane will become a Partner in the firm and will act as Head of the new Morocco office. Nesrine has worked as a lawyer with the Casablanca Bar

A SPORTING CHANCE

The ADGM based law firm, Sol International Ltd has announced it has launched a new sports practice. As a result, Adam Rasul has joined the firm as Senior International Counsel. Rasul is a wellrenowned Solicitor-Advocate who has considerable experience in both criminal law and sports law. Previously, he had founded his own private law practice in the UK but has also worked in some of the largest international law firms globally. Rasul has over 18 years’ experience in acting for clients nationally and internationally and has been involved in a number of landmark, complex matters. His criminal work focuses on sophisticated fraud and high- level business crime. In addition, his advice has been regularly sought in high-level criminal interviews by investigators from the Serious Fraud Office, HMRC, the police and international agencies. He also acts as a Personal Legal Representative for various international sports celebrities, protecting their interests in negotiations on contracts with promoters, agents and commercial sponsors. He is also often instructed by clients overseas on urgent and serious matters which require immediate, strategic, specialist expertise and a carefully executed plan. However, Rasul is not the only new joiner at Sol, as Louise Wright is also now a Partner

since 2002 and has been the Managing Partner of Roudane & Partners Law Firm since 2008. In addition, she is also a trained mediator and a commercial arbitrator. Nesrine has also been a former member of the Order Council of the Casablanca Bar and currently acts as the Coordinating Officer of the International Bar Association’s Arab Regional Forum. She also chairs the Start-Up and Venture Capital Commission of the Union Internationale des Avocats and the Legal and Tax Commission of the French International Chamber of Commerce and Industry in Morocco.

there. Louise is an experienced litigation media rights agreements and setting and arbitration lawyer, who is also a up companies in the UAE. She also acts member of the Chartered Institute of as a consultant for an international Arbitrators. She is recognised as an sports management agency, where international disputes lawyer. She was she focuses on sports law and athlete called to the Bar in England and Wales management. and worked for many years in the UK on In addition, she advises clients various high profile cases before making in all manner of tech areas, including the moving to the UAE. regulatory and contractual agreements She has considerable experience in related to the crypto space, advice and construction, project and shareholder legal assistance around NFTs, smart disputes, and commercial litigation. contracts, Web3 and the Metaverse. In addition, Louise is a Part II registered She also hosts seminars for clients and practitioner at the DIFC Courts and lawyers in the TechLaw space. regularly appears in all the Courts. Another new COMPARE THE MARKET starter at Sol is Nicola Olivia Darlington is now Rayment who is now the Head of Insurance– the Head of the firm’s Middle East and Africa new Technology Law at Simmons & Simmons. Department. Prior to Olivia has worked for the joining the firm, Nicola worked in the firm since 2011 and going arbitration, private client/real estate forward will lead the firm’s insurance and corporate team in a leading operations from the UAE. international law firm in Dubai. She is a She initially moved to the UAE in qualified UK solicitor who specialises in 2019 and has a wealth of experience corporate and commercial law. In addition, she is also a DIFC registered wills draftswoman, who is able to Sol International Ltd: Kiran Gokal help clients residing in the has joined the firm as a paralegal. UAE with estate planning. PwC Middle East: have expanded Nicola’s sectoral their operations in Saudi Arabia and experience includes advising have a new office in Al Ul. clients in the sports Mazars: Mazars has partnered with Ideagen to and entertainment provide integrated internal audit solutions in Qatar. industry, providing Law In Order: Law In Order has signed a partnership advice on sponsorship, agreement with Flosmart Solutions to deliver a full advertising, suite of hearing solutions in Dubai. management, IP, TV and

OTHER CHANGES

| Lexis Middle East Law Alert | March / April 2022 | www.lexis.ae

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MOVERS AND SHAKERS in insurance in the both the Middle East region and the UK particularly in relation to advising London Market reinsurers and their insured parties in matters involving the Middle East.

RAKA CAN

Raka Roy has been made a Partner at Galadari Advocates & Legal Consultants. Raka is an intellectual property and data protection lawyer and has been the head of the firm’s intellectual property and data protection department since she joined Galadari in back in 2019. She regularly advises Dubai Government authorities on their projects and also assists businesses which are establishing a presence in the Middle East and internationally. In addition, she helps clients with benchmark surveys and advises on media and advertising laws. In the past, Raka has successfully defended international fashion brands and grey good companies in litigation action in the UAE, and has also enforced local and international court decisions.

YOUR CAPTAIN SPEAKING

Mohamed El Hawawy and Alastair Holland have become the new joint managing partners at Ince & Co’s Dubai office. Mohamed El Hawawy is one of the UAE’s leading shipping lawyers and specialises in litigation and dispute resolution. He assists local and multi-national companies on shipping disputes in the Middle East and has advised in numerous highprofile cases and casualties in the UAE, Egypt, Qatar, Saudi Arabia, and Kuwait. In addition, El Hawawy handles a range of insurance matters involving life, property, product liability, marine, political risk, and medical insurance. His fellow managing partner, Alastair Holland works in the firm’s corporate practice. He has over 20 years’ experience advising clients throughout the Middle East on public and private M&A, joint ventures, equity capital markets and private equity across a wide range of

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industries. His work includes advising multinational corporations, high net worth individuals, entrepreneurs and family-owned businesses on the acquisition, disposal and restructuring of assets in the region, as well as advising on day-to-day business matters, in particular corporate governance and commercial contracts.

LITIGATION, ARBITRATION AND INVESTIGATIONS

Andrew Mackenzie has joined DLA Piper where he will be a Partner and the firm’s new Head of Litigation, Arbitration and Investigations in the Middle East. Mackenzie previously worked in Baker McKenzie’s Dubai office, where he was Head of their Arbitration, Construction and Offshore Litigation practice. He has been based in Dubai since 2009 and is an England & Wales qualified solicitor-advocate and barrister. In addition, he is active in international arbitration and his clients include Governments and international corporations with complex commercial, construction and finance disputes. He appears regularly before the ADGM and DIFC courts.

DAWSON’S CREEK

Fraser Dawson has joined Addleshaw Goddard as a corporate and private equity specialist. Previously Dawson worked for Gibson Dunn where he was a leading corporate partner. Dawson has considerable experience in M&A and other corporate transactions across the Middle East and North Africa region. He has been working in the region since 2007. His work includes auction processes, joint ventures, consortium

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arrangements, restructurings, convertible loan issues and trade sales both across the MENA region and further afield. He also has specific experience in private equity.

THIS TIME IT IS PERSONAL

Shaikha Al Jalahma has joined Farrer & Co’s private client team as an Associate. Previously, she worked at Trowers & Hamlins where she was an Associate in the Dubai office. Shaikha is a Private Wealth specialist who is dual qualified in Bahrain and England and Wales. She works on international matters, including succession planning for families and related UK tax advice. She also has experience of advising clients on civil law matters, including Sharia law.

GET YOUR FINANCIAL HOUSE IN ORDER

Rustum Shah has joined Stephenson Harwood LLP’s finance practice as a Partner. Shah joins the firm in Dubai and will head their Islamic Finance practice. Previously he worked for Hogan Lovells where he was also a Partner. To date, Shah has had more than 20 years’ experience of advising international and local banks, large corporates and governments on all aspects of financial transactions, although he specialises in Islamic Finance matters. His practice is mainly cross-border and covers all areas of finance, debt capital markets and derivatives. He also advises clients on infrastructure and construction finance, real estate finance, aviation finance, funds finance, corporate finance and syndications, restructuring and debt capital markets.


EVENTS

LEXISNEXIS EVENT CALENDAR UPCOMING AND RECENT EVENTS FROM AURIFER AND LEXIS UPCOMING EVENTS FROM BRICKS TO BYTES 10 May 2022

Aurifer will host an e-commerce seminar and webinar with partners which will give practical guidance to help people with bricks and mortar shops. The seminar will be led by Nirav Rajput and Thomas Vanhee. For more information contact lovely@aurifer.tax.

RECENT EVENTS STATE OF PLAY OF TAX LITIGATION IN SAUDI ARABIA 9 March 2022

LexisNexis Middle East and Aurifer Middle East Tax hosted a seminar on the current state of play in Saudi Arabian tax litigation. The event which was led by Thomas Vanhee and Mohamed AlAradi included a discussion on pending tax dispute cases in Saudi and other recent relevant developments. Other topics included the merger of the Saudi customs and tax authorities which will be now known as the Zakat, Tax and Customs Authority or (ZATCA) and what its role will be in tax litigation. The merger of the dispute committees and common pitfalls to look out for were also considered. In addition, it will discuss the best practices for proactively preventing tax disputes, tips for preparing when a tax dispute arises and remedies against tax disputes. For more information on this subject contact lovely@aurifer.tax.

GCC OUTLOOK: COMPLIANCE UPDATES FOR SAUDI ARABIA AND BEYOND 8 February 2022

December 2021 saw Saudi Arabia pioneer the implementation of mandatory e-invoicing in the GCC. As Phase 2 was on the horizon and there was also talk of e-invoicing developments in the rest of the GCC, Pagero and Aurifer Tax hosted a discussion led by Thomas Vanhee and Alex Pavel. Discussions included key compliance updates for the region and the impact this move will have on businesses. Also considered

were the top five e-invoicing mistakes companies in Saudi Arabia have been experiencing, and whether gamification of tax compliance is the best solution for improving tax compliance levels. For more information on this subject contact lovely@aurifer.tax.

NEW UAE CORPORATION TAX 3 February 2022

The introduction of corporation tax in the UAE has been a direct result of OECD’s Pillar Two which is part of the Base Erosion and Profit Shifting (BEPS) project. With a headline rate of 9% on taxable income, carve outs for start-ups, small business and free zone companies, and different tax rates for MNEs, the UAE is trying to strike a difficult balance. At this webinar Aurifer considered key features of the UAE corporation tax regime. Discussions included why corporation tax was implemented in the UAE, whether free zone companies will be within the scope of the new tax and how UAE corporation tax will be calculated. Also considered were whether or not there will be any income exemptions, how the new CIT will affect the existing Economic Substance Requirements and transfer pricing regulation considerations. The webinar was led by Nils Vanhassel & Nirav Rajput. For more information on this subject contact lovely@aurifer.tax.

RECENT LEXISNEXIS EVENTS FIRST EVER WOMEN IN LAW AWARDS IN THE GCC!

LexisNexis Middle East were pleased to hosted the GCC’s first ever Women in Law awards which were sponsored by Yungo Legal Consultants, New York University (NYU) Abu Dhabi, Al Tamimi & Company, HFW Middle East, DLA Piper and Phoenix Advisors. Over 150 women, all of whom were either legal practitioners or active in the legal industry in the GCC entered the awards, which were awarded in 20 different categories of law practice. The winners in each category were announced at a gala dinner/awards ceremony at the Westin Dubai Mina Seyahi Beach Resort and Marina in Dubai on 23 February 2022.

UPCOMING EVENTS LEADERSHIP FOR WOMEN IN THE 21ST CENTURY 10 to 31 May 2022

LexisNexis Middle East and Beyond Billable Hours will host a four-part online training course which will focus on Leadership for Women in the 21st Century. Experts will consider the topics of leadership in the 21st century, emotional intelligence, relationship management, selfmanagement and social awareness. For details go to https://www.lexis.ae/events/ leadership-for-women-in-the-21stcentury-online-training.

| Lexis Middle East Law Alert | March / April 2022 | www.lexis.ae

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ARBITRATION CORNER

POWERED BY WASEL & WASEL ARBITRATOR SERVICES INC.

NEW RULES, SAME ARBITRATION GAME

Abdulla Wasel of Wasel & Wasel Arbitrator Services Inc. examines key changes in the DIAC New 2022 Rules of Arbitration which came into force on 21 March 2022 and the reasons for these changes.

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he Dubai International Arbitration Centre (DIAC) has just finalised the latest version of their Rules of Arbitration which were approved by the DIAC Board of Directors on 25 February 2022 and come into force on 21 March 2022. This version of the Rules has been drafted with Abdulla Wasel the aim of streamlining arbitration procedures and improving the efficiency of arbitration proceedings. Director of The new Rules also reflect the latest developments in Operations international arbitration, and the evolving needs of the Wasel & Wasel business community, including the post COVID era’s Arbitrator increased digitalisation of business. They have also Services Inc. been designed to take into account the UAE Federal Arbitration Law (Federal Law No. 6/2018)’s provisions One of the areas where there are changes to the rules is on Consolidation and Joinder. Under Article 8.1 of the new Rules claimants must submit a single request for arbitration in respect of multiple claims arising out of more than one arbitration agreement. In addition, under Article 8.2, where there is more than one arbitration agreement, the Arbitration Court may allow the proceedings to continue as a single arbitration if certain conditions are satisfied, including but not limited to, where the same parties are involved. In addition, under Articles 8.5-8.9 of the new Rules, powers are also now conferred on tribunals to consolidate arbitrations after their appointment. Provisions, like Article 9 also now allow third parties to join an arbitration as additional claimants or respondents. While under Article 9.1 and 9.4, the joinder may be permitted either by the Arbitration Court or the tribunal itself. Another significant change involves third-party funding, as unlike the previous rules, the new Rules now expressly provide for and permit the use of thirdparty funding in arbitration, as long as the funded party discloses this fact, together with details of the funder’s

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identity and whether the funder has committed to any adverse costs liability. Third-party funding generally falls under Article 22 of the new Rules and it should be noted that under Article 22.3, the tribunal may consider the existence of any third party adverse costs liability when apportioning arbitration costs. As is the case with a number of other arbitral institutions around the world, DIAC’s new Rules also include provisions for expediated proceedings, which are found primarily in Article 32. Under Article 32.1 of the New Rules, expedited proceedings will be applied where the sums claimed and counterclaimed are 1,000,000 AED or less, unless it has been otherwise agreed, if the parties agree to the proceedings being expedited or where the case is exceptionally urgent. Where expedited proceedings are triggered, under Article 32.5, the award must be issued within three months of when the tribunal receives the file, unless the Arbitration Court agrees otherwise. Although, the provisions which apply to expediated proceedings only apply to agreements which have been made after the new Rules come into force, i.e. on or after 21 March 2022. Appendix II of the new Rules covers Exceptional Procedures, which primarily involve interim measures, emergency arbitrators and conciliation procedures. Article 1 of Appendix II specifically sets out the powers for tribunals to order interim measures. The interim measures which are made available to the tribunal are rather extensive but are also generally in line with the provisions in the UAE Arbitration Law (Federal Law No. 6/2018). In terms of fees, Article 36.3 of the new DIAC Rules also states that legal fees are now part of arbitration costs and can be claimed by the parties under these Rules. The issue of costs and partyincurred expenses has been a grey area in the past, so it is useful to have additional guidance on it.


Arbitration Update

ARBITRATOR SPOTLIGHT ARRAN DOWLING-HUSSEY

HAVING PREVIOUSLY SERVED AS A CONSULTANT TO THE COUNCIL OF EUROPE AND PROVIDED TRAINING IN ARBITRATION IN ARMENIA, DO YOU BELIEVE THERE IS A BENEFIT IN TEACHING ABOUT AND IMPLEMENTING ARBITRATION ACROSS THE WORLD? My primary role is as a lawyer and an arbitrator. However, I have been fortunate enough to also provide training on the subject of arbitration in a number of countries including Armenia. I enjoyed working for the Council of Europe because of the range of arbitral work they have done. In fact, there were cases where my fellow trainer and I learnt more from the attendees than they probably learnt from us.

HAVING BEEN CALLED TO THE BAR IN LONDON, BELFAST AND DUBLIN, WITH RIGHTS OF AUDIENCE IN THE ADGM COURTS AND THE AIFC COURTS, WHAT EXAMPLES CAN YOU GIVE OF DEVELOPMENTS IN THE ARBITRAL INSTITUTES AND JURISDICTIONS WHICH YOU HAVE EXPERIENCE OF? I’m particularly interested in the changes taking place in the legal marketplace in the UK and Ireland as the impact of Brexit is obviously still playing out there. It is often easier for small jurisdictions like Ireland, with a population of five million, to be more innovative so steps being taken in Ireland are worth following. I also greatly admire the work being done in the UAE and the number of institutions and courts there.

YOU HAVE ACADEMIC QUALIFICATIONS IN ARBITRATION, ECONOMICS, INTERNATIONAL COMMERCE, AND CONSTRUCTION LAW. ARE THESE ACADEMIC QUALIFCATIONS THE REASON FOR YOUR DEVELOPMENT AS A WELL-ROUNDED ARBITRATOR? I have been fortunate with the range of lecturers who have taught me, including Dr Nael Bunni and colleagues who I have taken courses with, such as the 2023 CIArb President John Bassie. John and I both took the Diploma in International Commercial Arbitration at Keble College some years ago. My academic experience has certainly been invaluable. Although legal theories learnt about in past courses can always be superseded by new ideas and case law. It may sound cliché, but I truly believe in lifelong learning.

Arran Dowling-Hussey works as an independent arbitrator.

MOHAMMED ELAYYAN

HOW HEAVILY DO ARBITRATORS RELY ON EXPERT EVIDENCE IN CONSTRUCTION ARBITRATION? There is often reliance on expert evidence in construction arbitration. When the dispute requires delay, quantum, or other technical analysis in order for the arbitrator to conclude their award, arbitrators rely on experts. Some arbitrators in construction arbitrations also use legal experts when they need an opinion on a legal matter and are not familiar with the dispute’s applicable law.

HOW DO ARBITRATORS MANAGE INTERIM OR EMERGENCY ORDERS IN CONSTRUCTION DISPUTES? Parties who need an arbitrator to issue an interim measure must prove that not granting the order would cause damage beyond reasonable repair, which can be difficult as most construction disputes reach arbitration after the project has been completed. Therefore, arbitrators should measure the weight of benefit in issuing these orders while the project is still in progress. Project completion will benefit more than damages which might occur by preventing further progress until the final award is issued. Arbitrators refuse to issue these orders, if they can be considered as a prejudgment of the issues which are part of the case merits or affect the final award.

HOW DO YOU UNDERSTAND PROJECT STATUS QUO IF THE DISPUTE IS VIRTUAL OR DOCUMENTS-ONLY? Although some matters cannot be understood unless physically experienced or touched, recently it has been easier for arbitrators to understand the project status quo with modern technology such as 360 views and videos, holograms, 3D modelling, BIM modelling and advanced planning programmes.

Mohammed Elayyan works as an independent arbitrator.

Wasel & Wasel Arbitrator Services Inc. First Canadian Place 100 King Street West, Suite 5700 Toronto, Ontario, M5X 1C7 Email: inquiry@waselandwasel.ca Tel: +1 416 900 1213 Web: www.waselandwasel.ca

| Lexis Middle East Law Alert | March / April 2022 | www.lexis.ae

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ARBITRATION CASE FOCUS RECENT KEY ARBITRATION CASES

Case No .... DCC 1115/2021 (Commercial) Issued on 17 October 2021 Jurisdiction ....Dubai Court ....Dubai Court of Cassation Recommended by .... Wasel & Wasel Arbitrator Services Inc.

WHAT HAPPENED?

This dispute revolved around a private corporate share acquisition where the share transfer agreement was subject to an arbitration agreement as the dispute resolution forum. The buyers filed their claim before the Dubai Primary Court seeking claw-back of the share sale with an order on the seller to re-acquire the shares. The seller did not defend the case before the Dubai Primary Court, or before the Dubai Appeals Court. Instead they only filed their defence and the rejection of the courts’ jurisdiction before the Cassation Court

WHAT WAS DECIDED IN THE DUBAI PRIMARY COURT?

The Dubai Primary Court rejected their jurisdiction to hear the dispute by their own accord, citing that the parties had agreed to resort to arbitration, even though the seller/ defendant had not appeared before the Dubai Primary Court, or filed any statements before that Court either.

WHAT WAS DECIDED IN THE DUBAI COURT OF APPEAL?

The share buyers then appealed before the Dubai Appeals Court. The Dubai Appeals Court overturned the Dubai Primary Court judgment and ruled on the substance of the dispute. Once again the seller/defendant had not appeared or filed any statements before the Dubai Appeals Court either.

WHAT WAS THE RULING OF THE DUBAI COURT OF CASSATION?

The seller/defendant then petitioned the Dubai Cassation Court to review and overturn the Dubai Appeals Court judgment. At this point the Dubai Court of Cassation ruled as follows: “it was proven in the evidence that the appellant [seller] did not appear before the Primary Court or before the Appeals Court, whose judgment is being contested, and he [the seller] did not submit any memorandum of his defence in the case, proving that he had not

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made any request or any defence or argument on the subject matter of the case in the two stages of litigation and that he had done so for the first time – arguing against the jurisdiction of the court due to the existence of the arbitration agreement – before this [Cassation] Court before making any request or any defence in the subject matter of the case…”. It was then stated, “so the appellant’s argument that the Dubai Courts have no jurisdiction over the dispute in question due to the presence of the arbitration agreement is valid, and since the judgment of the Appeals Court has contradicted this consideration and decided on the merits of the case, it is thus defective, which requires its revocation.” As a result, the Dubai Court of Cassation overturned the Appeals Court judgment and ordered that the Dubai Courts lacked jurisdiction in this dispute in view of the arbitration agreement.

WHY ITS SIGNIFICANT?

In the past in such cases where the question of the court’s jurisdiction has been raised in the Dubai Courts as a result of the existence of an arbitration agreement, as was the case here, the position taken by the Dubai Courts has generally been that the party making this argument must iterate and voice their challenge to the court’s jurisdiction at the dispute’s first hearing or case management session. This was not what had happened in this case as the share seller had neither appeared nor filed any statements before the courts until the final Court of Cassation stage. What happened instead was that this judgment and the position taken by the Dubai Court of Cassation expanded the temporal and procedural spectrum of challenging the courts’ jurisdiction where there is an arbitration agreement that exists between the litigants. This expansion should give litigants an additional avenue for triggering jurisdictional arguments at later court stages. This will also give them more time to discover whether a jurisdictional challenge is a suitable approach. This means that rather than attempting to trigger a jurisdictional challenge at the early stages of the dispute, litigants will instead be able to hold their challenge until they believe that sufficient grounds can be established. However, having said that, it should also be noted that if the litigants opt for an early jurisdictional challenge, it is possible that a challenge at the later stage using this route, may not be successful.



CONTRACT WATCH

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Sanctions mitigation

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ussia’s invasion of Ukraine has led the UK, US and EU to sanction hundreds of Russian individuals and entities. While Middle Eastern countries are not subject to these sanctions, any US, UK or EU national present in these countries will be subject to sanctions, meaning they may not do any business with an individual on the sanctions list regardless of where they are in the world. Parties who are not themselves required to adhere to sanctions can be found to have violated a sanction prohibition indirectly by ‘causing’ a sanctioned party to violate them. For example, a UAE bank which sends a Dollar wire transfer to a sanctioned oligarch will cause the US correspondent bank through which the transaction must flow to violate the sanctions and the UAE bank could be held liable. All UAE businesses which employ US/UK/ EU nationals should consider putting a formal recusal policy excluding these nationals from any business with a sanctioned party in place. Each country will generally have a Government website explaining their specific sanctions regulations. While nobody would dispute financial sanctions can be an effective and appropriate tool to punish bad actors and their supporters, sanctions regulators are not infallible. Designations can be overly broad and include innocent parties. US and UK sanctions administrators have

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implicitly recognised this by creating formal mechanisms for challenging designations. However, this is a time consuming process under which designees must satisfy a high legal standard. Therefore, individuals and entities at risk of being sanctioned should consider pre-emptive strategies to shield and preserve assets which may be frozen. Given the relatively consistent structure of the financial sanctions imposed on Russia, potential sanctions targets can predict what they are likely to face and take legal evasive action. However, these moves are fraught with risks, including criminal charges, and must be done with extreme caution and careful planning. Effective sanctions countermeasures are generally based on ownership, location, currency, maintenance and engagement considerations. Financial sanctions typically freeze all assets owned or controlled by a designated individual or entity. Ownership here is defined as anything in which the designated party has a direct or indirect equity stake of 50%+ or effective control via majority voting rights. One defensive strategy is to restructure ownership/ control of any key assets so they fall below the majority threshold. When any sanctions are imposed, they are likely to relate not just to the individual or organisation but any agents, relatives or associates known or believed to have links to the individual. Strategic divestiture therefore needs to be done with arm’s-length counterparties on objectively reasonable commercial terms. It is generally a good idea to have a counterparty affirmatively represent they are not subject to sanctions and to include a force majeure clause that lets a party terminate a contract if fulfilling it would lead to a sanction violation. This is especially important in joint ventures or other situations where

www.lexis.ae | March / April 2022 | Lexis Middle East Law Alert |

there is likely to be a ‘lock-up’ period which could prevent a quick exit. While the location of real property is of course not easily changed, this is not the case for other assets like cash and securities, aircraft and ships. Asset freezes generally only apply to items physically located in particular jurisdictions, so it is worth thinking if an asset could be moved to a safer home. For example, a private aircraft kept in a US hangar could be moved to another country which is unlikely to participate in the anticipated sanctions regime such as the UAE. Difficulties can also arise with US Dollar-denominated transactions for sanctioned parties. To get in front of currency-related problems, thought should be given to holding cash in alternatives to the main reserve currencies. Several Middle Eastern countries, including Kuwait, Bahrain and Oman have stable currencies which are coupled with relatively strong domestic banking systems. However, a key problem faced by sanctions targets is maintaining real estate, ships and private aircraft once sanctions are imposed. To prepare for a worstcase scenario, potential sanctions targets should pre-emptively plan on how to preserve the value of high maintenance assets during a potential asset freeze. A final strategy which can be successful is pre-emptive engagement with regulators. So, if a party believes they are likely to be sanctioned based on misperception of their role in a foreign policy issue underlying the sanctions regime, it may be worth proactively submitting documentary evidence which explains why any sanctions would not be appropriate under the domestic law of the sanctioning country. However, ultimately, the right strategy depends on the exact circumstances a particular sanctions target faces. Contributor J}RR˙USv}vE ˘ RRuvRoo]



Update your Library L A WS O F THE D I F C V O L . 1 RE I S S UE

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Updated analysis and commentaries on Arbitration, Companies, Employment, Damages & Remedies, Obligations and Court Laws.

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Commentaries on the new DIFC Foundations Law, the DIFC partnership legislation and the DIFC Non- Profit Organisations Law.

Commentaries on Operating, Leasing, Intellectual Property, Insolvency, Netting and Security Laws.

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This looseleaf provides easy access to the full text of all 57 chapters of the current DIFC Court Rules.

DI FC LAW REPORTS 2017

Official law reports of the DIFC for 2017. Contains selected cases for their legal importance. Summaries written by an All England Law Report trained Reporter.

Purchase the LexisNexis-DIFC collection online at www.lexis.ae/publications